The City of Pittsburgh is poised to shell out $400,000 as it tries to get two dozen properties back on the tax rolls. While some members of City Council argued the fight will pay for itself once property tax revenues increase, others voiced concern Wednesday about how the Gainey administration is selecting property owners to target.
The city petitioned Allegheny County to review 26 parcels this year: City Solicitor Krysia Kubiak said that county officials have ruled that half of those should be returned to the tax rolls. The city will now appeal the county’s assessment of some remaining properties in court.
The Gainey administration wants to hire Washington D.C. law firm Loeb & Loeb to assist with those challenges. Originally the administration estimated the firm's work on the review would cost the city $150,000. But the city has already spent nearly $120,000 of that.
Kubiak said the city is asking for a $250,000 increase in the contract to help cover the often-unpredictable cost of appeals, while allowing the city’s in-house legal team to learn from Loeb’s expertise.
“We hope sometime in the future [we] will be able to take all of this work in-house,” Kubiak said. “But I also want to be fully prepared for the fight. … I don't want the city to not have the proper resources that it needs to have to put on the best lawsuit possible.”
Kubiak said the city "will need some more specialized legal help" as it prepares for the next phase of the fight, which includes hearings before the county’s Board of Property Assessment Appeals.
Gainey announced a city-wide review of all tax-exempt properties in January, on the grounds that some properties don’t qualify for those exemptions under Pennsylvania’s “purely public charity” criteria. State law requires property owners to meet a five-prong test which includes requirements like operating entirely free from private profit motive, relieving government of a burden it would otherwise fill, and benefiting people who are legitimate recipients of charity.
Gainey said his team would prioritize ensuring all non-profit property owners “pay their fair share,” when those criteria are not met.
But when the administration first asked for the additional money to support the review, council members questioned how it would be spent and whether the city could expect to see another $400,000 bill next year. It appears most of those concerns were ironed out in an executive session not open to the public.
Councilor Deb Gross said Wednesday that the higher upfront cost was a result of the city having previously done a poor job keeping property records current. She described the review as “housekeeping” work.
“Fifteen [or] 20 years ago we fired half of the city staff and … this is one of the ramifications,” Gross said. “If we even find, you know, $8,000 of under-assessed property… over 10 years, that's $800,000 of revenue. So this looks like a no-brainer to me.”
According to Kubiak, if the city wins challenges to the tax-exempt status of the properties it plans to appeal, the resulting revenue will cover the cost of the Loeb & Loeb contract. She added that the city may not expend all $400,000, and said any leftover funds would go toward the next round of property challenges.
Kubiak did not disclose how many properties the city plans to appeal in this round. She did not say how many properties the county agreed to add back to the tax rolls, but claimed so far the city has billed $70,000 to newly added property owners.
The initial list of challenged properties previously released by the city included parcels owned by UPMC, 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.
But some properties had council members scratching their heads, including the Karpeles Manuscript Library in the Sheraden neighborhood. Council president Theresa Kail Smith, whose district is home to the library, argued that it operates as a charity and shouldn’t be part of the city’s review.
Kail Smith told WESA that Karpeles has worked with Pittsburgh Public Schools to host educational exhibits about Juneteenth. She argued that since the library is free to enter, it should qualify for an exemption.
“They took… what could have been a blighted property and turned it into an amazing gem for that community," Kail Smith said. "It was disheartening to see them listed."
Kail Smith is also concerned about how the city selected Loeb & Loeb. During a council meeting Wednesday, she questioned whether the Gainey administration followed a proper contract procurement process to begin working with the law firm.
There have long been exceptions to the usual competitive bidding process, for situations in which special expertise is needed. But Gainey’s use of no-bid contracts has attracted scrutiny from council itself and the Allegheny County District Attorney.
Kubiak told council the contract qualifies for an exemption from the typical bidding process, because Loeb & Loeb is uniquely qualified in the field of property assessment.
"One of their attorneys was with the IRS in their charitable division for 35 years,” Kubiak told council.
She added that while the administration did not perform a formal competitive-bidding process, her office did “call around to several different law firms who handle this type of work to get quotes and to see availability.”
Strassburger asked Kubiak to prepare reports in the future for council to follow the property tax review. She said regular reports would help alleviate concerns “for some of us who still have questions about the financial strategy, the legal strategy and the financial implications of that legal strategy.”
Kubiak agreed such updates would be helpful to the city and the public.
Council preliminarily approved the additional funding for the city’s property tax review Wednesday, though Kail Smith abstained from voting. She said she wanted to speak with the law firm directly before approving the expanded contract.
A final vote on the expanded contract is scheduled for next next week.
