Pittsburgh mayor shelves plan to tax tuition

Six weeks after touting a tuition tax as a key component of Pittsburgh's fiscal recovery, Mayor Luke Ravenstahl yesterday shelved the levy in favor of pledges of help from universities, tax-exempt organizations, and the corporate community.

He came away from the bruising battle over the tax proposal unable to show any down payment toward the $15 million a year he said he needs to restore health to the city's pension fund. He was able, though, to claim new allies in what could be an equally tough slog in Harrisburg.

Ravenstahl said the University of Pittsburgh, Carnegie Mellon University, and nonprofit health insurer Highmark Inc. had agreed to donate more to the city than previously, but would not cite a figure nor a number of years, and emphasized a planned push for state help.

An as-yet-undefined group called the New Pittsburgh Collaborative "will sit down in the early part of 2010 and come up with a strategy and a goal, if you will, on what it is we will ask Harrisburg for," Ravenstahl said at a news conference.

Flanked by university presidents, six City Council members, a handful of corporate leaders, and one student, he said the collaborative would craft "a plan that will have the input of City Council, of the corporate community, of the nonprofit community."

The collaborative will then "physically go to Harrisburg" to seek changes in the rules that govern the city's finances.

A coalition could help the city to get Harrisburg's attention, but might not guarantee success.

Some of the ideas the mayor has floated - like raising the $52-a-year tax on people who work in the city to $144, or expanding a tax on payrolls to include tax-exempt employers - might be tough sells next year, when all state House members and half of the Senate face voters.

A tax hike is "probably a nonstarter, especially in an election year," said State Rep. David Levdansky (D., Allegheny).

The show of unity came after more than a month of sharp division between the city and its universities, which opposed what would have been a first-in-the-nation 1 percent tuition tax.

After the state declared Pittsburgh financially distressed in 2004, the city sought $6 million annually from nonprofits, which are exempt from most taxes, saying the money would help offset city services including police, trash pickup, and road maintenance.

The Pittsburgh Public Service Fund, a group of about 100 nonprofits, formed in response, and contributed nearly $14 million for 2005-07. But that number has decreased, and this year, the city expects just $1.6 million from the fund.

Early this month, the mayor demanded a pledge of $5 million in donations in return for dropping the tax proposal. He apparently didn't get that. Though Pitt, CMU, and Highmark have apparently pledged to give more than before, the mayor said the parties "don't have that deal structured yet."