As of Now, Host Fee Fix Deadline is Friday

Due to a Supreme Court ruling in late September of 2016, the General Assembly has to come up with a fix for the local share assessment that casinos pay to their host municipality and county.  When the language on the “host fee” was struck down by the Court, the General Assembly was given 120 days to come up with a new structure; that date, January 26th, came without a plan due to an appeal by members of the Senate to the Court which again granted an extension, which is to arrive this Friday.

According to one news article, there may be some quick movement on the plan this week, but there was even a mention of not getting it done and making language retroactive.  One member opined that a fix might not come until late June.

Commonwealth Court Upholds County Court Decision on Sick Leave

The Commonwealth Court has upheld the December 2015 decision by the Allegheny County Court of Common Pleas that struck down the City of Pittsburgh’s ordinance on paid sick leave.  We wrote about the proposal several times in 2015, including a piece that looked at the laws cited by the City as justification for passing the ordinance.

The City has indicated it will appeal the Commonwealth Court’s decision, with the next step being the Pennsylvania Supreme Court.  The Court upheld another ruling by the Common Pleas Court related to a requirement on training for staff in commercial buildings in the City.

Water Authority Rejects Sale, but Wants to Study Effects of a Sale

An independent water authority whose service area includes a municipality in fiscal distress received an offer from a private company to purchase the water system but wants to study if a sale is in the “…best interest of its customers“.

No, this is not Pittsburgh and the Pittsburgh Water and Sewer Authority (PWSA), but way over in the southeastern corner of Pennsylvania with the Chester Water Authority, which serves the City of Chester along with other municipalities in other counties.  The Authority has 42,000 customers, about half of what is served by the PWSA.  For the customer base and the existing pipeline (656 miles) the Chester Authority was offered $250 million at a meeting this week.  That offer was rejected and the Authority board then agreed to conduct an analysis of what a sale would mean for customers.  Some of those customers that attended the meeting were not interested in the idea, and the Authority has provided a comparison of its rates to other private companies.

In Pittsburgh there is the unique situation in that there is already a private utility presence in the south hills section of the City (see slide 1 of this presentation), and the rates of customers served by the utility are subsidized so that their rates would be identical to PWSA rates (see slide 8).  So even though there is a private presence in the City of Pittsburgh the opposition to “privatization” has been evident (see here, here, and here for example).  The direction in Pittsburgh has been for a “restructuring” of the PWSA with a consultant and a blue ribbon panel.




If a Municipality Disincorporates, What Happens to Employees? Pensions?

Last week in a blog we wrote about the report on voluntary municipal disincorporation as proposed by a task force and the process it recommends for a municipality to move from incorporated to disincorporated and how services would be provided by the County.  As proposed by the task force, any municipality in the County “regardless of geographic size, population, or finances” could disincorporate.

As noted, both in the report and by our 2014 Policy Brief on changes to Act 47, the state allowed for a possible avenue to disincorporation for municipalities in Act 47 status that are deemed “nonviable”: meaning, in essence, the municipality can’t function, can’t provide services, has a tax base that collapsed, and can’t find a municipality to merge into or consolidate with.  In defining a “municipality” in the section on disincorporation, the definition does not include a city of the first class (Philadelphia) and says that a county, city, borough, incorporated town, township, or home rule municipality that would be in Act 47 status and does not provide police or fire service through its employees would be eligible for disincorporation procedures if found to be nonviable.

Of Allegheny County’s 128 municipalities, based on the 2015 reporting of municipal pension plan data on active employees, 98 municipalities reported actives for police and/or fire.  If the state were to keep the requirement that a municipality providing police and/or fire could not disincorporate, that would severely limit the number of municipalities that could even consider the possibility.  This goes without mentioning if the municipality is getting police coverage from another municipality, the state, or is part of a multi-municipal force and would have to compare the expenditures on that arrangement to what they would be paying the County if they disincorporate.

And then there is the question of what happens to municipal employees.  Based on that pension data for just the municipalities (no authorities, associations, etc.) there are 6,125 municipal employees.  Who knows what would happen with collective bargaining agreements should a viable municipality be able to disincorporate.  Or what the County would need to do should it find itself providing service to municipalities that, in aggregate, have almost as many employees as the County itself (6,831 in 2015).

And then there is the pension question with municipalities handling retirement benefits for its employees.  The 2014 law does give power to the unincorporated service district administrator to “provide for the transfer and administration of any municipal pension obligation to a private or public pension fund”.  That would probably include PMRS, which is a voluntary system for municipal pensions.  Since the task force report recommends municipalities coming into disincorporation debt free, how would pensions that are not funded above 80% be treated?


A Decade After Ballot Question, 13 Districts Partake of Tax Shift

Today is the municipal primary election, when voters select nominees for county, municipal, and school board offices.  There are no statewide ballot questions for voters to consider, so let’s take a look back ten years to the municipal primary of May 2007 when voters were first asked whether they wanted to reduce school property taxes via a higher income tax or the creation of a personal income tax for school finance purposes.

That question was part of Act 1 of 2006, which provided homestead exemptions funded by slot machine gaming, a cap for annual growth in school property tax that could be exceeded by either an exemption from the state or a ballot question to be approved by the voters of the school district, and a chance to expand a district’s property tax relief via approval of a tax shift.

As pointed out in the Department of Education’s FAQ document on the law, at the “May 2007 (primary) election – Every school district, except Philadelphia, Pittsburgh and Scranton, will give voters the opportunity to approve local property tax relief by increasing the local income tax.”.  Every two years thereafter all districts except Philly would get the ability to bring the question up again.  As our 2008 report on Act 1 noted, the question was rejected in the 42 districts in Allegheny County in May of 2007.  None have approved since, even if a district brought up the question after 2007. The Governor at the time noted ““I am not surprised by the resounding defeat of the Act 1 tax shifting proposals. Unfortunately, in many cases, the full value of the property tax relief that the shift would have provided was not clear to the voters. I believe this contributed to the lackluster voter support.” Our 2014 report revisited tax relief from gaming and the tax actions districts had taken in the years since the law went into effect.

So how many districts, if any, took up the offer to net greater school property tax relief by shifting to another tax via referendum?  By 2015-16’s count in the Department of Education’s data 13 districts (2.6% of the 500 in the state) are collecting an earned income under Act 1.  There are none in southwestern PA; three are in Bedford County, two in Huntington County, and the rest in other counties in central and eastern PA.  In terms of dollar value generated, the district collecting the most money through Act 1 earned income tax is Central Dauphin School District, with $36 million in 2015-16.  It is not clear from the data if these districts took the opportunity to shift ten years ago of did it in a subsequent election.

A Graduated Police Fee?

News from over the weekend (read here and here) highlights the developments in the debate over a proposed fee for state police coverage in municipalities that have no local police and are not part of a multi-municipal police force.  It has divided municipal associations representing different types of municipalities, with townships not in favor and boroughs for.  As noted in a previous blog based on a 2014 report on police consolidation, state law requires cities of the first class (Philly), second class (Pittsburgh) and second class A (Scranton) “to provide police service within their jurisdiction”.  It is optional for all others (third class cities, boroughs, and both classes of townships).

The report noted “the [state police] provides part-time service for those municipalities that have a police department but do not have police on duty 24 hours a day and seven days a week. Collectively, these municipalities comprise 66 percent of the municipalities in the Commonwealth, 82 percent of the land area, and 26 percent of the total population. Based on the 2010 census figures, that equates to approximately 3.3 million residents.”

As the debate continues, one legislator mentioned the possibility about a “…distinction made between communities of differing size” which hearkens back to where the proposal was around a decade ago, when a legislator at the time proposed charging only communities of 10,000 or more residents a fee of $100 per capita.

Goodbye, Town Hall, Part II?

In 2014 we wrote about amendments to Act 47 (in Act 199) that opened up the possibility of disincorporation for distressed municipalities (among other options after proceeding through the Act 47 process) and noted that Pennsylvania, along with a handful of other states, not only had the presence of incorporated territory wholly within their states, but also had nothing in statute allowing for those incorporated municipalities to disincorporate.

Yesterday a task force report was released on “voluntary municipal disincorporation”.  The report examines disincorporation laws around the country (38 states have one) and how they function.  The task force proposes a state law change that would apply only to counties of the second class (Allegheny); it would allow all municipalities to consider disincorporation (it is not known if the intent of the proposal would allow Act 47 municipalities in Allegheny County–currently there are four–to be permitted to follow the task force proposal or to be exempted and follow the Act 199 process so long as they are in fiscal distress status) by starting with an ordinance of the governing body, public hearings, a referendum, and then the disincorporated municipality to become “an entity of the county”.  An advisory committee would be created and an essential services plan would outline the services the unincorporated area would receive and the taxes and fees that would be levied to provide said services.  The task force report states that liabilities of the former municipality–such as debt–would remain the obligation of the former municipality.  That sounds very familiar to the “urban services district” framework that came out of the 2008 report on consolidating the City of Pittsburgh and Allegheny County.

The report notes that the County would try and offer some of the services it provides now to all municipalities in the county “…to build economies of scale to help offset the cost of delivery to unincorporated areas”.  Some of the services listed in the report are ones that the County does not provide currently (building inspection, emergency medical, solid waste collection) and are either provided “in house” currently by municipalities, through multi-municipal arrangements or authorities, or contracted out to private companies.

The report provides no examples of a municipality in Allegheny County under its present composition and how it would be better, worse, or the same if it were to disincorporate and receive services from the County.  The current County Executive even pondered “Why would a community want to do it if it doesn’t improve their tax situation and service situation?”, but there is no way to tell beyond initiating the process (the report notes “although the exact tax and fee rates are determined by the essential services plan, residents should understand the basic parameters of how it will be determined” which would have to come about by education from officials of the disincorporating municipality and the County).

If the County cannot sell its services on a broad scale as mentioned, would it even be worthwhile for a municipality that becomes disincorporated?  Does the County envision charging a per-capita fee for services regardless of the population and area of a municipality that opts for the change?  If not, then it would seem uniformity of taxation issues come up.

Already municipal officials have given a less than lukewarm reaction to the proposal.  While the report notes some states allow citizens to petition for disincorporation, or in some cases for states to disband municipalities if certain conditions exist, the proposal as presented yesterday puts the elected body of the municipality in the position to start the process, and it is not surprising few would entertain that.

Pensions as a Path to Wealth?

A convicted former lawmaker wants his pension restored now that he is out of prison. After pleading guilty to corruption charges in 2012 he served 16 months and was released in 2014. As a result of the felony conviction he was stripped of his pension; but now wants it returned and has appealed to State Employees’ Retirement System to get it back.

Two obvious points have to be made. First, why should a person who has violated the law and their oath of office be entitled to a pension, especially for corruption in office? Wrong message, wrong practice. If pensions are still available to law breakers, a major incentive for not breaking the law has been removed. That on top of the very difficult and time consuming job it is to get a conviction in the first place.

Second, how is that an elected official ever gets to be entitled to $246,000 a year pension when salaries for legislators are barely a third of that amount? Of course, it is entirely possible because the legislature writes the rules for calculating its own pensions. Little wonder few ever resign voluntarily before they are well advanced in years.

The preposterous generosity of the pension plan formula for legislators could be major conflict of interest obstacle to ever achieving meaningful public sector pension reform. That combined with government employee union intransigence on the topic keep the can moving down the road owing to the perennially kicking. Absent an ongoing a substantial increase in investment values and income flows from pension assets, the state employee and school employee pensions will continue to eat up major shares of any revenue growth and lead to fewer employees, smaller raises and less generous benefits.

But for those already in the pension plan or retired the time will never arrive when they will support reform. This is one of the worst (if not the worst) problems facing the government in Harrisburg and in a large number of other states.

The convicted legislator and the pension he would have received if not convicted is a symbol of much that ails Pennsylvania—and no doubt many other states.

Should Redevelopment Authorities Have Land Bank Powers?

Five years after the state passed legislation creating land banks, a member of the General Assembly has introduced legislation that would equip redevelopment authorities with the powers possessed by land banks.  The member noted that he had heard from a county redevelopment authority and the costs it incurred with setting up the land bank.

Three years ago we wrote about the basics of the land bank statute and the land banks that had been established at the time.  In two of those counties–Westmoreland and Dauphin–the boards of the redevelopment authority and the newly created land banks were occupied by the same appointees .  In Pittsburgh and Philadelphia members of the respective redevelopment authorities were not guaranteed seats.  At the time we noted ” It seems a better legislative solution would have been to grant redevelopment authorities the powers given to land banks and thereby avoid unnecessary duplication of efforts and potential conflicts”.

That seems to be the thrust of the current proposal.  It won’t end the creation of land banks, but rather it would amend the 1945 Urban Redevelopment Law to give additional powers to redevelopment authorities.

PA’s Status in Tracking Incentives? “Trailing”

A new study by the Pew Charitable Trusts titled “How States are Improving Tax Incentives for Jobs and Growth” states that Pennsylvania is “…trailing other states because it has not adopted a plan for regular evaluation of tax incentives”.

Note that this is 2017: we wrote in 2006 about economic development efforts by the state and noted a 2000 study by the PA Legislative Budget and Finance Committee that did not heap praise on Department of Community and Economic Development monitoring; the year after the Auditor General wrote about the monitoring of the Opportunity Grant program.  And then we noted how there have been no reports on tax increment financing projects as required by the law because there is nothing in place to actually require information to be submitted.

The study separates states into “leading”, “making progress”, or “trailing” in terms of how well they monitor the effects of incentives handed out in the name of job growth/retention.  The study notes  “the leading states have well-designed plans to regularly evaluate tax incentives, experience in producing quality evaluations that rigorously measure economic impact, and a process for informing policy choices. The states that are making progress have made a plan by enacting a policy that requires regular evaluation of major tax incentives. The trailing states lack a well-designed plan to regularly evaluate major tax incentives (italics added)”.

PA is not alone in the “trailing” category as 22 other states are also there.   Most of the states in the “leading” or “making progress” categories enacted laws improving monitoring and evaluation in recent years, so in some sense it is not out of the realm of possibility for PA to step up its efforts and enact a process to measure the effects of its economic development efforts.