Pittsburgh Mayor Ed Gainey is moving ahead with efforts to challenge the tax-exempt status of 26 properties within the city Tuesday. This marks the first batch of properties targeted by a city-wide review of parcels owned by nonprofits.
“This is just the beginning,” Gainey said during a press conference Tuesday. “We have heard from hundreds of people from across the city who have provided us with reports and testimonies about charities that they would like to see us investigate first.”
The city said the 26 properties could account for $3.5 million in tax revenue, including years of back taxes the city could pursue in some cases.
The review is aimed at getting more properties on the city tax rolls, including those owned by large nonprofits that Gainey argues may not qualify for tax exemptions under the state’s multi-pronged “purely public charities” test. Exemptions can only be granted for “real property … which is actually and regularly used for the purposes of the institution,” according to the state Constitution.
Gainey noted that the review began officially two months ago, “and already the Law and Finance departments have identified properties that are not paying their fair share.”
The 26 parcels being challenged are located in neighborhoods across the city, and they include a UPMC facility in Oakland: the Forbes Tower complex between Atwood Street and Meyran Avenue. The building holds insurance office space and a parking garage, the city said.
Activists gathered Downtown last week to call on the administration to focus its efforts on UPMC’s properties. But while large nonprofits like UPMC loom large over the review, the Gainey administration has stressed that the health system isn’t the only target of the investigation.
A UPMC spokesperson argued the parcels identified Tuesday “support UPMC’s charitable mission of serving our patients, members, and communities” and that all six had previously been approved for their tax-exempt status.
The spokesperson did not indicate whether UPMC would fight the challenged parcels in court. He stressed that the health system would continue to participate in the review so long as it is “fair and equitable” and includes the region’s other nonprofits.
Other properties the city is challenging are owned by Allegheny Health Network, Carnegie Mellon University, the University of Pittsburgh, Propel Schools, housing development companies and private citizens. The properties include parking lots, vacant lots, houses and office space.
A spokesperson for Allegheny Health Network declined to speak specifically about the parking garage at Allegheny General Hospital being challenged by the city. He noted that the health system is “in conversations with the mayor’s office” about how AHN could contribute more to the city, though he didn’t elaborate on any potential outcome of those conversations.
AHN argued that the tax exemption review should not target any one nonprofit but ensure that “funding support is equitably and fairly proportionate to each organization.”
The health system did not indicate whether it would fight the city’s review in court.
Krysia Kubiak, the city’s solicitor, said the review is targeting organizations that hold “the largest amount of property in the city first,” but that the investigation has also turned up several exempt properties owned by private citizens or companies.
“We didn't realize until we dove into this that there were a lot of people on the list who were not charities at all,” she said. “We needed to stop that as soon as possible.”
Nearly half a dozen private citizens are being challenged in the review. Kubiak said in some cases, private houses were exempt because they were previously owned by a veteran and the property wasn’t added back to the tax rolls when ownership turned over.
In other cases, Kubiak said exempted properties are owned by limited liability companies.
While houses of worship are exempt from the review, the former Holy Innocents Church building along Landis Street in Sheraden is among those being challenged: The structure is now home to the Karpeles Manuscript Library Museum.
Also included in the challenges is the North Side campus of Propel Schools. Kubiak explained that the city isn’t going after Propel itself, but rather the nonprofit that owns the property, School Facility Development, which acts as landlord to charter schools.
“We don't believe owning the property satisfies that purely public charity test,” Kubiak said.
When asked if other Propel Schools properties could be challenged, Kubiak said the city hasn’t completed its review of those parcels.
Roughly one-third of the city’s total real estate is tax-exempt. While much of that is owned by government agencies, which the review does not include, nearly 20% of the city’s real estate is tax-exempt and privately held.
More of those properties are likely to be challenged: The city said staff from the law and finance departments have so far completed reviews of 10% of the properties on their list.
In the release announcing the challenges, the city said the first batch is due to the County by the end of this month, which marks an annual deadline for assessment appeals by taxing bodies and residents alike. But officials added, “the city will continue its review and hopes to have the review completed by next March.”
The challenges were being submitted Tuesday to Allegheny County’s property assessments office.
“This work is far from over,” Gainey said. “As we hand this process over to the Office of Property Assessment at the county, I hope that they work as diligently as we do.”
The county will next schedule a hearing for the challenges where both parties will present evidence. If the county rules in favor of the city, property owners could still appeal.
