Mayor Corey O’Connor is seeking “long-term, four- to five-year” agreements with major local nonprofits to bolster the City of Pittsburgh’s finances, looking to UPMC, Highmark and major universities for “millions per year” going forward.
“We’ve had good conversations about long-term agreements,” O’Connor said, pointing out he already inked a deal with the University of Pittsburgh for $5 million over five years.
Potential new commitments would expand on one of the biggest developments of O’Connor’s first 100 days as Pittsburgh mayor: the announcement of a $10 million gift from UPMC to fund new city ambulances, as well as smaller gifts from PNC and Pitt for other specific city needs. Those gifts did not come with any commitment of future generosity.
Numerous Pittsburgh mayors have sought long-term payment arrangements over recent decades, mostly coming up short. O’Connor took a different approach than his predecessor, Ed Gainey, in asking for money for specific needs that align with the contributing organization, like the health care company UPMC’s gift of ambulances.
Gainey insisted the city should receive unrestricted funds from nonprofits and framed the debate around the groups paying their “fair share” to the city — despite the organizations having no legal obligation to pay. He never reached an agreement with any major nonprofit, and a legal strategy to challenge tax exemptions on their properties did not produce meaningful results.
Former Mayor Bill Peduto, who served from 2014 through 2021, took an approach similar to O’Connor’s, garnering commitments from UPMC, Highmark, Pitt and Carnegie Mellon University to fund specific projects benefiting the city. But he announced the plan shortly before he left office, and Gainey nixed it.
“It’s gotta be with specifics,” O’Connor said during an interview Tuesday ahead of his 100th day in office. “ … If you are specific with an ask and making sure that money is audited, those are the conversations we had with PNC and UPMC. They did not want it to go into our budget deficit. They want it to go directly into something that everybody is going to see.”
O’Connor’s results so far — $18 million from a handful of institutions — mark the most meaningful progress on this front in years. But it remains to be seen if he will secure the recurring, significant monetary commitments that current and former city controllers and other city finance experts say are necessary to keep the city afloat.
“We absolutely need contributions from nonprofits,” said Erika Strassburger, the chair of City Council’s finance committee, in March. “We’ve already seen a product of that … and I hope that [talks] are fruitful, not just in future years, but this year.”
Strassburger knows the city’s dire financial situation well. She presided over an unusually dramatic budget negotiation in December in which council rejected then-Mayor Gainey’s plan and voted to raise property taxes to prevent a potentially crushing deficit.
Any feeling that the tax hike solved the city’s problems evaporated in March, when O’Connor announced that the prior administration failed to account for more than $20 million in spending. He moved to amend this year’s budget, adding $28 million in spending and dipping into the reserve fund to make ends meet.
The bottom line: The city is still headed for a deficit this year and in the future, despite a 20% tax hike.
After producing a landmark 2022 report on the nonprofits’ massive tax-exempt real estate holdings and the city’s revenue needs, then-City Controller Michael Lamb said, “When it comes to the city’s financial bottom line, [nonprofits] have to play a role.”
Tax-exempt nonprofit organizations own 20% of Pittsburgh property. If the property within the city owned by the five largest nonprofits was taxable, the city would collect an additional $34.5 million a year, according to the 2022 report. That amount is bigger than the budget deficit or the hike taxpayers were handed last year.
Pittsburgh would be far from the first city to make a payment-in-lieu-of-tax [PILOT] deal with local nonprofits. Erie collects about $13 per resident in PILOT revenue, Altoona $5, and Providence, Rhode Island collects $17. Pittsburgh has collected less than fifty cents per capita on average since 2000, according to the controller’s report.
O’Connor said he does not view those cities’ PILOT agreements as a standard.
“Some of them, those deals were made a very long time ago and they were just extended,” he said. “Let’s get to, hopefully a couple-year agreement, and then we can build off of that momentum to see if there are other priorities when you get to that time frame.
“… If they wanted to give general fund money, they would have by now.”
Charlie Wolfson is the local government reporter for Pittsburgh’s Public Source. He can be reached at charlie@publicsource.org.
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