Pittsburgh’s ‘eds and meds’ are economic drivers. But their tax status largely passes the bill for government to the rest of us.
A little more than a year ago, then-Mayor Bill Peduto announced what he hoped would be a triumphant milestone in his yearslong quest to get tax-exempt nonprofits to contribute more to the city. The OnePGH Fund would be the financial solution Pittsburgh had been waiting for.
The future of OnePGH was thrown into doubt when Ed Gainey defeated Peduto last May and became mayor this year. But the new administration may not scrap the project entirely: Gainey has appointed two high-profile administration officials, Deputy Chief of Staff Felicity Williams and City Planning Director Karen Abrams, to its board while he simultaneously negotiates with major nonprofits.
“We’re in a ‘to be determined,’” said Grant Ervin, OnePGH’s board president and a former city planning resilience officer under Peduto. “The tool and the organization is there for [the Gainey administration’s] utilization. It’s incumbent on the mayor and his team to set the course on how to utilize it and what those priorities are.”
Deputy Mayor Jake Pawlak told PublicSource that the administration is looking at ways to use the nonprofit and that it will continue to exist, but they do not intend to use it as a conduit for major funding from the likes of UPMC and other large nonprofits.
“We are figuring out the right way to situate it in the city’s toolbox for seeking outside funding,” Pawlak said. “It’s fair to say we have a more limited view of that than the previous administration.”
Of the board appointments, Pawlak said they reflect the administration’s desire to have a seat at the organization’s table as the city plots its next moves.
The OnePGH Fund was designed to work in concert with the city, but it is an independent nonprofit with its own board of directors. The Peduto administration envisioned nonprofits funding projects of their choosing, each to satisfy an identified need in the city, with little to no money ever entering the city’s purse. It was a new installment in the decadeslong struggle by city officials to get greater contributions from major nonprofits, which are largely exempt from property taxes and own a significant portion of city property.
Peduto’s OnePGH model appears to be highly unusual among American cities, according to local public finance experts Adam Langley and Daphne Kenyon of the Lincoln Institute for Public Land. It could have some benefit compared with direct payments by approaching a solution that pleases both the city and the nonprofits, they said.
“It’s nice if you set up a program where both parties are happy,” Kenyon said. “So it could be worth a compromise, if that made the nonprofits more likely to participate and contribute.”
In announcing OnePGH with just weeks remaining in his unsuccessful reelection campaign, Peduto touted commitments from UPMC, Highmark, the University of Pittsburgh and Carnegie Mellon University, totaling $115 million over five years. At the time, some critics said that amount was too low considering the amount of tax-exempt property owned by the nonprofits.
The $115 million pledge represented just under three-quarters of what the four nonprofits stand to save through property tax exemptions over the same time period. But the amount is just under 20% of what they would save on total property taxes to municipalities, school districts and the county.
Asked for a list of OnePGH-related programs underway or completed, Ervin pointed to a guaranteed income program that the Gainey administration has shelved and a green space improvement initiative. Peduto had planned to route federal pandemic relief dollars through OnePGH to fund the income pilot program, but Gainey nixed it, citing legal and funding issues.
Pawlak said monetary commitments announced last year “did not move forward” and other announced projects were already occurring independent of the initiative.
Officials at the four major nonprofits would not provide specific updates this week about their OnePGH commitments, which ranged from social services and public health to STEM education and programming for seniors.
The biggest commitment was a UPMC Health Plan pledge to invest in affordable housing. Asked if UPMC’s $40 million commitment is proceeding despite the uncertainty around OnePGH, a spokesperson for the hospital group said “UPMC always lives up to its commitments.”
Shortly after the April 2021 announcement, Peduto’s chief of staff told PublicSource that $15 million of that commitment would be fulfilled through existing pledges by UPMC Health Plan to local affordable housing-focused nonprofits, with the rest coming from unspecified future projects.
A University of Pittsburgh spokesperson said the school “has already invested more than $8 million since 2020 in projects consistent with the priorities articulated in OnePGH.” He did not specify any projects.
A Highmark/AHN spokesman said the group is committed “to being a good corporate citizen to the Pittsburgh community” but did not answer questions about its $25 million pledge announced last spring. A representative for CMU did not respond to requests for comment.
Settlement or ‘charade’?
Peduto’s ambition for OnePGH went far beyond the $115 million announced last year. He wanted the commitments to be for 15 years, not five, and for more money, but reluctance from the major nonprofits led him to settle.
A far more expansive OnePGH “investment prospectus” released in 2021 contains plans for 38 projects, with proposed budgets totaling more than $4 billion, ranging from universal Pre-K to stormwater improvements, with some of the funding from nonprofits and some from public coffers. Few of the proposals listed sufficient existing funding, and none of the largest ones were included in Peduto’s 2021 announcement, but the list shows the former mayor’s grand vision for what OnePGH may have been.
City Controller Michael Lamb, who has been in office since 2008, referred to OnePGH as a “charade” in a recent interview and called it “a bad deal for Pittsburgh taxpayers.”
Lamb and acting County Controller Tracy Royston released a joint report this week, outlining the potential for traditional payment in lieu of taxes [PILOT] agreements that would instead see major nonprofits pay the city millions annually, modeled on an existing program in Boston.
The report concluded that the five largest nonprofits in Allegheny County would pay about $127.5 million more each year to local municipalities, the county and their public schools without exemptions and abatements.
Shortly after Peduto’s 2021 announcement about the OnePGH Fund, City Councilor Deb Gross blasted it for a lack of accountability and called it a “shadow government.” Then-candidate Gainey, promising voters he would make UPMC pay its “fair share,” called the $115 million “too little, too late.”
Langley told PublicSource this week that the OnePGH model, which gives the nonprofits far more control than traditional PILOT agreements often do, may have resulted in greater pledges than a traditional PILOT would have. He said the $115 million in pledges could make OnePGH among the nation’s most lucrative PILOT programs if it comes to fruition.
Sticks and PILOTs
Ervin said recently that the Gainey administration may view the fund differently now than it did in early 2021.
“I think there’s a general understanding of purpose, structure and intent of [OnePGH], and that was something they did not come into this situation with,” Ervin said. “There’s a framing of a fund that got caught up in an election cycle versus a tool that a lot of cities across the country utilize.”
Ervin pointed to New York City’s Mayor’s Fund, which is also an independent nonprofit entity.
Langley said that while he is not sure if OnePGH is the answer as currently constituted, the concept could ultimately foster a more cooperative relationship between the city and the nonprofits, which he said is key to getting greater contributions.
“The track record seems to suggest that a cooperative approach is better,” Langley said. “There are various sorts of sticks that city governments try to use. And in a narrow sense, they may work in getting PILOT contributions in some cases. But my sense is that the majority of the time they don’t work.”
Pawlak said the administration is more interested in traditional PILOT agreements, with money going directly from nonprofits to the city’s coffers. “This is not uncharted territory,” he said. “We’re not viewing this as something that needs to go through an intermediary.”
Charlie Wolfson is PublicSource’s local government reporter and a Report for America corps member. He can be reached at firstname.lastname@example.org and on Twitter @chwolfson.
This story was fact-checked by Oliver Morrison.
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