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City, county could have millions more if large nonprofits pay taxes, report says

The Downtown Pittsburgh skyline on a sunny, clear summer day.
Keith Srakocic

The five largest nonprofits in Allegheny County would, if they were taxed, contribute more than $127 million a year to local municipalities, the county and school districts, according to a report released earlier this week by the city and county controllers.

“Now is the time for a substantive conversation aimed toward establishing meaningful and predictable contributions from these entities to our local governments," City Controller Michael Lamb and acting County Controller Tracy Royston said in a statement. "We hope that the information presented in this report can be a basis for that conversation.”

The report showed that nearly 10 percent of non-government property in Allegheny County was tax-exempt; in Pittsburgh the share is 20 percent. Much of that land is held by the five large nonprofits: Allegheny Health Network, Carnegie Mellon University, Duquesne University, the University of Pittsburgh, and UPMC.

The controllers propose the local officials seek long-term, voluntary payment-in-lieu-of-tax agreements. A binding agreement to make such payments to government coffers, they argue, could help fund public services.

Currently, PILOT arrangements raised slightly more than $325,000 for Pittsburgh and $569,499 in Allegheny County.

"In neither case do any of the 'Big Five' institutions have adequate PILOT agreements in place," the controllers said in a statement.

The report was the latest salvo in a long-running debate over how much large nonprofits — who rank among the region's largest employers — should be asked to contribute to the cost of providing public services. Nonprofits argue that they contribute in a variety of ways: through providing services that would otherwise have to be done by government, through charitable activities, and through taxes other than those on property.

"The report doesn’t accurately reflect the University of Pittsburgh’s many contributions to the city and region," a spokesperson for Pitt said. "For example, the report omits the more than $15 million in city and county taxes remitted by the University in calendar year 2021."

The city of Pittsburgh in particular has tried a variety of approaches to obtaining more financial support from its nonprofits. PILOT payments have been used for decades, although they have never produced more than $6 million a year. Former Mayor Luke Ravenstahl pondered a tax on tuition and health care — an idea that briefly resurfaced in March — and sued over UPMC's tax-exempt status in court.

The suit was later dropped. Former Mayor Bill Peduto sought a more collaborative approach in which nonprofits and others would contribute to a special fund, OnePGH, that would finance social goods like affordable housing. Peduto had lined up $115 million for the fund by last spring, though the amount was well short of what he ultimately hoped to raise.

Pitt noted that it had committed $8 million to that fund on its own, and said the school "looks forward to engaging with local officials further on this topic."

But Lamb said that as things stand now, the burden of Pittsburgh's government falls heavily on city residents.

“Hospitals and learning institutions undoubtedly provide great services and buoyed our economy in the wake of big steel’s departure, but they rely heavily on our public safety, infrastructure, sanitation, and other essential services,” Lamb said. “They must come to the table and contribute to the operation of local governments where they operate, starting with the City of Pittsburgh.”

Mayor Ed Gainey campaigned for the city's top post last year in part by pledging to renew the lawsuit challenging UPMC's tax status. No suit has been filed, but Gainey has previously said there had been talks with the hospital giant.

A spokesperson for his administration said this week's report "shows just how important it is for all of us to pay our fair share. Each and every one of us has contributed to the success of these institutions through our tax dollars, premiums, and charitable donations, and now we need them to invest back into the city of Pittsburgh."

The administration is "currently meeting with UPMC, Allegheny Health Network and other large nonprofit institutions," said Maria Montano. "We plan to share the results of those meetings as soon as we are able to do so."

“The Pittsburgh region has been justifiably lauded for its transition from a primarily industrial economy to one in which ‘eds and meds’ comprise a significant and growing share of employment and economic activity," County Controller Royston said. "However, these institutions’ continued emergence as property owners, developers, and economic drivers has presented challenges to our local governments.