Pitt gives money to city despite nonprofit status

Over the last few months, many Pittsburgh homeowners sat down and wrote checks to the city… Over the last few months, many Pittsburgh homeowners sat down and wrote checks to the city for their property taxes. The money covers the city’s costs for services such as fire fighting and police protection.

Few would give money if they weren’t required to.

But Pitt – and several nonprofit groups in the city – did just that. Even though Pitt is exempt from paying property tax on most of its buildings, it shelled out $800,000 as a “gift” to the city, which has fallen on fiscal hard times and has asked many nonprofits for donations.

“When the request came from the city for help in this financial crisis, the chancellor said the University needs a fiscally sound city just as the city needs a fiscally sound university,” Renny Clark, Pitt vice chancellor for community initiatives and chief of staff, said.

Pitt’s generosity isn’t sitting well with some members of the Pitt community, who say the money would be better spent on scholarships and other needed changes on campus, and others aren’t even aware that the payments are taking place.

Sara Fatell, president of Pitt’s Campus Women’s Organization, said Pitt should spend more money on its undergraduates before giving money to the city.

“Even though the city is poor and probably bankrupt at this point, I think we should take care of our own first,” she said. “It’s not selfish, just self-sustaining.”

This situation is not unique to Pittsburgh, but in some areas it has been solved by state intervention.

Connecticut and Rhode Island reimburse local governments for some lost tax revenue. But even in those states, some colleges still make yearly payments. Last year, for example, Connecticut gave New Haven $36 million to make up for Yale’s taxes.

Pitt made its donation to the city as part of the Pittsburgh Public Service Fund, a consortium of donating nonprofits. The city asked nonprofit organizations, with large nonprofits like Pitt in mind, for help three years ago in the face of financial crisis, Ron Lengwin, spokesman for the Fund, said.

“It is a gift. It is truly a gift on our part because we love the city,” he said.

The University donated $800,000 to the Fund last year, according to the Pittsburgh Post-Gazette. Lengwin said donation amounts are not publicly disclosed in order to prevent some organizations from looking more generous than others.

“Without a strong city, each nonprofit is weaker for it,” he said. “All nonprofits contribute to the quality of the city, and we want the city to be strong.”

The city took in more money last year – $121 million – from property tax than any other tax.

The agreement, worth $13.25 million, will expire this year, and Lengwin said he did not know if the organization would renew its agreement.

Bob Strauss, professor of public policy at Carnegie Mellon, said local law could not compel nonprofits to pay, and state law would have to change to make a viable system for donations.

“It’s purely voluntary. There’s no statutory basis for it. And you know we’re not rolling in money,” Strauss said. “Asking for voluntary taxes is an oxymoron.”

In Pennsylvania, Act 55, amended in the ’90s to prevent local governments from challenging universities’ nonprofit statuses, stipulates that universities are tax-free and encourages them to enter into agreements with local governments to defray the costs of local services.

“There’s no legal obligation to do this, and if there should be, then it has to be a state issue, and that gets complicated. Everybody wants money. Hell, I’d like a little more. But the reason they’re tax exempt is because they provide a service so the government doesn’t have to,” Strauss said.

Clark said the donations protected the University from appeals by the city for payments in lieu of taxes, like those some other states have already adopted.

He said Pitt already pays taxes on its commercial properties. These real estate taxes amounted to $543,094 in 2005. According to Pitt’s Annual Report for Fiscal Year 2006, Pitt has $42 million in land holdings – a figure 25 percent larger than the previous year.

In addition, Pitt reported owning $1.7 billion in buildings and improvements on its properties.

Some politicians, though, want Pitt to donate every year, as a few universities around the country already do.

But Pitt isn’t giving in, at least not permanently.

“The agreement is for three years, and it should not be in perpetuity,” Clark said.

With more than one-third of Pittsburgh’s property in the hands of nonprofits but nonprofit donations accounting for only 8 percent of property tax revenue, some officials see incentive to pursue larger donations.

“East Coast cities have learned that rules that were made centuries ago are not applicable today,” Dan Gilman, chief of staff to Bill Peduto, who is the city councilman for District 8, said. “Pittsburgh has just left the red, and it’s headed back into the red.

“What we need is our major nonprofit institutions to become partners with the government to provide the everyday services they use. Across the country, other colleges are paying,” Gilman added.

Some Pitt students agree with Gilman.

Pitt Student Government Board member Jim Priestas said he was not aware Pitt made these payments to the city but wasn’t opposed to them.

He said that while he would love the money to go to scholarships, he thought donations were appropriate in light of services the city provides Pitt, including reduced rates on city buses.

“The city is very good to us,” he said.

New Haven’s controller, Mark Pietrosimone, said nonprofits in New Haven hold about $1 billion in property, and the city is never paid the full amount it would receive if those organizations were taxed. Last year, these losses were in the range of $12 million to $15 million.

There have been historical tensions between the city of New Haven and Yale University, Gila Reinstein, spokeswoman for Yale, said.

“Yale is a very wealthy university, and New Haven is not a very wealthy city. That makes for tensions,” she said.

The tensions are easing now as Yale gives the city money each year to cover lost tax revenue and costs of fire service. In addition to taxes on commercial properties, Yale gave New Haven about $4 million last year as a result of two payment agreements, Pietrosimone said.

But now that the largest university is donating, Pietrosimone said he was unsure if city officials were even attempting to get other universities to donate.

“We have some smaller schools – Albertus Magnus,” he said. “We’ve started to talk to them, but I can’t even say if that’s still going on. You might want to say we’re kind of satisfied now.”

In other places, however, schools have not responded as willingly.

Northwestern University in Evanston, Ill., has fought off several attacks on its nonprofit status in the past. Charles Loebbaka, spokesman for Northwestern, said the Supreme Court has upheld the university’s tax-free status.

However, Northwestern is shrinking its commercial properties instead of expanding, he added. Northwestern has sold off all but about one acre of its commercial holdings.

In Pittsburgh, the remedy is still being debated.

Tony Pokora, Pittsburgh’s controller, said the city is auditing the situation and would make a recommendation soon. He added that city officials are still seeking voluntary agreements with nonprofits, including Pitt.