Time out, everyone. That was the welcome call Tuesday from City Council to stop the runaway train that followed UPMC's pledge of up to $100 million to the Pittsburgh Promise, a scholarship program for city high school graduates.
Council had been asked by the staff of Mayor Luke Ravenstahl, with far too little notice, to authorize an agreement between the city and the University of Pittsburgh Medical Center that would grant tax credits based on the health system's donations to the Promise, in the event that the state someday made nonprofits like UPMC taxable.
To any taxpayer who has taken tax deductions for charitable contributions, the idea of some tax forgiveness sounds reasonable. But how much? The Pittsburgh Promise, for all of its value, is a charity, not a branch of city government. Therefore, Pittsburgh's conferring a credit, even a hypothetical one, on taxes paid to the city for a gift to a third-party charity could well be illegal.
Someone -- either UPMC or the mayor's office -- botched the communication on this. No mention of it was made at the right time, on Dec. 4 when UPMC announced its investment in the Promise. Now a public stir threatens a unique opportunity to use private donations for not only boosting the city's graduation rate but also attracting new residents.
UPMC, the region's largest employer and richest non-profit, has committed a generous pledge of $10 million next year for scholarships to Pittsburgh Public School graduates to attend college or technical schools, followed by up to $90 million in challenge money to lure $1.50 from new donors for every $1 from UPMC. In the end, the Promise could receive $225 million due to UPMC's commitment.
That's a huge investment in the well-being of Pittsburgh. If the state someday were to allow the city to tax nonprofits on all of their real estate, should UPMC's contributions be eligible for some sort of credit? Yes, but the legal details must be worked out and the credit should be only for the tax years in which the contribution is paid. In other words, if UPMC's real estate is taxed under the law beginning in, say, 2010, then only the Pittsburgh Promise dollars it donates that year should be eligible for credit -- and so on in successive years.
The other bit of news that should have surfaced, not on Tuesday, but when UPMC announced its pledge two weeks ago, was that its substantial commitment to the Pittsburgh Promise would supplant the $1.5 million contribution it has made to the Pittsburgh Public Service Fund in each of the last three years to help balance the city's budget.
It was the bad timing of these belated developments -- the request for approval of the hypothetical tax credit and the withdrawal from participation in the public service fund -- that created the notion that "strings were attached" to UPMC's gift, which led to the public relations train wreck.
It would be easy to argue that a nonprofit with a $618 million surplus in its last fiscal year, rising health care charges and growing dominance of the region's hospital market could easily afford to do both. But since UPMC's contribution to the Promise -- $10 million next year and up to $90 million through a 10-year challenge grant -- will exceed the $8.3 million it could be forced to pay, conceivably, in yearly taxes on its $773 million in real estate, the institution should be applauded, not scorned.
Another disquieting element of Tuesday's events was the attempt to railroad something past council that it did not have time to examine. For those on Grant Street who need a civics refresher, council members, like the mayor, are the elected representatives of the people. Although the city school board saw fit to approve a potential tax credit on a vote of 8-1, council felt its questions had not been sufficiently answered and that it couldn't act with confidence in the public interest. Mayor Ravenstahl's terse defense Wednesday of the rush job unleashed in council chambers showed that he failed to grasp that.
In the end, after everyone takes a deep breath and council holds a public hearing, we hope UPMC is granted the ability to have contributions toward student scholarships be counted against property taxes it might have to pay some day. We hope that its commitment to the Pittsburgh Promise stays on track so that additional money can be leveraged from other donors.
A PR fiasco should not be allowed to cost Pittsburgh a program of great possibility. This is one promise worth keeping.