All Eyes on Pittsburgh

Pittsburgh mayor Luke Ravenstahl, just seven years out of college, is igniting ire with his plan to levy a 1 percent tax on tuition collected by the city’s 10 nonprofit colleges and universities.

Introduced as part of Ravenstahl’s 2010 budget less than a week after he won reelection on Nov. 3, the so-called “Fair Share Tax” would raise $16.2 million in annual revenue for the city, his estimates claim. “We value Pittsburgh’s nonprofit community,” he said as he announced the tax. “They are our major employers, and a big part of why our economy continues to be strong. However, we can no longer afford to provide city services to those who are not paying their fair share.”

Students would have to pay between $27 and $409 annually, depending on tuition, to their colleges and universities, which would then remit the money to the city. Students at the Community College of Allegheny County would pay the least and students at Carnegie Mellon University would pay the most.

The state-appointed Pittsburgh Intergovernmental Cooperation Authority -- which counts four university-affiliated panelists among its five members -- rejected the budget Tuesday on the grounds that it violates Pennsylvania tax law, but the mayor vows to fight on. Because the panel's decision hinged on the fact that it had never been approved by a city or state legislative body, the mayor is now pursuing the next logical move -- convincing the City Council to approve the tax. "I’m going to continue to fight for the residents, continue to fight for what’s fair,” he said Wednesday.

But to the administrators and students at Pittsburgh’s institutions of higher education, the proposal is anything but fair. “We’re opposing the principle of taxing tuition,” said Mary Hines, president of the Pittsburgh Council on Higher Education (PCHE), which represents the city’s 10 nonprofit accredited colleges and universities. “It’s the mayor’s attempt to try to tax us to make up for our property tax-exempt status."

Pittsburgh would direct $15.2 million of the projected tuition tax revenue to its ailing pension fund and the remaining $1 million to its library system to keep branches open. Hines said she finds it “convenient” that the p

Luke Ravenstahl, Pittsburgh's mayor

rojected revenues fit so squarely with what would otherwise be the city’s budget deficit, especially since PCHE has “no idea what model the mayor used to come up with the $16 million estimate.”

The editorial boards of the student newspapers at the University of Pittsburgh and Carnegie Mellon have blasted the proposal, arguing that students do pay plenty of taxes to the city. The added cost “could prevent prospective students from coming to Carnegie Mellon and Pittsburgh would be missing out on some of the best talent from around the world,” read a staff editorial published Monday in The Tartan.

Ravenstahl’s press secretary, Joanna Doven, said the mayor is “a huge proponent of higher education and firmly believes that this 1 percent tax on tuition is not going to change a student’s mind” about enrolling in a college or university there. The University of Pittsburgh, she said, plans a 4 percent tuition hike next year. “A 1 percent tuition tax … is a small fraction of what that increase is going to be.”

Hines said the mayor was missing the fact that most students “are not paying the sticker price” and that tuition increases aren’t haphazard.

First in the Nation

A tuition tax in Pittsburgh would likely be the first in the nation, and much attention is focused on western Pennsylvania.

“As far as our research shows, there is no other city in the country that is taxing students’ tuition,” Hines said. Since Ravenstahl announced his proposal, “we’ve heard an outcry from institutions across the nation. We’re very sensitive to the fact that a lot of people out there are looking to us, to see what happens here in terms of what it could mean for them.”

Kim Griffo, director of the Clemson University-based International Town and Gown Association, said her group is watching carefully. “This is a hot topic across the country” that is “quietly brewing in university and college towns,” she said. “All eyes are on Pittsburgh to see how they handle this and whether it works.”

Other cities are trying to find some way of generating tax revenue from the thousands of students who study there each year. Boston Mayor Thomas M. Menino launched a task force in January to standardize and increase voluntary payments coming from the city’s colleges and universities, as well as its hospitals. David N. Cicilline, mayor of Providence, Rhode Island, this spring proposed a $150 per semester tax on students at the city’s four private colleges.

The Association of American Universities (AAU) first warned its 62 member institutions of the coming wave of municipalities looking to tax higher education about 18 months ago, said M. Matthew Owens, an associate vice president for federal relations. “States and localities look to universities as a revenue source in tough times,” he said. “The greater the pain gets, the more likely the momentum.”

Robert M. Berdahl, AAU’s president and former chancellor of the University of California at Berkeley, said Pittsburgh’s colleges and universities are facing a “perennial problem” of town-gown relations, where cities and towns search to find new ways of extracting revenue from the institutions that call them home. While he led Berkeley, he said, the city did “all kinds of studies” to try to find new sources of income from the university.

What Colleges Do Contribute

Beyond the challenges that municipalities face in trying to skirt tax-exempt status is the fact that many institutions do indeed make substantial contributions to their hometowns.

Colleges and universities, Berdahl said, don’t try to be free riders in their communities. Many “do contribute offset money for things like fire, police, sewage and so on …. They try to calculate their fair shares.”

In Pittsburgh, PCHE’s Hines said, the 10 colleges and universities pay $23 million annually in taxes to the city for payroll, parking, business privileges and any real estate not directly related to their educational missions.

Some also make voluntary contributions to the city’s public service fund, she said, although “fewer organizations are participating” than have in the past. The University of Pittsburgh Medical Center system has redirected a $10 million annual contribution from the fund to Pittsburgh Promise, a program created by Ravenstahl to fund college costs for the city’s top high school graduates. Others have backed out “for financial reasons, some for philosophical reasons.”

On Wednesday, the Pittsburgh Post-Gazette reported, a member of the Pittsburgh City Council proposed a bill that would authorize a study of the value of property held by tax-exempt institutions and the costs the city incurs from providing services to its students. Under the plan, colleges and universities would then enter into negotiations to figure out acceptable values for their voluntary contributions.

In addition to institutional payments, students already contribute substantially to the city, said Hines, who is also president of the predominantly female Carlow University, where more than a third of undergraduates are over age 25. Many of her students, and students at other institutions in the city, also live and work within its borders, paying income and property taxes that compensate for their “fair share” of city services.

“There’s always been a sort of town-gown animosity, the perception that the students don’t give, they just take,” she said. “Towns and cities think students are just these rich, privileged 18- to 21-year-olds who just take from the city and then leave once they graduate. They’re not and they don’t.”

The Community College of Allegheny County serves the city “many of them who would be affected by this are Pittsburgh residents and so are already contributing through their wage taxes, property taxes, etc.,” said David Hoovler, a spokesperson. “With the population we serve, in particular, there are many students who struggle to pay our tuition, already the lowest in the city.”