Allegheny County's records of UPMC applications for property tax exemptions are spotty and incomplete, raising questions about how vigorously assessors review exempt parcels and leaving gaps in the public's understanding of whether the hospital system deserves all the tax breaks it gets, according to a six-monthlong review by the Pittsburgh Post-Gazette.
Each of the 26,000-plus tax-exempt parcels of land in the county is supposed to have an application on file and be subjected to a rigorous, in-person field review by a county assessor.
But of UPMC's 196 tax-exempt parcels, the county could locate applications for only 64 of them.
"That's unbelievable," said charity expert Nicholas Cafardi, dean emeritus and professor at Duquesne University's School of Law.
"The public -- those of us who do pay taxes in Allegheny County -- have a right to know how they were granted those exemptions from paying taxes. Was it a favor? How was it granted?" Mr. Cafardi said. "The county should ask for a do-over for at least those [properties] that they can't find paperwork on."
State Sen. Jim Ferlo, D-Highland Park, who has closely followed the debate over the state's charity law, said he was troubled to hear Allegheny County only has applications for exemption on about one-third of UPMC's exempt properties.
"That raises the need for an audit" of UPMC's tax-exempt parcels, he said.
Exemption applications that the county could not find range from those for entire hospitals in the UPMC system (UPMC Passavant) and hospitals that had a change in ownership (UPMC McKeesport), to individual pieces of commercial property UPMC purchased, all of which should have triggered the need for a new application under county policy.
In the case of UPMC McKeesport, the only applications on record date from the mid-1990s and cover land previously owned by its predecessor, McKeesport Hospital.
County Executive Rich Fitzgerald did not dispute the Post-Gazette's findings of an archaic, noncomputerized system in which thick files are jammed in dusty bankers boxes and warehoused by broad category -- hospitals, in this case -- instead of arranged chronologically or by parcel identification number.
Asked if the county's record-keeping system for exempt parcels should be revamped, Mr. Fitzgerald said, "If it's incomplete, the answer is yes, and it sounds like you're telling me it is incomplete."
In addition, the county is not abiding by a 2007 amendment to the administrative code that mandates that the county's chief assessment officer review "at least once every three years" each of its tax-exempt parcels.
The change was sponsored by County Councilman John DeFazio, D-Shaler, and signed into law Nov. 27, 2007, by then-County Executive Dan Onorato. Mr. Fitzgerald, who was then council president, co-signed it.
Mr. Onorato, now an executive with Highmark, declined comment on why his administration did not conduct the reviews.
Had that change in the code been followed, the county would be on its second review of exempt property now.
Mr. DeFazio said the change "fell through the cracks."
"The administration was supposed to make the move on that. I have to find out what we can do now that they haven't done anything about it," Mr. DeFazio said. "I guess what we have to do is sit down with Rich and talk about that."
Amie Downs, Mr. Fitzgerald's spokeswoman, said the process for examining exempt properties "has not been formalized, but has been proposed in order to assure that an ongoing review of properties is conducted. The reassessment lawsuit delayed the work because the county would not have had the personnel or financial resources to conduct a review of all exempt properties twice and in such a short period of time."
Once the county completes the time-consuming, current reassessment, Mr. Fitzgerald said it would focus on a new evaluation of tax-exempt properties.
But county Controller Chelsa Wagner, whose office did its own study of the county's tax-exempt properties earlier this year, placed the blame on the county's top officer. "I think that was something that was certainly missed, and you have to put that on the executive when it is, whether that was Dan Onorato then or Rich Fitzgerald now," she said.
Exemption applications reviewed by the Post-Gazette covered properties used for various purposes such as health care, administrative functions, storage, employee parking, scientific research, computer operations and day care for employees' children.
But the reason for exemption is not always clear. A 2003 letter from the Office of Property Assessment granting one exemption read, "This decision is based on the following: This property is vacant land contiguous to the above and undeveloped. As such, it qualifies as exempt property under the General County Assessment Law."
Mr. Cafardi and other charity law experts say exemptions like that would be relatively easy to challenge since land exempt from taxation typically has to be used for a charitable purpose, or be in the process of being developed for a charitable purpose.
In other cases, assessors clearly went floor by floor through buildings and recorded what portion was dedicated to what uses.
Since 2008, no UPMC exemption requests have been denied. The county does not often reject applications. For the past five years, the county has received an annual average of 395 requests and rejected, on average, 32, or 8 percent. UPMC has applied for exemptions each year.
In an earlier era when taxing bodies had more legal authority to challenge the exempt status of nonprofits' property, the county was more proactive.
Many of the folders provided by the county contained a 1989 letter from the then-director of assessments that began: "This is to inform you that we are in the process of reviewing and re-evaluating properties located within Allegheny County for the purpose of determining their continued status in the 'exempt' category."
Mr. Fitzgerald said he plans to take a hard look and challenge nonprofits' tax exemptions.
"My desire would be to be aggressive in that regard," Mr. Fitzgerald said. 'From a policy standpoint, I think it is something we, representing all the other taxpayers, should be pushing towards in [terms of] a fairness issue of trying to provide equity to all the taxpayers who pay for all the services that we all enjoy."
The lack of adequate record-keeping is a major theme of Ms. Wagner's criticism of the current system.
Ms. Wagner said the system is not transparent or meaningful for residents trying to understand why a particular property is tax-exempt or how it is used.
A review by her office showed more than 215 vague land-use codes that designate generally what properties are used for, including a category of "other" that makes up more than 20 percent of all parcels.
Equally difficult to discern is who owns what. Allegheny County's online real estate database lists UPMC property held under 46 different names. At least one is a typographical error. Some property owners of record are entities that once served as the land-buying arms of UPMC's predecessor hospitals. Thirty-four do not contain the word "UPMC."
Having that many names on property it owns is not illegal, but Ms. Wagner believes it creates confusion that could easily be rectified by creating a system "that clearly identifies both primary owner and user."
Mr. Fitzgerald endorses the idea of streamlining the data and making it readily accessible.
"That would be the best way to be able to do it, by a keystroke of a computer to type in 'what does UPMC own' or 'what does [Carnegie Mellon University] own or University of Pittsburgh,' and then it would bring up all that data for you," Mr. Fitzgerald said.