Pittsburgh’s nonprofit organizations are some of our most valuable resources. They have sustained the City through tough economic times and have helped us build new economic sectors that are positioning us as a world-class city of the 21st century. However, the proliferation of nonprofit organizations and the vast tracts of land they now own throughout the City has put serious pressure on our budget – which relies heavily on property taxes – and our ability to provide services to our residents. We have to find new ways to create sustainable partnerships with these organizations that will help all of us thrive in the coming decades.
1. Reforming PILOTs
Payments in Lieu of Taxes, commonly referred to as PILOTs, are our primary strategy for obtaining some reimbursement from tax-exempt nonprofit organizations for the services the taxpayers of the City provide them with. These services include everything from ambulances to deliver patients to hospital emergency rooms, to streetlights along their sidewalks, to police and fire service. However, our current voluntary PILOT payment, through the Pittsburgh Public Service Fund, a consortium of more than 40 nonprofit organizations, is only about $3 million a year. This accounts for only 0.6% of our total annual budget. Not only is that contribution far too low compared to the value of services provided by the City, but the organizations contributing are not necessarily those making use of most of the services. We have tiny community organizations chipping in thousands of dollars a year while some of the City’s largest nonprofit organizations pay nothing. That is simply unfair and unsustainable. We must dramatically reform our PILOT system in partnership with nonprofit organizations across the City by creating solid targets for funding, baselines of eligibility to contribute, and an equitable formula for calculating the requested contributions.
2. Statewide Reform
While municipal PILOTs are important, we also need statewide reform of our property tax exemption system and a sincere effort to help struggling municipalities across the state address this issue. Connecticut provides one example of how it can be done. The state reimburses its municipalities 77% of the value of the taxes they would receive if their resident nonprofit organizations paid property taxes. The reasoning is that if the state requires municipalities to exempt certain organizations then the state should help fill the resulting budget gap. Rhode Island operates similarly, though their reimbursement is smaller. With so many core cities across Pennsylvania facing the same challenges it stands to reason that we should be working with members of the General Assembly that represent those cities to find a common solution that protects the status of those nonprofit organizations that are truly public charities while honoring our duty to our residents to provide them the services.