We wrote about the Supreme Court’s decision to strike down the host fee in the gaming law and how several municipalities and counties had reached agreement with the casinos located in their borders for voluntary payments (the City of Pittsburgh is one of them). We also have written about the legal requirement that the host fee for the City of Pittsburgh is intercepted by the oversight board and restricted for specific purposes.
This week Pittsburgh City Council expects to take action to receive host fee money from the second and third quarters of 2016 and deposit the funds into account for capital needs. The total amount is close to $2.8 million for the two quarters. Legislation in 2016 places new requirements on the oversight board as it pertains to the host fee money for the City. The 2016 audit that we wrote about last week notes that in the fiscal year ending June 30, 2016 the oversight board allocated $9.5 million in host fee money to the City.
Back in 2012 the Pittsburgh School District when the issue of teacher furloughs came up the issue of conducting layoffs by means other than seniority was discussed (see this blog and its links). The superintendent at the time had been directed by the school board to approach the teachers union with the proposal. Two years ago the idea of applying measures related to performance and evaluations over seniority came up for discussion in the state House. and legislation that passed the General Assembly was vetoed by the Governor in May of 2016.
Earlier this week the House again passed legislation making changes to the state’s Public School Code that includes language regarding teacher layoffs. Presently, a decline in pupil enrollment, curtailment or alteration of educational programs, consolidation of schools, and new school districts created by reorganization are grounds for suspension of employees (under section 1124, causes for suspension, page 16, and also discussed in a Brief earlier this year). The amended language would add “economic reasons that require a reduction in professional employees.”
The legislation would not permit employee compensation to be the determining factor, and a school board could layoff teachers only if they layoff the same percentage of administrative staff. The exception to this rule would be if the district was granted a waiver by the Secretary of Education if all of the following were met: if the district’s administrative functions were already streamlined and reducing further would cause harm and the state Board of Education agrees with the Secretary’s determination. Economic layoffs could occur only if a number of specific steps are carried out by a school board taking such an action, such as doing so at a public meeting, documenting the total cost savings from the layoffs, what other actions have been taken to save costs, and what district expenditures would look like with and without the suspensions.
The provisions for laying off teachers are contained in the section following the language on layoffs for economic reasons (beginning on page 20). Teachers would be listed by their two most recent annual performance evaluations, with those with consecutive “unsatisfactory” evaluations being suspended first, then those with one “unsatisfactory” and one “satisfactory”, then those with two “proficient” or one “proficient” and one “distinguished” and then those with two “distinguished”. If all teachers had the same ranking, the legislation allows for seniority within areas of certification to be the determining factor. There would be an appeal process with the Secretary of Education and new collective bargaining agreements after the effective date of the legislation would have to incorporate the new language on suspensions into them.
The Governor’s office has announced a memorandum of understanding (MOU) between the Department of Corrections and the Board of Probation and Parole that will combine “…the agencies’ similar, shared and overlapping resources and functions”. We wrote in February that as part of the FY 2017-18 budget the Governor proposed to combine the Department and the Board into a new Department of Criminal Justice, a Department that would have grown by 838 positions to 17,027 employees via transfers and reductions.
Based on the MOU, the entities “…will remain separate from each other; however, the community supervision of parolees and all other reentry services will be combined under a new, centralized chain of command that everyone in those areas will report to and follow.” Some office functions, such as communications and business administration, will be combined and will follow the consolidation of other functions previously completed.
The other major departmental consolidation that was proposed earlier this year was a new Department of Health and Human Services, a proposal that seemingly ended when it was reported that the Governor had made appointments to the Departments slated to be involved in the consolidation earlier this month.
Two issues related to the Intergovernmental Cooperation Authority for Cities of the Second Class (oversight board). One is that the board took action on the City’s 2018 operating and capital budgets and approved it 3-0, with two members of the board abstaining from the vote. One member noted that there could possibly be a tax increase taken up by City Council, which would then require reconsideration by the board. That’s not the real story–the fact that the board now has five functioning appointees and can carry out business is.
Consider that in December in 2015 there were only two appointees and the Mayor of Pittsburgh noted that there weren’t enough members to vote on matters before the board. We suggested that the appointing officials responsible for filling those seats make the appointments and then “They could vote together to advance ICA business, even if it occurred on a series of 3 to 2 party line votes. A 3 to 2 partisan vote would release gaming money the City receives from hosting the Rivers Casino (a critical issue in the current dispute), approve operating budgets, and make City-overseer relations much more amicable.” The appointments were made by March of 2016.
Two, not long after problems with the executive director of the oversight board surfaced, and in April of 2016 we wrote about the failure of the oversight board to comply with state law requirements on the audits for the entire history of the board’s existence. this past April we updated the status of the audit for 2015 and 2016 which was delayed due to the involvement of the District Attorney’s office. The audit has now been released and is available on the oversight board’s website.
The audit does discuss the details of the investigation and how it impacted the audit. The financial position of the oversight board at the conclusion of Fiscal Year 2016 (June 30th) shows a net position of $19 million with most of the liabilities tied to restricted uses for the City via the board’s intercept agreement of the host fee money from the Rivers Casino. That money is to be used for debt reduction, pensions, or any other purpose deemed to be in the best interest of the City per the gaming law. For 2016 revenues and expenditures, the bulk of the $9.8 million in revenue received by the oversight board was from the gaming money, along with a $250k appropriation to operate, and it had expenditures of $3.5 million that fiscal year.
Under changes signed into law as Act 99 of 2016, the audit required under Section 207 going forward are to be completed by December 31st following the end of the fiscal year.
This week Pittsburgh City Council will consider extending the life of the Oakland Business Improvement District and to levy a special assessment on the property in the boundaries of the District. The assessment will be around 3.8 mills on land and buildings with specific dollar amounts that the levy is to raise for “…administrative services and improvements permitted by the Act and not essential government services provided by Pittsburgh City government.”
A 1996 state law permitted the creation of business improvement districts and that same year the Allegheny Institute produced an analysis of the Downtown Pittsburgh Improvement District. The state law empowers cities of the second class (Pittsburgh) to provide administrative services in addition to the powers granted to all other governing bodies in relation to their role in improvement districts (establishing boundaries, expend money for feasibility studies, carry out improvements in the district, and to accept or acquire property or rights of way for improvements).
The resolution under consideration describes the board of the Oakland District, auditing requirements, and sunset provisions.
The 2018 comprehensive fiscal plan for Allegheny County–containing the operating budget, capital budget, and various longer term forecasts–shows a significant increase in real estate revenue for the County in 2018 from $359 million this year to $371 million next. There are several components of real estate revenue (discounted, if the taxpayer pays before March they receive a 2% discount on the total tax bill, delinquent, liened, and penalty and interest for all components, detailed on page 11 of the operating budget).
In the budget’s “Comparison of Estimated Countywide Revenue, By Object and Character Levels” (see page 11 of the operating budget) the category of “Real Estate, Discount” is projected to be $351.2 million next year, an increase of $11 million over this year’s budgeted amount of $340.1 million. In the years since 2014 the real estate discount category has increased by $2.7 million, $1.2 million, and $5.7 million, year over year.
In 2014 the real estate discount revenue total was $330.4 million, an increase of 6%. The taxable assessed value for the County has not yet been certified for 2018, but from 2014 to 2017 it increased 4%. Since the County projects $371 million in real estate revenue (that is the sum of all discount, current, delinquent, liened, etc. less the total amount for homestead exemptions) overall for 2018, that would imply a taxable value of around $78.4 billion.
Property taxes account for 80% of the total tax revenue collected by the County with taxes on alcohol, rental cars, and a share of the 1% local option sales tax making up the remainder.
In a July Policy Brief we documented the date of gubernatorial signatures on budget legislation for the Pennsylvania fiscal year back to FY 2007-08. Those dates were obtained by examining the legislative history of general fund budget legislation provided in the budget histories on the website of the Office of the Budget.
Two fiscal year budgets had stretched past July (the first month of each new fiscal year)–the FY 2015-16 budget, which was signed by the Governor on March 28th of 2016 (about three months prior to the start of the following fiscal year) and FY 2009-10 which was signed on October 9th, 2009. By marking today’s date, October 10th, 2017, the FY 2017-18 budget has now surpassed that second runner up and stands behind only the FY 2015-16 budget in terms of length of time to approval.
The next step, as noted by the Governor last week, is to borrow against future anticipated payments of the Liquor Control Board, an idea that the Board appears to be open to exploring judging by a press release on the proposal. In current statutory law there is an arrangement between the state stores fund and the general fund–whether this permits for a long-term securitization versus taking current revenues in the fund will no doubt be deliberated upon.
On Allegheny County Council’s agenda for tomorrow evening is a presentation of the 2018 fiscal plan and operating budget. In the County’s Home Rule Charter (VII,2,b) the Chief Executive is required to “…appear before County Council to present the budget message and submit the comprehensive fiscal plan no later than 75 days before the end of each fiscal year”.
The Charter likewise requires the County Manager to prepare the comprehensive fiscal plan and it must include a two-year projected operating budget and a five year capital improvement plan. In 2017’s fiscal plan the operating budget was a recommended $880 million; in the two year forecast the coming fiscal year was projected at $897 million, or 2% above the proposed budget for 2017. The year after next was forecast at 2% above 2018.
Currently the County’s budget has five operating funds: general, debt, liquid fuels (money from gas tax remitted to local governments for road maintenance), transit support (taxes on liquor and rental cars that goes to the Port Authority for the local match) and infrastructure support (the $5 local use fee add on to auto registrations for roads).
Emerging from the budget impasse talks this week–albeit briefly as the idea is now apparently dead–was a proposal to raise the hotel tax levied by the state from 6% to 11% in order to boost state revenue.
The Department of Revenue notes that the hotel occupancy tax is “imposed at the same rate as sales tax, [and] applies to room rental charges for periods of less than 30 days by the same person”. Its rate was set in 1968–with local option sales/use/hotel occupancy taxes in Philadelphia and Allegheny County. A person subject to the state hotel occupancy tax pays an additional sales tax of 2.5 percent in Philadelphia and one percent in Pittsburgh.
In addition to the state hotel tax, there are separate hotel taxes levied by counties, with differing rates depending on the class of county. Two years ago the state gave several classes of counties the permission to raise their county hotel taxes, and earlier this year officials from Allegheny County expressed their wish to get permission from the Legislature to raise its tax from 7% to 8.25% to fund a variety of tourism and sports related endeavors. The proposal was marketed as a painless undertaking that would not raise the price of hotel stays that much, would fall on out of towners, and had the support of hoteliers.
What a different reaction the budget proposal received (here, here, here, here) compared with the recent hikes or the proposed one in Allegheny County. To be fair, a five point increase would be steeper than the two percentage point increase in the County’s occupancy tax in 1997. The Legislature’s proposed 5 percentage point jump in the rate would have been raised the total tax on hotel stays in Allegheny County to 19%. This would have boosted the average hotel room price of $118.71 to a total cost of $124.64 assuming all the tax could be passed on to customers, i.e., hotels would not lower their base prices to keep business. In comparison, the County’s proposed 1.25 point hike would have pushed the average total room cost to $120.19. Thus, the state plan would have added $4.45 more to the cost of room night than the 1.25 point hike would have.
Interestingly the Mayor of Pittsburgh stated that he would want to know how the possibility of the state hotel tax boost would affect the local plan for the 1.25 point hike. “If they are looking at using a hotel tax to put a stopgap in their budget then we would like to see the assurance that the sports commission is still on the table” referencing the County plan. Surely, if the 5 percent add on had been passed, Pittsburgh hotels would have dropped their support for another 1.25 percent. Surely.
The Auditor General’s office announced today that $289 million in municipal pension aid was distributed on October 1st to 1,479 municipalities and regional affiliations (multi-municipal police forces). Another $60 million was distributed for volunteer fire companies, bringing the total disbursement statewide to $350 million for these purposes.
Pension aid comes from a tax on fire insurance and casualty premiums sold in Pennsylvania by out-of-state companies (the tax and the distribution formula is described in this piece from 2008).
From the October distribution recipients in Allegheny County received $44 million in pension aid. Combined with Philadelphia’s distribution ($72 million) that accounted for 40% of the distribution. A detailed list of the recipients in Allegheny County for pension aid, volunteer fire aid and other pension aid is available here.