What should tax-exempt nonprofits give the city, county?
The five biggest non-government owners of tax-exempt property own about 13% of the property in Pittsburgh and 5% of the property in Allegheny County. In the city, that’s much more than half of all exempt real estate. If they weren’t exempt from property taxes, these five behemoths would be paying the City of Pittsburgh $127.5 million per year.
The leader is UPMC at over $2 billion in property countywide, almost all in Pittsburgh. The University of Pittsburgh comes next at about $1.5 billion. Highmark/AHN, Carnegie Mellon University and Duquesne University have about half a billion dollars each.
This is all according to a recent joint report by the City of Pittsburgh and Allegheny County controllers’ offices on collecting payments-inlieu-of-taxes from the city’s large non-profits.
It’s tempting to assert that these cash-flush giants with positive revenue flows are freeloading on taxpayers and the public services — police, fire, EMS, etc. -— they fund, and they should give the city something in return. Better, we think, not to think of PILOTs as acts of restitution but as good-faith contributions to the community.
And contributions different from the benefits these institutions already provide. For instance, UPMC reported $1.7 billion in IRS-defined public benefits last year. Pro-bono care is good, but it doesn’t fund repairs for the roads that bring patients and workers to the hospital. For that a city needs cold hard cash.
The city-county report collects the basic information all parties will need to come to an equitable solution to the issue. But there are sticking points, and foreseeable squabbles.
For one, just how much should each nonprofit pitch in? In Erie, UPMC and Highmark/AHN agreed to 50% of their property tax burden. That’s a good starting point, although their larger presences in
Pittsburgh would make it a bigger ask than in Erie. That’s why the report also includes a 25% estimate, which amounts to about $6 million a year to Allegheny County and $9 million to Pittsburgh.
For another, how will the amount to pay be assessed? Based on tax-exempt real estate, UPMC would be on the hook for more than three times as much as Highmark/ AHN, but their revenues are almost on par with one another. That’s because more of Highmark/ AHN’s revenue comes from less real estate-intensive operations, mainly insurance, that stretch nationwide.
This is where Mayor Ed Gainey comes in. He has already shown a penchant for collaboration rather than dictation, and that will serve him well here. He will have to convene the institutions’ leaders — not one at a time but all at once — and iron out a deal where everyone actually does what they claim they want to do: contribute equitably to local governments.
With new leadership in the mayor’s office — not to mention at the top of the Steel Building — now is the time to rebuild relationships of mutual respect rather than mutual suspicion.