Pittsburgh-based UPMC and the city's mayor have declared a legal ceasefire that will put an end to the city's challenge to the health system's tax-exempt status, according to a a Pittsburgh Tribune-Review report.
Pittsburgh's former mayor, Luke Ravenstahl, filed suit in spring 2013, contesting UPMC's exemption from city payroll taxes. This week, current Mayor Bill Peduto said the city dropped the suit in a "leap of good faith," as he said in the report. The health system responded by dropping a federal countersuit, which alleged the city, Mayor Ravenstahl and a union group conspired to violate UPMC's constitutional rights by challenging its tax status.
Mayor Peduto has previously said he wants a collective $20 million from nonprofits to help pay for city services, such as fire and police protection and street maintenance. The mayor said dropping the lawsuit paves way for successful negotiations with UPMC about this, according to the report.
The case has been slowing down in recent weeks. The city declined to appeal an Allegheny County judge's ruling that would have forced it to sue each of UPMC's 37 subsidiaries, rather than a single entity, to challenge the tax-exempt status of UPMC. Last fall, at the first hearing for the case, UPMC claimed that it, as a parent company, had no employees. For the purposes of Pittsburgh's wage taxes, UPMC's subsidiaries file separate forms.
UPMC posted $10.2 billion in revenue and $10.1 billion in expenses for the fiscal year ending in June 2013, according to the report.
One legal expert in the report said Pittsburgh avoided an extremely costly lawsuit. City officials could not immediately provide how much the city has spent so far on the legal costs.
"It's hard to say whether or not the city or UPMC could have won the lawsuit and won the inevitable appeal," John Burkoff, JD, a professor with University of Pittsburgh School of Law, said in the report. "One thing that everyone would agree on is it would take years, and it would take a lot of money to fight a lawsuit like this. This certainly seems like a sensible strategic decision to me."
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