Tuesday, December 18, 2007

Smithers! Unleash the Pittsburgh Promise Tax Credits

In regards to the announcement that local medical behemoth UPMC is asking for tax credits, PittGirl is torn between thinking that this is a brilliant move to reward the organization for its generous contribution to the Pittsburgh Promise and thinking that the Mayor is the toadying Smithers to Jeffrey Romoff's (UPMC's CEO) Mr. Burns.

I don't think I'm nearly as torn on the matter, except to say that Smithers is at least a competent toady.

In what can only be described as a high stakes shell game, the Mayor is pushing council to OK a pre-emptive tax break to a non-profit (untaxed under current law) for matching funds contributions made to a mayoral pet project.  Now, don't get me wrong, the Pittsburgh Promise idea has a lot of... erm... promise, but it's hardly the type of program that is essential to the City qua its function as a City, as would be road maintenance, public safety, zoning, tax collection, parks, etc.  Those things are the kinds of services that the City would be paying for with the money that it could receive from a UPMC tax contribution which it doesn't receive yet anyhow.  

Still with me?  Good.

So, if you can't figure it out, it sounds like UPMC is betting that the law will, in fact, be changed to allow non-profits to be taxed and is trying to pre-emptively offset its losses.  

The problem, of course, is that once UPMC does it, there is precedence for other non-profits to pull the same kind of crap, earmarking money that would have gone into roads/bridges/trash collecting/etc. for a mayoral fancy.  If that happens, we still have the status quo... which, as you know, is Latin for "the mess we're in."

Of course, the City may have the last laugh: if the Pittsburgh Promise works out, perhaps down the road we'll have smarter politicians and a smarter voting public that won't fall for this type of bullshit.  


Sherry said...

we can only hope so.

Anonymous said...

UPMC drops tax credit bid
Goes forward with pledge of $100 million to Promise
Thursday, December 27, 2007
By Matthew P. Smith, Pittsburgh Post-Gazette
Citing the controversy that has embroiled its $100 million pledge for a city high school scholarship program, the University of Pittsburgh Medical Center yesterday said it was dropping its request for a possible tax credit in exchange for its commitment to the Pittsburgh Promise.

On Dec. 5, UPMC said it would give $100 million over 10 years to fund the Pittsburgh Promise, an effort by the city and the Pittsburgh Public Schools to ensure that city high school graduates have the money needed to go to college.

Several days after the much ballyhooed announcement, Mayor Luke Ravenstahl on Dec. 17 asked City Council to ensure that if UPMC was ever required to make payments to the city, it would get what a proposed resolution calls a "tax credit equal to certain payments which may be made by UPMC to the Pittsburgh Promise."

His request generated controversy and drew immediate criticism from City Council members who balked at the idea of giving the medical giant a tax break. There was no mention of a tax credit or tax break at the time UPMC made its pledge to the Pittsburgh Promise.

Last week, the city school board voted to give UPMC possible tax credits in exchange for its commitment. But City Council members have balked at passage and called for a public hearing on the matter.

In a statement yesterday, however, UPMC said it was waiving the tax-break condition and would make its initial $10 million contribution and $90 million in matching donations to the Pittsburgh Promise.

Jeffrey Romoff, UPMC president and CEO, said UPMC was waiving the provisions of its commitment that would have required City Council approval.

"The initial outpouring of enthusiastic support for The Pittsburgh Promise speaks to its immense value to the community and our children," Mr. Romoff said. "With our decision to move forward without requiring City Council approval, we ask that everyone refocus attention on what is truly important -- building and sustaining widespread and financially significant public support for The Pittsburgh Promise, which is essential for the program's success."

City and school officials said the tax credit agreement would be invoked only if the state Legislature or courts took the unlikely step of taxing nonprofit organizations such as UPMC or required them to make payments in lieu of taxes.

By removing its requirement for Council approval, UPMC believes it has eliminated the source of controversy surrounding its commitment, UPMC's statement said.

"We believe it is more important to move forward with the program than to worry about a hypothetical situation, which is highly unlikely to arise," UPMC general counsel Robert Cindrich said in a statement.

Pittsburgh Public Schools Superintendent Mark Roosevelt said last night he was pleased to hear that UPMC had moved to end the controversy surrounding its pledge.

"It certainly should put it (controversy) to rest but I didn't think there was anything to put to rest in the first place," Mr. Roosevelt said. "There was a slim chance of them being taxed anyway.

"I think their comittment to the promise is very real and I think it got labeled as something else."

Mr. Ravenstahl could not be reached for comment last night.

UPMC said it would continue contributing to the Pittsburgh Public Service Fund, which the city established to seek money from nonprofits to bolster its finances. UPMC has voluntarily given around $25 million to the city since the mid-1980s, including $1.5 million a year the last three years. The nonprofit will give another $1.5 million in 2008, according to Mr. Cindrich.

UPMC said it could withhold its contribution to Pittsburgh Promise if the hospital system encounters a deficit in any year. UPMC earned a record $618 million in fiscal 2007.

"We encourage business leaders, foundations and individuals to join us in attaining the dual objectives of The Pittsburgh Promise: making higher education achievable for Pittsburgh's public school students and their parents, and enhancing the growth, stability and economic development of the City by providing a substantial incentive for families with school-aged children to reside in the City," said Mr. Romoff.

Matthew P. Smith can be reached at msmith@post-gazette.com or 412-263-1738.
First published on December 27, 2007 at 12:07 am