Pittsburgh Mayor Luke Ravenstahl is going after UPMC's tax-exempt properties in the city. All 150 of them.
Ravenstahl said the city is challenging the tax-exempt status of the $10 billion hospital system's properties in the city with a lawsuit it filed Wednesday with the Allegheny County Court of Common Pleas to lift UPMC's exemption from paying the city's payroll tax.
With more than 55,000 employees, Western Pennsylvania's largest health care system is the state's largest employer.
Ravenstahl estimated that if UPMC paid the 0.55 percent payroll tax and property taxes on land it owns that is currently tax exempt, the financially strapped city would net roughly $20 million a year. He hopes other municipalities will join the city's lawsuit.
“We know that UPMC is no doubt prepared to spend a lot of those billions of dollars to fight what we're trying to do,” Ravenstahl said during a news conference in which he was flanked by fellow Democrats including City Controller Michael Lamb and City Council President Darlene Harris, both of whom are running for mayor, and County Controller Chelsa Wagner. “It's kind of the David versus the Goliath.”
UPMC replied to Ravenstahl's announcement with a harsh rebuke.
“The challenge to UPMC's tax-exempt status appears to be based on the mistaken impression that a nonprofit organization must conduct its affairs in a way that pleases certain labor unions, certain favored businesses or particular political constituencies — in other words, the way that some local governments are also run,” said Paul Wood, a UPMC spokesman.
Ravenstahl expects the legal battle to extend well into the next mayoral administrative. Ravenstahl last month dropped out of the mayor's race. He acknowledged that he supports the efforts of the Service Employees International Union to unionize UPMC employees and that he believes UPMC underpays many of its workers. SEIU members and representatives from other labor unions filled much of the mayor's conference room during the news conference.
The city in its filing claims the system does not meet the state Supreme Court's requirements as a purely public charity, including that UPMC does not operate entirely free from profit motive.
Ravenstahl said the city examined the business practices of other large nonprofits in the city including Highmark, West Penn Allegheny Health System and Pittsburgh's universities, but determined UPMC was the only one acting as a for-profit, international corporation with interests that extend far beyond its hometown.
“This isn't about the charities that are operating on the neighborhood level or the churches or the folks that do neighborhood, community work,” Ravenstahl said. “I have the list of countries that UPMC now has expanded to. Let me read it off to you, and you tell me if this is a charity that the taxpayers of Allegheny County and Pittsburgh should be supporting ... places like Ireland, Italy, Great Britain, Qatar, Kazakhstan, Singapore, China, Japan and Cyprus. UPMC is in all those places; no other local nonprofits are in all those places.”
Ravenstahl said he expects UPMC to try to frighten others in Pittsburgh's nonprofit community with the suggestion that Ravenstahl will challenge their tax-exempt status as well in a bid to extract even more tax dollars.
The mayor said he doesn't intend to pursue other nonprofits.
Councilman Bill Peduto, who is running for mayor this year, said he would continue the challenge of UPMC's tax-exempt status if elected and likely expand it to include other large nonprofits in the city. He said the city should also investigate the tax-exempt status of other large medical facilities, insurers and universities.
All nonprofits in Allegheny County are working to comply with County Executive Rich Fitzgerald's directive that they justify their property-tax exemptions. The county mailed 2,800 letters this month to nonprofits asking them to fill out forms for the Office of Property Assessments.
The nonprofits must fill out a three-page application and explain why the property meets a 2012 state Supreme Court decision that qualifies them for tax exemptions as public charities. The city is challenging UPMC's tax-exempt status under the same ruling.
Ravenstahl said he decided to proceed with the challenge now because of a recent state Supreme Court ruling that said charities must comply with five requirements outlined in state law to qualify for tax-exempt status. The lawsuit states UPMC doesn't meet the requirements.
Specifically, it says UPMC donates less than 2 percent of revenues to needy patients; runs many operations as for-profit entities; engages in expensive advertising campaigns; has closed hospitals in low-income areas; pays 20 of its officers, directors and other top employees annual compensation of more than $1 million each; and rents the “most expensive office space” in Pittsburgh in the U.S. Steel building for CEO Jeffrey Romoff, who has access to “a private chef and dining room, chauffeur and private jet.”
This article was written by Channel 11's news exchange partners at TribLIVE.