Oversight agency approves Pittsburgh's 2013 budget while targeting nonprofits
One of two financial oversight agencies on Tuesday joined Pittsburgh in pressuring nonprofits to increase their financial contributions to the cash-strapped city.
The Intergovernmental Cooperation Authority approved Mayor Luke Ravenstahl's proposed 2013 budget under one condition: that the city set up a task force to consider whether nonprofits should give the city more money in lieu of taxes.
Critics say nonprofits such as UPMC and the University of Pittsburgh are cash cows that should pay taxes on land they own. The nonprofits counter that they give millions to charity, pay millions in state and federal taxes and are among Western Pennsylvania's largest employers.
“I think everybody has an important role to play in what makes up the quality of Pittsburgh, and hopefully the not-for-profit community is not just seen as another source of income,” said Reynolds Clark, who chairs the advisory board for the Pittsburgh Public Service Fund, which represents city nonprofits.
Authority Chairman Dana Yealy said the task force could induce greater contributions by operating under the glare of the public eye. The city negotiates too privately with nonprofits, he said.
“Transparency brings a motivational aspect,” Yealy said.
Ravenstahl must assemble the group by year's end. It must include residents and representatives of nonprofits, Allegheny County, labor and other stakeholders. They must conclude their work by June 1.
Nonprofits gave Pittsburgh $19.3 million since the public service fund was formed in 2005. They're finalizing an agreement projected to reap $2.6 million annually in 2012 and 2013.
City Council this year began reviewing law with the hope of finding precedent that would allow it to tax nonprofits. Members said they favor expanding the city's 0.55 percent payroll preparation tax to nonprofits. That would generate $20 million annually, they said.
“We need some agreements with the nonprofits that gets them closer to paying their fair share to the city,” said Councilman Ricky Burgess, who chairs the finance committee.
Yealy said the city in recent years did well digging itself out of a financial hole that projected crippling budget deficits, yearly debt totaling $90 million and unfunded pension liabilities of $375 million. It must continue to cope with long-range financial problems that include pension obligations of about $1 billion.
The Act 47 oversight team last week recommended that the state eliminate oversight, based on the city's improving financial condition. The authority would remain.
City Finance Director Scott Kunka said pension funds, as of Sept. 30, earned 11.2 percent on investments and likely will earn $41.3 million for the year.
That would permit a pension contribution next year of $107 million, including $13.4 million from employees, Kunka said. It would be the first time in years that the city — which projects an $83.4 million pension payout next year — gained ground on a $454 million unfunded pension liability.
Controller Michael Lamb, who advocated for annual pension payments of at least $60 million, said the city shouldn't count on wildly fluctuating financial markets.
“By putting in smaller amounts of money, you're either just maintaining yourself or you're treading water backward,” Lamb said.
Bob Bauder is a staff writer for Trib Total Media. He can be reached at 412-765-2312 or firstname.lastname@example.org.