Pittsburgh's mayor says he'll pursue 1 percent higher-ed tax
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Pittsburgh Mayor Luke Ravenstahl plans to propose a 1 percent college-education privilege tax to council today, in a move that's likely to set off a fight with the city's schools of higher learning.
College and university representatives met with the mayor on Wednesday and argued against the tax, which would be assessed on a college student's tuition. It technically would not be a levy on the students or their schools, but rather on the privilege of getting a higher education in Pittsburgh.
"They weren't pleased to hear that this was an option we were pursuing," Mr. Ravenstahl said. But he said he is ready for "a fight, or a battle, if you will," if that's what it takes to plug a $15 million gap in his 2010 budget and help the struggling Carnegie Library of Pittsburgh.
"We don't believe that [1 percent] is too burdensome on college students," Mr. Ravenstahl said. "The city taxpayers are paying for the services that are provided to those college students," including police, building inspection and fire service, he said. "The students have a role to play."
City administrators have long wrestled with the growth of tax-exempt institutions, which has occurred even as the city's population and heavy industry have waned. From a proposed-but-not-enacted "sick tax" on hospital bills in the 1970s, to court battles in the 1980s, to voluntary payments this decade, no solution has endured.
An umbrella group of tax-exempt institutions, called the Pittsburgh Public Service Fund, donated $14 million to the city from 2005 through 2007, then offered $5.5 million for 2008 through 2010, but the city did not accept the latter amount.
Shelved, for now, are proposals floated by the mayor since May that include a tax on hospital bills, a surcharge on all-day parkers in public lots, and a hike in the water rates charged to educational and medical customers.
The tuition tax would raise around $16 million a year. Of that, $15 million would cover increased payments to the city's limping pension fund and capital needs, required by its recovery plan under state Act 47. The balance would become a dedicated, annual payment to the Carnegie Library system, which faces a budget deficit that has prompted plans to close four city libraries, merge two others, and move yet another.
"This is the first step of two over the next 12 months that we think will achieve" long-term financial health for the city, the mayor said. The second step is a planned long-term lease of public parking garages and meters that he hopes will raise $200 million for the pension fund.
"We believe that there is a very strong argument for the city to be removed from Act 47 oversight, if those two steps are taken," he said.
The director of the Pittsburgh Council on Higher Education, which represents the local colleges, could not be reached for comment last week. The University of Pittsburgh has said repeatedly that it will fight any effort to chip away at its tax-exempt status.
Mr. Ravenstahl said he anticipates court, legislative and public relations assaults on his proposal, but he's ready. "When you look at some of the fees these places charge," he said, citing charges for everything from athletic facility use to orientation to security, "we think it's only fair to include a fee for the city."
Formulas like Mr. Ravenstahl's have met with vigorous opposition in other cities, like Providence, R.I., where a mayor's bid to tack a $150-per-semester fee on to tuition bills at four universities ended in stalemate.
Providence Mayor David N. Cicilline first negotiated a payment plan, totalling $50 million over 20 years, with that city's colleges and universities but found that wasn't enough. So he asked students to accept the tuition surcharge, even hosting student leaders for dinner, but they soundly rejected it.
He then asked the state legislature to OK the surcharge, and floated a reduced-rate property tax on large not-for-profit landowners. But he couldn't win legislative approval.
The schools' concern "on principle is the erosion of the tax-exempt status," said Dan Egan, president of the Association of Independent Colleges and Universities of Rhode Island. "Any formulated tax as such is just that -- an attack on our nonprofit status."
Providence's college presidents also felt they couldn't pay more than they had already agreed to, since they were faced with a tough economic climate and were trying to hold tuition hikes at around 3 percent.
Here, too, the economic downturn has hit tax-exempt institutions.
"Charities are suffering as much as governments, as far as how we balance our budgets," said Joe Geiger, executive director of the Pennsylvania Association of Nonprofit Organizations, at a Friday forum on taxes and nonprofit institutions held by the University of Pittsburgh's Graduate School of Public and International Affairs. "The charities are going to have to compromise, and government is going to have to compromise, and good luck with that right now."
At the forum, former city Finance Director Jim Turner, who served under Mayor Richard Caliguiri, said that until the state can figure out a way to compensate cities for hosting big, tax-exempt institutions, conflict will continue.
"I think local governments like the city of Pittsburgh should challenge" nonprofit institutions, he said, "and I think institutions like the University of Pittsburgh should defend to the death" their tax-exempt status.
First Published November 9, 2009 12:00 am