Nonprofit Hospital Cuts Big New PILOT Deal in Erie, Pennsylvania

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October 21, 2010; Source: Erie Times-News | Eighteen years ago, the Hamot Medical Center agreed to pay the city of Erie, Erie County, and the Erie School District an annual payment of $1.2 million a year.  In February, Hamot became affiliated with the University of Pittsburgh Medical Center.  Like municipal officials in Pittsburgh, officials in Erie saw the affiliation as worth some extra leverage.

The public sector technique of choice was for the Erie County Board of Tax Assessment Appeals this past April to launch a challenge UPMC Hamot’s tax exempt status. 

While nonprofit hospitals that operate like they could be for-profits but for having grabbed a 501(c)(3) corporate status merit critical scrutiny, the Erie deal looks like it was little concerned with Hamot’s charity care record and mostly focused on accessing UPMC’s deep pockets. 

The principle of UPMC Hamot’s qualification for tax exempt treatment fell by the wayside when Hamot cut a new deal with the city, the county, and the school district to continue the $1.2 million annual payment for another five years through 2016. UPMC Hamot will apparently be paying half of what it would owe in property taxes if its property were fully taxable.  According to the hospital, it acceded to the PILOT because it “recognizes its obligation to the Erie community and for the costs of the governmental services which it receives.”

That was enough for the Assessment Board.  It apparently determined that the agreement superseded the legal and factual question of Hamot’s tax exempt qualifications. 

“The three taxing bodies are in agreement. If they are in agreement, I guess that’s it,” Chairman Robert J. Tullio said on behalf of the Assessment Board. “I’m not going to be a roadblock.”

This isn’t the first time for this kind of action.  Hamot’s original PILOT deal followed a court challenge of its tax exempt status.  Hamot lost in 1990, reorganized in 1993, regained its tax exempt status, and cut the PILOT deal with the city.  Had the taxing districts approved a reorganization that didn’t meet the standards of the law back then or had Hamot drifted away from its tax exempt mission?  Or was it simply that Erie needs money, and the nonprofit medical centers are good targets?  We think it’s the latter, especially since the largest tax exempt landowner in the city, Gannon College, only pays $85,000 annually to the city and nothing to the county or the school district. 

Somehow, Erie’s concerns about Hamot’s tax exempt status disappeared for the 18 years that the hospital agreed to kick into public coffers only to be revived again when the original agreement expired.  Do the public authorities consider Hamot tax exempt?  Only so long as there is a cashflow from the hospital to city and county budgets. It seems like in Erie, the principle behind the UPMC Hamot PILOT was nothing more than money.—Rick Cohen