Friday, January 27, 2023
More on Pittsburgh's Audit of Nonprofits
The Cathedral of Learning at the University of Pittsburgh
PILOTS depend on public shaming for their implementation and perpetuation. The process of imposing PILOTS invariably follows a well worn pattern: (1) a local government official searches for revenues while maintain an incumbent's aversion to any type of tax increase. (2) The official floats the idea that "hey, those rich nonprofits don't pay for anything!" (3) There follows a media campaign -- press releases and the release of official reports, maybe a board of carefully selected local citizens appointed to study the issue -- to keep attention focused on the "rich" nonprofits. (4) Nonprofits, fearing damage to their brands more than a legal challenge, eventually agree to another round of PILOTS. Sometimes the nonprofits offer a feeble defense of their status, pointing to their economic impact on the city and county. But they don't push too harshly, lest they erode their goodwill in the community. When they inevitably pay, its all very much "voluntary," though.
So Pittsburgh is at step 3. Here is a recent editorial in the Pitttsburgh Tribune, following up on the Mayor's call for a complete audit of all nonprofits in the city.
On Tuesday, Pittsburgh Mayor Ed Gainey called for a deep dive into the city’s “purely public charities.” According to Pa. Act 55 of 1997, a purely public charity has to meet certain requirements. It has to have a charitable purpose directed in one or more of six areas: poverty relief, education, religion, health care, government and “accomplishment of a purpose which is … important and beneficial to the public.” It also must be “entirely free from private profit motive.” It must “donate or render gratuitously a substantial portion of its services.” It must “benefit a substantial and indefinite class of persons who are legitimate subjects of charity.” And, notably, it must “relieve the government of some of its burden.” The problem is that charity is big business. Of the top 30 employers in Pennsylvania, 11 are nonprofits. They include UPMC, the University of Pittsburgh and Allegheny Health Network.
In some ways, this is a good thing. These are industries that rebuilt Pittsburgh’s economy as it transitioned away from steel. But they do so without paying taxes, which makes it a lot easier to expand. That means more of the tax map is ceded to nonprofits, which puts more of a burden on the government and other property owners. Gainey isn’t the first mayor to deal with it. His predecessor, Bill Peduto, tried to bring the government and charities together with his ONE PGH collaboration aimed at creating up to $115 million for city projects. Gainey walked away from it last summer, favoring pursuit of voluntary payments in lieu of taxes. But if payments are voluntary, unlike taxes, they are an unreliable foundation for building a budget. Gainey’s call is long past due. It isn’t because the nonprofits are untrustworthy. They are a critical part of the city, county and state economic infrastructure. It is important because, like a car’s inspection, it is an impartial assessment of where the entity stands.