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Fontana to Introduce Tool to Address Tax Exempt Properties
On March 14, 2008
HARRISBURG, March 14, 2008 – State Senator Wayne D. Fontana (D-Allegheny) today announced that he will introduce legislation that allow municipalities additional tools to address costs associated with providing essential services where the municipality contains a large percentage of tax exempt property.
Fontana said that the bill, currently being circulated for co-sponsors, is intended as a starting point for discussions on how to address this growing issue, “No one is disputing the impact that non-profits have on our communities – the jobs provided, their economic impact, or the importance of their community involvement and service, but there is a cost to the services that are provided to them. Municipalities aren’t able to generate tax revenue from those properties owned by non-profits, but must still provide services – that cost is shared by the residents and companies who are paying property taxes in that municipality.”
The bill would allow municipalities the option to enact an essential service fee of up to $100 per 1,000 square feet, with the first 5,000 square feet exempt, on non-profits with tax-exempt property. For new properties, the municipality could impose a limited property tax that would be phased in and applied to 10% of its assessed value per year for five years.
The essential service fee and limited property tax would not be mandated for municipalities. In fact, nothing would prohibit municipalities from continuing to operate under the Purely Public Charities Act as it exists today, with the option to enter into voluntary agreements with non-profits. That option, however, has been increasingly difficult for municipalities that have an extraordinarily high concentration of tax-exempt property owned by non-profits. In the City of Pittsburgh, one-third of the property is tax-exempt. A 2003 study estimated that that the total value of that property was $2.9 billion and would generate $31.3 million in property taxes.
The City of Pittsburgh has benefited from a voluntary service agreement with the Pittsburgh Public Service Fund in the past, which has contributed $13.98 million in the last three years (an average of $4.66 million per year) to the City from more than 100 tax-exempt universities, hospitals, health insurers, foundations, arts groups and religious organizations. The Fund is expected to begin talks with the City on a new three-year agreement, but the agreements are voluntary and the participating organizations do not need to contribute anything if they do not wish to do so. Even more daunting is that Individual entities’ payments are confidential and a well-known non-profit resident of the City – the University of Pittsburgh Medical Center (UPMC) – will not be participating in future agreements with the City, but is instead focusing on its pledge to the Pittsburgh Promise.
The proposed legislation will probably be part of a larger discussion being held later today with members of Allegheny County Council who are seeking alternatives to the County’s drink tax. The meeting with state lawmakers was called by Allegheny County Council; someone from the Chief Executive’s Office is also expected to attend.