Pittsburgh Public Service Fund

I'm trying to get a handle on the Pittsburgh Public Service Fund. Last week, the umbrella for local nonprofits anted up a less-than-expected $12.1 million to the City, to offset the fact that nonprofit owners of real estate don't pay real estate taxes. For years, nonprofit real estate owners (hospitals, universities) have made payments-in-lieu-of-taxes to the City. The new Fund expands that program, in exchange for promises not to assess further taxes or fees on the nonprofits. But all of the details, including the identities of the nonprofits involved, are confidential.

Have I got that right? If so, I have some questions.

First, there is no local or state law that gives the City any real leverage here. There is no law that imposes a tax on nonprofits by default, so that Fund participants are getting a better deal by making this pledge. Is that right?

Second, does Philadelphia have this problem? Lots of untaxed real estate owned by nonprofits? What does Philly do?

Pittsburgh and Philadelphia have conspired in the past to solve common problems. Is this a situation where a little cooperation could help both ends of the Commonwealth? Maybe our state legislators could earn a little of their compensation: Everyone meet in Harrisburg and hammer out a state-brokered PILOT (payment-in-lieu-of-taxes) program that mandates default levels of payments to cities by real estate-owning nonprofits, with the proviso that cities and local nonprofits are free to negotiate alternative payment plans. Pittsburgh votes to support the Philly plan so long as Philly votes to support the Pittsburgh plan. And vice versa.

It's worked before.

Link: http://www.post-gazette.com/pg/05286/587793.stm


12 Responses to "Pittsburgh Public Service Fund"

Anonymous said... 10/17/2005 10:02 AM

Philly has a commuter tax. People woh work in Philly but live in the burbs pay more than 4% wage tax to the city. It ain't happening here.

Mark Rauterkus said... 10/17/2005 11:15 AM

Who cares what Phili does. We need to distance ourselves from them as they -- as mentioned -- don't have good government either.

I think you've got the right idea in most of your assumptions.

The solutions that are now on Grant Street are wrongheaded, IMNSHO.

I'd love to enact a total lock-down of all non-profit land expansions. No net gains on land for 20 years. Nonprofits have been spreading wildly under Tom Murphy's lead. That has to stop. They can rent, or expand upward. Plus, there are lots of spaces that are being squandered in some of the more rusty nonprofits in the region.

The $5-million or whatever amount for the TAX fund thingie is penny wise and dollar foolish.

C. Briem said... 10/17/2005 4:44 PM

concur.. no commuter tax here given the political winds. the cynic in me says that the level of state/city or city/city or city/anybody cooperation needed in what you suggest is political fantasy these days...

there are several reasons Pgh and Philly are not in the same exact boat. commuter tax obviously but probably the main thing is Pittsburgh the city is a much smaller proportion of the MSA than is Philly. Yet it retains a high concentration of institutions. Thus the same amount of institutional footprint is more concentrated here. Works both in terms of real estate taxes displaced but also, city relies on income taxes.. and an ever bigger proportion of the city is made of of income-poor students.

how to arrange PILOTs (payments in lieu of taxes) or any other voluntary tax (a voluntary tax is an oxymoron isn't it?) is your run of the mill public goods problem. few tax schemes have ever relied on altruism in the long run. So it might help but city is not going to survive as a municipal version of the Salvation Army.

and Mark's thought on building 'up' is an offshoot of the motivation for the two tier 'split' tax the city had for most of a century. the idea was that taxing land value much more than structure value would give inventives to develop land (i.e. build more on same space). Of course, that motivation is meaningless if you do not pay property taxes. To be fair, Most institutions have built up vice sprawled within the city. Even now, I am pretty sure Children's is putting more into same space St. Francis used to be for example.

C. Briem said... 10/17/2005 4:55 PM

what is often overlooked in looking at the city is that while residents have fled the city for suburbs or elsewhere, and continue to do so. Jobs located in the city have not fled the same way. People generally dont believe the fact that the total number of jobs located in the city is actually higher than 40 years ago.. the same period over which population has essentially collapsed. Jobs located in city has even had a positive trend through much of the last decade. Thus if it isnt true yet Pittsburgh will soon have one of the the highest proportions of jobs to residents (especially jobs to tax paying residents) for a major American city.

Amos_thePokerCat said... 10/17/2005 10:03 PM

35% of the land in the City of Pittsburgh is not taxed.

Yup. You read that right.

35%. Worth $7.2B. It went up 5% since this Feb article. It would have brought in $77M more per year. Yup, per year. Not 10 years, not three years, every year.

What is amazing is that it toke this long before finally breaking down.

Maybe this is the root problem. The city is hoping on growing the economy based on growing nonprofits. Almost an oxymoron. A growth nonprofit stock! Woo-hoo. I want some of those options as signing bonus. Ha!

Want those jobs to leave PIT? Just put on a commuter tax. Anything that can move, will move then. A local city income tax is pretty much an anomaly. I rarely see local incomes most places I have worked. Maybe 10% of the time. Cities generally rely solely on property tax, sales taxes, and fees. Lots of fees.

Oh, ya, those non-profits don't pay fees either.

In '97 the law was changed to limit the city's ability to challenge nonprofit status and use of property. There now is a "5 Point HUP" test. A law prof associated with the Urban Inst. wrote a book about Property-Tax Exemption For Charities. Here is a review. Philadelphia has its own chapter.

PHI sets PILOT goals at 40% of imputed property tax. Of course, PHI got started years ago in '94 with 50 nonprofits paying a max of $9M. Now there are only 22 participant, and they will pay less that $1M this year. About 25% of the property in PHI is tax exempt. It is 47%(!) in Buffalo. Other cities with PILOTS are Baltimore, Boston, Detroit, Indianapolis, and Minneapolis.

Mark Rauterkus said... 10/18/2005 9:14 AM

I'm going to speak today at city council to mention an idea: STOP the expansion of all nonprofit sales. The nonprofit footprint is too big. The agency among nonprofits could and should talk with city leaders so that the nonprofit land grab reverses.

I want to establish a moratorium on any new land being taken by nonprofits. And, with MAP Pittsburgh accounting -- this should all be out in the open.

True, Childrens went UP with a re-do. But, the tallest building at Pitt was built 80 years ago. They did an airplane hanger-ish design for a one-floor indoor football facility on the South Side.

C. Briem said... 10/18/2005 9:58 AM

can city code legally block sales to non-profits? I'd be shocked. I'm sure that would increase cooperation on the public service fund.

I'm not so sure an athletic field reflects most recent construction by Pitt or other institutions. How many floors in the new biomedical tower. 'UP' is one thing but re-creating the Cathedral of learning (I presume that is your 80 year reference) is another. It's a disfunctional use of space inside.

Mark Rauterkus said... 10/18/2005 2:09 PM

City code can't prohibit the further expansion of the nonprofit footprint. However -- I think creative minds and teamwork within the realm of the Pgh Public Service Fund could and should.

And, I think that a city charter change might make it a legal. The residents of the city could vote to make a new stipulation in the city charter that no more than x square feet within the city ever be owned by a nonprofit / tax exempt entity.

Otherwise, what is nonprofit and what is not can come into question. The state gives the business operation the 'nonprofit status.' That is the big rule change that lurks large in the future.

The athletic fields also come into play with Oak Hill. That is very recent and yet unsettled.

Anonymous said... 10/19/2005 10:09 AM

Hold on.

First, your right that these institutions don't pay taxes but they create an enormous amount of jobs so their growth is not all bad.

Second the biggest holder of tax exempt property in the city is not the non-profits, it's the government. Take away property owned by the city, the school district the ura etc., and the percentage of tax exempt property is not that great.

Amos_thePokerCat said... 10/19/2005 3:09 PM

Interesting theory. Any link, pointer, or url to the % of real estate owned by gov?

Mark Rauterkus said... 10/23/2005 4:21 PM

Of course the city owns way to many properties. But, that does not mean we should not care about the land grab from nonprofits too.

Furthermore, the value of the properties owned by the nonprofits is not a big deal to me -- not at all. I don't think we need to do any assessments on those properties. But, I want to limit the expansion of the footprint.

And, of course, we'd release a lot property to the private sector that is now in the hands of the city, URA and such.

Finally, I love to see the work of the nonprofits flourish in Pittsburgh. It puts a roof over my head. The growth can occur -- but it has to come with a loss elsewhere. The city's land volume can't increase unless we annex Wilkinsburg, etc.

Anonymous said... 1/14/2012 8:52 PM

Remember folks, non-profits have never been an issue Until the Democrats in PA have Spent this state and Cities into bankruptcy over the last 40 years. Driven out businesses, jobs and home owners from this town and the state. Taxes, welfare, food stamps, ad Unions have crippled this state. The non-profits are the only ones left and you screw with them too much and they to will leave. Just look at the steel mills, Westinghouse and other manufacturing in this and other liberal progressive socialist states...Hell the Pitts Post Gazette is DEAD and they don't know it.

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Pittsblog 2.0 is written by Mike Madison, a law professor at the University of Pittsburgh. Send email to michael.j.madison[at]gmail.com. Mike also blogs at Madisonian.net, on law and technology. Chris Briem of Null Space drops by from time to time.

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