UPMC payment to Promise partly at city's expense

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The University of Pittsburgh Medical Center's pledge of $100 million to fund college tuitions would supplant the healthcare giant's $1.5 million-a-year contributions to city of Pittsburgh coffers, its top lawyer said today.

That could mean other nonprofit entities, on whom the city relies for $4.2 million a year, or 1 percent of its budget, could choose to contribute to the Pittsburgh Promise and not the city, too.

Asked whether that could create budget problems for the city, Robert Cindrich, general counsel for UPMC, said: "It could. It depends whether they find alternate revenue sources, whether other nonprofits step up to the plate."

That news came after lengthy, testy City Council discussion of a proposed deal that would give UPMC credit against any future taxes for its contributions to the Pittsburgh Promise of scholarships for public school graduates.

At the end of that session, council voted unanimously today to hold a public hearing before voting on the deal that would shield the University of Pittsburgh Medical Center from making both donations to the Pittsburgh Promise tuition plan and other payments to city coffers. Mr. Cindrich said a short delay for a hearing would not jeopardize UPMC's proposed donation ?? though failure to eventually ink the arrangement would nix it.

The controversy stems from the Dec. 5 announcement that UPMC would give $100 million over 10 years to fund the Pittsburgh Promise, an effort by the city and the Pittsburgh Public Schools to ensure that all graduates of the public schools have the money needed to go to college. Of that, $90 million must be matched by $135 million in contributions from other sources.

Mayor Luke Ravenstahl's administration submitted to council yesterday legislation to cover the possibility that the General Assembly or courts will someday declare UPMC a taxable entity, or impose a fee for city services. The legislation would give UPMC a "tax credit ... equal to certain payments which may be made by UPMC to the Pittsburgh Promise."

City Solicitor George Specter said that if the city was required to tax UPMC, the healthcare giant's tax bill would be reduced by the amount it was paying to the promise. If such a credit were not legal, UPMC could reduce its payment to the Promise fund.

UPMC's property within the city is assessed at $773 million, according to a City Controller's Office audit released in May. That would translate to an $8.3 million property tax payment to the city, if the healthcare giant was subject to the tax.

UPMC's pledge to the Promise, if finalized, would immediately cost the city the $1.5 million a year it has received from the hospital system in each of the last three years under the latest in a series of voluntary arrangements that have pumped $25 million into the city's coffers since the mid-1980s, according to Mr. Cindrich.

"For the residents of the city of Pittsburgh, [the Promise payment] would be the annual gift that we will make," he said. "So naturally, [city officials] are going to be concerned. I would be too, if I was in the city government."

Several council members pounced on the proposal to shield UPMC from having to pay both the Promise and the city coffers.

"We are basically saying that UPMC, and UPMC alone, by virtue of its size and its power, will be given a special right" to write off a charitable contribution against future city taxes, said Councilman William Peduto. Giant Eagle, he said by way of example, "cannot say, 'Hey, we fed the hungry, we're not going to give money to the city of Pittsburgh.'"

Council President Doug Shields subjected lawyers for UPMC, the city and school board to lengthy cross-examination regarding the process that led to the legislation submitted to council at the last possible time. "This is a lack, a total disregard, for the people's representatives sitting at this table," he said. "Who knew about this? ... It's the people of the city of Pittsburgh that you didn't tell on Dec. 5 that there are side-deals here."

Other members came to UPMC's defense.

The $100 million pledge to the promise "puts a second thought in the younger family's minds [when they're asking], 'Do I stay in the city of Pittsburgh, or do I move because of the school system?'" said Councilman Jim Motznik. "They're reconsidering whether or not they should stay, or they should leave."

Mr. Cindrich said that if council balks, the Promise is "in jeopardy. The deal was expressly made contingent upon city council and the city school board agreeing to these arrangements whereby we won't get hit double."

He said the city "shouldn't look a gift horse in the mouth. That applied 100 years ago. It still applies today."

"It would be unfortunate if the actions of a few council members have the effect of preventing the class of 2008, those [2,000 seniors], from participating in the Pittsburgh Promise," said city Chief of Staff Yarone Zober. "There are only so many things a city can do that are real game-changers, that can change the landscape of a city entirely. ... The Promise is one of them."

Speakers during council's public comment period opposed the arrangement, and asked for a public hearing. Some submitted signed petitions that could require a hearing before a final vote.

Barbara Daly-Danko, chair of the 14th Ward Democratic Committee, centered on Squirrel Hill, called the arrangement a "classic bait-and-switch." She said she has a child graduating from Schenley High School this year and "would love $20,000 in grant money, so I don't have to take out more loans. ... If this is such a great idea, it will stand a few weeks of scrutiny."

Mr. Cindrich said UPMC may also try to deduct part of its contribution to the Promise from the federal taxes due on its for-profit subsidiaries.



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