Pittsburgh targets more tax-exempt properties, including 61 owned by UPMC

Pittsburgh is challenging the tax-exempt status of more than 100 properties as part of its review of sites exempted from property taxes, Mayor Ed Gainey said Wednesday.

Sixty-one properties — more than half of the 104 properties the city will challenge this year — are owned by UPMC. Also included on the list are sites owned by Allegheny Health Network, Duquesne University and the University of Pittsburgh. Gainey said the properties in question are owned by purely public charities.

The city will submit its challenges to the county property assessment office. The process includes opportunities for appeals.

The UPMC-owned parcels being challenged located on the campuses of five hospitals “clearly support the charitable mission of those hospitals,” UPMC spokesman Paul Wood said in a statement.

“The mayor knows he has UPMC’s commitment to participate in a program that’s fair and equitable” and includes the city’s other major nonprofits, he said.

Dan Laurent, a spokesman for AHN, said the health giant meets regularly with local leaders, including the mayor, “to discuss public health issues and opportunities to improve the health and well-being of the people and communities we collectively serve.”

“We are fully committed to meeting our tax obligations, and in fact our organization pays hundreds of millions in taxes every year,” he said, adding that they also “have a long history of going above and beyond tax obligations” to offer additional community services and investments.

Jared Stonesifer, a spokesperson for the University of Pittsburgh, said the school is “confident that Pitt meets the requirements for tax-exempt properties and are proud of the millions of dollars we contribute to the region’s economy every year.”

If all of the properties the city is now challenging would be put back on the tax rolls, it would generate about $6.5 million in annual tax revenue for the city, Solicitor Krysia Kubiak said. Including school district, parks and library taxes, that total would jump to more than $14 million, she said.

The parcels the city is challenging, Kubiak said, include properties that are owned by private corporations or entities that have lost their legal nonprofit status; parcels that are owned by nonprofits but not being used for a charitable purpose; and properties that don’t belong to purely public charities. They include empty lots with no immediate plans for development, vacant buildings and parking lots, officials said.

The city last year challenged 27 properties in its first round of the effort, including parcels owned by UPMC, Allegheny General Hospital, Carnegie Mellon University and the University of Pittsburgh.

Those challenges yielded mixed results, Kubiak said. The city withdrew challenges on three properties, won their challenges on a dozen and lost their challenges on a dozen more, which now are going through an appeals process, she said. Kubiak could not say how long that appeals process may take.

The dozen properties that are now paying property taxes brought in about $100,000 in tax revenue in 2023, Kubiak said.

Last January, Gainey signed an executive order calling on the city’s finance and law departments to investigate whether the city’s purely public charities meet the requirements for tax-exempt status. Under the state’s definition, purely public charities must advance a charitable purpose, donate a substantial portion of their services, benefit a substantial class of people in need of charity and operate entirely free from private-profit motive.

More than a third of Pittsburgh’s properties have tax-exempt status, including the city’s colleges, universities and health systems. Gainey has said such nonprofits need to live up to their nonprofit status or pay their fair share in taxes.

“We are here today to make sure our city has the resources it needs to pave our roads, pick up the snow, open our pools and give our residents the services they truly deserve,” Gainey said during a news conference.

It’s “really in the self-interest” of Pittsburgh’s educational and medical entities to help the city thrive, because they benefit when the city is doing well, said Amy Hanauer, executive director of the Institute on Taxation and Economic Policy.

In 2021, tax-exemptions cost the city about $34.5 million in potential property tax revenue, said Emily Gee, senior vice president for Inclusive Growth at the Center for American Progress, a nonpartisan policy institute. That’s equivalent to 500 times the median salary of a Pittsburgh Public Schools teacher, she said.

“The hard truth is there is some cost to tax exemptions,” she said.

Kubiak said the city has reviewed more than 60% of the city’s 940 tax-exempt parcels. Officials hope to finish their first review of all the properties by the end of next year, she said, though they will continue to review properties on a regular basis after the initial round of reviews is complete.

By reviewing every tax-exempt property, Kubiak said, officials can make sure “we are treating every property owner the same.”

The process, she said, should have been done regularly in prior years.

Officials said the challenges are “only one part” of a broader effort to bolster the city’s revenues. Jake Pawlak, who heads the Office of Management and Budget, said the city isn’t relying on this cash to fill holes in the budget.

City officials also have advocated for voluntary payments in lieu of taxes, or PILOTS, with the city’s major nonprofits. Gainey said those conversations are continuing, but he declined to provide specifics on such negotiations.