UPMC’s $14 Million Obligation

Doesn’t $14 million a year for Pittsburgh’s schools sound great? Think about how many of our furloughed teachers we could hire back, the arts and music programs we could restore, the tutoring for our students. Allegheny County Controller Chelsa Wagner has conservatively estimated that’s how much UPMC would owe the Pittsburgh Public School district if it were to pay its fair share of property taxes. [Post-Gazette, 3-20-13]

Yesterday, Mayor Luke Ravenstahl surprised everyone by announcing that the city would be suing UPMC, challenging the tax exempt status of the county’s largest property owner and our region’s largest employer. It was a bold move, and one that has been gaining public support. Back in September, the Post-Gazette conducted a special investigation revealing that the healthcare giant could be sending Pittsburgh Public Schools as much as $8.5 million if it agreed to a Payment in Lieu of Taxes, or PILOT, plan. It already does this for the South Fayette school district here in Allegheny County, as well as a school district up in Erie, PA. [“UPMC: Forging a Giant Footprint,” September 2012].

In December, I testified before a packed County Council hearing about the impact of UPMC’s tax breaks on our schools. [See “UPMC’s Fair Share”] I argued then that UPMC calls itself a public charity, while behaving like a big-money, global corporation. I reminded our county representatives that school districts in Pennsylvania are particularly vulnerable to tax-exempt property because our state is extremely stingy when it comes to funding public education. Pennsylvania ranks in the bottom ten out of all fifty states in this country in the proportion of school funding provided at the state level: that pushes responsibility for schools down on our local communities, which have no choice except to raise property taxes. When you have a giant charity, acting as a corporation, coming in and taking more and more of that property off the tax roles, our kids wind up paying the ultimate cost.

I applaud Mayor Ravenstahl’s decision to stand up to UPMC. It’s time to say no to their tax breaks that are costing us taxpayers millions of dollars. What I can’t understand is why the Pittsburgh Public School district is refusing to challenge UPMC as well.

The school district’s lawyer, Ira Weiss, was reportedly “unsettled” by Ravenstahl’s decision to sue UPMC, “because he worried it would jeopardize the funding for the [Pittsburgh] Promise, around $100 million over 10 years.” You would think the mayor might be concerned about this, too, since the college scholarship program has been one of the signature achievements of his administration. Ah, but here’s the real reason the school district is backing away from this lawsuit: when the Promise program was developed, the district apparently “agreed it would never challenge UPMC’s tax status or seek tax income.” What’s more, the district now says that “if push comes to shove” it will “do whatever it needs to protect the agreement.” [Post-Gazette, 3-21-13]

Excuse me? Now I love the Pittsburgh Promise program – we are vocal supporters and donors – but this program is not the Pittsburgh Public School district. It is an entirely separate entity, with its own board, staff, and non-profit status. Since when does the school district enter into a binding agreement with an organization saying that it will never pursue tax revenues from them if that organization pays a nice fat sum to a third party? Sure, Pittsburgh Promise scholarships benefit students – but so does a properly funded, K-12 education, which our district is struggling to provide these days. (Do I really need to run through the long list again of all the things our students have lost these past two years?) How are our students going to be “promise ready” when they are sitting in ever larger classrooms, without access to a full, rich curriculum? Did our school board representatives sign off on this agreement?

Let’s take a quick look at the math here. Back in 2007, UPMC had pledged to pay around $10 million per year for 10 years (though these are matching dollars and the Promise program has to raise $1.50 for every $1 UPMC gives – meaning they don’t receive the full $10 million if they fall short of the $15 million goal raised from the public in a year). Now County Controller Wager is estimating – conservatively, she says – that UPMC would owe the district $14 million per year if it paid property taxes on its city property. Even my nine year old can do that math in his head: by this reckoning, UPMC owes our schools far more than it’s paying out currently. And let’s remember, it’s not actually paying our school district a dime.

What’s more, UPMC’s commitment is limited to 10 years. I’m not sure where they are on their payment schedule with the Promise program, but if they started in 2007, then we only have about four years left on their pledge to our city. The thing about taxes is that the obligation doesn’t go away. If UPMC is taxed as a corporation, it will have a yearly tax obligation that will support our schools in perpetuity. So someone please explain to me how this deal with the Pittsburgh Promise program is better for our kids – today or in the long-term. Either way, our children seem to be getting the short end of the bargain.

What I particularly resent is the way that UPMC spokesman Paul Wood issued veiled threats aimed at their support for the Pittsburgh Promise. He suggested that UPMC’s charity work would cease or diminish, complained that its funding of the Promise program is “often disregarded,” and warned that “any sort of new, discriminatory tax scheme would certainly result in less monies for the region.” [Post-Gazette, 3-21-13] I’m sorry, how exactly is paying your fair share a “discriminatory tax scheme”? And you really think UPMC isn’t getting enough credit for its support of Promise scholarships? Its name is prominently displayed in all Promise publications and in just about every media story related to the program. Who in Pittsburgh doesn’t know about UPMC’s support for the Promise by now?

Mr. Wood also characterized the city’s lawsuit as “politically motivated” and catering to “certain labor unions, certain favored businesses, or particular political constituencies.” [Post-Gazette, 3-21-13] I’m not sure how Pittsburgh’s 25,000 public school children factor into “labor unions” and “favored businesses,” but they certainly ought to be a favored “political constituency.” If they were treated as such, we would all agree that UPMC needs to pay its fair share to support our public schools. I can think of a lot of things our district can do with that $14 million every year.

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