The Great Rust Belt Property Tax Dilemma

2020-03-06T12:06:45-05:00February 19, 2020|

Commentary: a large percentage of the land in Cleveland and Pittsburgh is tax-exempt. What does this mean for the health and wealth of cities?

By Anne Trubek

Last year, I attended a conference in Monterey Bay, California, populated by many Silicon Valley and “thought leader” types. One morning, I went to a panel on non-profits. One speaker worked for Lady Gaga’s foundation; another, based in San Francisco, worked on housing. The week before, I had been thinking about the outsized role nonprofits play in Cleveland: so many major players in town are 501(c)3s—including all the universities and the Cleveland Clinic, the city’s largest employer. Someone had noted to me that, unlike our weak, elected city government, no one could vote for the board or trustees of these large organizations that wield much civic power. So I asked the panel a question: what did they think about non-profits having an outsized influence in communities?

The panelists stared at me. They could not wrap their heads around the question; it was evident they hadn’t previously considered this idea. “Well, people can try to pressure board members to resign?” The guy from San Francisco answered. I tried imagining how that would work for the Cleveland Clinic and similarly became speechless.

Most of the others in the audience were looking at me quizzically. I was about to say “you know what? Forget it” when I saw one woman nodding her head. I looked at her imploringly, and she spoke up: “Right! Like that fact that forty percent of property in Pittsburgh is tax-exempt! That pushes up property values for the other sixty percent.”

Now they all looked at her, befuddled, and then another person asked an unrelated question and we all moved on. But I was so relieved to have a friend in the room. And I now had a stunning and framing statistic: forty percent of property in Pittsburgh is tax-exempt, again largely for “meds and eds,” but also for others: arts organizations, churches, and even private business that receive incentives from local governments, like professional sports teams and technology companies seeking to relocate.

Support writing by and for the Rust Belt.

Become a member of Belt Media Collaborative today.

Join Now

I wished I had a handy percentage number for Cleveland, so I took to Twitter. Within ten minutes I had a tentative answer, based on data drawn by a friend who refuses to have his name made public—a common situation in a city where so many work for these very institutions, and fear retribution. According to the data pulled by my friend (which you can look up for yourself here), the owners of 45.4 percent of the property value in Cleveland are exempt from paying taxes. The combined value of parcels, as of 2010 data, was $22,596,252,500. The combined value of tax-exempt properties was $10,242,837,000, or 45.4 percent of the total.

Using newer, 2019 data, based on parcel records for Cleveland, we can break down that number further: hospitals had more than $80 million they didn’t have to pay; nonprofit organizations more than $37 million; stadiums nearly $12 million; educational institutions had more than $34 million; and religious sites had nearly $13 million dollars in property taxes they did not have to pay.

In addition, many parcels in Cleveland have been tax abated, given temporary leave from paying property tax, usually in order to spur new development. An additional 6.8 percent of properties are tax abated: their total assessed value is more than four billion, or 15.1 percent of the total property value in the city. Even parking lots can be abated or exempt: there are twenty-eight in Cleveland, and they cover more than fifty-two acres.

What does all this mean? If, for example, the private hospitals in Cleveland (Cleveland Clinic and University Hospitals) paid the full commercial property tax rate of 3.34 percent, the city would bring in about $79 million a year in property taxes, more than double its estimated property-tax revenue for 2020.

That might help explain why your sidewalk hasn’t been salted (city services are cut); or why the 26 bus never seems to arrive (less money for public transportation); or why the taxes on your house rose recently (individual homeowners have to pick up the slack). It also helps explain why small businesses struggle and grouse about the taxes they pay, which are a much larger percentage of their annual revenue than they would be for larger organizations.

In Pittsburgh, in Cleveland, and no doubt in other Rust Belt cities, were the data to be compiled, many of the engines of renewal—meds, eds, publicly-funded arts organizations, and abated properties—also represent a loss of direct property tax funds that could help ameliorate the poverty rates in these cities. At any rate, this could help explain the strangely high property taxes many residents are now being assessed, forcing long-time owners to put suddenly unaffordable houses up for sale.

This situation is unimaginable in wealthier, coastal cities, who cannot fathom why giving a hospital a tax break might not necessarily be a social good. Which is why those making policy decisions, and those proposing ways to improve Rust Belt economies, must not simply apply the latest white paper from D.C. to these unique cities. We need to better understand the conditions that have led to the barren coffers in our city governments, and start considering different ideas for economic stability and revival in Rust Belt cities. ■

*Correction: an earlier version of this piece under-counted the revenue estimates from untaxed properties.

 

 

Anne Trubek is the founder and publisher of Belt Publishing, and was the founding editor of Belt Magazine.

Cover image of the view from Cleveland’s Terminal Tower. Photo by Erik Drost (Creative Commons).

*Opinion and commentary columns are the work of their authors, and do not necessarily reflect the views of Belt Magazine or its parent organization, Belt Media Collaborative.

Belt Magazine is a 501(c)(3) nonprofit organization. To support more independent writing and journalism made by and for the Rust Belt and greater Midwest, make a donation to Belt Magazine, or become a member starting at just $5 a month

 

Get the best regional writing sent straight to your inbox.