State legislature to propose bill as alternative to 1 percent tuition tax

The state legislature might offer the city of Pittsburgh an alternative to the student tuition… The state legislature might offer the city of Pittsburgh an alternative to the student tuition tax.

The Non-Profit Essential Services Fee Bill would allow municipalities to place a fee on the real estate of nonprofit institutions, such as universities and hospitals, or allow the institutions to continue with voluntary contributions. The bill was referred to the Senate Finance Committee last year, but two state congressmen plan to reintroduce it.

State Sen. Wayne D. Fontana, D-Brookline, will reintroduce the bill that would amend the Institutions of Purely Public Charity Act that governs tax exemptions for nonprofit institutions. State Rep. Timothy Solobay, D-Washington County, plans to introduce a similar bill in the State House of Representatives.

Fontana said that he wants to start a genuine discussion about the role of nonprofit institutions and their contributions to local municipalities. The nonprofit institutions need to give some money in exchange for the municipal services that they expect, he said.

The bill would provide “another alternative for the problems on the table,” especially the controversial student tuition tax, Fontana said.

The student tuition tax was the main subject of a public hearing by City Council on Monday, where officials and students from various universities in Pittsburgh spoke out against the tax.

Five members of City Council came out in support of the student tuition tax, the necessary number of votes for it to pass, at a press conference two weeks ago. Mayor Luke Ravenstahl’s budget for 2010 does not include revenue from the proposed tuition tax, at the urging of the state-appointed Intergovernmental Cooperation Authority.

Instead, the budget includes a series of smaller budget cuts and source of new revenue proposed by City Councilman William Peduto and City Controller Michael Lamb.

Peduto opposed the student tuition tax, saying that it was “illegal and off-target,” to tax students rather than the institutions.

Ravenstahl said that he wanted to pursue the student tuition tax and have it in the books before the end of the year. That would give the city enough time to defend a likely court challenge and collect the tax in 2011, he said.

The proposed student tuition tax would bring Pittsburgh an estimated $16 million in yearly revenue, necessary to fill budget gaps and shore up the city’s ailing pension fund.

Fontana said that the Non-Profit Essential Services Fee would be a viable alternative to the student tuition tax, although it might not generate as much revenue for the city.

The bill exempts nonprofit institutions with less than 50,000 square feet of real estate. Every 1,000 square feet after that could be taxed at up to $100, he said.

To determine the amount of revenue the fee would bring Pittsburgh requires an audit by Allegheny County to determine the amount of nonprofit real estate that would fall under the fee, Fontana said.

Based on anestimate of Pitt property at its main campus in Central Oakland, the proposed fee could cost the University less than $1 million. If the cost were passed on to students, they would pay about $33 each. The currently proposed 1 percent tax would charge undergraduate, in-state Arts and Sciences students $135.

Mary Hines, president of the Pittsburgh Council on Higher Education, said that the universities would focus on the student tuition tax before considering other proposals.

“Until the student tuition tax is off the table, we will not talk about other solutions,” Hines said.

While the student tuition tax would directly impact students, Fontana said the proposed real estate fee placed on nonprofits would not necessarily hurt students or patients. The institutions could choose to avoid raising the cost of tuition by making cuts in other areas of their budgets.

Because the proposed fee would be based on real estate, the amount that the fee costs in the future would remain in the hands of nonprofit groups, Fontana said.

“The institutions have the option to buy or not buy. If they can’t afford the tax, then they shouldn’t buy,” he said.