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July 9, 2009

City plan could be costly for Pitt

Last week’s approval by Pittsburgh City Council and Mayor Luke Ravenstahl of the five-year roadmap to steady the city’s shaky finances potentially could cost Pitt some major bucks.

The new Amended Recovery Plan, mandated by a state-appointed oversight board under the Municipalities Financial Recovery Act 47, has authorized the city to pursue several new revenue-generating options, including legislating a 0.55 percent payroll tax on the city’s non-profit institutions, and levying a $50 per undergraduate student, per semester surcharge.

These and other options — including as a last resort raising property or other taxes — are proposed to make up an expected $10 million-$14 million annual shortfall in the city’s worker pension fund commitment, city officials said.

The city’s coffers have in hand less than a third of the nearly $900 million in pension fund legacy obligations for the 3,200 city employees, according to the recovery plan approved by a 6-3 council vote and signed by Ravenstahl June 30. The plan covers fiscal years 2010-2014.

Gov. Edward G. Rendell declared Pittsburgh a distressed municipality in December 2003. A team of state-named financial managers and attorneys working under Act 47 has overseen the city’s financial affairs since City Council adopted the initial five-year recovery plan in June 2004.

The approved successor plan (available at lists as the first alternative hiking the city employment (EMS) tax from $52 to $145 annually and/or expanding the city payroll tax to the city’s non-profits, including Pitt. Both actions require the state legislature’s approval.

If those actions are not authorized by the state, the Act 47 recovery plan recommends as the second alternative selling or leasing the city’s 11 Parking Authority garages to a private company or, if that is unsuccessful, assessing surcharge fees on local college students, hospital admissions and all-day parkers at Parking Authority garages.

The mayor’s office has stated that a $25 surcharge on hospital admissions could generate $5.4 million a year; a $5 fee on all-day parkers could net $10 million a year, and a $50 per student, per semester fee could bring in $3 million annually.

The plan does not specify who would be responsible for the student surcharge: the institution, the student or some combination of the two.

Robert Hill, vice chancellor for Public Affairs, stated, “The University of Pittsburgh is a partner with the city, cooperates with the city and supports the city and the region in many ways. Pitt already pays more than $3 million in taxes and fees to the city annually. We remain opposed to any efforts not recognizing the University’s not-for-profit status and any actions putting us at a competitive disadvantage against peer institutions [such as a student surcharge].

“Most of our peer institutions don’t pay municipal taxes or make payments in lieu of taxes. Anyone interested in the economic welfare of the region should be against the city’s proposals; those proposals are against the University’s best interests and, therefore, the best interests of the region.”

In addition to the options above, the Amended Recovery Plan directs the city to obtain contributions of at least $6 million annually from the non-profit community, beginning in fiscal year 2011.

According to the Act 47 plan, “This may be achieved through increased voluntary contributions through a revised agreement with the [Pittsburgh] Public Service Fund; … pursuing [Pennsylvania] General Assembly approval for amendments to the payroll preparation tax to include non-profit institutions, [and] initiating new legally enforceable fees applicable to services rendered to tax-exempt institutions,” such as a tax on the city-provided water supply.

Pitt is a charter member of the Pittsburgh Public Service Fund, a consortium of more than 100 local universities, hospitals, foundations and other non-profit organizations that voluntarily agreed to help the cash strapped city in 2005-2007.

The group gave a total of $13.98 million to the city over those three years, according to city records. Under the service fund’s bylaws, Pitt’s contribution was not made public.

Attempts to negotiate a new agreement after the public service fund contract ran out at the end of 2007 are ongoing. The service fund has proposed an amount it would contribute under a new agreement, but neither fund nor city officials have made that amount public except to confirm it would be less than the nearly $14 million the fund provided in 2005-2007.

“We have been generous in our voluntary support of the first public service fund and continue to pledge funds to the new public service fund now on the table,” said Hill, who did not specify the amount of Pitt’s pledge. “The fact that this new public fund has less in it [than the 2005-2007 agreement] is not because of Pitt. The city’s two big problems with the fund are that a number of the largest donors to the public service fund shifted their donations to support the Pittsburgh Promise instead, and a substantial number of small donors are so pressed by the economic downturn that they’ve dropped out.”

City Council is expected to determine which revenue-generating options it will pursue by the end of the city’s fiscal year, Sept. 30.

—Peter Hart

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