The County and its municipalities run their fiscal year on a calendar basis, and so in two weeks will have presumably established their property tax rates for 2013 and adjusting them for revenue neutral requirements under Act 71 of 2005.  The only school district in Allegheny County that operates on a calendar fiscal year is the Pittsburgh Public Schools, and they have proposed a millage rate of 9.65 so as to comply with Act 1 of 2006 requirements, which state that in a year of reassessment a school district can't collect more revenue than what is allowed by its Act 1 index for the previous year. 

As of now, proposed rates and homestead exemptions (which lower the assessed value of a qualified owner-occupied home for tax purposes) for 2013 are as follows:

Allegheny County: 4.73 mills, $15,000 exemption

City of Pittsburgh: 7.56 mills, $15,000 exemption

Pittsburgh Public Schools: 9.65 mills, $28,685 exemption

All millage rates were adjusted downward; the County's homestead exemption amount is unchanged, the City's proposed exemption is up from $10,000 last year, and the school district's amount is higher due to increased gambling receipts (it was $19,000 in 2012).

A home in the City assessed at $115,000 that took all available exemptions would have a tax bill of $3,039 in 2012.  That amounts to 2.6% of the assessed value.

Assume that the assessed value for the home rose 50% and no appeal of the value was undertaken, establishing the 2013 assessed value at $172,500.  The resulting tax bill for 2013 would be $3,328 for 2013, an increase of $289 (10%) over the 2012 tax bill.  The tax bill would equal 1.9% of the assessed value. 

Cut positions in order to save the district.  That's the position taken by the administration of the Northgate School District, a district serving the North Hills communities of Avalon and Bellevue.  Population has fallen in the communities, as has public school enrollment, but there are more teachers now (115) than there were in the 1995-96 school year (110).  Thus, the proposal to layoff 23 teachers and 10 aides at a meeting this week.  As we have written before, Pennsylvania only allows layoffs of public school employees when there is a drop in enrollment or a program is shuttered, not for economic conditions. 

Consider: in 95-96 enrollment was 1,644 students and the pupil to teacher ratio was 14.9.  In 12-13 enrollment was 1,211 and the resulting ratio was 10.5.  Laying off 23 teachers-and assuming enrollment does not change dramatically for next year, say it stands at 1,180-the pupil-teacher ratio would be 12.8, lower than the national average of 15.1 and that of Pennsylvania (13.8) as of 2010.  Curiously, a November 2011 article detailing a new four-year contract for teachers recalled three teachers who had been laid off and stated that it had "eliminated the need for additional layoffs". 

The superintendent-who was hired last May-went on record saying he would not support merging with another district due to losing the character of neighborhood schools that serve the district.  Property tax rates went up 24% in the District from 2001 through 2012 and, at 28.6 mills now, the District has one of the highest millage rates in Allegheny County.  Northgate, like all districts in the state, are facing steep increases to pension costs.  How does the District work its way out of this situation? 

A state Senator has proposed levying Pittsburgh's Payroll Preparation Tax (PPT) on non-profits with 250 or more employees.  The PPT is a flat rate levy of 0.55 percent on the total payroll of businesses within the City. This tax was imposed back in 2004 and was part of package of tax reforms that lead to abolishing the mercantile tax and the business privilege tax-two very onerous revenue taxes that were not based on company earnings and were quite punitive for some businesses.

The proposed PPT for non-profits would apply to the charitable part of a non-profit's activities since presumably they are paying the tax on any activities that have been deemed for-profit.  Note there are no taxes on the non-profits that could be eliminated as part of a deal sweetener for them.

This issue was debated at the time the PPT was being drafted into law. The arguments then and the arguments are still about the legality and constitutionality of taxing purely charitable organizations.  There is also the issue of whether the taxing power can be given to the City if it is not part of a law that would allow other taxing bodies in Pennsylvania to levy the tax on non-profits. 

Beyond those technical considerations, there is the political angle. Without question, the foundations, universities, churches and other non-profits in the cultural, educational and economic development community will be up in arms about the tax. These groups have many loyal and powerful friends who will point out all the good they do for Pittsburgh to help maintain its high rankings in many desirable amenities and attention to community needs.  These friends will also be calling Harrisburg to make sure this bill never gets out of committee. 

There are legitimate questions about what constitutes a qualified charitable organization. It is high time the Legislature update any laws pertaining to the criteria that must be met to qualify as a charitable organization and to delineate clearly when the activities they engage in are for-profit and must pay taxes.

All this is complicated by the rise of the mega-hospital such as UPMC where revenues have on occasion exceeded expenditures by large amounts.  The laws need to recognize and deal with those situations by forcing the non-profit to lower its prices, allocate their excess to free care or donate to other hospitals that need financial help.  Universities will also need a lot of examination to determine whether they are stepping over the lines in some areas into for-profit activity.  This is not easy but it will have to be dealt with if we are to put an end to the annual cries for non-profits to do more.

Will the Senator also ask that governmental entities including authorities to also pay the tax as the law currently exempts them?

Act 44 of 2009 addressed public sector pensions at the local level in Pennsylvania and came up with a typology of distress based on the funding ratio (assets/liabilities) of the plan to determine if there was no distress (90% or above), minimal distress (70 to 89%), moderate distress (50 to 69%), and severe distress (49% or lower).  Pittsburgh was at the severe distress level for some time until the 2010 "revenue infusion" plan moved it, by PERC's measurement, to moderate distress.

The latest PERC status report looks at this typology. In 2010, with 1,439 municipalities scored, 27 (less than 2%) had a designation of severe distress.  In 2012, with 1,449 municipalities scored, 26 (1.8%) had a designation of severe distress.  One can see the impact of plans in Pittsburgh, as well as Philadelphia, moving out of this level of distress: in 2010, the class of "cities" reported 32,524 active members in the severe distress level, and by 2012 "cities" had 782 active members in the severe distress group. 

PERC notes that many of the severely distressed plans are newer plans (less than ten years old) and gave past service credit to employees, raising the liability of the plan.  Makes one wonder how many plans are severely distressed because of mismanagement or underfunding and if officials view the local pension system as one in need of inclusion in statewide reform (like the systems for state workers or school teachers) or if there are enough plans in good shape that should be left alone. 

Just two months after adopting new, stiffer toxic emission guidelines for new installations of plant and equipment, the Allegheny County Health Department voted to relax one of the new guidelines.   Rather than measuring pollutant levels at the company's property line, as called for in the November approved guidelines, the new relaxed requirement will be to measure the pollutant level at the nearest habitable structure.

Last August when the guidelines were proposals and made available to the public, the Allegheny Institute  produced an analysis of the guidelines in which we challenged the type of measure of toxicity being proposed and all also strongly questioned the use of the company "fence-line" as the appropriate place to measure the pollutant.  For one thing, the gauge of carcinogenic effect being employed is the Maximum Individual Carcinogenic Risk (MICR). The MICR-a creature of the EPA-is defined as the estimated risk of contracting cancer for an individual exposed to the pollutant 24 hours per day, 7 days per week, and 52 weeks per year for 70 years.  The risk setting is placed at one predicted case of pollutant caused cancer in 100,000 persons so exposed. 

Obviously, the MICR is a questionable measure since there has never been, nor is there likely to ever be, a study lasting 70 years that keeps a person continuously exposed to a specific toxic emission level.  In other words, the MICR is a projection and depends on assumptions about mechanisms and extrapolations of effects over a very long time based on controlled experiments for much shorter duration. Indeed, subjecting individuals to deliberate exposure to toxic emissions for periods of time in order to assess carcinogenic effects is a violation of accepted protocols for human testing.  In the absence of direct tests, scientists are forced to use epidemiological studies in an effort to assess the carcinogenic effects of a toxic substance.  Such studies are extraordinarily difficult to refine to a level that statement t with high degrees of confidence can be reached, especially when the risk factor is being set so stringent as one cancer in 100,000 exposed individuals-over a period of continuous exposure lasting 70 years.

However, beyond the inherent difficulties in using the MICR, having the measure taken at plant boundary line is seriously over the top.  What if the nearest domicile is 200 yards away?  The likelihood of the toxic emission being nearly as concentrated as at the boundary is highly improbable, the more so depending on strength of prevailing air flows.

In short, the Health Board made the right decision regarding where to measure the pollution. Now they need to revisit the MICR and satisfy themselves that the standard is of value.

Finally, it should be borne in mind that the new guidelines apply only to new or rehab installations.  What if the new equipment is less polluting than the old but does not meet the new guidelines? The impact might well be to have the firm continue using the old equipment rather than investing in new, cleaner equipment. Where is the logic in creating such a scenario?

The Pennsylvania Public Employee Retirement Commission-PERC for short-just issued its latest status report on local pensions in the state, municipalities, authorities, and counties.  There are more than 3,200 local plans in the state, and the report is a real treasure trove for those looking to find data on specific plans or the overall characteristics of local plans in Pennsylvania. 

Status reports date back to 1985 when PERC was charged by Act 205 with monitoring plans (Act 293 covers counties).  Back then there were 2,372 plans: thus, another 856 plans have been created, about 33 per year through 2011, the year the latest status report collects actuarial data on.

So has the nature of plans changed much in that time?  In the public sector pension lexicon there is the overarching distinction between defined benefit plans (where the employee is promised a defined retirement benefit that depends on retirement age, service length, and final average salary) and defined contribution plans (where the employee is promised a fixed contribution that is often matched by the employer and what is in the employee's account upon retirement is the benefit).

In 1985 the PERC status report shows that 75% of plans were self-insured defined benefit plans, 21% were defined contribution, and 4% were "other".  In 2011 the distribution of the pie (which had gotten bigger) shifted slightly with 70% of the plans defined benefit, 25% defined contribution, and the remaining 5% "other". 

The number of employees covered by a specific plan has remained largely unchanged: in 1985 slightly over 94% of employees were participating in a defined benefit plan.  By 2011 the percentage was 92%.  There was a corresponding rise in the number of employees covered under defined contribution plans, rising from 5% to 7% over that time frame. 

It is fair to conclude that the public sector plans at the local level in Pennsylvania are thus still defined benefit in nature.  It is also fair to say that the majority of the plans are small: in 1985 67% of the plans had 10 or fewer members, and in 2011 68% had 10 or fewer. 

There has been much debate about the proposed riverfront development in the Strip District.  A URA request for proposals says the development will be part residential, part hotel, part office and commercial, and have a parking garage.

The company announced today that it won't pursue a TIF anymore, noting the company "does not wish to participate in a financing program the community views negatively" and that it will self-finance the infrastructure improvements that would have been funded with the TIF.     

Why the change of heart?  Was the company worn down by trying to get financing? Pittsburgh City Council agenda notes show that motions to adopt a Lower Strip District Tax Increment Financing (TIF) plan and to set forth cooperation agreements with the URA, the County, and the Pittsburgh Schools were presented and withdrawn on nearly a weekly basis going back to late May of 2012. 

Such a large development going forward without expecting some sort of subsidy is rare-the predictable by-product of handing out money to certain developments only to see others parroting the request.   If a TIF were granted, the taxing bodies that opt to participate agree to redirect all or some of the incremental property taxes from their coffers to pay off debt issued to get the project off of the ground.  Once the arrangement expires, usually it is a twenty year deal, they recapture all of the money from the property.

If the company holds true to its word, and it is not in line for nor seeking any other source of state or local subsidy, then there might be a lesson to be learned for those quick to hand out public dollars when asked and the strength of the "but for" criterion attached to TIF subsidies. 

A few years ago, 2009 to be exact, the County's tangled web of relations between itself and UPMC, the County's role as the body that assesses property value and certifies that parcels exempt from real estate taxation really should be, the County's role as promoter of economic development and leaning heavily on "eds and meds", and the County's role as viewing itself as needing to intervene in matters such as UPMC's decision to shutter the hospital in Braddock all intersected at one Council meeting, one that we wrote about then.  That's because on the same night that County Council decided it wanted to explore what UPMC owned and whether everything was deserving to be exempt (presumably as a tactic to scare UPMC into changing its mind) it had to decide whether the County-acting through its related Hospital Development Authority-would issue $1 billion in bonds on behalf of UPMC.

The issue of the Authority acting as a debt issuing vehicle rose again in 2011 when the UPMC-Highmark battle was at its apex.  Again, we wrote about that debate and the $330 million borrowing request that, in case the County wanted to exert influence by not issuing the debt, another state level authority stood ready.  The County did not issue the bonds.   

So why bring these instances up?  Because at the end of 2012 County Council held a hearing on UPMC which it promised would be the first of many on finding out if property owners classified as charitable and exempt really deserved all their exemptions.  As an article today pointed out, the classification system the County has on exempt property is a mess, but tomorrow night the Council will take up business deciding whether its Higher Education Building Authority should issue over $80 million in debt for two private universities in the City of Pittsburgh and, after that, whether the Authority needs a new lease on "municipal" life, which amounts to fifty years additional.  The County does not pledge its revenues or the state's by issuing the bonds but it has the opportunity to make plenty in fees and payments.  That's the decision point it has to deal with when deciding if it wants its instrumentalities to help the institutions it is trying to get to act a certain way. 

Earlier in 2012, Allegheny County released preliminary assessed value changes for its cities and towns showing how property values had changed, in aggregate, for 2013.  The range ran from a 75% increase in Rankin (with values rising from $14 million to $24 million) to a 5% decline in Pitcarin, the only municipality that saw aggregate property values fall in the County.

With appeals taking place and certified values reflecting those changes as of their December 20^th release, we see that five municipalities (Turtle Creek, East Pittsburgh, West Homestead, Sewickley Hills, and Pitcarin) saw their certified values come in higher than their preliminary numbers.  Nine municipalities saw no change.  The remaining 114 municipalities saw certified values fall from preliminary numbers.  A good many of these (86) saw rather small decreases (5 percentage points or less).  Sizeable reductions from preliminary numbers to certified numbers came in these communities: Dravosburg (86% to 34%), Neville (96% to 56%), Versailles (43% to 17%), Sewickley Heights (61% to 37%), and Harmar (56% to 41%). 

Municipalities have until the end of January to set millage rates for 2013 tax bills that comply with the Act 71 requirements on revenue neutral rates and rate hikes following the establishment of those revenue neutral rates. 

Prior to Christmas and New Year's Day, back on December 20^th, Allegheny County certified assessed values for 2013.  It will take until the end of January for local governments operating on a calendar year for their fiscal year to finalize millage rates for 2013 tax bills.  School districts, with the exception of the Pittsburgh Public Schools, operate on a July-June fiscal year but with Act 1 governing budget development that process will begin rather soon.

Appeals of initial values have adjusted the aggregate changes for the County, municipalities, and school districts.  As reported after the certification, the County as a whole will see values rise 32%, from $64.1 billion to $84.5 billion.  Earlier in 2012 it was projected that the County would rise to $86.8 billion, a 35% increase.

A quick look at values sorted by school district (there are 43 in Allegheny County) shows a few with what could be considered sizeable drops in the initial projections of assessment changes.  Pittsburgh (Pittsburgh and Mt. Oliver) was initially projected to increase 55%; now it will rise 48% under certified numbers; Cornell (Coraopolis and Neville) was initially set to rise 42%; now values are expected to rise 26.7% (in initial 2012 numbers Neville Township was projected to rise 95%, and now the certified numbers show the municipality's values climbing 56%); Wilkinsburg, Allegheny Valley, McKeesport Area, and Quaker Valley are others that will see somewhat significant drops in what was originally projected to be their assessed value increases. 

Only one district, Steel Valley (Homestead, Munhall, and West Homestead) saw even the slightest uptick in values from initial to certified, rising from 25.4% early in 2012 to 25.5% in the certified numbers.