Favorite

Friday, November 13, 2009

Tuition Tax a Test for Financial Overseers?

Posted By on Fri, Nov 13, 2009 at 5:08 PM

No one knows what lies in store for Mayor Luke Ravenstahl's 1 percent tuition tax. But one thing seems clear: It's going to be a test for the state-appointed financial oversight process. 

There's already been some attention given to a letter city councilor Bill Peduto sent to the Intergovernmental Cooperation Authority today. In that letter, Peduto notes that the ICA was formed in part because in 2003, then-Mayor Tom Murphy proposed a budget that relied on non-existent tax revenue. "We again find ourselves in the same position," Peduto wrote. Ravenstahl's tax is supposed to raise $15 million, but it's not clear whether his tax proposal is legal either. "City Council needs to have these revenues certified and approved by the ICA prior to considering the budget proposal," Peduto asserts.

In fact, there's word from Grant Street that the ICA is indeed trying to schedule a meeting for next week, perhaps as early as Tuesday. And Peduto's letter was actually the second such request made to the ICA this week. On Tuesday, City Council President Doug Shields sent a longer letter to ICA Chair Barbara McNees.

"Without the express and unconditional approval of the mayor's budget by the ICA, the Council cannot proceed with its budget deliberations," Shields writes. 

Shields predicts that educational institutions "will vigorously litigate the matter in the Courts," and complains that the city law department has not provided a legal analysis "that clearly indicates that the city has the ability to enact such a levy." Shields also notes that by state law, the city's budget "shall note include projected revenues that ... require the enactment by the General Assembly of new taxing powers or the approval of a court." 

Shields raises other concerns as well: For example, "How does [the tax] apply to for-profit institutions that already pay city payroll and property taxes?"

So far, the ICA has hedged on all these matters -- which strikes me as kinda interesting. After all, the board was created because city officials couldn't be trusted to make tough decisions. But the ICA hasn't had to make them either -- until now.

To date, the ICA has conditionally approved an earlier version of the city's budget. But that edition contained a vague line item pledging $16.2 million in revenue enhancements -- without saying where the money would come from. Since Ravenstahl proposed his tuition tax, ICA executive director Henry Sciortino has issued little more than boilerplate. According to the Post-Gazette, Sciortino muttered something about how the ICA "urge[s] the city to maximize its operating efficiencies ... before they go after new revenue."

In related developments, councilor Ricky Burgess has made a fiscal proposal of his own: Compile data about how much city services cost ... and about how much university tax-exemptions cost the city. Then use that data to leverage money from the schools.

As Burgess explained to me earlier today, he plans to put three related proposals on council's table next week.

First, Burgess wants to assess what it actually costs, per capita, to provide everyday services to residents. Burgess says that he'd ask the finance department to calculate the city's overall budget for services -- NOT including things like pension payments or debt -- and divide that by overall population. Second, he wants the city to carry out an assessment of the properties owned by tax-exempt universities and other educational institutions. With those numbers in hand, Burgess says, the city could begin negotiating with colleges about "Payments in Lieu of Taxes." 

"That's my approach," says Burgess. "Let's be systematic and data-driven." 

It might not be quite that simple. For one thing, it's notoriously hard to get reliable property valuations on tax-exempt property. Where, for example, do you find the "comparables" for the Cathedral of Learning? It's not like a lot of other skyscrapers in the university district have gone on the market lately. 

Then too, why only look at educational non-profits? There are numerous hospitals scattered around town, each depriving the city of a sizable chunk of property-tax revenue. Why not look at those? 

For two reasons, Burgess says. First, Ravenstahl's tuition tax is targeted at students, "And I want to compare apples to apples." Second, Burgess says, cities like Boston -- where schools like MIT and Harvard each contribute seven-digit sums to city operations -- have already established a precedent for treating universities differently from other big non-profits. Then too, he says, "UPMC already participates in the Pittsburgh Promise" -- a college scholarship program for city schoolkids.

"Pitt and Carnegie Mellon are sitting on billion-dollar endowments," Burgess says. "They have the wherewithal to solve the city's [pension] costs on their own. For them to not participate is unacceptable." 

There's a bit of a good-cop/bad-cop dynamic going on here. Ravenstahl has proposed a tax that goes right after students ... and Burgess has emerged with a proposal that gives schools a chance to assume some of the burden. It's not that he and the mayor were planning this, Burgess stresses. Still, he says, maybe schools will be a bit more responsive to the city's pleas than they've been before:

"In the past, there was no alternative if [the schools] didn't pay," he says. "But the mayor's plan gives us an alternative. If they won't participate on the front end, they leave us no choice."

Favorite

Comments

Subscribe to this thread:

Add a comment

Listings

Submit an event

© 2015 Pittsburgh City Paper

Website powered by Foundation

National Advertising by VMG Advertising