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City waits on nonprofit donations

| Thursday, June 2, 2005, 12:00 p.m.

Six months after being asked to help the city by contributing $6 million annually, Pittsburgh's tax-exempt nonprofits haven't made a payment -- and aren't being pressured to do so.

If the city is on track to end the year with an $11 million surplus, as Mayor Tom Murphy asserted last month, some leaders of nonprofits who had committed to giving now wonder whether the need truly exists.

"I've heard there was a shared reluctance," said James Edwards, chairman of the distribution committee for the McCune Foundation, which doles out $25 million annually to health care, educational, social service and community projects.

Like other large foundations in Pittsburgh, McCune probably will ante up to help balance the city's budget, "if we have to, if others do," Edwards said Wednesday. "But we're not going to lead the charge."

A lawsuit filed against the city and its firefighters union by Pittsburgh's state-appointed oversight board makes the matter more confusing, said the Rev. Ron Lengwin of the Catholic Diocese of Pittsburgh. The oversight board says the city can't afford the raise-granting five-year contract with firefighters and wants a judge to cancel it.

Oversight board Chairman William Lieberman has told Lengwin that because the city isn't complying with its agreement to control spending, the nonprofits don't have to make any payments, said Lengwin, who is spokesman for the Pittsburgh Public Service Trust Fund that was formed to bring together Pittsburgh's nonprofits to contribute to the city.

"That doesn't mean we're not going to try to continue to raise funds and hold the money in the trust," Lengwin said.

Lieberman said the oversight board isn't advising nonprofits to contribute anything at this point.

"The nonprofits have told us they're not going to release any money until we opine that the city's in good fiscal condition," he said. "The oversight board's not ready to make that opinion."

Lawyers for the city and the trust fund are still writing an agreement, and it likely won't be signed until the oversight board's lawsuit is settled. In the meantime, the trust fund intends to send 1,000 letters to nonprofits soon, reiterating the need for their cooperation, and will hold a meeting later this month.

More than 80 organizations talked a couple of months ago in a series of meetings, Lengwin said, but no guidelines have been established to determine how to meet the $6 million goal set by the five-member oversight board, created by the Legislature, and the separate Act 47 recovery team appointed by Gov. Ed Rendell.

"It's not a goal that we selected for ourselves," Lengwin said. "At this point, I'm not sure we'll be able to reach that goal, but that has not been determined."

The groups are holding firm to a three-year, $18 million commitment, even though they've been asked to consider giving money for seven years, he said.

In a "good news for the city" announcement May 13, Murphy said the city would end the year $11 million in the black, if revenue and spending patterns from the first quarter hold. Murphy in April had predicted a $12.5 million surplus, but revised the number after reviewing full first-quarter figures from the city controller's office.

Either way, the $6 million from nonprofits is part of the budget and was included in the mayor's projections, spokesman Craig Kwiecinski said. That nonprofits haven't been forthcoming doesn't concern the mayor yet, Kwiecinski said.

"We're confident that the nonprofit community is going to come through on their commitment," he said.

Lieberman said he doubts the mayor's numbers.

"If they have a $12 million surplus, what do they need nonprofit money for?" he said.

Jim Roberts, spokesman for the Act 47 team and a lawyer with the Downtown firm Eckert Seamans Cherin & Mellot, did not return calls yesterday.

The two oversight panels in November suggested contributions from nonprofits to help cover the cost of city services they use. The $6 million goal was based roughly on a then-proposed payroll tax on for-profit companies in the city, Lieberman said at the time.

The state and city cannot tax nonprofits. A 1997 state law created broad exemptions for IRS-recognized charitable and nonprofit organizations, and requires cities to prove that a nonprofit doesn't deserve the tax exemption.

Legislators, who approved new and increased taxes for the city last year, aren't putting pressure on the nonprofits. Having them give money to the city is fine, if they want to, said Rep. Mike Turzai, R-Bradford Woods, but he'd rather see something more concrete.

"I think the most important thing that has been on the table and still hasn't happened is having the hospitals take over emergency medical services," Turzai said. "I think a lot of focus needs to be on that issue."

Nonprofits that choose to contribute to the trust fund will do so not because they don't pay taxes, nor because they perceive a threat, Lengwin said. The idea has been pitched to them as a voluntary, cooperative effort.

"We recognize the difficulty the city is having, and because of our love for the people of the city ... we have chosen to try to do our best to assist the city over the next three years," Lengwin said.

The $6-million-a-year goal could be hard to reach, he acknowledged, and some nonprofits probably won't be able to contribute.

"These aren't all large groups; some are very small groups," Lengwin said. "A good percentage of nonprofits are already in the red themselves. Some people have to make a decision in order to make a contribution to the city -- do we diminish the ministry we offer to people who are in need?"

Lengwin said the Catholic Diocese intends to contribute.

The city's nonprofits share a belief that a partnership with city government is a good idea, Lengwin said, and even if no money materializes, he will try to foster positive relations.

"I think people recognize that nonprofits provide significant benefits to the public and relieve the government of some of its financial burden, and so we believe that we are contributing to the public good," Lengwin said.

That's the key issue for the McCune Foundation's Edwards, a Squirrel Hill resident. The foundation has a civic job to do, Edwards said, but the idea of tapping nonprofits to help balance the city's budget "personally repulses me."

"I think the city has to get its act together independently before sticking a hand in that till," he said.

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