Wednesday, October 17, 2012

Promises, Promises: Political tribulation has hampered City's quest for nonprofit support

Nathan Scheck, Albino Kraken

Pittsburgh has been "ordered" by the ICA to reopen talks with its nonprofits to receive higher payments in lieu of taxes -- with a June 30th deadline to "report back".

The city has been communicating with its nonprofits on that subject for the past six years.

At present, we are receiving less money from these frequently profitable large institutions than we did six years ago.

It is hard to fathom what is expected to change this time.

In surveying the past six years of fruitless talks, two fateful moments seem to stand out:

1. The sum gathered from the closed-book Pittsburgh Public Service Fund roughly halved following UPMC's announcement to become the major donor to the Pittsburgh Promise -- indeed the medical giant briefly revealed an intention to quit PILOTs altogether in exchange. This was reversed in response to some awful publicity involving provisional tax credits asked for in exchange for Promise donations, but seems to have been un-reversed the following year.

2. After three years taking a self-described "cooperative" approach to negotiations, the Ravenstahl administration attempted to get tougher -- and chose the method of threatening to levy a tuition tax on university students. The tuition tax was also noteworthy for taking universities to task while holding other major nonprofits harmless, unlike some other options: a tax on hospital bills or beds, hikes in discounted medical water rates, or a fee on all-day parking. The tuition tax failed both to pass, or to motivate a better deal -- indeed it seemed to poison the water for further productive talks.

Please add your own comments beneath the Roxette video if you know of anything else which belongs in the narrative after reviewing and exploring these news excerpts.

Act I: Talks and confidence

It [the budget] counts on $17.7 million from a yet-to-be-built slots casino next year, $10 million from the state each year, and $5.7 million annually from nonprofit groups starting in 2008 -- none of which is guaranteed, he said. (Oct. 18, 2006)

Ms. McNees said the revenue predications were based on state estimates and that the authority is in talks with nonprofit groups. (Oct. 21, 2006)

"It's my belief that we will be able to successfully get those revenues...  from the nonprofit community," he said. "They've been great partners in the past." (Nov. 14, 2006)

Mr. Peduto said he thinks the red ink will flow by 2008. He said the long-term plan includes "phantom revenues" including overestimates of payments by nonprofit groups, deed transfer and parking taxes, and state aid. (Dec. 19, 2006)

Included in the revenue estimate is $4.3 million from nonprofit organizations. The mayor said he has received verbal pledges in that amount and is seeking binding commitments. (Sept. 21, 2007)

"At this point [pledges from nonprofit groups] are verbal and we're in the process of establishing agreements and commitments," Mr. Ravenstahl said. There's no promise by the groups "that I'm aware of, because we've not met to speak about it," said the Rev. Ron Lengwin, spokesman for the Pittsburgh Public Service Fund, a group of some 100 hospitals, educational institutions, foundations and arts organizations. (Sept. 22, 2007)

That begins to erase a big question mark from Mayor Luke Ravenstahl's fiscal plan, which counts on $4.3 million in contributions from the organizations next year and $4.1 million annually after that. Still uncertain, though, is how much they'll end up paying. (Oct. 2, 2007)

"I've always been someone who's been cooperative" with non profits, Mr. Ravenstahl said, gesturing at Mr. DeSantis, "rather than confrontational." (Oct. 10, 2007)

Mr. Ravenstahl said he is confident that city nonprofits will voluntarily pay up to $4.2 million in each of the next three years to help the city's bottom line... (Oct. 26, 2007)

Mr. Ferlo said that if the ICA is still warranted, it should go to the state with recommended changes in laws governing pension aid and contributions from tax-exempt groups to cities. Mr. Pippy said he will hold hearings on municipal contributions by nonprofit groups, and he believes there will be serious discussion in Harrisburg on pension aid. (Nov. 8, 2007)

Act II: UPMC shifts around

The Price is Right, Game Show Utopia
The University of Pittsburgh Medical Center's pledge of $100 million to fund college tuitions would supplant the healthcare giant's $1.5 million-a-year contributions to city of Pittsburgh coffers, its top lawyer said today. That could mean other nonprofit entities, on whom the city relies for $4.2 million a year, or 1 percent of its budget, could choose to contribute to the Pittsburgh Promise and not the city, too. (Dec. 18, 2007; see also Dec. 19)

City Chief of Staff Yarone Zober said Tuesday that the city is talking with tax-exempt groups about ongoing contributions. (Dec. 24, 2007)

In another bit of good news, UPMC also said it would still contribute $1.5 million next year to the Pittsburgh Public Service Fund, a 3-year-old voluntary fund through which nonprofits have helped the city balance its budget. (Dec. 29, 2007)

The Pittsburgh Public Service Fund, which assembled contributions from some 100 organizations during the city's fiscal crisis, made its last agreed-upon payment Feb. 21, bringing its total contribution to $13.98 million [over 3 yrs = $4.7 million per yr for 2005-2007]. The Rev. Ron Lengwin, spokesman for the Catholic Diocese of Pittsburgh and for the fund, said the pledge was for $13.57 million, so the fund exceeded expectations by $411,000...

Father Lengwin could not predict how much the fund would give to the city over a subsequent three years, saying that depends on member groups' finances. The city's long-term plan counts on $4.2 million a year in contributions from tax-exempt entities. One complicating factor is the role of the University of Pittsburgh Medical Center, which has said it will contribute to the city for one more year but is shifting its focus to the Pittsburgh Promise of college aid to graduates of Pittsburgh Public Schools. (Mar. 1, 2008)

He said the administration is entering into negotiations with the Pittsburgh Public Service Fund, a consortium of nonprofit groups, to reach a voluntary donation agreement to replace one that ended last year. (May 2, 2008)

And then comes a long pause with little news or apparent progress.

Act III: The Tuition Tax boner *

Growing Pains c/o makintosh
A consortium of tax-exempt groups, including the universities, hospital groups and nonprofit insurers, paid the city $14 million from 2005 through 2007, and offered $5.5 million for 2008 through 2010. Council hasn't acted to accept the current offer.

Mr. Peduto and Mr. Lamb said they've had conversations with leaders of large tax-exempt institutions, including universities, who may be willing to make further voluntary contributions. The Pittsburgh Council on Higher Education announced in a news release that the colleges and universities would "discuss our continuing activities in support of the entire Pittsburgh community."

But Mr. Ravenstahl said that without the "threat" of a tuition tax, they'll feel that $5.5 million over three years is enough. "There's nothing that compels them to do anything more, so they're able to get away with that." (Nov. 18, 2009)

Mr. Ravenstahl again aimed for $6 million a year. He said he had "one-on-one discussions, and individual commitments were made. ... It was difficult to get all of the people in the room and say, 'We need $6 million.' " (Dec. 9, 2009 -- a superior article, due to widespread frustrations over issue at that moment)

Pittsburgh's universities told Mayor Luke Ravenstahl yesterday they won't agree to his call for them to contribute $5 million to city coffers to avoid a tax on tuition paid by students. (Dec. 12, 2009)

"One does not negotiate with an ax hanging over your head," said Chatham University President Esther Barazzone, while joining her peers in calling for "a big-tent coalition to help to lead the city to a different future." (Dec. 15, 2009)

On Tuesday night, Councilwomen Theresa Smith and Tonya Payne got the sense that their efforts at diplomacy between the city and university leaders might bear fruit. (Dec. 17, 2009)

University officials are complaining behind the scenes about Mayor Ravenstahl's "bullying" on the tax, which includes his promise Dec. 10 that he would not pull the proposal without a commitment of at least $5 million annually from the schools. (Dec. 20, 2009)

An as-yet-undefined group called the New Pittsburgh Collaborative "will sit down in the early part of 2010 and come up with a strategy, and a goal, if you will, on what it is we will ask Harrisburg for," Mr. Ravenstahl said at a news conference in his office...

"We're not pledging a contribution in order to get rid of the tax," said CMU President Jared Cohon. "We are prepared to pledge a contribution as the tax is gotten rid of..."

Mr. Ravenstahl said that UPMC is not "out of the equation," but he has considered excusing them in light of their $10 million annual pledge to the Pittsburgh Promise of college aid to public school graduates. (Dec. 22, 2009)

Act IV: Making do with less...than 6 years ago

Infinity Loop
"There has been no 'agreement' established between the city and the other member institutions," she said. "Even the statement made today by the University of Pittsburgh and Carnegie Mellon University identified 'handshake agreements,' not finalized until the tax was actually removed from consideration." (Dec. 22, 2009)

The five-year plan included $20 million in revenue from big nonprofits, such as the city's universities. Mr. Ravenstahl's office said it believed the contributions had been solicited by Councilman Bill Peduto.

However, Mr. Peduto accused Mr. Ravenstahl of being misleading about the matter.

He said he has talked to nonprofits about contributing $20 million to a pension bailout plan. However, he has announced no commitments and said he never intended for the contributions to be used for general operating expenses anyway.

Last week, Mr. Peduto sent the ICA a letter calling the $20 million "phantom revenues" and urging ICA to reject the budget and five-year plan. (Nov. 15, 2010)

At a brief meeting Wednesday, ICA unanimously approved a $451 million budget and five-year plan that did away with the $20 million... (Dec. 9, 2010)

The budget lists about $3.2 million in revenue from nonprofits this year, but the city's agreement with the Pittsburgh Public Service Fund -- a coalition of nonprofit groups that has made payments in lieu of taxes to the city in some years -- expired Dec. 31.

"At this time, there have been no formal discussions regarding a new agreement," G. Reynolds Clark, a fund representative and University of Pittsburgh vice chancellor, said in an email relayed through the university's media relations office. (Jan. 16, 2012)

Overseers and Mr. Ravenstahl's aides met Friday to work through their differences. The same day, Mr. Ravenstahl sent authority Chairwoman Barbara McNees a letter noting that legislation to establish the trust fund had been introduced in council Jan. 17 and that efforts to secure nonprofit contributions were under way. (Jan. 25, 2012)

This year, the city anticipates about $2.6 million from the fund, a consortium of nonprofits that identifies its members but doesn't say how much each contributes. (Today)

Monday, October 15, 2012

State Oversight, We Hardly Knew (Know?) Ye...

Apoplectic, Spreadshirt

Do you think the Intergovernmental Cooperation Authority (ticka ticka... ZOOMP!) is just an opaque and unelected cabal of political appointees beholden to Harrisburg legislative caucus leaders, run by a battered and bruised bonds trading journeyman earning $120,000 a year for part-time consulting?

Well, your understanding couldn't be more partial! The ICA are hometown nuns and union laborers who volunteer because they share a love for this City and are working hard to put it back on its feet!

The second thing we share is our support of the recent findings of the Act 47 team and its recommendation to terminate the city's status as a financially distressed municipality -- while keeping the Intergovernmental Cooperation Authority in existence. (P-G, Geibel & Stanizzo)

The first question to ask is, who is the audience for this op-ed? Who exactly is it important to convince of this? Public officials? Financial markets? The newspaper itself?

So far, there has been no move to dismantle the five-member Intergovernmental Cooperation Authority.

"One step at a time," Mr. Ravenstahl said. (P-G, Joe Smydo)

One wonders whether there is anything buried deep down in the enabling legislation underpinning the ICA which the end of Act 47 can "trigger" in terms of its own sunset.

“I’ve always said I think this administration can use all the oversight that it can get, and I still feel that way,” said Lamb, a likely candidate for mayor next year. (Trib, Bob Bauder)

Editorial comment: I hear that -- I really do -- and bonus points for quotable zing. But it's just no valid argument in terms of whether or not to disband oversight. If democratic self-government is good enough for Egyptians, it's good enough for Pittsburghers -- and although it might be better in terms of bean-counting to remain impervious to some collective bargaining pressures until we manage to elect a True Savior, it's not terribly fair with respect to those collective bargaining units and their constitutional rights.

Of course, as 2/5 of the ICA point out above, we are still behind the eight-ball in terms of the very pension and debt burdens which caused the City put out a "distress" call in 2003 in the first place. So I'm not in any great rush to quit that until we have substantially resolved those conundrums.

Wait and see time.


Pocket Childrens' Books
But last week's display left us with at least two interesting bits of intelligence:

1. The Act 47 Coordinators are really the junior partners when it comes to oversight. The last time they were in the news at all was the summer of 2009, when significant portions of their 5-year recovery plan were re-written by an historically rebellious Pittsburgh City Council. It almost seems as though the Coordinators lost their mojo after they threatened hardball and sanctions, yet ultimately accepted a deal.

Meanwhile, it is still an annual spectacle getting the City's budget approved by the ICA. They are even known to step in to override day-to-day matters.

Considering the timing, it's almost as though somebody or somebodies in Harrisburg wished to provide Mayor Ravenstahl with the presumed massive political triumph of vanquishing "Act 47 Distressed Status" -- while still keeping the City fundamentally down under strict oversight. Who ever said the Mayor doesn't enjoy good relationships with leaders in Harrisburg?

2. Let's return to what the two board members of the ICA wrote. Aside from pension obligations, which has conventionally been considered the paramount impossibility:

The second obstacle is overall debt. While the debt level has been moving in the right direction, the city issued $80 million of new debt this year and has plans to issue more in 2015, 2018 and 2021. This will make it hard to reduce overall debt to an acceptable level. (P-G, Geibel & Stanizzo)

Really? Plans for more new debt in 2015, 2018 and 2021? The one loan was one thing, but it would be uncharacteristic for this administration to backslide into such a credit-card mentality.

I can recall over the years looking at so many graphs, looking forward to the immense relief of a debt-cliff in 2017. Now, no more debt cliff in 2017? How will we pay down the pensions?