Nearly 30 percent of the property value in Butler belongs to tax-exempt public charities.

City officials hope that number will not increase as the result of a proposed state constitutional amendment that would give the General Assembly the authority to define what is a charity.

Senate Bill 4 would allow legislators to establish uniform standards to determine which institutions would qualify as public charities, allowing them to be exempt from paying property taxes.

The bill passed the state Senate on Feb. 17 and now is in the state House, where it is being reviewed by a finance committee.

It passed the General Assembly in its last session, and if approved by the House this year, it would go to Gov. Tom Wolf to be signed before appearing as a referendum on voters’ ballots.

The earliest that would happen is November.

But many municipalities around the state fear the bill will broaden what is considered a charity, adding more properties to the exemption list and taking away tax revenue from municipalities.

“(About) 30 percent of properties in the city are tax-exempt,” said Butler Mayor Tom Donaldson. “That causes a real hardship on the city.”

Donaldson said the city, which is struggling to balance its $8.3 million budget, cannot afford more tax exempt properties.

There is about $69 million worth of taxable property in the city, out of nearly $98 million in total property value.

The city collected about $2.1 million in property taxes in 2014. It could have earned an additional $850,000 from the tax exempt properties.

Donaldson said the city is aware of the need for public charities, and said he is not against the exempt status of churches and schools.

However, the mayor has concerns about some entities’ claims as nonprofits, and he is worried about any legislation that could add more into the mix.

“We need to make sure nonprofits haven’t done anything to change their (tax-exempt) status,” he said. “It’s not fair if they’re not paying, if others who do the same thing are.”

The mayor said some nonprofits in the city have crossed a line on what should be considered tax-exempt, but would not say which ones he was speaking about.

Donaldson said he is looking to contact the county assessment office to recommend a review of some nonprofits in the city.

“Nonprofits still need to be held to a standard and be in compliance,” Donaldson said.

Statewide municipal organizations such as the Pennsylvania State Association of Township Supervisors and the Pennsylvania Municipal League oppose the bill, claiming it will take away power from local officials and judges.

Currently, tax-exempted properties are determined through county assessment offices and local courts.

The state Department of the Auditor General released a report in December examining the potential increases in exemptions under the new law, and the affect it would have on both municipalities and nonprofits.

The report said, “Local governments forgo significant amounts of increasingly needed taxes, while some institutions’ exclusion from paying property taxes is a critical factor in their financial health and ability to provide charitable service.”

Jerry Andree, Cranberry Township manager, said 8 percent of the township’s property value is tax exempt.

However, Andree said he expects that number to increase.

“We will see that grow as the community grows,” Andree said.

Cranberry has not contacted its state legislators about the bill, but Andree said it does belong to statewide municipal organizations fighting the bill.

“The state Supreme Court already clarified what a tax-exempt property must meet,” Andree said. “So from a local government standpoint, it’s already clear.”

Andree stressed that municipalities are not opposed to charities like churches or schools being exempt, but said large institutions like hospitals sometimes have operations that go beyond a nonprofit status.

However, state legislators supporting the bill say it is being misinterpreted by its opponents.

“Those who are unsure about this bill are a little confused,” said Sen. Scott Hutchinson, R-21st. “The bill is a constitutional amendment that clearly states it is the Legislature, not the courts, that define what a public charity is.”

The bill passed the Senate by a vote of 30-19. Each of the senators who represent Butler County voted in favor of the bill.

The bill stems from a 2012 state Supreme Court ruling that affirmed the courts’ authority to define a purely public charity.

Institutions in the county currently seeking exemption from property taxes must go through the county assessment office, which will review the application and make a decision.

If the office rules against the exemption, the case can go before a judge to make a ruling.

Hutchinson said the process of having public charities be determined by local officials and judges means what qualifies for tax exemption in one county may be different from another.

Hutchinson’s district covers 15 municipalities in Butler County, as well as parts of Clarion, Venango, Forrest and Warren counties.

State Rep. Brian Ellis, R-11th, said he doesn’t think the bill will increase the number of tax-exempt properties.

“I believe the exact opposite,” he said. “It will just set a clear standard on what a purely public charity is.”

Ellis, who supports the bill, said, “This can be a great opportunity to clarify what is an exempt property.”

Hutchinson said some municipalities in his district have expressed concerns about the bill.

State Rep. Jaret Gibbons, D-10, said he has heard concerns about the bill.

“I have not heard from any in Butler County, but I only have Slippery Rock over there and the primary issue as it relates to tax-exempt property there is SRU, which as a state-owned property would not be affected,” he said in an e-mail.

“I have heard from several county and municipal officials in Beaver County who were all opposed primarily over concerns relating to property tax collections and additional revenue losses due to this change.”

Gibbons said many cities like Butler have concerns on the bill.

“This is a significant concern for third-class cities and other municipalities that host large medical facilities, private colleges and multiple religious institutions,” he said. “Any loss of revenue could mean increased property taxes for home and private business owners which is a significant concern.”

Hutchinson maintains the bill’s intention is not to change what is considered a public charity.

“All it is doing is changing who makes that decision,” he said. “That way it’s not up to individual courts to say what a public charity is.”