Wednesday, January 25, 2023
Blitzburg Tackles Nonprofit Property Tax Exemptions . . . Again.
Welp, my team is once again back home on the couch during this playoff season so I have lots of time to blog. Pittsburgh, the city once known mostly for steel mill working, hard drinking, hard fighting, pierogi and Primanti Brothers-eating Steeler fans, is one of the best places to study "town-gown" relationships, particularly as relates to state charitable property tax exemptions. Smoke stacks and fiery smelting pots have disappeared in favor of hospitals, universities, and sanctuaries for coders plotting world domination. Places like UPMC, Pitt, Duquesne, and Carnegie Mellon, all with very well appointed surroundings showcasing grass lawns that stay green even during the winters. And, as reported in the Post Gazette yesterday, the City has long waged a cold war of sorts trying to get the mega nonprofits to make "voluntary contributions" to the public fisc:
Pittsburgh Mayor Ed Gainey said Tuesday morning that he is ordering his law and finance department to begin a review of parcels owned by organizations claiming tax exemption based on their charitable status, a long-debated issue that could impact the city’s major universities and health systems. This review is to ensure that the business is being conducted there are in compliance with the Pennsylvania public charity test, he said. It marks yet another Pittsburgh mayor taking a run at an issue that has dogged the city for 20 years.
Mr. Gainey said it’s estimated that $36 million is owed in property taxes by charitable organizations in the city if they fail the Pennsylvania public charity test. Places of worship, which are not listed under the Pennsylvania law, will not be subject to the review. In the order, Mr. Gainey points out that 34% of parcels in the city are exempt from property taxes. Over the past few administrations, Pittsburgh leaders have struggled with ways to increase financial contributions from some of the massive institutions such as universities and health systems that are major employers and economic drivers, but are exempt from things like property taxes that help fund city services.
The state constitution doesn’t define “purely public charity.” Courts have relied on a 1985 Pennsylvania Supreme Court decision containing five criteria that nonprofits have to meet to be considered an institution of purely public charity. Among the requirements are advancement of a charitable purpose, donation of a substantial part of its services and operating entirely free from private profit motive. The review of nonprofit properties began in 2003 with former Mayor Tom Murphy and a $60 million budget hole in the city budget. Mr. Murphy proposed that the University of Pittsburgh, Carnegie Mellon University and other charitable organizations pay into a fund that would help offset the cost of providing municipal services such as fire protection and EMS. In later years, the idea evolved into voluntary payment in lieu of taxes programs, none of which lasted.
If you are interested in PILOTS, you really oughta get this May 2022 study by the Pittsburgh City Controller's Office. The report has a lot of good data and some neat pictures too if you are more of a visual learner, like me.