Peduto Could Shift Millions in Taxes to Schools

Dec 2, 2013

Every year, the city of Pittsburgh collects about $10 million in taxes that many members of the Pittsburgh Public School Board feel is rightfully the district’s. 

Now, Pittsburgh Mayor-elect Bill Peduto says he might be willing to send the cash back to the district, but only if the city’s nonprofit sector steps up with a few dollars of its own.

“It has never come up for discussion,” Peduto said, “but that has to happen in conjunction with a long-term commitment from the major nonprofits, because we don’t have enough money to just open up our budget and give anybody money.”

In 2006 the state shifted from the district to the city .25 percent of the three percent wage tax paid by city residents. It was part of the city’s Act 47 long-range recovery plan. That shift has totaled about $65 million in the last six year.

In the meantime, the district has closed schools in an effort to balance its budget and members of the Pittsburgh City Council and the Mayor’s Office have increasingly begun to look for ways to exert more control over the district.

Peduto says he sees himself as a mediator in looking for ways to improve the district, which is faced with a new teacher contract in 2015 and the projection of a $46 million budget deficit in 2016. 

“Offering the opportunity for additional revenue is a partial solution but in return also asking for things that would make the district stronger,” Peduto said at a recent news conference introducing his new cabinet and outlining some of his priorities.

Between 2005 and 2011 a consortium of about 40 of the city’s largest nonprofits voluntarily made payments to the city of nearly $14 million dollars. The deal between the city and the so-called Pittsburgh Public Service Fund expired in 2011, and the Ravenstahl administration has not been able to negotiate a new deal. 

Further complicating the deal is a suit filed by the Ravenstahl administration challenging the nonprofit status of UPMC.

Peduto says they have been working with the nonprofits, but Pittsburgh Public Service Fund spokesperson Renny Clark says there have been no talks involving the idea of shifting the income tax revenues to the district if the nonprofits reach an agreement with the city.

Peduto says it would have to be a long term agreement and part of a 5 year Act 47 plan that would move the city closer to being removed from the financial oversight.

“It’s like playing three-dimensional chess,” Peduto said. “We need certain help from the nonprofit community in order to be able to help the schools but we will have to stay under act 47 for a number of years. What that will get us in a stable budget by 2018, more stable schools and a long term commitment from what is the biggest part of our economy, the major nonprofits within in the city.”

Peduto says the deal is absolutely critical for the city, but he would not say how large the commitment would need to be from the fund before he is willing to shift .5 percent income tax revenues back to the school.

Up until 1997 cities in Pennsylvania would reach “Payment in lieu of taxes” (PILOTS) agreements by threatening the nonprofit status of the major tax-exempt landholders in their city. A change in state law took away much of the threat and cities across the state struggled to put together smaller budgets. 

Peduto transition team chief of staff Kevin Acklin says they will not even call the potential payments from the nonprofits PILOTs. Instead, he continues to stick to the word “agreement.”