Pittsburgh Mayor Reaches Deal with Nonprofits

Darryll Jones recently blogged about the efforts of Pittsburgh's mayor to impose a 1% "tuition tax" on students attending one of Pittsburgh's tax-exempt universities.  But according to this story in the NY Times, the mayor has reached an agreement for "voluntary" payments from the colleges and universities in question to contribute as much as $15 million annually to Pittsburgh's coffers.

Now I know Darryll isn't too fond of PILOTs (Payments in Lieu of Taxes) foisted on nonprofits by (usually) large metropolitan areas such as Boston and now Pittsburgh.  But there is another side to this debate. Universities (both public and private) have raised student tuition to the stratosphere arguing that they need the money to maintain a quality education, while at the same time salting away billions in endowment funds (which admittedly took a hit in the stock market crash, but which have now recovered pretty nicely).  The tuition and fees at Carnegie Mellon University (one of the universities that Pittsburgh put the squeeze on) runs over $53,000 per year.  No, that's not a typo: $53,000 (here's the link).  Meanwhile, major research universities across the country are entering into private research deals with corporations, building hotels and office parks with real estate developers, and generally beginning to act more like large corporate conglomerates than the ivory towers they are often accused of being.  So I ask you: is Carnegie Mellon a charity providing a public good?  Or is it akin to Rolls Royce or Gucci or Tiffany's, selling a premium product at a premium price to those than can pay for it (and yes, I'm aware that the top private universities provide a great deal of financial aid to less wealthy students; so perhaps we should subject them to the corporate income tax and local property tax and let them take a deduction for the "charity" that they actually provide).

Though I argued in a paper I delivered this past October at the National Center on Philanthropy and the Law that limiting tax exemption to organizations that provide relief to the poor is a bad idea (and I still believe that to be the case), I really don't have a great deal of sympathy for Carnegie Mellon and its siblings when they whine about being asked to contribute to the cost of city services.  I'm sure they provide many benefits to the city of Pittsburgh, but so does Microsoft to the Seattle metro area, and the last time I checked, Microsoft was paying local property taxes.  I'm also sure that the 2010 freshman class at Carnegie Mellon ultimately will absorb this blow - anyone want to bet that the tuition/fees number goes up to, say, $55,000 and that Carnegie Mellon blames it in part on the "forced" contributions to the city of Pittsburgh?  Seems like a sucker bet to me, and if you want to take the "no they won't" side, e-mail me.  I could use the money to put my own kid through college.

JDC