Forum Place. Harrisburg Hospital. The Farm Show complex. The state Capitol.
Four places, four very different businesses, one thing in common—all are regarded as nonprofit entities, so pay no property taxes to their host city, Harrisburg.
According to the city treasurer’s office, Harrisburg is home to 716 parcels that are tax-exempt due to their non-profit status. Making the situation even more difficult: more than 75 percent of those parcels belong to either the government or government-related entities, which by law cannot be taxed, according to the Harrisburg receiver’s office.
So, what’s a city to do?
For years, the answer was “not much,” as the state did with Harrisburg pretty much what it wanted. Condemn and raze entire neighborhoods? Sure. Turn local streets into forbidding, perilous highways to accommodate suburban workers? Why not? Expand and take more properties off the tax roles? OK.
During the past century, the city has toggled between actively participating in its own destruction by facilitating the state’s unquenchable thirst for more land and, more recently, lamely complaining in City Council meetings and mayoral press conferences that the state does not pay its fair share for the services it consumes.
Last month, the situation changed somewhat. The state passed a 2013-14 budget that gave Harrisburg $5 million in “fire protection” funds, representing the largest-ever direct infusion of cash from the state as part of a regular budget process.
However, as it stands right now, that level of funding is a one-shot, one-year deal. Meanwhile, there are numerous other issues emerging that could affect the capital city’s relationship with the many nonprofit entities that call Harrisburg home.
State of the State Funding
To say that John Campbell was surprised would be an understatement.
“I’ll be honest with you—I was shocked,” said Campbell, Harrisburg’s treasurer.
Campbell was speaking of the $5 million the state coughed up to the city, double the amount allocated in the 2012-13 budget. His surprise was heightened by the fact that House Republicans, in their budget plan, had already slashed the allocation to $496,000.
Most city officials, including Mayor Linda Thompson, expected the amount to increase once the budget bill was finalized. In the end, however, it surpassed nearly everyone’s expectations.
“It’s a figure we’ve never received before,” Campbell said.
State Sen. Rob Teplitz said he and Rep. Patty Kim had worked hard to get funding restored, hoping to reach $4 million, a figure most city officials had set their eyes on. Receiver William Lynch lobbied Gov. Tom Corbett and Republican legislative leaders for another $1 million, which is how Harrisburg ended up with $5 million for this fiscal year, said Teplitz.
“It really is a windfall,” he said. “But we’re not asking for extra payment. We’re only asking for fair compensation.”
That fair compensation is, technically speaking, for protecting state buildings from fire, thus the money is accounted for in the state budget’s line item for fire protection. In fact, according to Teplitz, the city had to pledge the money would go only for that purpose.
However, it’s a stretch to believe that 60 percent of the city Fire Bureau’s $8.4 million budget goes to safeguarding the 40 buildings that constitute the Capitol complex. The money, in fact, flows to the city’s general fund, which does include the Fire Bureau, but also includes most other parts of the city government. So, money that goes into the Fire Bureau budget simply frees up funds elsewhere for the financially strapped, indebted city.
In the end, the state uses fire protection as a politically expedient way to compensate Harrisburg. It’s simply easier to fund a single, existing line item for a specific use than to transfer money into the general fund of the much-criticized and ostracized city. Besides, firefighters have hero clout lacking in, let’s say, the city’s IT department.
Harrisburg is happy to go along with this process because the state has habitually underfunded the city for services rendered: use of its roads, its emergency services, its public works and sanitation staff. Each weekday, the population of Harrisburg doubles, largely due to the presence of the state government, with the small population of the largely poor city left to pick up the tab of this white-collar invasion.
Until this year, the state has never owned up to its obligation as, by far, the largest employer and landowner in Harrisburg. Exempt from having to pay property taxes, the legislature allocated whatever it wanted, with the amount bouncing around from year to year. So, under the Reed administration, the state often provided just over $1 million. In 2010, that amount was cut to $987,000 and then to $496,000 in 2011. After the city’s financial crisis hit full-on, the state used the line item to assist the city to the tune of $2.5 million for 2012 and now $5 million.
City officials seem satisfied with that level—that $5 million finally compensates the city fairly. The problem, however, is that the funding level is not guaranteed going forward. It’s subject to the legislature’s annual horse-trading extravaganza known as the budget process. So, will the state reduce funding again once the city’s finances stabilize or when Corbett is no longer governor or Lynch is no longer receiver? No one knows.
Teplitz said he’s introducing legislation in the fall that would stabilize Harrisburg’s state funding, ensuring the city fair compensation in the fire protection line item that also would allow it to plan financially from year to year.
“The legislation would require the actual cost to get reimbursed,” he said.
Teplitz acknowledged passing such legislation would be an uphill climb, but vowed to put in a strong effort.
“Then we wouldn’t have to go begging every year,” he said.
In Harrisburg, after the state government, the next largest block of tax-exempt properties in the city belongs to PinnacleHealth System, one of the area’s largest healthcare providers, which is listed as a non-profit 501(3), the IRS
’s designation for a tax-exempt organization. In the city, healthcare providers alone account for 11 percent of the non-taxable properties. If taxed, the PinnacleHealth parcels alone would bring in more than $1.13 million in property tax revenue, according to the receiver’s report.
But Pinnacle, like many other non-profits, instead makes Payments In Lieu of Taxes (PILOTs) to the city, amounting to more than $120,000 a year. Pinnacle spokeswoman Kelly McCall said in an e-mail that a 1998 court settlement prevented her from discussing specifics.
“Our PILOT was established through the Settlement Agreement, and the Agreement contains a confidentiality provision. We do make PILOT payments to the City of Harrisburg, Harrisburg School District and Dauphin County,” McCall’s e-mail said.
“PinnacleHealth provided more than $14.8 million in community benefits and reached more than 2.1 million people through programs and services, such as free screenings, community health education and chronic disease management in fiscal year 2012.
In addition, PinnacleHealth has supported numerous initiatives within Harrisburg, including increasing access to healthcare for the underserved through the Keystone Continuum, donating to maintain extracurricular activities and athletic programs in the Harrisburg School District and providing nutrition and physical activity education and meals to Harrisburg School District students,” she continued.
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