The city of Pittsburgh will conduct a full review of all tax-exempt properties — many worth millions of dollars and owned by powerful nonprofits that have powered the city’s new economy of “eds and meds” — and potentially move to restore tax payments if a given property does not meet strict state requirements for an exemption.
During a Tuesday news conference, Mayor Ed Gainey signed an executive order directing the city’s law and finance departments to conduct the review. Nearly a third of all properties in the city are currently exempt from paying property taxes, and legal action could lead to tens of millions of dollars in new tax revenue for the city, Pittsburgh Public Schools and Allegheny County.
“We estimate that charitable organizations in our city, right now, will owe $36 million in property taxes if they fail to meet the Pennsylvania Purely Public Charity test,” Gainey said.
The move fulfills a major promise from Gainey’s mayoral campaign to work to make the area’s powerful nonprofits — including the University of Pittsburgh and health giants UPMC and Allegheny Health Network — “pay their fair share, on our terms.” Some nonprofits make what are known as payments in lieu of taxes, sometimes known as PILOT payments, but they are a fraction of potential property tax revenue.
The city will have to evaluate whether each property meets five criteria set by a state Supreme Court ruling from 1985 — advance a charitable purpose; donate a substantial portion of its services; benefit a class of people that are legitimate subjects of charity; relieve the government of some of its burden; operate without seeking profit.
“If an organization fails to meet any of these requirements,” Gainey said, “they cannot be considered to be a purely public charity.”
Gainey is seeking the public’s help in identifying charitable organizations that fail to measure up to the exemption criteria. People can identify nonprofits they suspect are falling short by sending the city an email at firstname.lastname@example.org.
“We believe people who know best about what is happening are the people that live in our great city, the people who live in our neighborhoods where these organizations operate, those who work there, or those who receive services from them,” Gainey said. “If you know that the place you go to is a charity but you have to pay market rate for the services you received there, let us know. If you know that the charity is just a fund for someone to pay themselves a higher salary and deduct the cost, let us know.”
City Solicitor Krysia Kubiak said a review of the city’s tax-exempt properties will take years, but “we will do it fairly and equitably.” The city will begin the assessment on two fronts, looking at the largest properties as well as those reported to the city by residents.
Any paperwork for the 2023 tax year must be sent to the county’s property assessments office by March 31, giving the city about two months to fire its opening salvos. Filings will then be reviewed by the county’s Board of Property Assessment Appeals and Review, and can be appealed to the county’s Board of Viewers.
One organization that some local leaders particularly want to examine is UPMC. The health care giant was slammed last week by U.S. Rep. Summer Lee, D-Braddock, and state Rep. Sara Innamorato, who is seeking the Democratic nomination for county executive. The two claimed UPMC’s dominance has created a crisis affecting health care, workers, patients and communities.
UPMC spokesperson Paul Wood said in a statement that the health giant has “long been committed to being a great neighbor,” and that city officials are “aware of UPMC’s ongoing support and can count on our full participation in programs that are fair and equitable and include the region’s other major nonprofits.”
Pitt spokesperson Jared Stonesifer said the university values its “longstanding partnerships throughout the city” and looks forward to “continuing to work with the mayor and local officials on building a brighter future for Pittsburgh.” Dan Laurent, a spokesperson for AHN, said the company is “committed to meeting the expectations and requirements of purely public charities.”
Gainey’s move received immediate support from Lee and other local leaders, including State Sen. Jay Costa, D-Forest Hills.
“The people of Pittsburgh work hard for their paychecks,” Lee said in a statement. “They deserve confidence that their tax-dollars are reinvested in our communities, not cheated by entities exploiting charity status to avoid paying their fair share — especially entities ripping hospital workers and patients off despite revenue more than double the NFL’s.”
Pittsburgh politicians have attempted for years to extract more tax revenue from the region’s powerful nonprofits.
As opposed to Gainey’s strategy of challenging properties on a case-by-case basis, then-mayor Luke Ravenstahl filed a lawsuit in 2013 seeking to strip UPMC itself of its nonprofit status. He argued the company did not operate free of a profit motive, and “their actions have given us no choice but to do what we’re doing.”
The case was later dismissed on technical grounds, and his successor as mayor, Bill Peduto, chose not to refile the suit. Peduto instead said it was hard to negotiate with “guns pointed at each other’s heads,” and sought to talk privately with the big nonprofits.
He ultimately helped create the OnePGH Fund, a separate entity that would gather voluntary payments from the nonprofits and then fund specific projects, with some city oversight. Peduto was able to collect commitments for an average of $23 million per year to be paid over five years.
But a new mayor again chose to take a new approach, and Gainey had the city sever ties with OnePGH a few months after taking office last year.