Governor Proposes Severance Tax—Again

Summary: The Governor’s third budget address did not ask for increases in personal income or sales taxes to patch over the State’s budget deficit, but he did trot out an old favorite of his—the severance tax on extracting gas from the Marcellus Shale formation.  It is widely assumed to be a non-starter with the Legislature, but it has been put on the table and as such must be analyzed.

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This year’s budget proposal calls for a severance tax of 6.5 percent on Marcellus Shale gas production to go into effect July 1, 2017 (the start of the new fiscal year). In the past two budgets the severance tax proposal called for a five percent levy on the value of the gas coming from Marcellus Shale wells (also called unconventional wells) plus an add-on of 4.7 cents per thousand cubic feet (Mcf) (see Policy Brief Volume 15, Number 10).

While proponents of the severance tax are quick to point out that Pennsylvania is the only major gas producer without a tax on the value of gas produced, they fail to mention that the Commonwealth is the only state with an impact fee.

We have written extensively on the impact fee which was instituted by Act 13 of 2012 (see Policy Brief Volume 12, Number 11).  The impact fee is to be paid on any well drilled within the Marcellus Shale formation.  The amount of the fee depends upon a few things:  (1) the trading price of natural gas on the New York Mercantile Exchange (NYMEX)—the higher the price, the greater the fee; (2) the age of the well—there is a gradual reduction in the fee as a well ages; and (3) the volume produced with wells producing less than 90,000 Mcf per day would be exempt as are any wells that are subsequently capped.

A key difference with the impact fee compared to the severance tax is that most of the money is returned to the communities where the activity is taking place, both at the municipal and county level.  However, some money is distributed to all counties (with or without wells), and seven state agencies.  None of the money goes back to the general fund.

In his first two budget proposals, the Governor stated that producers would still be responsible for paying the impact fee as well as the severance tax.  In this proposal (FY 2017-18) he is offering a credit against the severance tax for any impact fees paid.  Act 13 stipulates that if a severance tax is enacted, it voids the impact fee.  While laws can be amended so that both can exist, what would be the point of having both?  If the severance tax is passed, eliminate the impact fee.  Take the amount the impact fee would have generated (the average for the first five years is $213.3 million) and distribute it to those communities and state agencies receiving impact fee money in the same ratios.

As proposed the Governor’s severance tax, along with the impact fee credit, is projected to net $293.8 million in FY 2017-18. How much gross revenue would the 6.5 percent severance tax produce?  Of course the answer depends upon the trading price of natural gas and the volume produced by unconventional wells.  Production has been steadily growing in the Commonwealth with 5.09 billion Mcf reported in 2016.  This is up from 4.6 billion Mcf removed in 2015 and the 4.07 billion in 2014.  Thus, the rate of increase has slowed sharply—2016’s production is up 10.6 percent over 2015 which was 13 percent higher than 2014 while 2014 was 31.2 percent higher than in 2013.

The price of natural gas, as measured by the Henry Hub price (the terminal out of Louisiana, traded on NYMEX and the basis for the impact fee) has fluctuated over the past few years.  In 2016, the average annual price of natural gas fell to its lowest point over the last five years ($2.46 per Mcf).  The high point was $4.46 per Mcf in 2014 and the average since 2011 is $3.16.

Thus, had a severance tax of 6.5 percent been in place for 2016, and using the Henry Hub price, it would have grossed $814.1 million—5.09 billion Mcf multiplied by an average selling price of $2.46 gives a market value of $12.5 billion.  But as we mentioned in Policy Brief Volume 15, Number 16, while the Henry Hub price is the basis for calculating the impact fee, Pennsylvania natural gas producers sell their gas at five local hubs in the state such as the Transco-Leidy hub in Potter County and the Dominion South hub near Pittsburgh.  At these hubs the prices have been lower than those of the Henry Hub, due in large part to the expanding supply being removed from the Marcellus Shale and lack of pipeline capacity.  As a result the actual value of production and the tax revenue will likely be far less than if calculated using the Henry Hub price.  And under the Governor’s proposal the net from the severance tax would be reduced by crediting companies with the amount of the impact fee paid—that fee has been around $200 million a year.

If the severance tax passes at the proposed rate, Pennsylvania would go from not having such a tax to having one of the highest rates in the nation.  Neighboring Ohio’s rate is 2.5 cents per Mcf while West Virginia charges five percent of market value.  West Virginia had an add-on of 4.7 cents per Mcf which had been dedicated to paying off a workers’ compensation debt, but that debt has been paid off and the add-on has been dropped (July 2016).  There is also a bill in committee that would reduce the severance rate to four percent and three percent over the next two years.  Thus at a time when Pennsylvania is looking to impose a severance tax, West Virginia is looking to lower theirs.

A final point to consider is the effect the severance tax will have on royalty payments received by mineral rights holders in Pennsylvania.  In states with severance taxes, producers are allowed to deduct the amount of the tax from royalty payments.  These deductions would in turn reduce the royalty payments to Pennsylvanians, implying lower income tax revenue to the state.

In 2006, before the Marcellus Shale boom in Pennsylvania, the state recorded 246,889 returns that claimed income from a category called “rents, royalties, patents, and copyrights”.  The amount claimed came in at $3.6 billion.  In 2014 (the most recent data available), the state recorded 342,889 returns—an increase of 39 percent in eight years.  The accompanying income claimed was $6.9 billion—nearly double the 2006 amount.  At the personal income tax rate of 3.07 percent, remittances to the state would have risen from $109.4 million to $211 million.

Unfortunately, the proposal to enact a severance tax on Marcellus Shale gas production is once again on the table.  It would place Pennsylvania from being the only major gas producer not levying a severance tax, to having one of the highest in the nation.  Another question is what to do with the impact fee.  After all Pennsylvania is the only state with an impact fee.  The current proposal is to give the producers a credit against the severance tax.  But it will further underscore Pennsylvania’s status as an unfriendly to business state and lower the profitability of gas production in Pennsylvania and the incentives to produce gas in the state as more business friendly states get a bigger share of expanding production.   For example, Ohio and West Virginia have lower tax rates and also sit on the Marcellus Shale and Utica Shale formations.  At a time when the industry is just recovering from low prices and a subsequent reduction in its workforce and drilling activity, there needs to be encouragement for growth, not more disincentives as represented by a severance tax.

Insolvency Travels North

Recall last year we wrote a reaction to the Auditor General’s audit of the Pittsburgh Public Schools and their claims of insolvency and how it kept getting pushed to the future.  That occurred even though the District was running surpluses.  The mention of insolvency was gone from this year’s budget.

Now the mention of insolvency has moved to the Erie City School District, which is currently in financial watch status under Act 141 of 2012, which is essentially the Act 47 for school districts.  The District was placed in watch status in September of last year.

An audit conducted pursuant to the law noted that the District’s ability to “…stay solvent and pay obligations on a timely basis” was in question.  Some comments in an article about the District’s status noted that insolvency usually applies to a private entity (since public entities can always raise taxes–it appears Erie last raised taxes in the 2011-12 school year), not a public one.  But districts in financial watch move to financial recovery when the district gets an advance on its basic education subsidy (if the district has more than 7,500 pupils) or is in litigation against the state for an advance in order to have the district continue in operation.  Whether or not Erie is there or headed there is yet to be seen.

A GOP cave on Pa. minimum wage (& other public policy matters)

The Associated Press reports that some legislative Republicans in Harrisburg are open to a minimum wage increase. Simply put, that’s daft.

The Pennsylvania minimum wage is $7.25 an hour. Democrat Gov. Tom Wolf is seeking a $12 hourly wage floor. The AP says the GOP could accept a minimum wage hike “but at a much lower figure.”

But even “at a much lower figure,” entry-level jobs will be lost.

The wire service story cites “years of pressure by Pennsylvania Democrats” for what, by any standard, represents a caving in by the GOP. After all, Republicans control the Pennsylvania General Assembly.

There are many ways to improve the economy. Raising the minimum wage is not one of them.

It’s not everyday that you see this headline: “New coal mine to bring 70 jobs or more to Pennsylvania.”

But that’s the plan by Corsa Coal Corp with its new Acosta Deep Mine in Somerset County’s Jenner Township, beginning in May.

The Tribune-Review reports the mine is expected to produce 400,000 tons of metallurgical coal annually which would be used, hopefully, by the steel industry.

Corsa CEO George Dethlefsen tells the Trib the Trump administration’s plan for roads, bridges and other public infrastructure should boost demand for steel — and the kind of coal needed to make that steel.

We shall see, of course. But there can be no doubt that having confidence in the economy is a critical component in the economic health of a state and nation. And the best way to fill tax coffers is economic growth.

Speaking of energy, the Beaver County Times reports that plans for the Falcon Ethane Pipeline are progressing.

That’s the 94-mile pipeline that will carry ethane from and through three states (Ohio, West Virginia and Pennsylvania) to supply “feedstock” to Shell’s coming “cracker” plant in Beaver County’s Potter Township.

Property rights-of-way are being assembled and necessary permits are being acquired. Construction is expected to begin in 2019.

Coupled with the recently approved Mariner East 2 cross-state pipeline, the fortunes of the tri-state region’s shale gas industry certainly appear to be looking up.

Here’s a hypocrisy we see all too often from “progressives” entrenched in bureaucracy, and at all levels of government: They questions the motives of others as “extreme” but dismiss their own motives — motives that oftentimes redefine “extreme.”

To wit, The Washington Times reports that some within the U.S. Environmental Protection Agency are expressing concerns about newly confirmed EPA Administrator Scott Pruitt’s “ties” to the oil and gas industries.

Pruitt is the former Oklahoma attorney general who pulled no punches in challenging EPA regulations he thought exceeded the agency’s congressional and/or constitutional warrants.

Critics, however (including many Democrats), argue that Pruitt is too cozy with energy industry players. Among their concerns, The Times reports, is “a letter sent by Mr. Pruitt to the EPA, raising questions about the agency’s conclusions regarding harmful emissions from natural gas wells.”

The majority of the language came directly from an Oklahoma energy company, critics complain. It is nothing less than “collusion,” they charge.

But where are these same critics when the environmental regulatory agencies, federal and state, parrot (and apparently without much vetting) the talking points of envirocrats?

Or, in Pennsylvania’s case last year, a top state environmental official imploring the environmental lobby to strike back against the shale gas and oil industries?

One of the great champions of capitalism, and a Western Pennsylvania icon, has died. Michael Novak passed away Friday in his Washington, D.C., home. He was 83. Novak was born in Johnstown and grew up in both Indiana, Pa., and McKeesport.

It is this quote that best embodies his philosophy:

“Capitalism forms morally better people than socialism does,” Novak said in 2007. “Capitalism teaches people to show initiative and imagination, to work cooperatively in teams, to love and to cherish the law; what is more, it forces persons to not only rely on themselves and their own moral qualities, but also to recognize those moral qualities in others and to cooperate with with others freely.”

Re-read that quote several times and let its import sink in.

Colin McNickle is a senior fellow and media specialist at the Allegheny Institute for Public Policy (cmcnickle@alleghenyinstitute.org).

Three More Executive Orders Related to Affordable Housing Issued

Our last blog discussed Executive Orders 01 and 02 related to the work of the Affordable Housing Task Force and three more came late last week on the same subject.  The new orders direct various officials and departments as well as independent authorities (the URA is mentioned again, as well as the Pittsburgh Land Bank) to focus on various recommendations from the Task Force.

One recommendation directs the Finance Director to work with Allegheny County and Pittsburgh Public Schools to:

“Evaluate the potential for a uniform property tax assessment appeals policy for those appeals initiated by any of the three taxing bodies so as to limit any unexpected tax increases to City residents that disproportionately harm elderly residents and those residents living on fixed incomes.”

As we noted in the blog and in a Brief last year, the Task Force was directed to come up with something regarding appeals following the Mayor’s decision to withdraw 2016 appeals and issue a moratorium on new ones, but did not, so the Executive Order 05 looks to do something regarding appeals that might take place on a property in the City of Pittsburgh, realizing that one of three taxing bodies could choose to file an appeal on a property.  As noted in a 2016 newspaper article, the City went after properties they felt were underassessed by 50% or more and the County did not appeal values.  The School District appealed commercial properties where they felt was an assessment that was 85% lower than market value and residential property that sold for above $500,000 and were subject to that same standard, based on communications with the District.

So the charge to the Finance Director is to talk to the other two taxing bodies and find common ground.  The county could say “don’t do appeals, we don’t” but try convincing the District of that.  The City could say they would follow the District’s appeal standard (assuming that did not change).  Or the City could make its case for appeal policy that contains new elements to the District and the County (assuming the County wants to enter the appeal business).

 

Envirocrats are it again (& other business matters)

It took no time at all for envirocrats to appeal the Pennsylvania Department of Environmental Protection’s approval of the critical cross-state Mariner East 2 natural gas pipeline.

The $2.5 billion pipeline would transport natural gas liquids from Western Pennsylvania, Ohio and West Virginia to a Sunoco refinery in Marcus Hook, southwest of Philadelphia. The product will be shipped to Scotland for making plastics.

Environmental groups allege the DEP bowed to “heavy political pressure” and accuse the agency of “lacking all the information it needed to make a reasoned and reasonable decision.”

Two points:

First, the DEP hardly has been a rubber stamp for Pennsylvania’s shale gas industry. In fact, many of its past comments and delaying tactics have been considered decidedly anti-industry.

Second, DEP points to not only the five public hearings it held on the pipeline project but to the 20,000 hours it required to review permit applications and 29,000 public comments.

To call the review “utterly inadequate,” as the envirocrats allege, defies credulity.

Word out of Eastern Ohio is that PTT Global Chemical Public Ltd. has postponed until later this year a decision to build a multibillion-dollar ethane cracker plant near the village of Shadyside.

A decision had been expected in the next few weeks.

It appears the company needed more time to further vet the engineering and economics of the project, though reports have it that PTT already has spent tens of millions of dollars developing the site. The facility would “crack” Utica shale gas into “feedstock” for plastic products.

Some have characterized the delay as good news for a similar cracker plant now under construction by Dutch Royal Shell in Beaver County, also along the Ohio River, about 70 miles to the north. That is, the Beaver County facility, which would “crack” Marcellus shale gas, will have something of a head start.

That might be. But could the delay also be signalling something else? Could it be fears of yet another softening of the shale gas industry, one generally believed to have been on the rebound? Or is it that another cracker plant so close presents too much of a competitive problem?

These are the times that try Westinghouse employees’ souls.

Parent company Toshiba is looking to unload all or part of the iconic electric-turned-nuclear company. It — meaning Toshiba — might even file for bankruptcy protection.

Beset with billions of dollars in debt — largely blamed on the foibles of a Westinghouse nuclear construction subsidiary — the Japanese conglomerate says it will write off more than $6 billion and leave the business of building nuclear power plants, The New York Times reports.

That could place the very future of Westinghouse in doubt. What happens to its Cranberry Township headquarters in Butler County? What happens to its more than 2,200 employees?

And just as significant, what does this portend for the future of nuclear-generated electricity in the United States, if not the world?

WITF Radio in Philadelphia calculates that Gov. Tom Wolf’s proposed Fiscal 2018 budget contains “about a billion dollars in new taxes.” It’s not exactly an austerity budget, now is it? And so much for the governor’s claim of no new “broad-based” tax hikes.

As Gene Barr, executive director of the Pennsylvania Chamber of Business and Industry, reminds, many of the tax hikes target commonwealth businesses.

“We can’t sit here and say, ‘That’s a great tax’ or ‘That’s a great approach,’” Barr told the station. “I mean, all those things are just going to make Pennsylvania less competitive moving forward if we adopt them.”

It remains this fundamental: The more you tax business, the less you get of it.

A letter writer takes issue with the Allegheny Institute’s position on the governor’s budget blueprint.

First she says it’s contradictory to criticize state government for attempting to raise the minimum wage while saying that the economy is not being stimulated by low wage earners.

But it’s not contradictory at all. Wages should not be set by government fiat but based on market conditions and productivity. Government wage floors are nothing more than a tax on labor; the more you tax it, the less you get of it.

The better way to raise wages is to reduce onerous taxes and regulations on business. That frees up more money for investment, leads to business expansion, creates more jobs and leads to competition among businesses for workers, which is the natural way to increase wages.

By the correspondent’s illogic, all we need to do to sufficiently stimulate the economy is to raise wages by government fiat; the higher the government-mandated wage, the healthier the economy will be. But it would be quite difficult to have a healthy economy if you have no commerce to power it.

The same letter writer claims that Pennsylvania is the only state not to collect taxes from companies extracting shale gas. That’s simply not true; they long have paid an “impact fee,” which, of course, is a tax by any other name. And they already pay the kinds of business taxes that every other commonwealth business pays.

“Something reasonable and logical needs to be done to increase revenue to the state coffers without burdening those who can least afford it,” the letter writer continues, noting she is retired and that her pension is fixed.

But raising the cost of labor through minimum wage floors and adding taxes upon taxes for businesses (which only serves to decrease revenue to state coffers) certainly is neither “reasonable” nor “logical.”

Colin McNickle is a senior fellow and media specialist at the Allegheny Institute for Public Policy (cmcnickle@alleghenyinstitute.org).

Mayor Issues Two Executive Orders Related to Affordable Housing

The Mayor of Pittsburgh issued two executive orders yesterday (the most recent one was November of 2015) related to the Affordable Housing Task Force report from last year.  These executive orders issue directives to various parties (the City Finance Director, the Bureau of Neighborhood Empowerment, the Chief Urban Affairs Officer–all of these are under the administration–and the Urban Redevelopment Authority and the Housing Authority–independent authorities whose boards are appointed by the Mayor, but qualify “subject to appropriate board action”) to carry out recommendations made by the Task Force.

Various aspects will be explored, with status reports due back at different points in 2017.  The Bureau of Neighborhood Empowerment is to examine titles of properties and work on financial education and is supposed to have a report in six months time; the URA is to examine residential projects that request public funding or purchase publicly owned land on tenant protections and report within six months; the Housing Authority is to look at what the Task Force recommended for that Authority and present findings in six months time.

The Finance Director is to carry out two functions that we discussed at length in a Policy Brief last year related to a long-term owner occupant relief program and/or the possibility of “increased homestead exemptions for longtime owner occupants”.  The Finance Department is to work with Allegheny County and the Pittsburgh Public Schools on these two topics, and allow for review by each “…during the third quarter of 2017″.

We noted that the Task Force mentioned a court case in the late 1990s related to a long-term owner occupant program (but no citation for the case was provided, nor could we locate one or find anyone who knew the name of the case, so perhaps that will be made clear in the report) and currently all three taxing bodies offer a homestead exemption (though there is no distinguishing factor on length of ownership time, just so the property qualifies as a homestead) with the County permitting an $18,000 exclusion, the City $15,000, and the School District $29,447.  The School District’s exemption comes from slot machine gaming, so its exclusion is based on the number of homesteads and the amount of money from gaming.  The City and the County simply establish theirs by ordinance and could change the amount.

Allegheny County’s Certified Property Values for 2017

Summary: Allegheny County’s property values in 2017 stand at $100.7 billion, with $77.7 billion being taxable and $22.9 billion exempt from taxation—a ratio of $3.39 in taxable value for every $1 in exempt. These figures are based on the 2017 County Certification Roll that was certified to the County Controller on January 15th.

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Allegheny County has officially certified its property values for 2017. Taxable value stands at $77.7 billion, which is up a modest 1.4 percent over 2016’s total. That’s slightly under the increase of two percent from 2015 to 2016. With no reassessment, changes to property values year to year reflect new construction, improvements, demolition, corrections to records, and appeals.

The County Certification Roll separates taxable value into residential and commercial as well as the value for buildings and land. Residential value stood at $53.7 billion and commercial value at $23.9 billion. Combined residential and commercial land value was certified at $20.9 billion and the value of all buildings was placed at $56.7 billion.

Sizable percentage jumps in taxable value from 2016 to 2017 occurred in: Findlay Township, where value rose from $823 million to $894 million (8.6%), Marshall Township up from $1,211 million to $1,278 million (5.6%), and Robinson Township with value increasing from $1,726 million to $1,800 million (4.3%). Growth in commercial building value was strong in Findlay ($50.1 million) and Robinson ($58.7 million) and residential building value was robust in Marshall ($45 million) in 2016.

At the other end of the spectrum West Elizabeth, North Braddock, East Pittsburgh, Rankin, and Wilmerding all saw the certified values for 2017 taxable fall by 2.9 percent or greater from 2016. Wilmerding Borough had the biggest percentage decline with taxable values dropping from $39.4 million to $33.2 million (-15.7%), due primarily to a huge decline in certified taxable value of commercial buildings from $19.0 million in 2016 to $12.9 million in 2017.

Overall, 86 municipalities had increases in taxable value while 42 municipalities saw decreases from 2016. This presented something of a mixed bag for 19 of the multi-municipal school districts in the County (there are 31 multi-municipal districts) where there were some municipalities with falling taxable values and some with higher values. The number of municipalities, size of tax base, and degree of change from 2016 to 2017 present a wide range of possibilities. Here are two examples. In the Gateway School District Monroeville’s value fell while Pitcarin’s grew, but overall the taxable value in the District fell $3.4 million. In the Shaler Area School District taxable value in Etna fell but that was offset by increases in Shaler, Reserve, and Millvale, giving the District an increase of $7.7 million.

Taxing bodies, including the County, municipalities, and school districts levy millage rates upon taxable value to generate real estate tax revenue. Where values have gone up, governing bodies can collect more revenue at existing rates. The County, with its unchanged millage rate (4.73 mills) expects to collect $359.1 million in property taxes in 2017, $6.8 million above its projected 2016 amount.

Consider Marshall Township for example. In its proposed 2017 budget Marshall planned to keep its millage rate unchanged at 1.42 mills, the growth in taxable value would net the Township around $96,000 in additional property tax revenues without adjusting millage.

The County also certifies the value of exempt property and it is interesting that in 2017 that number dipped very slightly from $23.1 billion to $22.9 billion ($195 million). The Certified Roll counts regular exempt (churches, government, authority owned, etc.) as well as public utility property to calculate its total exempt property value. Utility property value for 2017 was unchanged at $90 million.

Note that the County is still conducting a review of exempt parcels that are classified as purely public charities (exempt property covers a wide range of uses, from government owned property, churches, universities, etc.). An article in late 2016 reported the review had led to reclassification of $108 million in formerly exempt charitable property to taxable property. That change would account for just over half of the decrease in the certified exempt value from 2016 to for 2017.

In the near future the Institute will be releasing a report examining the millage changes, school property tax relief amounts via slots gaming, and the impacts of those changes on property values in the County since the 2013 reassessment when millage rates were reset to comply with state law.

A red-letter development for shale gas

Meanwhile, back at The Great War Against Shale Gas, some major and refreshing news from the Pennsylvania Department of Environmental Protection:

Not only has the DEP approved a final water quality permit for the $1 billion PennEast Pipeline, which will primarily deliver natural gas from Northeast Pennsylvania to New Jersey utilities, it has approved the final water-crossing and sedimentation permits for the $2.5 billion Mariner East 2 pipeline, which will carry natural gas liquids across the commonwealth.

Both projects have undergone exhaustive vetting — envirocrats did their darnedest to scotch them — and their importance to developing this state’s much-needed pipeline infrastructure cannot be overestimated.

As The Philadelphia Inquirer reminds, the Mariner East 2 pipeline will link shale gas producers in Western Pennsylvania, West Virginia and Ohio with Sunoco’s Marcus Hook Industrial Complex, about 23 miles southwest of Philadelphia.

Indeed, this is a red-letter development for an industry that long has garnered little respect from the regulatory regimen of “The State.” Let’s hope it’s the beginning of a new day.

Ford’s planned $1 billion investment in Pittsburgh certainly is nothing to sneeze at. The auto giant says it would like to make the erstwhile Steel City an engineering and test center for autonomous vehicles.

Uber, the ride-sharing company, already uses Pittsburgh as a testing ground for driverless vehicles. Ford will team up with Argo AI, an artificial intelligence company.

It’s not yet clear how many jobs will be a part of the investment. But an Allegheny County official told the Tribune-Review that “thousands” of jobs could be created over the next five years. We shall see.

While the news is encouraging, more details are needed to better evaluate the plan.

Are there tax breaks for Ford? If so, how are they structured?

Are there any direct public subsidies? If so, how much?

Will tax-increment financing (TIF) be sought to help Argo AI build a Pittsburgh headquarters? If so, will Pittsburgh Public Schools, which would have the largest share of tax receipts to lose, be consulted or merely asked to rubber stamp the deal?

The Pittsburgh Business Times quotes a local regional development official as saying it’s “fair to say that almost every major car company has had some conversation about Pittsburgh.”

The intimation is that other major car makers might be considering locating research and development operations here.

That’s great — if it’s truly a testament to Pittsburgh’s universities-based high-tech acumen. But, past being prologue, we also have to wonder if any part of it is based on what public subsidies these companies can extract.

Public subsidies for public infrastructure are appropriate. And TIFs can be structured to dedicate tax dollars to the new infrastructure for which such projects create a demand.

But if tax-increment financing merely turns taxpayers into venture capitalists — which is not its or their role — then a major re-think of the respective projects’ value should be in order.

Stay tuned.

The Urban Institute is touting its new study showing how the repeal of ObamaCare would “cost” about $13 billion in lost tax credits and subsidies over the next decade in Pennsylvania.

OK. But playing the same numbers game, there’s another side of this equation that too few are too loath to discuss: That means about $13 billion in tax credits and subsidies won’t be given.

Thus, “cost” becomes a “savings,” does it not?

Think of this in the same vein as gambling. “The State” often touts how much it’s “making” from legalized gaming. But, a like amount of money was lost by gamblers.

Of course, when it comes to health care, one cannot ignore the equation’s variables. The study also predicts nearly 1 million additional Pennsylvanians won’t have health insurance should ObamaCare be repealed.

Unless, of course, ObamaCare is replaced by more market-based insurance that embraces competition and lowers cost.

Colin McNickle is a senior fellow and media specialist at the Allegheny Institute for Public Policy (cmcnickle@alleghenyinstitute.org).

Higher LST Tax Not Sitting Well With Some in Scranton

In 2014, the General Assembly made changes to Act 47, the statute that outlines financial recovery for municipalities.  One of those changes was to allow distressed municipalities to seek a boost in the Local Services Tax (LST) a flat tax levied at a maximum of $52 on people who work in the municipality (regardless of residence).  We wrote about the proposal because Pittsburgh, an Act 47 municipality, was prohibited from pursuing the increase.

Scranton is in Act 47 and has levied the tax and planned on doing so again this year, but a lawsuit in Lackawanna County Court of Common Pleas against the increase (here and here).  One claim is that the distressed municipality is required to seek court approval prior to levying the tax, but the City did not do that for 2017.  According to the news articles the LST in Scranton applies to around 30,000 people and the boost in the rate has raised around $5 million.

Washington County’s Values Certified at $17.2 Billion

In a blog in late September we wrote about preliminary values that were published for Washington County, the county immediately south of Allegheny County and the only adjacent county to have a recent year of reassessment and a pre-determined ratio of 100%, similar to Allegheny County.

Last year, with an assessment year of 1981 and a PDR of 25% Washington County had taxable value of $1.6 billion.  This year, taxable value is $17.2 billion, about $200 million less than where the preliminary values from September stood.

As we wrote in a blog in late December Washington County established its millage rate and updated millages for municipalities in Washington County should be available soon.