Pittsburgh Mayor Ed Gainey’s administration is launching a citywide review of tax-exempt properties to determine whether they should be added to the tax rolls — marking another chapter in a years-long struggle by multiple mayors to capture revenue from property owners that include the state’s largest employer.
Gainey announced the review with an executive order issued Tuesday, which asserts “it is time for the City of Pittsburgh to conduct a systematic review of all property … that is currently designated as tax-exempt and not paying property taxes.”
The order directs the city’s Law and Finance departments to “immediately” begin determining if properties are owned by what state law calls “institutions of purely public charity” — and to take action if they are not.
“If you pass the test, then the city is truly benefiting from your presence and your exemption has been earned,” Gainey said at a press conference Tuesday announcing the review. “However, if you fail to meet our constitutional standards, then we will make sure that you are paying your fair share to our city.”
“This is about every charity in the city,” said mayoral spokesperson Maria Montaño. “This is a thorough examination of those properties to see if they meet the standards” set by state law for tax exemption. And for organizations with property that doesn’t qualify, “We’re going to ensure [they’re] paying [their] fair share just like you do, just like I do.”
City Solicitor Krysia Kubiak, whose office will lead the review, says the office will likely begin its review with large parcels but urged residents to inform the administration about where to prioritize its efforts. An email with which residents can suggest properties to review launched alongside the initiative Tuesday.
Gainey implored residents to take part. “If you know that the place you go to is a charity, but you have to pay market rate for a service you receive there, let us know,” he said Tuesday. “If you know that the charity is just a front for someone to pay themselves a higher salary and deduct the cost of their cars, let us know.”
Houses of worship will be exempt from the review.
Roughly one-third of the city’s total real estate value is tax-exempt. While much of that is owned by government agencies, nearly 20 percent of the city’s real estate is held by outside entities.
That means other taxpayers “are basically footing the bill for the entire city,” Kubiak said. “It is time for us to do a deep dive” on whether everyone in the remaining third deserves the break.
Kubiak stressed that the review “isn’t about any one specific charity. We’ll be looking at all the charities equally.” But if history is any guide, the review seems likely to refocus public attention on a handful of the city’s largest institutions — UPMC in particular.
Not a ‘gotcha game’
According to a joint report last year compiled by the controller’s offices of Pittsburgh and Allegheny County, the five largest tax-exempt organizations locally are UPMC, Allegheny Health Network, the University of Pittsburgh, Carnegie Mellon University and Duquesne University.
The report found that in 2021, these five organizations owned $4.3 billion in property that is exempt from property taxes levied by the city alone — nearly two-thirds of the tax-exempt property within city limits.
The report identified UPMC as the biggest player, with exemptions reducing its tax liability to the city by $13.9 million in 2021. And the health care behemoth has long drawn the scrutiny to match.
In 2013, then-Mayor Luke Ravenstahl sued UPMC in an attempt to require it to begin paying payroll and property taxes. Ravenstahl’s successor, Bill Peduto, dropped the lawsuit a year later, favoring a more collaborative approach in which nonprofits could contribute to specific social welfare causes through his “OnePGH” plan.
UPMC was often at the forefront of Gainey’s successful 2021 campaign to displace Peduto. Gainey, who was backed by a union long engaged in a labor fight with UPMC, promised a tougher approach.
“Ed will resume the legal and legislative fight against UPMC’s nonprofit status to ensure that they pay their fair share, on our terms,” his campaign pledged at the time. “The region’s most profitable corporation should pay taxes like anyone else.”
But while Gainey scrapped the OnePGH approach last summer, prior to Tuesday he has said little publicly about UPMC since taking office, except to say the city had been in talks with leadership. He declined to describe those talks Tuesday, except to say they are still ongoing.
The health care system seemed likely to receive more attention even before Tuesday’s announcement. Last week, Congresswoman Summer Lee held her first press conference as a U.S. House member to call for efforts to rein in UPMC’s control of the health care market: She was joined by state Rep. Sara Innamorato, who is running for Allegheny County executive. A fellow progressive, Darwin Leuba, launched a campaign for county controller that seemed likely to have UPMC in its crosshairs. (On Monday, Leuba already was suggesting he could take some credit for a review of tax-exempt parcels.)
UPMC responded to news of the city's review with a guarded statement that said that Gainey was "aware of UPMC's ongoing support and can count on our full participation in programs that are fair and equitable and include the region's other major nonprofits."
The statement also noted UPMC's own community investments, which include support promised through the OnePGH program and a $100 million donation to the Pittsburgh Promise scholarship fund made in 2007.
Kubiak stressed the city’s review is “certainly not doing anything that will hurt anyone’s 501(c)(3) status” — the federal government’s designation of an organization as tax exempt. Even if the city successfully challenged a property tax exemption, donations to the nonprofit would still be tax-deductible, she said.
“We’re literally only talking about your property tax,” she said. “We’re not trying to play a gotcha game.”
‘They should be paying their fair share’
The state constitution specifies that property-tax exemptions can be granted only for “real property … which is actually and regularly used for the purposes of the institution.” And state court rulings during the past decade also have made clear that the tax-exempt status of owners can also be challenged.
To receive tax exemption, an institution must meet the state’s criteria for a “purely public charity” under state law. Such institutions must meet a five-prong test, whose criteria include operating entirely free from a private profit motive, relieving government of a burden it would otherwise fill and benefiting people who are legitimate recipients of charity.
If property owners don’t meet that test, Montaño said, “Then they should be paying their fair share to the city.”
The difficulty of winning such challenges is open to debate. Government officials have long lamented that state law makes it difficult to revoke a tax exemption … even as advocates for nonprofit groups complain of a “relentless attack” by local officials and bemoan the “heavy burden” of justifying an exemption.
The city’s review will be open-ended: Kubiak said the process would be “ongoing … and every single time we find a property that we believe should be moving over to taxable [status], we will start that process.”
But it’s not clear when such a challenge might actually generate more tax revenue. Challenges to a parcel’s tax exemption are filed with the county’s Office of Property Assessment, a process that can lead to appeals and court fights.
Kubiak says the city “will be looking at each of the properties and what activities are occurring on [them]. We will then be examining the institutions themselves to see if they meet the standards” for tax exemption. Officials will review IRS filings and other documentation to determine such factors as whether people pay market rates for services and the income range of those who receive them.
In the meantime, it’s unclear what effect the current process might have on relations with UPMC, whose labor and business practices have also been decried by elected officials.
“We're not eliminating anything from the table in pursuit of other aims and goals in regards to our work with the nonprofits in the region,” said Montaño. But she added, “This process really is about property taxes.”
“We need to come up with more money to make sure we're paying for public services,” Kubiak said. And one way to do that, she said, was to ensure “that everyone is paying their fair share.”
