School district tax rates changes for 41 school districts in Allegheny County that operate on a July 1st-June 30th fiscal year show tax increases in 27 districts, no change in 13 districts, and a decrease in one compared to 2017-18 rates.
This fiscal year marks the twelfth in which school district tax increases are controlled by the Act 1 index. A district that enacts an increase that exceeds the upper limit of the index must either be granted an exception from the PA Department of Education or submit a referendum question to the voters of the district. For this year the index ranged from a high of 3.9% to a low of 2.4% for the districts.
Of the 27 tax increases 10 districts enacted increases that stayed below the index, 7 districts enacted increases that equaled the index, and 10 districts exceeded the index. Chartiers Valley School District did have a ballot question (the first one in Allegheny County under Act 1) which was defeated but also applied for an exception which allowed taxes to increase 2.8% compared to the Index of 2.4%. The largest increase was in the McKeesport School District where taxes increased 2.11 mills from 17.37 mills to 19.48 mills (12.1%). Districts that increased to or below the index did not have to take any special action.
Taxes remain the same in such districts as Bethel Park, East Allegheny, and Pine-Richland. The Wilkinsburg School District, which only operates elementary schools, reduced its millage rate from 32.63 to 29.5 mills. Based on budget documents each mill in the district generates $311,322, so overall collections of current property taxes should decrease from $10.1 million to $9.1 million.
For homeowners, school property taxes are offset by homestead exemptions paid for by slot machine gaming funds. For 2018-19, the estimated relief ranges from $73 per homestead in the Avonworth School District to $414 in the Duquesne School District.
Our most recent Brief detailed the changes brought about by new state legislation on land banks and redevelopment authorities and recent activities of some of the land banks in Pennsylvania. In counties other than Philadelphia and Allegheny it will be possible to designate a redevelopment authority to perform land bank functions as a result of the new law.
That means the Pittsburgh Land Bank will continue to operate as an independent entity (a memorandum of agreement between the City of Pittsburgh, the Urban Redevelopment Authority (URA), and the Land Bank details how all three parties will work together on properties and provides for URA staffing for the Land Bank).
This past week the Land Bank board authorized its first purchase. A search of the property record shows that it is vacant land and is exempt from property taxes due to City of Pittsburgh ownership (the City purchased it for $1,643 in 2016 and it previously owned the property from 1982 to 2000). The Land Bank bought it for $1 plus “necessary costs”. The property is to be sold to a private owner who had tried to buy the property from the City (it is not clear why that did not occur).
Based on the Land Bank’s 2018 budget it has budgeted $135,000 for acquisition costs as part of its overall expenditures of $798,512
The Assessment Reform Task Force, a project of the Local Government Commission, recently wrapped up its work according to the Commission. This past weekend the Task Force was saluted with a resolution by the County Commissioners Association of Pennsylvania, which, in part, stated its work will be included in “educational programming and training for all county officials and assessment staff across the commonwealth.”
The Task Force’s products include a self-evaluation tool and model RFP for counties that contract with vendors to undertake countywide reassessments. The self-evaluation guide notes “this document is not intended to indicate whether a reassessment is appropriate for any county, but is instead more of a survey of the many questions, observations, and discussions that must occur prior to reaching such a conclusion”.
Of course, in the nearly ten years since the Allegheny County decision by the Supreme Court and the report by the Legislative Budget and Finance Committee on the state’s assessment practices, there is still no movement in the General Assembly to prescribe a regular reassessment cycle. A similar panel that finished up in 2012 could not agree on assessment solutions.
This year new values went into effect in Lancaster County (the appeal date for next year just arrived last week). In the meantime there is a court case over reassessments in Beaver County and updated values coming next year and in 2021 in Monroe and Delaware Counties, respectively.
Back in the wintertime the second and third Category 4 casino licenses were auctioned to bidders that chose to set up shop in southwestern Pennsylvania. Under the law, a winning bidder has six months to submit the formal application to the Gaming Control Board. That time period just recently expired for the two winning bidders, who announced they will locate in Westmoreland County and Beaver County.
This map shows the protected areas existing casinos created under the original 2004 law and those created in the 2017 expansion law enjoy. Even though the center of the protected area for the winner of the third license was in Lawrence County, the casino could be located anywhere within a 15 mile radius from that point but not within 25 miles of another licensed casino–that is how it can be built in Beaver County.
Once the slot machines and table games are up and operating, the tax distribution formula for the revenues generated from play are for the varied uses of property tax relief, the state’s general fund, economic development, and money for the host county and municipality.
This week the cities of Scranton (Lackawanna County) and Wilkes-Barre (Luzerne County) received news related to their interaction with Act 47 of 1987.
Scranton, which has been in Act 47 since 1992, is in a three year exit plan and in good financial shape according to its coordinator. The three year exit plan is one of the four options available to municipalities under the amendments made in 2014 to limit the time spent in distressed status.
However, lawsuits and other big systemic issues remain, one of which noted by the coordinator is the lack of a countywide reassessment; Lackawanna’s base year dates to 1967.
Yesterday in Wilkes-Barre the state held a public hearing to determine if the City should enter Act 47. Based on two of the eleven criteria in the law–a deficit over a three year period with a deficit of 1% or more in each of the previous years and expenditures exceeding revenues for a period of three years or more– the recommendation that the City be declared distressed was made.
Two interesting notes about Wilkes-Barre’s tax structure that will affect it should it enter distressed status are that the City has the power, as a home rule municipality and a former city of the third class, to one, have a higher than normal earned income tax on its residents and can set its own property assessment values.
To the first point, the earned income tax rate on residents of Wilkes-Barre is 2.5%, which is well above the rates in other municipalities in Luzerne County. Entering into Act 47 will permit the City to levy an earned income tax on non-residents (the resident rate would have to go up as well) or an increase in the local services tax on all workers in the City, regardless of place of residence. To the second point, like Scranton, the “archaic property reassessment practices and stagnant property values” of Wilkes-Barre were noted. Turns out that while Luzerne County reassessed in 2008 the City did not adopt updated values and has an assessment that likely dates back to the 1960s.
A news article this morning chronicled several cases of property owners in Allegheny County who are unhappy with changes in their property values. This is likely due to a taxing body, typically a school district, appealing the value. Those who purchased property sometime after the 2013 Allegheny County reassessment went into effect are likely to be appealed while those who didn’t are not often appealed. We have written about this before, most recently in May when we detailed 2017 appeals.
The article covered the case of one property owner in the West Jefferson Hills School District whose tax bill went up from $4,600 to $8,000–a 74% increase. While there have been millage hikes in the School District and the municipality they are nowhere near that level of increase in the past five years (when the article says the property was purchased) so there had to be a value change; it is not clear if the value went up when the county’s 2013 reassessment went into effect or if the property owner was appealed by a taxing body and lost.
What to do about the taxing bodies focusing on sale prices compared to assessed values to decide which properties to appeal? A decade ago the Governor at the time said the solution was more frequent reassessments. That was briefly touched upon in a lawsuit over taxing body appeals emanating from Allegheny County and is now with Commonwealth Court. There is also legislation aimed at preventing taxing body appeals based solely on sales prices.
On July 9th, the initial meeting of the new Philadelphia Board of Education was held. For the previous 16 years the District was governed by the School Reform Commission, a five-member panel which was created by state legislation. The Commission voted to disband last November effective the end of the 2017-18 school year. The state also approved a rescission of the District’s distressed status.
All 500 K-12 districts in Pennsylvania now have nine-member school boards. The only difference in Philadelphia is that the board is appointed rather than elected.
As an appointed board, the school directors can’t set tax rates for the District–that is done by Philadelphia City Council (the City is itself under state oversight by the PICA). The current real estate tax rate is 13.999 mills, and 7.6 mills is utilized for public school purposes. That tax generated $650 million in 2017, which was 57% of the locally-generated tax total. Taxes on sales, liquor, cigarettes (a recently created tax that was supposed to sunset next year but has been made permanent), and use and occupancy made up the remainder of the District’s local tax collection.
A 2016 study of school board structure found a mixture of elected and appointed school boards in large cities with the structure in Boston and Cleveland– a mayor making appointments from a list drawn up by a nominating panel–most closely resembling what Philadelphia has going forward. Chicago, Baltimore, and New York also have appointed boards with mayoral involvement. In Baltimore, Boston, and New York school funds are allocated by the city government similar to process in Philadelphia.
The 2018-19 school year millage rates have been set by the 14 school districts in Washington County. A countywide reassessment that updated values from a 1981 base year required rates to be reset for 2017-18. This year, and in all future years until there is another reassessment or a change in the existing statute governing school tax increases, Act 1 of 2006, if taxes rise the increase must be to or below the district’s annual Act 1 index, or otherwise an exception from the Department of Education has to be granted or a referendum approved by the voters.
Ten districts raised taxes for this year, and the increases range from 1.5% to 3.9%. Eight districts increased taxes to or below their district’s index. Two districts, Burgettstown and McGuffey, applied for and were granted exceptions. Here is a look at the mechanics of the exceptions.
In Burgettstown the rate last year was 11.368. The Act 1 index for 2018-19 was 3.3%, which translates into a permissible hike of 0.375 mills, bringing the millage rate to 11.743. An exception permitted an additional 0.0789 mills and the new millage rate for taxpayers in that district stands at 11.8169 (a 3.9% increase). For a home assessed at $70,000 that is a $32 increase. Similarly, in McGuffey the Act 1 index of 3.1% would have capped the increase at 12.27 mills (up from 11.91 mills) but an exception permitted an increase of 3.7% to the new rate of 12.35 mills.
Two districts (Peters and Bethlehem Center) have yet to report their rates (though the Peters School District website indicates there is an increase). Washington School District kept its rate steady and Trinity Area enacted a 2% decrease. That latter district was investigated for possible issues in setting its rate following the reassessment, but it was concluded that there was nothing amiss. A home assessed at $100,000 in Trinity Area would see a drop of about $29 with the millage rate going from 13.6 to 13.31.
The 2017 Comprehensive Annual Financial Report for the State Employees Retirement System (SERS) shows that the System had quite a good year in terms of investment performance. The net appreciation in the value of investments grew $3.7 billion last year. The previous twelve months of 2016 the net appreciation was $1.2 billion. In 2017 the percentage share of investment growth was 88% of the increase in all investing activities income (interest, dividends, real estate, and miscellaneous income). The year end 2017 balance of the plan overall was $29 billion.
On an actuarial basis, the funded ratio (assets divided by liabilities) was 59.4% with $19.6 billion in unfunded actuarial liabilities. That’s a slight increase over 2016 and 2015 (58.1% and 58%, respectively).
Over half of SERS active employees (just over 102k) come from five departments/agencies: Human Services, Corrections, Transportation, State Police, and Penn State University.
In a few months new hires that begin joining SERS (on or after January 1, 2019) will choose between one of three pension plans (two hybrid defined benefit/defined contribution and one defined contribution) under the change to SERS (and PSERS) pension benefits last year. The 2017 Report contains a projection that in 2027 the employer contribution rate for the plan will have fallen to 25.7% (from 32% in 2018) and the funded ratio of the plan will stand at 75.9%.
Based on the 2017 city and town population estimates from the U.S. Census, Wilkes-Barre is the 13th largest municipality in Pennsylvania. It has just over 40,000 people.
It could be the newest entrant into Act 47 financial distressed status based on a petition filed by the city in late June. The petition was initiated by the Mayor who said the city had “no other alternative” after the City participated in the Early Intervention Program under Act 47.
Twelve other municipalities have a population greater than Wilkes-Barre based on the 2017 estimates; three of them are in Act 47 (Reading, Scranton, and Harrisburg) and two have been released (Pittsburgh and Altoona).
A public hearing on the petition is set for August 1st. There are eleven criteria in the statute. If there is evidence that one exists then the Department of Community and Economic Development may begin to exercise its powers under the statute.