Monday, December 21, 2009

Pittsburgh Profiting From Nonprofits

I'll start this story in Duluth, GA where NCR is expanding. The headquarters for NCR used to be located in Dayton, OH. Today brings news of the University of Dayton buying up the campus that NCR left behind. I mention the ownership transfer of this prime Dayton real estate because it is representative of the debate over Pittsburgh's proposed tuition tax.

I don't know how much property tax NCR contributed to the City of Dayton and the terms of the deal are unclear. As far as I can ascertain, the former headquarters is going from taxable property to non-taxable property. But the cost of keeping NCR in town (or the price paid to lure the company to Duluth) comes in the form of various tax breaks. Regardless, Dayton is transitioning in the same way that Pittsburgh has already done. Can a new city revenue model be far behind?

"As a result of the promise of this historic joint effort, my colleagues on council and I will not pursue the Fair Share Tax and are tabling the legislation," Ravenstahl said in a press conference this morning. "This is a leap of faith for us all - the future of our city and of our citizens is riding on it - but it is a leap of faith that, if successful, will result in the revenue, $15 million annually, that Pittsburgh needs to solve our legacy cost problem."

The mayor said Monday the city was partnering with the universities and the business community to form a New Pittsburgh Collaborative, aimed at solving Pittsburgh’s financial problems "once and for all. These leaders will join me and the rest of City government in an effort to address Pittsburgh’s legacy costs," Ravenstahl said.

"We will be able to achieve far more as a New Pittsburgh Collaborative than we would have been able to by passing a tax," the mayor said.

The deal with the nonprofits seems to reflect the analysis Mike Madison shared with his readers. Pittsburgh gets some of the money it needs and the urban institutions of higher education don't face the negative publicity associated with the tuition tax. The win for the universities and colleges deserves some explanation. In my Forbes op-ed, I referenced a study published in the pages of Inside Higher Ed. The aim is to measure the impact of the recession on enrollments in the cities of Pittsburgh and Dallas-Fort Worth. Smaller private universities such as Carlow and Duquesne are in the most precarious position.

I doubt that Carnegie Mellon University had much of a worry, but high school graduates in Southwestern PA might consider a cheaper alternative (such as community college) to the University of Pittsburgh. There exists a serious threat to the bottom line, particularly right now.

Both sides appear to be highly motivated to work something out, thus changing the nature of the relationship between Pittsburgh and its large nonprofit economy. Depending on the details, Ravenstahl's brinkmanship may have paid off for all concerned. In doing so, he could have turned a public relations disaster into a coup.

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