A Closer Look at Two County Funds

The County Controller’s office has released the 2017 Comprehensive Annual Financial Report and this blog covers two operating funds that we have written about previously: the Transit Fund and the Infrastructure Support Fund.

In 2017 the Transit Fund’s (page 260) two main revenue sources, the drink tax and the car rental tax, raised $47.8 million.  With penalties and interest total revenue was $47.9 million.  In making the required local match for Port Authority mass transit operations, expenditures from the fund were $30.9 million.  Then, transfers out of the fund for capital and debt service obligations were $15.4 million, leaving a result of $1.5 million.  Tacked on to the fund balance at the beginning of 2017, $14.4 million, at the end of 2017 $16.0 million was in the fund.  As we noted in the 2016 Brief, the fact that the Regional Asset District is contributing to the operating match given the sizeable surpluses in the fund is very questionable.

The Infrastructure Support Fund (page 262) holds revenue from the $5 auto registration fee that is on top of the state’s registration fee.  $4.8 million was raised in 2017, about $0.7 million more than in 2016.  However, the expenditures from the fund related to public works, $5.5 million, were greater than the revenue brought in and part of the beginning of the year fund balance was used, leaving a surplus of $0.2 million at the end of the year.

State Budget Done Before Deadline?

There was no agenda announced ahead of time for the House Appropriations Committee today, but a news article is reporting that the Committee voted unanimously to approve a $32.7 billion general fund state budget.  Another article mentions that a budget could be though the General Assembly by the end of the week.

Our Brief from last July–when there was a budget impasse that stretched beyond the start of the fiscal year–chronicled approval dates for state budgets in the previous decade.

One of the general fund items mentioned is an increase of $100 million in basic education funding for K-12 education.  For FY 2017-18 the basic education total was $5.995 billion with $452 million of that being driven out by the Act 35 student weighted formula.  An additional $100 million would take that new money amount to around $550 million.

Officials Trying to Reboot GEDTF Money?

A news article indicates that local officials might not be ready to see an allocation from the Gaming Economic Development and Tourism Fund (GEDTF) go away quietly.

Our Brief from April detailed the changes brought by Act 42 of 2017 to projects in Allegheny County.  Some will go on, others will cease, and one will be repurposed.  The David L. Lawrence Convention Center received three GEDTF allocations when the original gaming law was passed in 2004: $20 million for Center Debt, $20 million for Center operating deficit, and $44 million for a Center hotel.  The latter allocation was shifted to Allegheny County for the creation of an economic development fund when the hotel did not materialize.

With the end of the ten-year period for the original payment schedule approaching, local officials are “..scrambling for ways to replace [the money]” which has been used in part to discount convention events (Act 42 does not extend the payments for the Center debt, and repurposes the money that was going for the deficit to the creation of a Regional Sports Commission; both are essentially ending in the next two years, but the article seems to conflate the two streams).

From the point of view of a state senator, the money won’t continue “…because the convention center presumably was doing OK”.  How about this for a solution if the center is not OK?  Officials could make a case to take a piece of the annual allotments from the three streams of money (for the airport and for two county economic development funds) that will continue past the original ten-year deadline as set up by Act 42.  That would present a scenario in which those GEDTF recipients could show why they need all of the money for their projects and for Center boosters to plead for restoration of what will end.

Proposal Would Prohibit Local Business Mandates

In a 2017 Policy Brief we argued that it was an appropriate time for the General Assembly to expand the language of the Home Rule Charter and Optional Plans law in regards to regulating the duties of businesses to all municipalities.  A few years earlier Philadelphia and Pittsburgh passed ordinances mandating paid sick leave and just before that Philadelphia enacted an ordinance barring municipalities from asking about salary history.

A bill was introduced this spring and just had a hearing yesterday by a legislative committee. It would preempt a municipality (defined as encompassing all classes of local government from counties, cities, boroughs, townships, towns, home rule and optional plan municipalities, school districts) from passing any mandate on employer practices including wages, hiring and firing, the workplace, and sick and vacation leave. It would not apply to practices relating to employees of the municipality itself.

If the bill were to become law, any mandate enacted on or after January 1, 2015 would be void.  That would include the sick leave ordinances in the cities of Philadelphia and Pittsburgh (the latter is in front of the state Supreme Court along with another employer-employee mandate).  A local government that would enact an ordinance related to employer practices could be sued in a court of law by an aggrieved party under the proposal.

Reassessment Manual Addresses How to Contract, But Not When It is Time

Due to litigation and problems arising from the property tax assessment system in Pennsylvania, a panel to address the problem, the Property Assessment Reform Task Force, was formed.  Recall that in 2012 a task force on reassessments passed on devising a mandated county reassessment cycle or a statistical indicator.

The new task force has been working on a variety of assessment related proposals, and at its most recent meeting released its Model RFP and Contracting Guidelines for County Reassessment Services manual to “…help counties ensure that a reassessment is conducted appropriately and implemented successfully.”

It does not say when to carry one out.  In fact, in the opening boilerplate language of what would serve as a request for proposals for a contractor it states:

The Commissioners [or equivalent governing body in a home rule county] of _____ County have voted to proceed with a reassessment of all real property in the county to achieve equitable assessments. [There may be other factors contributing to the County’s decision to conduct a countywide reassessment that the County will want to include, e.g., passage of time since the last reassessment, assessment-sales ratio studies, property market shifts.]

Not included in that language is that the Commonwealth has passed a law calling for a regular cycle of reassessing or that a court has ordered the county to carry one out.  The courts were involved in reassessments in Allegheny and Washington Counties and could be the case with Beaver County as well.  A later section in the manual has a point called “impetus for reassessment” that could leave room for that point. And the task force is supposed to supposed to develop a self-evaluation tool for use in a pilot program sometime in the coming fiscal year.

The manual does stress the importance of a public information campaign.  This was a point emphasized in Washington County that was very valuable for taxpayers:

The understanding by the public of the goals of the reassessment and the process used cannot be overstated to help ensure a successful implementation. To this end, the County should give careful thought to the public relations challenges that may exist in the County and how those can best be addressed.

As we have pointed out before, a regular cycle would reduce the sticker shock and unease about conducting a reassessment.

 

 

 

Land Bank Proposal Gets Alteration

Four years ago we wrote about legislation allowing for the creation of land banks. We asked in that Brief why the General Assembly could not have just expanded the powers of existing redevelopment authorities to accomplish the goals of land banks.

Legislation to do that without taking away “…the ability of a community to create a land bank or affect existing land banks in any way” was proposed in 2017. It passed the Senate last July and the House last week, though the more recent version is different in some respects.

The Senate proposal amends the Urban Redevelopment Law, the House version amends the Land Bank Law.   Another change is that a land bank jurisdiction only in counties of the second class A through eighth class may designate a redevelopment authority as a land bank.  This means Philadelphia and Allegheny County would not be eligible to utilize this arrangement (the City of Pittsburgh land bank’s policies mentioned how the City, the URA, and the land bank were to interact).

If a redevelopment authority in one of the classes of counties is designated as a land bank the proposal spells out how the exercise of powers and accounting of finances are to be handled.

2017 Common Level Ratios Released

The State Tax Equalization Board has published the common level ratios (CLR) for 2017.  The CLR is calculated by the Board and is measured by valid sales from the previous calendar year, certified by the Board, and then used in the following fiscal year for purposes of property value appeals.  The 2017 CLR is based on valid sales from counties in 2017 and will be in use in appeals from July 1, 2018 to June 30, 2019.

Several counties (Adams, Indiana, and Lancaster) have a CLR of 100% or greater, many others have a CLR in the teens, including counties (Franklin, Lackawanna, and Butler) that have base years that are from the 1960s.

Traditionally the CLR came into play in the appeals process when it varied by more that 15% from a county’s predetermined ratio, which is the ratio of assessed to actual value in a given year established by the county government.  For instance, the predetermined ratio in Allegheny County is 100% of the 2012 base year value, in Washington County it is 100% of the 2015 base year value, Butler County 100% of the 1969 base year value, and on and on.

The traditional rule would mean that in Allegheny County, with a CLR of 87.5% in 2017, or Washington County with a CLR of 95.3% would not be able to utilize the CLR in the appeals process, but as we wrote in a Policy Brief there was a Common Pleas court opinion that the CLR should be able to be utilized at any time, not just when there is a 15% variance.  The Board’s calculation manual makes note of that decision and one from Downingtown that seems to make the same point.  An inquiry to the Board seems to indicate that it is possible that many of the state’s 67 counties are following the opinion from Allegheny County and Downingtown but there was no definitive answer as to how many.

What Was the Impact of the Parking Authority Rate Hikes?

In 2014 the Pittsburgh Parking Authority approved a series of rate hikes at its parking facilities.  These were the first increases since 2004 and were recommended by the City’s Act 47 recovery team as a way to garner more parking tax revenue for the City.  Since the parking tax rate is written into state legislation it will require an action in Harrisburg to change it.

Under the original proposal increases at garages were to come in 2014, 2015, and 2017 (in 2016 the Authority board cancelled the 2017 increase).  In the 2014 Brief we estimated that receipts would reach $37.5 million by the time all of the planned hikes went into effect.  The Authority’s  2017 audit shows parking facility receipts totaled $36.0 million.

So how did the City make out?  Based on the City’s effective tax rate parking taxes from facility receipts rose $1.3 million from 2014 to 2017.

However, other changes happened in the time frame of the rate increases. in 2015 the Authority amended its agreement with the City concerning meter revenue and the sharing of parking court revenue changed.  Overall, in the years 2014 to 2017–the year of the first facility rate increase to the year the last one was to go into effect–the total amount paid from the Authority to the City from parking taxes, meters, parking court, payments in lieu of taxes, etc. rose $8.6 million from $21.2 million to $29.8 million.

 

Bump in County Property Tax via Referendum?

If advocates for creating a new “Children’s Fund” can gather the requisite signatures, voters in Allegheny County will be asked to raise the County’s property tax millage about a year after they participated in a statewide ballot question to eliminate property taxes on homesteads.  Based on a news article the question as proposed reads:

“Shall the Allegheny County Home Rule Charter be amended to establish the Allegheny County Children’s Fund, funded by Allegheny County levying and collecting an additional 0.25 mills, the equivalent of $25 on each $100,000 of assessed value, on all taxable real estate, beginning January 1, 2019 and thereafter, to be used to improve the well-being of children through the provision of services throughout the County including early childhood learning, after-school programs and nutritious meals?”

The questions are plentiful, including: how much is spent in the County from various sources (Federal, state, local, school district, non-profit) on these programs? What are the outcomes of these programs? How will the money be distributed?  Who will oversee it?

Let’s look at some of the fiscal and Charter implications of the question should it proceed.  The County’s property tax rate is 4.73 mills. Based on current collections of real estate taxes ($367 million for 2018) about $19 million would be raised from an additional 0.25 mills.  The County currently has five operating funds: two (general and debt service) receive money from the property tax.  Three (liquid fuels, transit support and infrastructure support) account for revenues other than property taxes (share of fuel taxes, drink and car rental taxes and the local add-on fee for auto registration).

To date only one section of the Charter has been amended, and that was in 2005 to eliminate several row offices.  There is a Council-proposed amendment that is still in committee that may also be on the November ballot.

Charter language on changing the rate of taxation by a 2/3 vote of the seated Council members and fixing the rate of taxation seems to mean that, if the question should pass, at least 10 of the 15 members would have to vote to impose the tax.

If a 0.25 mills increase in property taxes for a special purpose via the ballot sounds familiar, it should.  Voters in the City of Pittsburgh approved such a levy in 2011 for the Carnegie Library system.  That question read:

“Shall a 0.25 mills special tax be imposed by the City of Pittsburgh on all taxable real estate in the city of Pittsburgh effective Jan. 1, 2012 and thereafter, the proceeds of which shall be allocated and used only for the maintenance and operation of the Carnegie Library of Pittsburgh?”

Following the ballot question’s approval the City Council–which does not have the 2/3 requirement like the County but still has to fix the rate of taxation–had to take action on an ordinance to impose the tax “based on the will of the majority of those voting” on the question.  The language of the ordinance is now in the City Code. 

 

 

 

 

 

 

PA and Pittsburgh MSA Out of Sync with US Labor Force Gains

From April 2017 to April 2018, the US labor force climbed by 1,346,000 (0.8 percent) and the number of people counted as being employed (called household employment) rose 2,020,000 (1.3 percent).

Meanwhile, over the same 12 month period, PA labor force fell by 57,000 (0.9 percent) and the number of people reported as employed fell by 36,000 (0.6 percent).

In the Pittsburgh seven county metro area labor force tumbled by 17,600 (1.5 percent) and household employment slipped by 8,500 (0.7 percent).

Interestingly, the establishment jobs data (the number of employees on a payroll) fared much better in the state and region than the labor force and household number. PA saw private payroll jobs climb by 1.6 percent (85,800) thanks to a very large increase in the education and health sector and sizable gains in professional and business services as well as construction.

In the Pittsburgh region private payroll jobs rose 1.2 percent (14,300) driven largely by gains in health and education, leisure and hospitality along with professional services. There were modest pickups in the goods sectors as well.

Nationally, private payrolls jumped by 2,020,000 (1.8 percent) nationally, faster than PA and the Pittsburgh region. However, the national reflects both fast growing and slower growing states. For instance, North Carolina comes in at 2.1 percent, Texas at 3.2 percent, Florida at 2.2 percent. These and other rapid growth states are propelling the country to faster growth than PA and the Pittsburgh MSA.