Pittsburgh's mayor drops tuition tax

Cites an undefined promise of help from schools, tax-exempts and corporations on pension solution


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Six weeks after touting a tuition tax as a key component of the city of Pittsburgh's fiscal recovery, Mayor Luke Ravenstahl yesterday shelved the levy in favor of pledges of help from universities, tax-exempt organizations and the corporate community.

He came away from the bruising battle over the tax proposal unable to show any down payment toward the $15 million a year he said he needs to restore health to the city's pension fund. He was able, though, to claim new allies in what could be an equally tough slog in Harrisburg.

Mr. Ravenstahl said the University of Pittsburgh, Carnegie Mellon University and insurer Highmark Inc. have agreed to donate more to the city than they had previously, but would not cite a figure nor a time frame, and emphasized a planned push for state help.

An as-yet-undefined group called the New Pittsburgh Collaborative "will sit down in the early part of 2010 and come up with a strategy, and a goal, if you will, on what it is we will ask Harrisburg for," Mr. Ravenstahl said at a news conference in his office.

Flanked by university presidents, six City Council members, a handful of corporate leaders and one student, he said the collaborative will craft "a plan that will have the input of City Council, of the corporate community, of the nonprofit community."

The collaborative will then "physically go to Harrisburg" to seek changes in the rules that govern the city's finances.

"We need significant legislation in Harrisburg that allows the city to have a revenue stream that will protect the city going forward and fund [its pension] obligation into the future," said Duquesne Light CEO Morgan K. O'Brien.

A coalition could help the city to get Harrisburg's attention, but might not guarantee success.

Some of the ideas the mayor has floated in the past -- like raising the $52-a-year tax on people who work in the city to $144, or expanding a tax on payrolls to include tax-exempt employers -- might be tough sells next year, when all state House members and half of the state Senate face voters.

A tax hike is "probably a non-starter, especially in an election year," said state Rep. Dave Levdansky, D-Forward, chairman of the House Finance Committee.

"It is going to require a coalition of dedicated, active citizens," and not just university leaders, said state Rep. Jake Wheatley, D-Hill District. "You also need the everyday men and women who live in the city."

Yesterday, the mayor insisted on optimism.

"It's not going to be easy," he said. "We've all acknowledged that. But we certainly also believe that we're more likely to be successful if we stand united than if we are divided."

The show of unity came after more than a month of sharp division between the city and its universities, which united against what would have been a first-in-the-nation 1 percent tuition tax. Academia won several early battles, as the state-picked Intergovernmental Cooperation Authority forced the removal of the tax from the 2010 budget, legislators threatened to preempt the levy, the Allegheny Conference on Community Development came out against it, and a bare-bones council majority that had been willing to vote for it began to waver.

"Did I anticipate standing here like this? No," said Mr. Ravenstahl.

The university presidents said they were not, in Pitt Chancellor Mark A. Nordenberg's words, "negotiating under the force of the pressure of the tax."

"We're not pledging a contribution in order to get rid of the tax," said CMU President Jared Cohon. "We are prepared to pledge a contribution as the tax is gotten rid of."

Early this month the mayor demanded a pledge of $5 million in donations in return for dropping the tax. It seems that he didn't get that. Though Pitt, CMU and Highmark apparently have pledged to give more than before, the mayor said the parties "don't have that deal structured yet."

For 2005, Highmark gave the city $1 million, Pitt $800,000, and CMU $250,000, according to records obtained by the Post-Gazette. The amounts of subsequent donations by the institutions were kept secret, but for the years 2005 through 2007, around 100 tax-exempt organizations gave a total of $14 million.

The organizations offered $5.5 million total for 2008 through 2010, but the city never has accepted that offer.

Councilman Ricky Burgess said he believes future agreements will be with individual organizations, and will be made public. "I will oppose any agreement," he said, "that does not fully allow the public declaration of individual donations."

Unclear yet is whether the city's biggest employer and owner of much tax-exempt land, the University of Pittsburgh Medical Center, will contribute. UPMC logged the largest contribution for 2005, at $1.5 million, and yesterday a spokesman for the hospital system would say only that it "contributed more than any other entity to the city and [Allegheny] County governments and to the city of Pittsburgh schools."

Mr. Ravenstahl said that UPMC is not "out of the equation," but he has considered excusing them in light of their $10 million annual pledge to the Pittsburgh Promise of college aid to public school graduates.

The city isn't "wedded," he said, to boosting the tax on people who work in the city, nor expanding the payroll tax, but will certainly seek some new taxing authority. "Who knows if there's another discussion that might take place," he said.

Mr. Levdansky said the mayor should consult with legislators and "shouldn't just throw half-baked ideas out there."

Rep. Mike Turzai, R-Bradford Woods, called the tuition tax "misguided," but said he's willing to meet with the mayor to discuss how to help the city pension fund. Before that, he wants to hear about "some bold measures he and City Council are taking to reduce expenditures and change the way they run city government."

Mr. Turzai, who is No. 2 in the House GOP caucus, didn't want to comment on raising taxes until Mr. Ravenstahl outlined some ways to cut city spending.

He said the city and its authorities "hold some assets that could bring in revenue if put into private hands."

Mr. Ravenstahl has said he needs $15 million a year, plus a one-time infusion of $200 million that he hopes to raise from leasing public garages, to bolster the pension fund. As of Sept. 30, the fund held just $280.7 million, and it should hold $899.2 million to cover future obligations. It will likely need a balance of more than $500 million by the end of next year to avert state takeover.

Council yesterday gave final approval to a $446.5 million budget for next year that includes no big tax or service changes. Before doing that, Mr. Burgess boosted funds for anti-hunger groups by $118,650, to $439,800. Councilman William Peduto added a requirement that the administration seek council approval before drawing $4.1 million from a $45.4 million fund that had been meant to lower debt payments in later years, but may be tapped next year instead.


Rich Lord can be reached at rlord@post-gazette.com or 412-263-1542. Harrisburg Bureau Chief Tom Barnes can be reached at tbarnes@post-gazette.com or 717-787-4254.


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