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November 24, 2004

Will Pitt, Non-Profits Help out City Financially?

Pittsburgh’s oversight board is asking tax exempt organizations, such as Pitt, to help the city crawl out of financial ruin by agreeing to a new payroll tax.

Participation would be voluntary and employers, not employees, would pay the tax, according to William Lieberman, who is chairman of the city’s oversight board and a Pitt trustee. The board was appointed by the state earlier this year as part of the city’s distressed status under Act 47. The oversight board can make recommendations to the state legislature, which has the authority to change the tax structure of the city. Currently, the board is trying to fill multi-million dollar holes in Mayor Tom Murphy’s 2005 budget.

“I’m a trustee and I’m not interested in adding expense for Pitt,” Lieberman said “But we’re in a difficult time — every part of the community has to feel a little bit of pain to help the city get out of its problem.”

To that end, leaders from Pitt, hospitals, religious organizations and other tax-exempt groups in the city met Nov. 17 to discuss how they could contribute. Pitt representatives included G. Reynolds Clark, vice chancellor for community and governmental relations and Paul Supowitz, associate vice chancellor for commonwealth and city/county relations. “We’re committed to participating in the process,” Supowitz said.

“We’ve said all along that it’s important to the University to have a healthy city and vice versa.” Supowitz declined to discuss details on if and how much Pitt might contribute to the city.

According to Lieberman, the tax-exempt groups are working together but have made no decision on a tax rate.

“We’ve asked the non-profits to come up with a formula to contribute collectively $6 million to the city for unrestricted use,” he said.

On for-profit businesses, the oversight board has proposed a .55 percent payroll tax (again, paid for by only employers), Lieberman said.

The non-profits could pay a portion, say 20 percent of the .55 percent payroll tax, which would translate into a .1 percent payroll tax, he said. “We want to implement this tax uniformly, across the board – the same rate for non-profits whether they have 10 or 10,000 employees.” Lieberman added that he wanted the non-profits to commit to a payroll tax rate by the first of the year.

Payment and disbursement of the non-profit payroll tax would most likely go through the Pittsburgh Foundation, Lieberman said. Although, the details are not yet worked out.

And if a tax-exempt organization opts out of the payroll tax, there is no hammer to legally enforce compliance, Lieberman acknowledged. “Non-profits have to agree to this, we can’t force them,” he said. “But non-profits that decline to participate, in my view, do so at peril. The legislature is looking to them to help out and the legislature will be unhappy if they don’t help out – there are potential consequences.” If Pitt agrees to a new payroll tax or another form of payment to the city to offset services, it won’t be the first time.

Pitt and two University Health Center hospitals agreed in 1988 to give the city $11 million over the course of a decade to offset the cost of municipal services.

-Mary Ann Thomas

Filed under: Feature,Volume 37 Issue 7

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