County Data Collection Moves Forward

Recall that near the end of 2012 County Council held a hearing on the tax-exempt status of UPMC even though, under County law, that is not the Council’s job and soon after it was declared that the Office of Property Assessments would begin doing what it was supposed to do under the 2007 ordinance. Under a three year time frame as set out by that ordinance this would be the third time that the County would have a handle on whether tax exemptions granted to charitable organizations would be justified-instead, since the process fell by the wayside, just about two-thirds of the County’s charitable organizations have responded to a letter from the County on the issue.

Some have asked for an extension. The County’s solicitor noted "…If we got a good faith request, we gave them more time." And why shouldn’t they? To reiterate, Council passed the ordinance calling for the review once every three years in 2007. When the condition of the County’s tax-exempt files and the failure to do the scheduled review was revealed the only answer was that things "fell through the cracks". What is the County going to say to non-profits taking their time? Hurry up and get things done?

Universities Need to Visit History Department

Pursuing a court case against the University of Pittsburgh Medical Center (UPMC) will tangentially affect the City’s institutions of higher education according to the Pittsburgh Council of Higher Education, which in turn will affect the task force working on non-profit issues (such as payments in lieu of taxes) that was created as a condition of the oversight board for approving the 2013 budget. Sounds like a house of cards or a big city version of the domino theory.

Because if the City challenges the medical system’s charitable status, as it has made clear it wants to, then the universities will feel threatened, and then any talk of cooperation on the task force will crumble under the specter of a lawsuit.

The universities indicate through a letter to the Mayor that they would prefer to move on to less controversial subjects like "…the city’s burgeoning pension obligations and the imposition of a tax on those who commute to the city". If the universities’ focus sounds eerily familiar it should: it was not long after the Mayor floated a variety of taxes and fees to see what would stick that what survived was the "post secondary education privilege tax" on college tuition. After that was eventually dropped in late 2009, the universities (along with one large Pittsburgh corporation) promised to go to Harrisburg and seek reform for pensions (this was post Act 44, but prior to the garage privatization plan) and possibly spreading the tax burden on to others. We noted at the time that "the universities should not, and in good conscience cannot, move from celebrating their hard work against the tuition tax to helping the City lobby Harrisburg for some other tax, most likely to be one imposed on people who cannot vote for the City’s elected officials."

There is a glimmer of hope four years later: the Council letter did note "The ultimate solution is not to look at another source of funding, but rather looking at the financial stresses of the city…Maybe there are some approaches that would reduce the need for funds". There’s been no shortage of recommendations on that line of thinking.

Diagnosing the UPMC Hearing


Allegheny County Council held a public hearing recently regarding the University of Pittsburgh Medical Center, better known as UPMC.  Based on the motion passed by Council in November the purpose of the hearing was “…to allow the opportunity for public comment regarding the tax exempt status of property owned by [UPMC] within Allegheny County pursuant to the Institutions of Purely Public Charity Act”. 


The twelve Council members who were present at the November meeting voted in favor of holding the hearing. The Council member who would chair the hearing said at the time “it’s a good idea to have this meeting and air it out properly in front of everybody” though the “it” and the “everybody” were never exactly clear.  The motion said “tax-exempt property” but some believed “labor relations” was the intent. 


A day after that quote an opinion piece appeared stating “given the backdrop of labor politics, the event should not be a club aimed at UPMC, but a lens through which a broad system of tax exemption and its public impact get close examination”.  However, a newspaper report detailing the meeting stated “…many of the speakers talked more about what they said was UPMC’s opposition to union organizing efforts by the Service Employees International Union.” 


Maybe we will never know for sure whether this was supposed to be a fact-finding mission or a show trial.  In the spirit of the holiday season, let’s give Council the benefit of the doubt on three points; one, the meeting really was aimed at examining UPMC properties exempt from taxation  to ascertain whether the justification for each parcel was warranted; two, the chair could not stop the large numbers of people from speaking on issues tangentially related to the topic at hand (salaries, pay levels, and organizing come to mind) thereby depriving many who might have  been ready to speak to the tax-exemption issue of that opportunity (they have been encouraged to submit their comments in writing); and third, there will be a sincere effort to examine other tax exempt property owners and that the UPMC hearing was just the first of many (the Council meeting chair was quoted as saying “We’re not picking on UPMC. They just happen to be the biggest and the first”).

However, even assuming all the benefit of the doubt is warranted, what transpired was in direct violation of the ordinance Council passed to determine if properties are deserving of their tax-exemption. 


Council passed ordinance #3504-07 in November of 2007 to establish “a County policy for periodically reviewing the status of all properties qualifying for exemption from property taxation under the Institutions of Purely Public Charity Act”, the state law that sets out the parameters for non-profit tax exemption. 


But this County ordinance does not give Council the power to review tax-exemptions: that’s the job of the Chief Assessment Officer.  The ordinance’s language added a new section to 5-210.12 of the Administrative Code stating:


“All properties granted tax-exempt status by the Chief Assessment Officer under the provisions of the Institutions of Purely Public Charity Act…shall be subjected to a parcel review by the Chief Assessment Officer…at least once every three years…the Chief Assessment Officer shall determine whether each property or any portion thereof continues to qualify for tax-exempt status , and shall forward written notice of this determination to the legal or equitable owner of the property and all taxing bodies within which the property is located”.


Nothing in that language assigns Council or the public responsibility for determining whether a tax-exemption is warranted under state law.  Was the Chief Assessment Officer (currently a contract employee holding the title of “acting” director) or assessment office staff present at the hearing?  Were they invited? Is Council forwarding the recorded comments to the assessment office? Will officials from municipalities and school districts where UPMC owns property get any information on the findings of the hearing?


In addition, note that the ordinance language states the review is to be done every three years.  Since the ordinance was passed in 2007, all exemptions subject to review should have been done in 2010 and the County should be gearing up for another review next year.  Clearly, something happened on the way to implementation-much like the delays in carrying out the County Charter’s required Sunset reviews. 


A news article in September quoted the Council member who chaired the hearing-and who sponsored Ordinance #3504-that something “fell through the cracks…and what we have to do is sit down with [the County Executive] and talk about that”.  In that same article the administration said that the tax-exempt review process had not been formalized and that it would start once the reassessment was over.  Since the reassessment is supposed to be completed December 20th it is curious as to why the UPMC hearing took place December 5th.  Two days after the hearing it was reported that the administration was prepared to direct the Office of Property Assessments to begin the process of reviewing exemptions, thus enforcing the ordinance six years after its enactment.  Is there confusion over territory in this episode? 


Lastly let’s examine something the ordinance does not do; a sin of omission, perhaps.  State law allows tax exemptions for many types of property, not just those owned by non-profits.  Ordinance #3504 does not instruct the Chief Assessment Officer to review all tax-exempt property every three years, only the tax-exempt property owned by non-profits under the provisions of the Purely Public Charity Act. 


That means the County is not going to scrutinize the broad swathes of property owned by Federal, state, local, school, and authority governments.  A report done by the County Controller’s office in June looked at exempt property in the County based on land use codes.  Roughly the same percentage of property value is held by higher education, churches, and hospitals as that attributed to County, municipal, and school district uses.  But stadia and the convention center owned by the Sports and Exhibition Authority, and property owned by the array of authorities at the County, City, and municipal level (redevelopment, housing, transit, airport, parking, etc.), school districts, municipalities, and the County itself won’t come under the auspices of #3504.  Council’s thinking in 2007 must have been that only non-profits are expansionist and take taxpaying properties off of the tax ledgers and that such action must be justified every three years. 


There is merit in reviewing tax-exempt property to see if the exemption is truly justified.  It is not clear if anyone involved in the UPMC hearing, either from County government or members of the public who attended came away with a better understanding of the issue of property tax exemptions.  That is a shame, but with plenty of tax-exempt non-profits, and Council’s pledge to be vigilant, along with the Executive’s directive to the Office of Property Assessments to do the job Council gave it, the public might be become well-informed of the topic in the months and years to come. 

County to Get Handle on Tax Exempt Properties

All non-profit property is exempt from taxation, but not all tax-exempt property is exclusively non-profit. That’s one of the important layers that have to be peeled off by the public, as well as by policymakers, when they discuss the status of tax-exempt property and say that if tax-exempt property were taxable taxing bodies would reap a bounty of dollars.

As yesterday’s Blog pointed out, there is merit in reviewing whether or not a property is truly deserving of a tax-exemption under the Pennsylvania Constitution or statutory provisions. That’s what the County Controller wants to do, as that office has issued its inaugural Taxpayer Alert discussing tax-exempt property, a recent court case, and the makeup of exempt property in Allegheny County.

The alert points out that "the total appraised value of exempt properties in Allegheny County is nearly $17 billion. After the latest reassessment this total to rose to over $23 billion". That means the rate of change in exempt value is roughly 35% from 2012 to 2013. But is that rate of change bigger than the rate of change for taxable property? It was $58 billion in 2011 according to the Controller’s CAFR.

How about in proportional terms? Based on the 2011 numbers, the $16.5 billion in exempt value represented 28% of total taxable residential and commercial value in the County (the $58 billion mentioned above). If taxable value rises to around $86 billion upon certification, the projected rise in exempt value to $23 billion keeps the ratio at around the same level as currently.

Then we have to turn to the original point above: just because a parcel is exempt from taxation does not mean it is a hospital, university, church, or charity. This was the analysis we did about a decade ago when looking at the City of Pittsburgh’s exempt parcels. The Alert shows that, based on land use codes (which may or may not have shortcomings), about 36% of the County’s total tax-exempt value can be attributed to church, hospital/charity, or higher-ed. About the same share, 38%, is tied to County government, school districts, or municipal government. A big piece (21%) is identified as "other", which could mean non-profit but could also include a lot of property owned by public authorities (unless those are counted under the county or municipal total). It is doubtful that even a serious examination of exempt parcels is going to lead to taxes being imposed on the County Courthouse or the slew of municipal centers or school buildings, meaning that the tax "loss" attributed in the Alert to various taxing bodies is overstated.