Pittsburgh reaches deal with universities, health insurer that avoids need for tuition tax

Pittsburgh won’t tax tuition; nonprofits to donate

PITTSBURGH — Pittsburgh officials shelved an idea for a first-of-its-kind tax on college tuition after two universities and a nonprofit health insurer agreed on Monday to make large contributions to the city.

Mayor Luke Ravenstahl hopes the contributions from the University of Pittsburgh, Carnegie Mellon University or Highmark Inc. will serve as a catalyst to get other nonprofits to help the city financially.

Ravenstahl had called for the 1 percent tuition tax on the city’s 65,000 college students as a way of getting money to help pay for some $15 million a year for the city’s pension obligations.

Nonprofits are exempt from most taxes, but represent many of Pittsburgh’s major employers and hold about one-third of the city’s property value.

Neither the mayor nor the three institutions would disclose how much they would give, but Ravenstahl said he was optimistic the money would help resolve the city’s long-standing financial problems.

“This is a leap of faith for all of us. The future of our city and our citizens is riding on it,” he said.

Nonprofits have given money to the city in the past under an entity called the Pittsburgh Public Service Fund, but the amounts given have been far below what Ravenstahl said was needed.

Ravenstahl said the new agreement represented a large contribution, but did not offer specifics. Other nonprofits would be welcome to contribute, and the city was in talks with other groups, he said.

University of Pittsburgh Chancellor Mark Nordenberg said the city was “trapped in a fiscal structure that might have been appropriate in the first half of the 20th century” but no longer made sense.

He and the mayor said state lawmakers must allow Pittsburgh to find a new way of collecting revenue, noting that municipalities across the state face pension-obligation problems.

The tuition tax drew instant and widespread criticism from students and the city’s universities, but it appeared to have enough support in council to pass.

Several other college towns have toyed with the idea of a tuition tax — most recently Providence, R.I. — but have set it aside as politically risky and reached similar voluntary payment arrangements with institutions.

Associated Press writer Ramit Plushnick-Masti contributed to this report.