UPMC tax status contested

At county hearing, supporters and opponents make cases on its standing as charity

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Allegheny County was urged Wednesday to use its legal authority to examine the tax-exempt status of real estate owned by UPMC and other nonprofit organizations.

Having tax-exempt status was a privilege, lawyer Brad Korinski told members of county council. That status should be reviewed every three years under legislation approved by council in 2007, he said. Mr. Korinski is solicitor for county Controller Chelsa Wagner, whose office recently completed a report on nontaxable properties.

"Purely public charities" like UPMC have to meet a five-point test to retain their tax-exempt status. Mr. Korinski and several other speakers told council members at a public hearing Wednesday that UPMC appeared vulnerable to the fifth requirement that it operate "entirely free from private profit motive."

Councilman John DeFazio, who chaired the hearing, said Wednesday's session likely would be the first of several to examine the status of tax-exempt properties. UPMC is both the largest private employer in the county and the largest property owner. A recent Pittsburgh Post-Gazette investigative series found that UPMC controlled real estate valued at $1.6 billion and claimed 86 percent of its property as tax exempt.

The controller's report found that the current total value of all tax-exempt property in the county was $17 billion. That number would rise to $23 billion under assessment numbers taking effect in January. If taxed, that real estate would have brought in $95 million in county real estate taxes.

While the announced topic of the public hearing was tax-exempt property, many of the speakers talked more about what they said was UPMC's opposition to union organizing efforts by the Service Employees International Union.

The two issues were related, according to Teri Collins, a secretary at UPMC Montefiore. "They are not paying us, and they are not giving back to the community," she said of UPMC's top leaders. She has worked for the health care giant for 31 years.

Presidents of three UPMC-owned hospitals described for council the community investments and free care their facilities provide each year. UPMC Mercy has raised charity care by 17 percent since it became part of the health care giant, president Will Cook said. Its new parent paid off Mercy's debt, invested $100 million and covered as much as $25 million in operating losses, he said.

UPMC invested $625 million in a new Children's Hospital campus in Lawrenceville, president Chris Gessner said. In addition, Children's provided $47 million in community benefits, including $34 million in charity care, in 2011, he said.

Cynthia Dorundo, president of UPMC McKeesport, said her hospital provides more uncompensated care as a proportion of revenue than any other institution in southwestern Pennsylvania.

In return for its property tax-exemption, UPMC provided more than $200 million in free or reduced-cost health care, chief legal officer W. Thomas McGough Jr. said. That contribution reduces the burden on government to provide similar services and dwarfs the amount UPMC would have paid in property taxes, he said.

Health care consultant Geoff Webster said the situation wasn't so simple.

He estimated the amount of free health care that UPMC provided at $96 million, a number that represented under 2 percent of annual hospital revenues.

In addition to providing a relatively small proportion of free care, UPMC took multiple other actions that made it seem more like a profit-making corporation than a charity. He pointed to $6 million compensation for president Jeffrey Romoff, 22 executives who earn more than $1 million annually and maintenance of two corporate jets.

"A charity should not be making its executives millionaires many times over," the Rev. David Thornton, pastor of Grace Memorial Presbyterian Church, told council. "We don't believe UPMC is carrying out its mission as a charitable hospital."

Rev. Thornton delivered a mailing tray containing cards signed by more than 3,000 county residents asking council to lobby UPMC to treat its employees with more respect and provide more assistance to the communities where it operates.

Wednesday's hearing drew about 200 people. About 150 filled every seat in the Gold Room of the courthouse, while another 50 waited and listened to the proceedings in an outside hallway.

Mr. DeFazio asked those attending to be respectful of all speakers, the great majority of whom were critical of UPMC. While there were occasional shouts from the audience, the crowd remained mostly orderly. When UPMC representatives got up to leave after 45 minutes, they faced some boos and catcalls. "Hope your limousines don't break down," someone shouted.

More than 90 people signed up to speak at the hearing, which began at 5 p.m., but only about 45 had been heard when Mr. DeFazio adjourned the session a few minutes after 8 p.m.

Those who didn't get a chance to talk or who still want to comment on the topic have until 5 p.m. Friday to deliver their remarks to county council. Written material can be dropped off at the courthouse at 436 Grant St. or can be emailed to jbarker@county.allegheny.pa.us. Call 412-350-6490 for additional information.

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Len Barcousky: lbarcousky@post-gazette.com or 412-263-1159.


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