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Official: City ready for EMS tax hit

| Thursday, Feb. 8, 2007, 12:00 p.m.

If more of Pittsburgh's workers learn what Elizabeth Gilbert knows, the city could lose $1.5 million to tax refunds every year.

University of Pittsburgh regional economist Chris Briem estimates at least 36,000 people work in the city and, like Gilbert, earn less than $12,000 a year, making them eligible for a $42 refund of the $52 Emergency and Municipal Services Tax -- a one-time payment deducted from employees' first paycheck each year.

If all of them applied, Pittsburgh would have to dole out roughly $1.5 million every year in refunds. But fewer than 7,500 people who work in Pittsburgh and were eligible for a refund applied for one last year, according to data provided by the city. The city paid about $342,000 in refunds last year.

The state Senate is considering a bill that would change how cities collect the tax -- cutting Pittsburgh's take by $6 million next year, and $3 million annually after that. That doesn't count the potential $1.5 million loss to refunds. But officials said city services such as police protection and emergency response would not be impacted.

"Mayor (Luke) Ravenstahl anticipated this was going to happen," said Scott Kunka, director of the Finance Department and Office of Management and Budget. "The projected losses are already included" in the budget.

Gilbert, 25, of Wilkinsburg, said she made less than $10,000 each of the past few years working at a McDonald's, a telemarketing company and a nonprofit in the city. She wanted to apply for an EMS tax refund last year, but didn't have a required pay stub. She'll apply this year, she said.

"It's a pain in the neck," Gilbert said. "We should just get our money back whenever we file our (tax returns)."

The 2005 state law that raised the tax to a maximum of $52 says anyone making less than $12,000 or working two jobs is eligible for a refund. Anyone working in Pittsburgh must pay a minimum of $10, regardless of income. The money must be used for municipal police, fire or emergency services; road construction or maintenance; or to reduce property taxes.

City records show 2,167 people applied for a refund in 2005. They were eligible to do so immediately because they worked two jobs. The number grew to 7,499 last year as people applied for refunds of the taxes they paid in 2005.

Kristie Weiland, tax-campaign coordinator for Just Harvest, a nonprofit organization that seeks to eliminate hunger and poverty, said "most people apply for the refund because we've told them to." She and others said most of the eligible people who don't apply either don't know about it or haven't saved their pay stubs.

Just Harvest helped file tax returns for 1,600 people last year, 800 of whom qualified for the refund.

The organization this year led a City Hall rally protesting the way the tax is deducted in one payment. A bill approved this week by the state Senate Appropriations Committee would spread out the payments to $1 each week. The Legislature passed an identical bill in November, but Gov. Ed Rendell vetoed it because it was too late in the fiscal cycle for municipalities, said the bill's sponsor, Sen. Patrick Browne, R-Lehigh County.

"We were hearing from constituents that a one-shot, $52 tax was far more oppressive," Browne said.

Employers would pay the city $13 for each employee every quarter. Kunka said the new collection method would be more fair for low-income workers, but would reduce the amount the city collects.

The city no longer would be able to collect $52 up front from an employee who works only part of the year, he said. Although the city could not estimate how many people make less than $12,000, Kunka projects the loss of taxes paid by seasonal and part-time workers would be about $3 million.

Collecting the money quarterly would cost the city another $3 million during the first year, since the fourth-quarter taxes won't be paid to the city until the following year, Kunka said.

The lost revenue is enough to pay for paving about 30 miles of city roads. But Kunka insisted the city is planning for the loss.

"It's going to cost us money, but the mayor thinks it's the fairest method," he said. "We were trying to be proactive because it already passed the Legislature once. We will provide public safety services with the funds we have."

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