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In re Appeal of the City of Pittsburgh

June 17, 2009

APPEAL OF THE CITY OF PITTSBURGH FROM THE ACTION OF THE BOARD OF PROPERTY ASSESSMENT APPEALS AND REVIEW OF ALLEGHENY COUNTY IN REGARD TO PROPERTY OWNED BY THE PITTSBURGH TRUST FOR CULTURAL RESOURCES, SITUATE IN THE 2ND WARD OF THE CITY OF PITTSBURGH BLOCK AND LOT NO. 2-A-25
COUNTY OF ALLEGHENY SCHOOL DISTRICT OF PITTSBURGH THE PITTSBURGH TRUST FOR CULTURAL RESOURCES
APPEAL OF: CITY OF PITTSBURGH
APPEAL OF THE CITY OF PITTSBURGH FROM THE ACTION OF THE BOARD OF PROPERTY ASSESSMENT APPEALS AND REVIEW OF ALLEGHENY COUNTY IN REGARD TO PROPERTY OWNED BY THE PITTSBURGH TRUST FOR CULTURAL RESOURCES, SITUATE IN THE 2ND WARD OF THE CITY OF PITTSBURGH BLOCK AND LOT NO. 9-N-196
COUNTY OF ALLEGHENY SCHOOL DISTRICT OF PITTSBURGH THE PITTSBURGH TRUST FOR CULTURAL RESOURCES
APPEAL OF: CITY OF PITTSBURGH



The opinion of the court was delivered by: Judge Butler

Argued: May 6, 2009

BEFORE: HONORABLE BONNIE BRIGANCE LEADBETTER, President Judge, HONORABLE BERNARD L. McGINLEY, Judge, HONORABLE DAN PELLEGRINI, Judge, HONORABLE RENÉE COHN JUBELIRER, Judge, HONORABLE ROBERT SIMPSON, Judge, HONORABLE MARY HANNAH LEAVITT, Judge, HONORABLE JOHNNY J. BUTLER, Judge.

OPINION

The City of Pittsburgh (City) appeals from the September 4, 2008 order of the Court of Common Pleas of Allegheny County (trial court) exempting two properties owned by The Pittsburgh Trust for Cultural Resources (Trust), located at 820 Liberty Avenue and 110 Ninth Street, from local real estate taxes. The issue before us is whether these properties qualify for tax exemptions when they are neither currently used nor occupied by the Trust. For the reasons stated below, we reverse the decision of the trial court.

The Trust is a Pennsylvania non-profit corporation founded in 1984 to promote economic and cultural growth in what was formerly a blighted 14-block area of downtown Pittsburgh, now known as the Cultural District. It was founded under the joint sponsorship of the Allegheny County Conference on Community Development, the Howard Heinz Endowment, and the Pittsburgh Foundation, with the support of the City and the County of Allegheny. The Trust is exempt from federal taxation under Section 501(c)(3) of the Internal Revenue Code, 26 U.S.C. § 501(c)(3), and is exempt from Pennsylvania sales tax.

According to its bylaws, the purpose of the Trust "is to receive, administer and distribute property, real or personal, to or for the use of the Commonwealth of Pennsylvania or any political subdivision thereof for exclusively public purposes." To that end, in October of 2000, the Trust purchased the 110 Ninth Street property, which consists of a vacant five-story building. It is not habitable for commercial or residential purposes without extensive renovations. The property was purchased in order to prevent its use in a manner that is inconsistent with a proposed mixed-use development along Fort Duquesne Boulevard up to Penn Avenue. The Trust intends to have the building torn down in anticipation of development by a private developer within a year or two. If the new building does not occupy the entire site, the Trust plans to retain a parcel of it for a public park. Architects were retained in furtherance of the proposed project; however, according to counsel at argument, the deal with the original developer has fallen through, so the project is now on hold.

In November of 2000, the Trust purchased the five-story 820 Liberty Avenue property whose only tenants at the time were a Chinese restaurant, and a 24-hour check cashing facility. The remaining four floors were empty. The Trust did not renew the tenants' leases when they expired. The ground floor of the property is currently used as an art gallery approximately 24 weeks per year by Carnegie Mellon students in the master of fine arts program, and is one of the locations of "gallery crawls" held four times per year. According to the Trust's General Counsel and Senior Vice President of Operations, David R. DeSimone, there are no specific plans to expand the 820 Liberty Avenue property use in furtherance of the arts.

Historically, it has been the Trust's policy to pay full real estate taxes on portions of its properties that produce taxable commercial business income, such as parking garages. It seeks exemptions for only those portions of its properties used for purely public charitable purposes. Thus, until 2006, the Trust paid real estate taxes on the subject properties. It sought an exemption for the 110 Ninth Street property beginning in 2006, only when a project known as the River Park Plan was finally adopted for the development of the area. Since the property's proposed improvements will include public uses as well as for-profit residential development, the Trust will eventually seek only a partial exemption for those portions designated for purely public use, i.e., the park.

By decision mailed January 3, 2006, Allegheny County's Office of Property Assessments determined that the 820 Liberty Avenue property was 43% exempt and 57% taxable. By decision mailed December 22, 2006, the Office of Property Assessments determined that the 110 Ninth Street property did not qualify for an exemption. The Trust appealed these determinations and requested a formal hearing by the Office of Property Assessments. Following the hearing, the Office of Property Assessments issued a determination on November 1, 2007 (later clarified by a letter dated November 8, 2007), that the 820 Liberty Avenue property was 91.5% exempt for 2006 and 100% exempt for 2007 and subsequent years, and that the 110 Ninth Street property was 100% exempt for 2006 and subsequent years. The City appealed these decisions to the trial court, which, after a status conference and the deposition of Mr. DeSimone, on September 4, 2008, ordered that the properties were entitled to the exemptions set by the Office of Property Assessments. The City appealed the trial court's order to this Court.*fn1

The City, joined by Allegheny County, argues that the Trust's purchase of real estate, either to hold it indefinitely in a vacant condition, or to demolish it and convey it to a for-profit business for future commercial development, does not constitute such use and occupancy as would entitle them to tax exemption.

The Pennsylvania Constitution authorizes the General Assembly to exempt from taxation "[i]nstitutions of purely public charity, but in the case of any real property tax exemptions only that portion of real property of such institution which is actually and regularly used for the purposes of the institution." Pa.Const. art. 8, § 2(a)(v). Pursuant to its constitutional authority, by Section 204(a)(3), (9), (b)-(c) of The General County Assessment Law (Assessment Law),*fn2 the General Assembly declared that:

(a) The following property shall be exempt from all county, city, borough, town, township, road, poor and school tax, to wit:....

(3) All... institutions of... charity... with the grounds thereto annexed and necessary for the occupancy and enjoyment of the same, founded, endowed, and maintained by public or private charity:....

(9) All real property owned by... institutions of purely public charity, used and occupied partly by such owner... and necessary for the occupancy and ...


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