A Quartet of New Taxes

The Act 47 plan’s Revenue Initiative #1, also known as RE01, instructs the City to "generate at least $10 million per year in local revenue or expenditure reduction, or enact tax increase". How to do it? The Act 47 team said the City could find spending efficiencies, generate legally enforceable fees on college students, hospital beds, etc., or get a plan together to put more money toward pension obligations, such as selling or leasing the parking garages.

Care to take a guess which one of these three options has been discarded? If you selected "find spending efficiencies" you win a prize. The City has decided to move ahead and propose the "Post Secondary Education Privilege Tax", "Healthcare Facility Admission Privilege Tax", "Pittsburgh Parking Authority daily parking surcharge and transfer", and "Pittsburgh Water and Sewer Authority Health and Education tier rate increase and transfer". Casually we can call them the frat tax, the sick tax, theextra parkingtax, and the non-profit water tax and they would add to the total number of levies the City collects, a number that was going down as a result of the reform package of 2005.

So why do it? Simply because the City’s spending tab is projected to rise over the next five years from the current year’s $437 million budget to a projected $502 million in 2014. That 15 percent increase is driven by a 33 percent increase in "pension, health benefits, and workers’ compensation"-no surprise given the need to plow more money into post-retirement benefits, but there is no similar control on "operating departments" (projected to grow 12%).

One would think the tack would be this: the City needs to find money from its existing budget to move toward its legacy costs. That is job one. Then it needs to look to the private sector, the County, or the non-profit sector to see if there can be operating efficiencies wrung out of current operations. But that is not the case.