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January 24, 2013

Debate over nonprofits expands

Debate continues over whether tax-exempt nonprofit organizations are paying their fair share for city services and infrastructure.

In accord with conditions imposed by the Intergovernmental Cooperation Authority oversight board in approving the city’s 2013 budget, a task force is being convened to study nonprofit sector support to the city.

The ICA has ordered the task force to “review, study, benchmark, develop and submit a written proposal to the city and the ICA regarding the level, length and form of support from the nonprofit sector” to the city. Its recommendation report is due by June 30.

A full list of members has not been released, but University sources said Paul A. Supowitz, vice chancellor for governmental relations, will represent Pitt as a member of Pittsburgh’s nonprofit sector support task force.

Joanna Doven, press secretary for Mayor Luke Ravenstahl, said a task force chair is expected to be named this week. Meeting dates have yet to be announced.

Since 2005, some nonprofits, including Pitt, have contributed to the city in lieu of taxes through the Pittsburgh Public Service Fund, which is administered by The Pittsburgh Foundation. (See Sept. 1, 2005, University Times.)

Under an agreement accepted by city officials last summer, the Pittsburgh Public Service Fund pledged to contribute $5.2 million over the two-year span of 2012-2013.

The number of participants has varied since the fund’s inception in 2005, but consortium co-chair G. Reynolds Clark, Pitt vice chancellor for community initiatives, told the University Times that 39 nonprofits contributed toward a $1.96 million payment made to the city on Dec. 19.

That figure represents about three-quarters of $2.6 million pledged for 2012. The remaining balance of more than $653,000 will be paid later this month or in early February, Clark said.

Chancellor Mark A. Nordenberg, in a Jan. 9 University Update (, expressed a lack of confidence in the task force’s ability to solve the dilemma, arguing that its scope is too narrow.

He stated: “The City of Pittsburgh, complying with a mandate from the Intergovernmental Cooperation Authority, one of the two fiscal oversight groups to which it reports, is creating a working group to study steps that might be taken to increase ‘contributions’ from the nonprofit community. A fundamental flaw with this initiative is the narrowness of that charge.

“All who have studied these matters recognize that the principal structural problem facing the city on the revenue side is the dramatic imbalance between the number of commuters who work in the city, directly benefitting from the services that it provides, and the much smaller number of city residents who pay, through their property taxes, for most of those services.

“On the spending side, underfunded pensions continue to loom as a huge problem for Pittsburgh, as they do for other cities. However, the ICA chose not to put these critical matters on the working group’s agenda, virtually ensuring that no meaningful solution can emerge.”

Meanwhile, State Sen. Jim Ferlo (D-38) has announced that he plans to introduce legislation that would impose Pittsburgh’s payroll preparation tax on nonprofits with 250 or more employees.

Ferlo currently is seeking co-sponsors for the measure. The memorandum is posted at

The bill is expected to be introduced later this month, a Ferlo spokesperson said.

In a Jan. 14 press release, Ferlo stated, “As the debate in Pittsburgh heats up on how best to raise appropriate revenue from Pittsburgh’s nonprofit community, I thought it best to put a progressive reform on the table.

“Million-dollar salaries and double-digit raises at our largest nonprofit employers have become commonplace. It’s no longer acceptable for these corporate giants to hide behind their nonprofit status to avoid paying their fare share toward local government.”

Currently, nonprofits are exempt from the 0.55 percent payroll preparation tax that is imposed on employers in the city. Ferlo’s proposal would cut that rate to 0.5 percent and impose a 0.4 percent rate on nonprofits that have more than 250 employees.

He estimated that his plan would raise $10 million-$15 million from the nonprofits annually. Factoring in the proposed reduction for for-profit employers, the reform would net $5 million-$10 million for the city.

“The bottom line is that the large Pittsburgh nonprofits can and should participate as part of the tax base to maintain our city. This proposal is fair and balanced and is in the best interest of our citizens. Pittsburgh is the epicenter of the regional employment base of southwestern Pennsylvania. Corporations housed in the city need to help continue our city’s growth and progress,” he stated.

Based on 2010 figures from the National Center for Charitable Statistics, some of the nonprofits with more than 250 employees in the city are educational institutions including Pitt, Carnegie Mellon, Carlow, Duquesne and Chatham universities and health-care organizations including UPMC and West Penn Allegheny Health Systems.

Other nonprofits of that size include the Carnegie museums, Carnegie Library of Pittsburgh, the Pittsburgh Zoo, the YMCA, the Children’s Institute of Pittsburgh, the Jewish Home and Hospital for the Aged, Marion Manor, the Pittsburgh Public Theater, the Pittsburgh Symphony, the Pittsburgh Opera, the Pittsburgh Cultural Trust and the Civic Light Opera Association, among others.

Pitt’s administration would not provide an estimate of the potential cost to Pitt, should it be required to pay a payroll preparation tax to the city.

John Fedele, senior associate director of News, told the University Times “It’s premature for us to comment on pending legislation” given that Ferlo has yet to submit the legislation.

Based on 2012 figures in the 2013 Pitt Fact Book, approximately 94 percent of Pitt employees are affiliated with the Pittsburgh campus. A 0.4 percent tax on 94 percent of the University’s $869.17 million expense for wages and salaries would add up to more than $3.27 million.

—Kimberly K. Barlow

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