Pittsburgh Again Serves as Nation’s PILOT Petri Dish

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November 23, 2012; Source: Pittsburgh Tribune-Review

Year in and year out, Pittsburgh is the epicenter of municipal efforts to tax otherwise tax-exempt property owners, drawing publicity for its attempts to get nonprofits to make donations to the municipality’s (and the county’s) coffers. Pittsburgh and the broader Allegheny County metro area function like a Petri dish for the struggle between local governments and nonprofit property owners over whether and how to exact taxes from tax-exempt institutions.

City officials have let it be known that the city expects to receive only $12.6 million in payments in lieu of taxes (PILOTs) this coming year, amounting to less than three percent of Pittsburgh’s $470 million budget. The officials seem to believe that the nonprofits’ payments are puny and well beneath their capacity to deliver more. Pittsburgh Mayor Luke Ravenstahl is currently engaged with the Intergovernmental Cooperation Authority to study what nonprofits can and should deliver to the city.

An obvious target is the Pittsburgh Public Service Fund (PPSF), within which 46 nonprofit property owners contribute $2.6 million annually to the city’s budget, a figure that the fund estimates will continue in 2013 and 2014. In an unusual structure, however, the 46 members of the fund are not identified, nor are their contribution amounts. The University of Pittsburgh Medical Center (UPMC) is not part of the fund but contributes to the Pittsburgh Promise scholarship fund, which is managed by the Pittsburgh Foundation, annually.

Allegheny County officials plan public hearings in December on the tax-exempt status of UPMC properties, which come with a current assessed value at something like $1.3 billion. On the city level, Mayor Ravenstahl is keeping an eye on the value of Medical Center contributions to the scholarship fund to see if it is, for his needs, equitable and appropriate. Besides the UPMC deal, Pittsburgh gets almost $29,000 from Duquense University for the Gumberg Library and the A.J. Palumbo Center, $31,500 from Carnegie-Mellon for the Pittsburgh Technology Center, and some other contributions outside of the PPSF structure.

Pittsburgh is now eyeballing Providence, R.I., a smaller city, which recently negotiated an 11-year deal with major tax-exempt property owners including Brown University, the Rhode Island School of Design, and Johnson & Wales University as well as a 20-year deal with Providence College. In municipal taxation terms, the grass is always greener in the other fellow’s yard. However, Pittsburgh probably looks good to other revenue-starved communities.

In Atlantic City, N.J., a citizens’ petition is calling for getting the 600 mostly tax-exempt properties owned by the state’s Casino Reinvestment Development Authority to pay property taxes, though part of the motivation may be court-ordered tax rebates to some less-than-tax-exempt casinos. Taxpayers in Lancaster, Pa. may be cheering that the Internal Revenue Service has denied nonprofit status to two facilities half-owned by Lancaster General Health (LGH), a ruling that could actually jeopardize LGH’s own nonprofit status. In Racine, Wisc., none of the city’s 182 tax-exempt property owners have pledged voluntary contributions in response to the mayor’s “Racine Fair Share” program.

Local governments are coming into the season of planning for their next budget. Expect more headlines about revenue-hungry municipalities making big eyes on endowed tax-exempt property owners. –Rick Cohen

  • Terry Fernsler

    It would be interesting to hear from these municipalities what tax deductions/exemptions for-profit corporations receive in their jurisdictions. Often these are doled out in the name of job creation, but I’d be willing to bet that nonprofits are better at creating jobs per dollar of exemption than large for-profits.

  • rick cohen

    Dear Terry: Yes, I agree. I’ve run a couple of pieces on the abatements and exemptions that cities give to for-profit developers, but there is no good tabulation. That would be more than eye-opening for many people.