Bipartisan panel trims spending, hikes some taxes

Sunday, October 19, 2003

By Mackenzie Carpenter, Post-Gazette Staff Writer

A bipartisan commission of civic, business and political leaders has crafted a financial bailout proposal for Pittsburgh that calls for increased business and occupation taxes in exchange for $40 million in cuts in city spending.

The plan was unanimously approved yesterday by the group, comprised of about 30 members and headed by former U.S. Steel chairman David Roderick. It then was turned over to four local legislators, who will take it to Harrisburg for consideration by House and Senate leaders.

It calls for a state-appointed board to oversee the city's finances, and it recommends giving the city the authority to raise new taxes. The plan says the city could only do so after satisfying the oversight board that it has made the necessary cuts in its budget.

The proposal calls for hiking the occupation tax from the current $10 a year for everyone who works in the city to $60 a year and for assessing a $8.25-per-employee tax on manufacturers and other businesses that presently are exempt from city business privilege taxes.

The plan differs from Republican-backed legislation introduced last week, which calls for a more powerful budget oversight panel and that would not permit the imposition of any new taxes.

While Roderick and others declined to attach a specific dollar amount to taxes that could be generated under the plan, the city faces an $81 million shortfall next year.

"We tried to be fair and make sure that the tax didn't fall disproportionately on any individual sector," said Roderick after yesterday's two-and-a-half hour meeting, which was held at the Squirrel Hill home of former Republican National Committeewoman Elsie Hillman. "We tried to come up with a plan where the employees would pay something, businesses would pay something, the city people would be paying something, and the commuter who works there would pay something."

The plan represents an attempt by key city decision-makers to present a unified front to Harrisburg legislators, who so far have been unwilling to give city officials the authority to impose new taxes. Attendees included leaders of the city's top health care and financial service companies -- which are currently exempt from the business privilege tax -- as well as Mayor Tom Murphy, City Council Member Sala Udin and Dennis Yablonsky, secretary of the state's Department of Community and Economic Development.

Jack Brooks, secretary and treasurer of the Brotherhood of Carpenters and Joiners of America, was the only city union official present. Murphy has been locked in a fierce battle with leaders of the Firefighter and Emergency Medical Services unions over his attempts to merge the two bureaus.

On Wednesday, House Republicans unveiled a plan for a powerful five-member oversight board that would develop a balanced budget proposal for the mayor's and council's approval. But the GOP's plan did not include any new taxing authority, prompting criticism from Murphy, who said revenue increases were critical to ensure the city's future financial health.

The four state lawmakers present did not take a position on the proposal but agreed to take it back to the leaders of their respective legislative caucuses. Sen. Jane Orie, R-McCandless; Sen. Jack Wagner, D-Beechview; Rep. Dan Frankel, D-Squirrel Hill; and Rep. Mark Mustio, R-Moon, attended the meeting.

Neither Orie, Wagner nor Mustio could be reached for comment, but Frankel said afterward he liked the plan, which he said was similar to one he and Sen. Jay Costa, D-Forest Hills, proposed earlier this year. Besides calling for an oversight board, it also increased the city's occupation tax by $42 and created a new payroll tax on businesses -- a proposal that attracted minimal support in the Republican-controlled Legislature.

"The good news is that it calls for an oversight board with very sharp teeth that will hold the city accountable for its future budgets," said Frankel. "That means it can withhold revenue from the city unless it makes the necessary cuts, but this group also agreed unequivocally that the city needs new revenue as part of the equation," said Frankel.

The proposal also would give the oversight board the power to override arbitration awards, he noted, just as in Philadelphia, which got its own budget oversight board in 1991.

"We are giving them a strong oversight committee, but we also said strongly that if the state wants to have oversight, they obviously have to be part of the revenue solution," said Roderick, who noted that the oversight committee would be allowed to ensure that the cuts have taken place before permitting any tax increases. "If they can't make a commitment to permit or empower the city to increase or consider increasing certain taxes, there's nothing more that we can do to resolve the city's budget problems."

Roderick said he and other city leaders will be traveling to Harrisburg next week to lobby for the proposal, which he said represents a remarkable consensus by business and community leaders.

"Here's a case where the business community has indicated a willingness in order to solve the financial crisis and to help cover the city deficit," he said. "We will accept this tax, and that's a rare thing. It shows again the commitment and the partnership that continues between the city and the businesses of this community."

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