Pittsburgh Budget Center Adds New Data to Drive Home Controllers’ Report Conclusion—It’s Time for Pittsburgh’s Big Nonprofits to Pay
Pittsburgh,PA: A recent joint report from the Pittsburgh City and Allegheny County Controllers estimates that the city’s five biggest nonprofits, all health care and higher education institutions, avoid $34.5 million annually in property tax payments to the city, led by the University of Pittsburgh Medical Center (UPMC) at $13.9 million. Today, a brief from the Pittsburgh Budget and Policy Center summarizes the findings of the Controllers’ report and adds new data documenting that the property tax breaks mostly benefit the more affluent and educated people served and employed by big nonprofits, leaving working people and for-profit corporations paying for the city budget.
“The City of Pittsburgh’s anchor medical and educational institutions greatly benefit from their ‘nonprofit status’ and contribute little to the city’s bottom line despite making millions of dollars in profits,” said report author and Pittsburgh BPC analyst Nthando Thandiwe. “It’s time for Pittsburgh’s big nonprofits to pay their fair share to the city.”
The Pittsburgh BPC brief highlights that big nonprofits in other cities inside and outside Pennsylvania contribute more to their city’s revenues than such institutions in Pittsburgh:
- The City of Erie, Pennsylvania, receives more than 12 times as much per capita as Pittsburgh from “Payment-in-Lieu-of-Taxes” (PILOT) agreements under which large nonprofits, including the UPMC affiliate in Erie, pay 50% of their property tax exemption.
- In four other PA municipalities—Braddock, Cranberry, Erie, and South Fayette—UPMC PILOTs contribute to local revenues about half of what they would pay in property taxes if not exempt.
- Boston uses PILOTs and provision of benefits to city residents at low prices to garner $90.5 million from big nonprofits, the equivalent (on a per capita basis) of $39.6 million in Pittsburgh.
Pittsburgh’s big nonprofits also serve and employ mostly affluent people.
- More than half the students at CMU, Duquesne, and Pitt come from the richest fifth of the population, more than 10 times the share that comes from the poorest fifth.
- UMPC has a history of closing facilities in low-income communities and marketing its services to wealthy patients around the globe.
- The hospital and education sectors have highly educated workers, with the college-educated making up a half to a third of employees versus a quarter of all employed Pennsylvanians.
- The total compensation of UPMC’s CEO has ranged from $2.4 to $10.4 million in recent years, and at least 32 UPMC executives received more than $1 million in 2019. These executives’ combined salaries of $54 million totaled more than four times the city’s property tax exemption. In other words, if these executives took a 25% pay cut—still leaving them all within the top 1 percent—the savings would more than cover UPMC’s property tax exemption.
“When you look closely,” said Thandiwe, “you realize that the city’s property tax exemptions are a ‘reverse Robin Hood’ policy—they give to the rich at the expense of the less affluent.”
The Pittsburgh BPC report acknowledges that the city’s big “eds and meds” nonprofits are critical drivers of the modern Pittsburgh economy; they deliver vital services to people of all ages and bring people and buying power into the region. Even so, given their astonishing annual surpluses, these institutions could contribute full property taxes to the city for roughly one percent of their annual surpluses. “These anchor nonprofits have what finance economists call the ‘ability to pay,’” added Thandiwe.
The Pittsburgh BPC report also acknowledged that these big nonprofits have a substantial number of low-paid workers, including front-line caregivers in health care and non-tenure track “contingent” faculty in higher education. None of these low-wage workers benefit from big nonprofits’ exemptions from property taxes. If the nonprofits are committed to raising their low-wage workers’ pay and honoring their employees’ rights to organize, the community benefits might warrant maintaining a partial property tax exemption. But currently, no such commitments exist and UPMC, especially, has invested in resisting union organization.
The Pittsburgh BPC report closes by echoing the Controllers’ report’s recommendation that Pittsburgh emulate the Boston process for setting PILOT agreement levels and negotiating other community benefits, including the lower-cost provision of services to low-income people, access to employment and decent pay for city residents, raising the pay of their own low-wage workers, and respecting their employees’ rights to form a union. If negotiation of PILOTS and community benefits with UPMC does not yield sufficient progress, the City should reinitiate the lawsuit to challenge UPMC’s claim to be a “pure public charity.”