Corporate Grinches

It’s legal – for now – but it stinks. Corporations are rushing to stuff their stockings with our public tax dollars before the New Year when the law changes. Right now companies are allowed to buy giant office buildings here in Pittsburgh without paying a penny in deed transfer taxes, which means millions in lost revenue for the school district, city, and state. These corporate Grinches are stealing public education.

Last year, a New York group under investor Mark Karasick bought the U.S. Steel Tower – one of the signature pieces of our downtown skyline – for $250 million. [Post-Gazette, 11-17-11] Using an “89-11” tax loophole, the real estate investors agreed to purchase 89% of the property up front, then the remaining 11% in three years time, handily avoiding the deed transfer tax. Because the school district receives 1% from this tax, that particular transaction cost Pittsburgh Public Schools $2.5 million right at the very moment Governor Corbett was brutally slashing the education budget. Two and a half million dollars could have saved a lot of those teaching jobs the District was forced to eliminate.

These things have been going on for years, with legislators crafting tax policies full of holes and then looking the other way as corporations moved in to take full advantage of these gifts from the public coffers. The U.S. Steel Tower sale tipped the scales, however, and State Senator Jim Ferlo (a Democrat from Highland Park) introduced an amendment to close the 89-11 loophole. I applaud Senator Ferlo and our state legislature for moving on this bill, and Governor Corbett for signing it into law this past summer. At the time, Senator Ferlo said, “We must not tolerate overt tax avoidance policies in the tax code that let big business off the hook and leave everyone else holding the bag.” [Post-Gazette, 7-12-12] I agree, and would add that those ultimately left holding an empty bag are our kids, whose public schools are being actively de-funded.

Unfortunately, the 89-11 rule doesn’t disappear until January 1st, so investors had a strong incentive to get their holiday shopping done early this year and close on some big real estate transactions. Another New York firm, KKR & Co. LP just bought the Del Monte Center office building over on the North Shore for $52 million. KKR also acquired the Del Monte company itself last year, so the investment firm is now a major corporate citizen of this city. But they won’t be handing over a dime in transfer taxes to our schools, which means a loss of over a half a million dollars for public education in Pittsburgh. [Post-Gazette, 12-19-12] Too bad their idea of corporate citizenship is to bilk taxpayers and our students of desperately needed revenue.

And KKR has some company. The group that just sold them the Del Monte building is selling another six-story office building on the North Shore: the California investment group IRA Realty Capital is buying the Equitable building for $31 million. This deal will cost Pittsburgh taxpayers over $300,000 in lost money for our schools. [Post-Gazette, 12-19-12] That’s a lot of library books for our ten schools that had empty shelves at the beginning of this school year.

Ah, but wait, it gets worse. The Del Monte and Equitable buildings were both owned by a real estate group contracted by the Steelers and the Pirates to manage the development of property between the two new stadiums. That group, the Continental Real Estate Cos. from Columbus, Ohio, received millions in taxpayer-funded infrastructure upgrades on the North Shore to support the development work. Ira Weiss, lawyer for the Pittsburgh Public Schools, notes that, “These developers come to the taxing bodies, extract concessions from them in the way of tax increment financing and other devices, then turn around and put a dagger in the back of these taxing bodies when they have a chance.” City Controller Michael Lamb called it a “slap in the face.” [Post-Gazette, 12-19-12] I’ll say. These two transactions alone constituted nearly a one million dollar slap in the face to every single student in Pittsburgh.

And KKR & Co. and IRA Realty Capital can welcome another corporate scrooge to their ranks. Highwoods Properties of North Carolina, which already owns PPG Place, just bought the EQT Plaza skyscraper downtown for $99.2 million. Crossing that sale off its wish list before the January 1st deadline means Highwoods will not pay our schools close to one million dollars. [Post-Gazette, 12-19-12] You know, a million here, a million there, and suddenly you are talking about real money.

If only the season had our corporate citizens in more of a giving mood. Of course, they are only doing what is legal (for the next two weeks). And really, they are only doing what our legislators allowed them to get away with until recently. This is how companies are supposed to behave – they are beholden to their shareholders and not to the communities that host them or offer them sweet deals to set up shop. They will find every tax loophole and even petition to lower their property assessment, as Rivers Casino is doing now, to try to reduce their obligations to our city and schools. (See “Rivers Casino’s Fair Share” on how this will cost Pittsburgh schools another $3 million.)

Corporations do not exist for the public good, but our legislators are supposed to: we must insist that our representatives protect our schools. The way things are going, the Pittsburgh school district is facing bankruptcy in 2015. [Post-Gazette, 12-5-12] It’s time for all corporations to pay their fair share. If you want to join the chorus of voices calling for just this, please come to the press conference today on the North Shore at 2:30PM to demand that Rivers Casino makes good on its promise to the students of Pittsburgh. Bring your little Cindy-Loo Whos. Even the Grinch had a change of heart.

Rivers Casino’s Fair Share

Now Rivers Casino wants to shortchange our kids $1 million per year. What is it with these large corporations that promise to do good things for our community and then try to wriggle out of paying their fair share to support our schools?

This week, we helped to make headlines by testifying at a special County Council hearing about UPMC’s tax-exempt status and its duties as a public charity. [See “UPMC’s Fair Share”] Several news sources featured our message about the impact of UPMC’s vast landholdings on local school districts. [For some great coverage, see KDKA TV, 12-5-12 and WESA 90.5FM, 12-6-12]

In the case of the Rivers Casino, we are talking about a business that promised to bring revenue to our city and schools when it opened back in 2009. The casino made that promise in exchange for its license to operate a gambling establishment that many did not want in our fair city and on prime riverfront property. But practically as soon as they opened, Rivers Casino started petitioning to reduce their property assessment, which would directly reduce revenue for our community. In fact, between 2009 and 2012 they sought to slash their assessment by half, on average, which would have meant a loss of $3 million for the Pittsburgh Public School district alone.

Fortunately, this August the Allegheny County Court ruled against the casino. [Post-Gazette, 8-25-12] But now Rivers Casino is back at it, attempting once again to lower its 2013 assessment. If they succeed in getting the property assessed at what they claim is its current value, the result will be a $1 million loss for our schools every year. Meanwhile, the casino has taken in over $1 billion in revenue since it opened three years ago. [Opinion and Order of the Court, 8-23-12] And it wants to take money away from our children?

But wait. It gets worse. The majority owner of Rivers Casino is an investment fund managed by Walton Street Capital. This Chicago based company (co-founded by billionaire Neil Bluhm, an ally of President Obama) takes money from various sources and invests it in this particular fund, which then profits when the casino profits. Guess who sends their money to Walton Street Capital? Teachers. That’s right. According to an analysis done by UNITE HERE (the union currently organizing Rivers Casino workers), the following teachers’ pension funds have invested in this particular fund [data from Walton Street]:

  • Chicago Teachers Pension Fund
  • Illinois Teachers Retirement System
  • Indiana Public Retirement System
  • New Jersey Division of Investment / State Investment Council
  • New York State Teachers Retirement System
  • Teachers’ Retirement System of Louisiana (TRSL)
  • Teachers’ Retirement System of Texas (TX TRS)

So, indirectly, public school teachers in at least six states own a stake in Rivers Casino here in Pittsburgh. Perhaps they will join us in calling for the casino to live up to its promises to our community.

UNITE HERE has started an on-line petition where we can join together in asking Rivers Casino to stop trying to wiggle out of its commitment to our public schools. Think about Pittsburgh Manchester preK-8, home of our very own Manchester Miracle, just a stone’s throw away from the casino and without books in its library. Please sign the petition today, and spread the word: perhaps you even know a teacher or two in one of those states listed above. After what Pittsburgh has given Rivers Casino – including a hefty piece of our beautiful skyline now occupied by their parking garage – it’s time for them to stop the legal maneuvering and pay their fair share for our kids.