It's not just a UPMC thing: cities across Pennsylvania have a nonprofit problem

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This sudden duel between the mayor and UPMC is great fun and probably overdue but obscures the larger point.

Pittsburgh is hardly the only region in Pennsylvania where the biggest employers are hospitals and universities largely exempt from taxes. Just about every city is sinking for more or less the same reason: a governmental set-up designed for a 19th-century economy.

I'm plagiarizing myself in the previous sentence. It led a column I wrote in 2010 and could have written in 2000 or 1990.

Other big states such as Texas, Arizona and California have adjusted to the modern economy by allowing cities to expand, essentially making residents out of their commuters whether they like it or not. Houston, Phoenix, San Diego are now anywhere from 300 to 600 square miles, five to 10 times the size of the city of Pittsburgh. If a hospital or college doesn't pay taxes, that's not as big a deal. Those cities take in the malls and a helluva lot of doctors' and professors' homes.

Large annexations aren't going to happen in Pennsylvania, and I'm not even arguing that they should. The political power in Harrisburg has shifted to the suburbs, and commuters generally like this set-up. America's Largest Full-Time State Legislature doesn't much care if cities fail, because the legislators won't pay any political price if they do.

With no statewide strategy to deal with large nonprofits, every Pennsylvania municipality that hosts them must sink or swim on its own. Mayor Luke Ravenstahl, suddenly freed from any worry about keeping his job because he doesn't want it anymore, has the city suing the $10 billion medical enterprise whose high-rise offices are within glaring distance of his.

"They're not a charity,'' the mayor said, announcing the lawsuit that demands six years of back payroll taxes and removal of the medical giant's tax-exempt status.

That's quite the turnaround for the mayor. Three weeks ago, when he announced he wouldn't run for re-election, he named foremost among his accomplishments the Pittsburgh Promise. That's the college scholarship program that has helped 3,800 city high school graduates by using UPMC's pledge of up to $100 million in matching funds.

That scholarship program "would have been stillborn had UPMC not come to the table with the $100 million," its spokesman Paul Wood said Thursday.

That's not to say that UPMC is pulling the plug.

"Unlike some politicians,'' Mr. Wood said, "when UPMC makes a promise, we intend to keep that commitment.''

Knowing its money goes toward tuition for city students attending colleges in Pennsylvania is "a whole lot better than going into the black hole of city government, where you have no idea where it's going," he added.

He'd have some support there, except that most taxpayers don't get to say where their money goes. That's life, but speaking of black holes, this should be one long and murky legal fight.

Already, a state Senate bill with 16 co-sponsors is seeking to set up uniform standards to determine what is and isn't a "purely public charity.'' Don't expect that to make the city's case any easier.

Ira Weiss, solicitor for the Pittsburgh Public Schools, sees the big nonprofits rallying together and lobbying Harrisburg to make sure the status quo is protected.

Just in Allegheny County, UPMC and its subsidiaries have about $1.6 billion in tax-exempt property and the University of Pittsburgh $1 billion. Carnegie Mellon and Duquesne universities and the West Penn-Allegheny Health System have more than $900 million in exempt property among them.

They all have lawyers and lobbyists, too.

Unlike the city, the school district agreed under the Pittsburgh Promise never to challenge UPMC's tax status or seek tax income. Mr. Weiss said the Pennsylvania Public School Code bars any school from using tax money for scholarships, so UPMC's donations would be tough to replace if they dry up.

UPMC says its commitment to the Promise remains, but it's now in for a bundle fighting the city in court.

Funny that a Pennsylvania Supreme Court decision involving an obscure summer camp in northeastern Pennsylvania provided the opening for this question of whether UPMC is a "purely public charity,'' but remember the old saying: It's all fun and games until somebody loses a tax exemption.


Brian O'Neill: or 412-263-1947.


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