AG Examines Exempts

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In order to “…provide taxpayers and other stakeholders with some data on the potential tax revenue from properties that are currently exempt from property taxes”, the state’s Auditor General released a report yesterday that showed the dollar value of property in ten counties in Pennsylvania, including Allegheny County.

The data for Allegheny County shows that the total value of all property (taxable and exempt) is $100.4 billion, all exempt value is $24.6 billion, and the amount of exempt value attributed to medical facilities that are classified as purely public charities at $3.1 billion.  The report repeats these classifications for nine other counties, and attempts to calculate a potential tax liability if such property were fully subject to county, municipal, and school taxes.  In Allegheny County, for example, if all current tax-exempt property were stripped of their exemption and subject to millage rates, the $24.6 billion in value would pay $619 million in real estate taxes to the County, municipalities (based on the average municipal millage rate), and school districts (based on the average school millage rate).  The municipal and school taxes would be concentrated where those properties are located.

Of course, that that total would be accurate if publicly owned property (attributed to Federal, state, local, school, authority) paid taxes and if the government would tax small charitable providers and churches.  That probably won’t happen, and that’s why the debate over tax-exempts “paying their fair share” typically falls to universities and medical facilities, the latter being analyzed in the current report.  When the Allegheny County Controller examined tax-exempt property in 2012—an analysis noted in the AG’s report and one we wrote about—the share of tax-exempt property owned by government was slightly more than the share owned by churches, hospitals, and higher-education.

So when one looks at how much of a share tax-exempt property is in the counties examined by the Auditor General, we see two counties (Allegheny and Dauphin) with over 20% of total assessed value accounted for by tax-exempt property; one county (Monroe) had less than 10% and the remainder fell in between.  When one looks at the share of exempt value that is accounted for by medical facilities, the highest share in the sample belongs to Lehigh County (15%) followed by Allegheny and Dauphin, both at 13%.  That means in Allegheny County that while its $3.1 billion in medical exempt value is far and away above any of the other counties examined there is still $21 billion in exempt value in other classifications.

State Examines a Countywide School Consolidation

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When the most recent iteration of a City-County merger was discussed in 2008 the focus was on a “Louisville type” approach where municipalities other than the City of Pittsburgh would be untouched.  The County’s 43 school districts would also not be part of the deal.  But the idea of school district consolidation—statewide and in Allegheny County—has been raised numerous times.  Even in western Pennsylvania the district of Central Valley arose from a consolidation of two separate districts and two districts in Allegheny County raised the issue of a merger/consolidation over the summer.

Much of the push behind consolidating school districts is to achieve economies of scale, especially by getting savings on the administrative side.  That’s why the state’s Independent Fiscal Office recently undertook a study of combining districts in a single county, York, in southeastern PA, to see what would be the results on costs, taxes, state funding, property tax relief, etc.  The 62 page report looks at many of the complex issues and runs scenarios of what a countywide school district  might look like after taking into consideration the variations of tax rates, how much the state pays for, how much is raised locally, administrative costs, etc.

It should be noted that York County has a third of the total number of districts that Allegheny County has (15 to 43).  However, a consolidated York County District would result in a combined student population of 62,000, making it the second largest district behind Philadelphia.  The study finds that “the costs of consolidation would likely outweigh the savings from the district level administrative combination—even if one assumes a very aggressive level of savings”.

Evening Meter Enforcement Shelved Again

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There are plenty of storylines coming out of the passage of the City’s 2015 budget, including a property tax hike, the return of diverted Regional Asset District money, amended agreements with the Parking Authority: most of these have been discussed in our 2014 Policy Briefs.  But let’s look at the one decision that did not happen, the decision to hold off on policing parking meters after 6 PM.

In fact, nearly two years ago the City brought up, debated, held off, and then ultimately ended a plan to enforce meters after 6 PM after similar concerns about negative effects were raised.  That plan would have affected more City neighborhoods and it was the current Mayor (then on Council) who proposed ending the plan.  It was held until June 2013 when it was ended.

The rate increases for meters did stay in place, and following August 1 hikes at garages and lots (with rates expected to rise again in 2015) there will be a lot of money flowing for Authority operations and for agreements with the City.

A Sampling of Millage Rates

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January 1st marks the start of the fiscal year for County government and the municipalities in the County.  We already know that the property tax millage for the County is staying the same and that there will likely be an increase for the City of Pittsburgh, its first following the 2013 reassessment but the second increase in the last four years following a voter referendum to raise millage a quarter of a mill to provide funding to the Carnegie Libraries.

So what of some of the other municipalities in the County?  Three of the larger ones—Ross, McKeesport, Penn Hills, and Monroeville—intend to keep rates the same.  Recall that Monroeville raised taxes in the year of the reassessment with the permission of the courts under Act 71 guidelines. Dormont in the South Hills and Oakmont in the East plan no tax increases.

Two other small municipalities—Sharpsburg and Whitaker—plan to increase property tax rates in 2015.

Of course, this is just a small fraction of the millage rates that will be set in the coming weeks for municipal governments in the County.

Clawbacks Getting Better

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The PA Auditor General’s office is out with an audit of five economic development programs administered by the Department of Community and Economic Development (DCED) that is quite critical (the audit states that “…only 56 percent of the businesses awarded assistance from 2007-2010 created and/or retained all the jobs pledged in exchange for the assistance provided to them”).  That basically picks up where the 2007 audit conducted by the previous Auditor General left off in his examination of the Opportunity Grant program.

Tis a joyous season at hand, so rather than go further into the new audit and DCED’s response to it, the fact that the audit says the Department does not have performance goals, does not look at job numbers, that job numbers are just one piece of impact, but that they don’t have a way to measure impact, let’s focus on one area where the Auditor General and the Department seem to agree: the Department penalized recipients that failed to deliver.

In 2007, the Auditor General’s office found that though DCED had levied $26.2 million in penalties related to the Opportunity Grant program it had only collected $3.3 million.  In the 2014 audit the AG’s office found that $7.5 million had been levied in penalties and $4.3 million collected related to the Opportunity Grant program.  Overall, the penalties levied to amount collected for three of the five DCED programs was $10.8 million and the total collected by the end of June 2014 was $4.5 million.

Could Private Transit Option Help South Hills Town?

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Residents of Baldwin Borough have been quite vocal in their desire to see mass transit service restored to their community, most recently with a letter to the editor (read here) and a letter from an advocacy group (read here) that is “…for public transit”.  Of course, Allegheny County has public transit, in that public dollars help fund transit operations.  It also has a private component, in that the public transit agency, the Port Authority, contracts with a private operator to drive shared ride service.  The Authority also turned over two routes that it had abandoned in 2011 to a private operator.

So, since it appears that the Authority does not want to extend service at this time, what a perfect opportunity it would be for a private operator that would be interested to make a case.  And, unlike the 2011 occurrence where the Authority board had to grant approval, changes to the law in 2012 moved this responsibility to the Public Utility Commission, which is the same entity that just approved experimental service for ridesharing in Allegheny County.  Perhaps residents and advocates need to redirect their frustration.

City Moves to Gain Parking Revenue

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There were three revenue boosting measurements for the City recommended by the Act 47 team in its 2014 recovery plan: one, raise the property tax millage rate; two, get the Parking Authority to raise rates at garages and lots and transfer money to the City; three, adjust fees and service charge revenues.  While it could be argued that the large turnout at a public meeting last night in reaction to a proposed rental fee might fall under number three, and the proposed millage hike is in committee, the last revenue action came up for discussion today.

See much of our 2010 Policy Briefs for discussion of the proposed parking lease and the eventual “infusion of value” plan that dedicated parking tax revenue through 2041 to the pension system.  Right now the annual amount is just over $13 million, but by 2018 the annual contribution is to double.  Noting that when that infusion of value plan came about Council passed legislation to “…confirm its intent for the City to amend existing agreements with the [Parking] Authority to ensure that the City receives the revenue generated by the increased parking meter rates in order to offset some of the aforementioned diverted parking tax revenue”.

The current proposal would amend a handful of agreements on meters and specific lots and garages that date back to the 1980s in some cases.  Along with the rate hike that took effect in August (and will occur in subsequent years) the City can stand to gain a significant revenue boost by way of parking activity.

Can County Council Take a Raise?

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By virtue of the County’s Home Rule Charter (Article III, Section 7) the fifteen members of County Council don’t get a salary for their service and don’t get County funds for personal staff, local district offices, or fringe benefits.  The body may hire centralized staff (including a Clerk).

What Council members do receive as compensation include “per-meeting stipends” than don’t exceed $9,000 per member and can be reimbursed up to $3,000 per year per member for “actual and necessary expenses incurred in the performance of their official duties” (all County elected officials can be reimbursed, but the Charter places the $3,000 limit on Council members).  This is further spelled out in the Code of Ordinances (5-301.09).

The $9,000 stipend amount and the $3,000 reimbursement are not to exceed four-tenths of one percent of the County’s annual locally levied tax revenues (presumably this would include the drink and car rental taxes along with the property tax) and the stipend amount and the reimbursement amount can be increased by up to 5% every five years.  It is the latter amount that Council has expressed interest in boosting recently.  If Council were to take the whole amount at once the current reimbursement amount would rise to $3,150.

Pittsburgh’s Superintendent Weighs in on School Finance

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The Superintendent of Pittsburgh Public Schools (PPS) testified to the state’s Basic Education Funding Commission yesterday across the Commonwealth in Lancaster.  The written transcript of the Superintendent’s testimony is not yet available on the Commission’s website, so all that exists at the time is the news coverage here in Pittsburgh and an article from Lancaster.

Between those two articles lies some confusion: in the Pittsburgh article the Superintendent states that there needs to be an inclusion of the “hold harmless” provision so that even if a district’s enrollment falls it does not lose funding ( “…losing the ‘hold harmless’ provision would likely mean [Pittsburgh] would not be the only district which would be in the distressed school status in short order despite our best efforts to avoid it”) but in Lancaster the Superintendent seemed to be in favor of a formula that might mean a loss of students means a loss of funding (“As the superintendent of a school district with declining enrollment, please know how hard it is for me to say this, but a formula has to be based on enrollment”).  Only when the testimony gets posted will it become clearer.

One thing the Superintendent did mention in the Pittsburgh article was that “For us on the ground in Pittsburgh, we did get less revenue than before, a lot less. How and why does not make much difference to us; the impact is the same.”  Of course this gets back to the whole Federal stimulus/state funding amount that has been a huge issue in Pennsylvania.

Here is what the state’s Department of Education Summaries of Annual Financial Data shows for Pittsburgh Public Schools in the fiscal years 2009-10, 2010-11, 2011-12, and 2012-13 (in millions):

Total Local Revenue: $280.1, $285.5, $283.4, $284.8

Total State Revenue: $245,1, $$234.9, $239.9, $244.0

Total Federal Revenue: $69.8, $115,0, $66.3, $66.6

Seems clear from the data that the biggest decline in funding came in Federal money from 2010-11 to 2011-12, a $49 million difference. Due to enrollment falling (27,922 in 2009-10 to 26,463 in 2012-13) the total revenue per pupil actually rose from $21,309 to $22,476.

Property Tax Boost Moves Forward

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After a decade of tax upheaval that began with an increase to the parking tax in 2004 from 31% to 50% and was followed by the erasure of the business privilege and mercantile taxes, the creation of a payroll preparation tax, a shift in the City-school district share of the earned income tax, and a gradual decline in the rate of the parking tax due to state legislation, the City appears to be on the cusp on increasing the property tax a half a mill.  Three years ago the voters of the City approved raising the tax a quarter of a mill to support the library system.

Based on budget numbers available recently, the hike is expected to raise $9 million for the City.  There are a host of other revenues (not tax rates) that are projected to increase in 2015 to $31 million net.