Tag Archives: tax exempt

Councilwoman Puts Economics Ignorance on Display

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Pittsburgh and Allegheny County are planning to revisit the issue of whether some large non-profit organizations in the City should have their property tax exempt status repealed. It is an argument that has been around awhile and a thorough discussion of the pros and cons is worth having. But as is invariably the case some politician will sally forth with an irrelevant, disturbing and illogical argument.

Enter a City Councilwoman saying that UPMC pays virtually no property taxes and commenting in a news report, "Additionally, many service workers at UPMC are not making family-sustaining wages", and continuing, "Roughly half of the service workers at UPMC make less than $12 per hour…while the living wage to support a family of four in Pittsburgh is $25.40 per hour."

First of all, when did a living wage reach $53,000 per year? That’s well above the regional average wage rate. Second, even if $53,000 a year is the family of four sustaining income, where is it written that everyone working at UPMC is the sole provider for a family of four? Third, if the skill levels of "service workers" can command no more than $12 per hour in the market place why is it the government’s job to artificially boost their wage rates? If UPMC is forced to pay higher wages, how will they make those payments? Charge more for services, offer less free health care, hire fewer workers, reduce the benefit packages for all employees?

If UPMC loses its non-profit status and has to pay millions in property taxes, where does it take the money from? Wages, benefits, free health care?

Whether UPMC should have all or parts its organization lose non-profit status is something to be debated and will probably either end up in court or require more legislation before tax exempt status is taken away. But that decision should not take into account the fact some workers do not earn $53,000. There are many non-profits with employees who do not earn that much. It is an irrelevant argument.

Officials Want to Study Use of Closed School Buildings—A Time Waster

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Pittsburgh has 15 closed school buildings and is about to add seven more to the list. City Council members now want to see studies of how to utilize these buildings. The School District is spending $15 million a year in maintenance and debt service costs on these structures.

Here’s a clue. Forget studies that will drag on and on, require community involvement, endless haggling, searches for funding to convert the buildings, and lobbying for government subsidies for politically correct and acceptable non-profit organizations to occupy the structures. Instead, put the buildings up for sale and hold auctions. Let the private sector decide what the best use is and the true value of the properties.

Large non-profits might choose to bid and should be allowed to, but the District should be aware that some non-profits are exempt from paying property taxes. One of the objectives of selling the properties besides getting out from under the costs of upkeep and the deterioration of unused buildings is to return the property to the tax rolls.

More studies are not the answer. They are time wasters and will be sources of controversy the District does not need.

County Calls Both Sides of Non-Profit Coin

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Will there be signs of an identity crisis at County Council’s regular business meeting tomorrow night? On the one hand, Council is scheduled to take up business regarding the issuance of over $1 billion in refinancing bonds through the County Hospital Authority for the benefit of UPMC. The taxpayers are not on the hook for any of the bonds, the purpose of which, according to the legislation, is "to benefit the health and welfare of the citizens of Allegheny County, Pennsylvania".

Soon thereafter, at the same meeting, Council is expected to consider two separate pieces of legislation, both concerning the tax-exempt status of parcels owned by UPMC. One would direct the Solicitor to "undertake a challenge to the tax exempt status of all parcels owned by UPMC within Allegheny County". The second would deal specifically with the parcels comprising the UPMC Braddock hospital site, the hospital slated for closure by UPMC.

Council is purely within its rights under the state’s tax exempt property law (The "Institutions of Purely Public Charity Act" of 1997) and if there are properties in use by the medical system that don’t meet the law’s test then those properties would have to pay real estate taxes if they are not already. For instance a 2009 report by the state’s Legislative Budget and Finance Committee noted that the University of Pittsburgh (not UPMC) paid $700k in real estate taxes to the City, County, and School District in 2007.

So would County Council breezily approve the refinancing deal and then show a hard line approach on the parcel legislation? It is hard to say. Even City Council has brought up the idea of adding additional layers of approval for building projects located in zoning districts labeled industrial or medical-educational while praising the benefits of "eds and meds". That goes without mentioning the "educational privilege tax" proposal.

This season is shaping up to be a challenging one for the non-profit community in the region.

Higher Education: Target One for More City Revenue

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Another City Council plan to extract money from higher education in Pittsburgh has surfaced. Under the plan proffered by Mr. Burgess the City will negotiate a payment in lieu of taxes based on the value of land on which colleges and universities sit and the value of city services provided to the students at these institutions.

The Councilman’s approach is superior to the Mayor’s plan to levy an education privilege tax on students based on the tuition they pay. Mr. Burgess would at least try to determine the value of City services used by students. However, his plans falls short for several reasons.

First, the Burgess plan would base the estimate of student service use on what the City spends on other residents. But this obviously misses the mark. Most colleges have their own campus police forces and effectively replace city police for routine patrols and non-felony investigations. Then too, how many campus fires have City fireman responded to in recent years?

Large institutions and commercial establishments also pay separately for garbage collection so one of the City’s most expensive services provided to residents is not consumed by students. Beyond these drawbacks, the City cannot provide services to the students without providing services to the faculty and administrative staff. And since many of them live in the City and pay taxes, the estimate for students would have to take that into account. A very messy problem at best.

Using the spending on residents as a measure of the amount spent per student is simply not a meaningful way to approach this issue.

At the same time, how does Mr. Burgess intend to estimate the tax revenue paid directly or indirectly by students? Many students live off campus in nearby housing and pay rent to property owners who in turn pay a portion of that rent to the City, County and school district. Their presence creates purchasing power to support shops, dining and tavern facilities that simply would not exist without that spending. Those businesses pay property taxes, license fees, LST taxes, wage taxes and payroll preparation taxes to the City. Indeed, many students are employed in the City and pay wage and LST taxes to Pittsburgh, undoubtedly at levels that exceed their usage of city services.

Finally, evaluating the value of land for the tax exempt institutions will present enormous theoretical and practical problems. The land derives a great deal of its value because of the presence of the institutions and the people, businesses and housing facilities needed to support the institutions.

In short, unless or until some organization with the resources and public confidence necessary to carries out a full blown, credible study of the taxes paid and services used by the institutions, all the talk of education privilege taxes or land taxes should be put on hold.