…So, Where are the Severely Distressed Plans?

A blog last week pointed out that there are no severely distressed municipalities in Allegheny County reported to PERC under the terms of Act 44 of 2009, there are plans that are in that level of distress as of their 2015 actuarial report.

So which municipalities are severely distressed (funded ratio of 49% or less) as a result of their pension plans?  The biggest one in the group is Philadelphia, which has a funded ratio of 45%, with $4.8 billion in assets and $10.8 billion in liabilities.  Statewide, the municipalities reporting to PERC, if grouped together as one plan, would be 65% funded.  Remove Philly from the aggregate and the ratio increases to 83%.

Two other big cities in eastern Pennsylvania (Chester and Scranton) are both severely distressed, though Chester just falls below moderate distress at 49%.  Scranton is in bad shape, with what would be the lowest funded ratio in the state, 24%.  No municipalities in southwestern PA (Allegheny, Beaver, Butler, Washington, Westmoreland) reported severely distressed local governments.

No Severely Distressed Plans in Allegheny County

Under Act 44 of 2009, which addressed municipal pension plans in the state, each municipality on a biannual basis is given a distress score based on the aggregate health of its plans measured by funded ratio (assets/liabilities).  Scores ranges from 0-3 and the numerical value coincides with having no distress (100% or >, minimal distress 99-70%, moderate distress 69-50%, and severe distress 49% or <).

This year’s scores from PERC for local governments in Allegheny County (107 municipalities and 32 authorities/associations received scores) show that no local government is in severe pension distress under Act 44.  Three municipalities–Pittsburgh, Braddock Hills, and Oakdale–had funded ratios in the 50s.  Pittsburgh and Braddock Hills were in severe distress in 2010 but have since moved out of that classification.

93 local governments were classified as “not distressed” with 8 (seven municipalities, one authority) having a funded ratio of 150% or greater.

PERC Dissolved, Auditor General Will Now Handle Muni Pension Reporting

Though it is not an earth-shattering change in the big scheme of Pennsylvania government, the Public Employee Retirement Commission (PERC) has been dissolved and its duties are going to be handled by the Independent Fiscal Office and the Office of Auditor General.

Signed into law as Act 100, the changes will move employees and responsibilities, including the requirements for municipalities to report on the health of their pension plans to the Auditor General’s office, which is already charged with distributing state pension aid to municipalities and auditing those plans.  PERC employees will be under the direction of the Auditor General in a separate bureau.

PERC reports on municipal pensions provided much of the data for reports we wrote on local government pension plans (here is 2015’s report).

Deciphering A Call for Tax Payments

A letter to the editor today called on UPMC to “pay more to City coffers“.  Presumably, since the letter refers to an op-ed about Pittsburgh’s efforts to get payment in lieu of taxes from large non-profits, the coffers in question are the property of the City of Pittsburgh.

The letter writer notes that “Studies by my organization and others have found that UPMC’s tax exemptions total more than $200 million per year”.  Does that mean the value of UPMC’s exemptions in the City’s borders total $200 million?  If so, at the City’s current millage rate (8.06) if that value suddenly became taxable and nothing else changed the levy would raise $1.6 million, about 1% of the amount the City expects to collect this year ($134 million) in property taxes.

It certainly can’t mean that the City would reap $200 million in additional taxes if everything that is exempt and owned by UPMC would become taxable.  In order to raise $200 million at the City’s millage rate it would take around $24 billion in property value (there was $12 billion in total exempt value in the City based on the 2016 county certification of values).  And it would mean that UPMC itself owns more taxable value in the City than all other taxable owners combined.

A 2014 report by the Auditor General’s office stated that the “total assessed value of all property” owned by UPMC countywide was $2.1 billion.  By applying County, municipal, and school district taxes to that amount, as the Auditor General’s office did, that exempt amount would raise $47 million countywide.

Note too that a previous writer of an opinion piece used the Auditor General’s report but confused tax-exempt and non-profit health providers, resulting in a significantly larger estimate of what would be collected than what the actual amount would really be.

If the letter writer’s $200 million in exemptions is based on that, then $200 million of UPMC’s property is in the City’s borders, which does not sound right given the large presence of hospitals in the City.



The Host Fee’s Wild Ride

Nearly a month ago it looked as though the Rivers Casino was going to conduct a legal battle to stop paying the municipal host fee set out in law to the City of Pittsburgh.    That lawsuit was dropped at the end of July.

Under a separate law, that host fee is intercepted by the oversight board and then directed toward specific City financial uses.  That has been a major point of contention between Pittsburgh and the oversight board, but according to published news reports and a press release from the Mayor’s office it appears the board will vote to release the money this coming week and it will be directed toward the pension fund.

The legislation signed into law as Act 99 of 2016 makes changes to the treatment of the host fee money going forward.  The law specifies that once the oversight board is terminated then the host fee money is to go directly to pensions.


Referendum Suggestion Void?

One of the recommendations made by the Affordable Housing Task Force in its report released in late May was for the creation of a fund of $10 million annually to provide “…a substantial pool of resources to directly target the most pressing housing needs in our city” (see page 15 of the report).

The Task Force listed a variety of revenue options, including a 1% increase in the City’s portion of the realty transfer tax.  This was projected to raise $9 million a year.

No matter the choice eventually settled upon, the Task Force recommended that a public referendum, like the 2011 one that increased the City’s real estate tax for funding the library system, be used (see page 18).  Now it appears that there won’t be a referendum even though supporters have collected more than enough signatures.

Again, the Task Force’s recommendation was just that, and the last time the realty transfer tax was increased based on another recommendation, that of the Act 47 recovery team.  Pittsburgh was levying the transfer tax at 1.5%, and raised it 0.5% to 2% (the state and school districts also levy a transfer tax, but Pittsburgh Public Schools is the only one in the County levying at 1%, the rest at 0.5%).  The Act 47 team did not recommend a referendum.

More Info on Washington County’s Projected Tax Changes

On Friday we wrote a blog that Washington County projects its millage rate in 2017 will be 2.36 mills, which reflects the County moving to a 100% pre-determined ratio and assessed values reflecting 2015 (as opposed to taxing 25% of the 1981 market value).  Over two years ago we wrote that the Washington county website noted ““By itself, a Reassessment is revenue neutral, although it will cause tax burden shifts among properties. Some owners will see increases while others will see decreases, and yet others will remain approximately the same”.

Now the County has produced a document that shows the factor of increase in each municipality and school district in the County as a way for taxpayers to estimate if their taxes will go up, down, or remain the same.  The factors are based on the change in old assessed value to new assessed value in the taxing entity (either a municipality or a school district).  By taking the current assessment against the factor, a taxpayer can determine what will happen to taxes based on the revenue neutral adjustment.  Recall that a taxing body can increase taxes on the reassessed value, it just has to do so in a separate vote, clearly indicating that they are taking such an action.

Washington County Reveals its Tax Rate

Just south of Allegheny County, Washington County is in the midst of its first countywide reassessment in thirty years.  We noted in April that taxpayers had begun receiving their preliminary notices in the mail.  We wrote that it would have been beneficial for taxpayers to see an estimate for future millage rates (Washington County is changing from 25% of the 1981 value to 100% of the 2016 value, but still has to comply with state law requirements on revenue neutral rates following a reassessment).

In an article today on a meeting held in Peters Township, it was reported that “The current county rate of 24.9 mills for 2016 will be reduced to 2.36 mills for 2017.”

What does that mean for taxpayers?  Well, if their new assessed value is $100,000, and since the County does not offer a homestead exemption on county taxes, they would pay $236 in property taxes to Washington County.  Taxpayers can take their current assessed value and the current millage rate of 24.9 and compare it to their proposed new assessed value at a millage rate of 2.36 and determine if their taxes are going up, down, or staying the same (at least for county purposes, municipal and school taxes will figure in as well).

Based on a Brief we did earlier this year on counties that reassessed in 2013, Washington County’s rate would be the lowest of all those counties studied, including Allegheny.  On a $100,000 assessment, the County taxes in Allegheny would be $388 (Allegheny offers an $18,000 homestead exemption), about $150 more than the taxes in Washington.  On a $500,000 assessment, the County taxes would be $2,279 and $1,180 respectively, a 50% difference.

PILOT Ready to Land?

An opinion piece today examined the status of the City of Pittsburgh’s attempt to negotiate a payment in lieu of taxes agreement with big non-profit entities.  Against the backdrop of a possible constitutional amendment on what a “purely public charity” in Pennsylvania is, and other cities that have made attempts at PILOTs and a late 2014 examination of exempt property by the Auditor General’s office, Pittsburgh officials classify progress on an agreement as “…not good enough”.

Looking Inside WalletHub’s City Ranking List

Pittsburgh was one of 150 cities analyzed by WalletHub’s Best Run Cities list. Out of 150 cities, it was ranked 103rd overall. The organization used “six key categories” (financial stability, education, health, safety, economy, and infrastructure/pollution) and used 25 separate metrics under those categories. Scores ranged from 0 to 100 “with 100 representing the most optimal city management” according to the organization’s methodology explanation.

One could see tasking “city management” with debt per capita (a metric under financial stability) and possibly even safety metrics (crime rates) but high school graduation rates? Or Average life expectancy? Or average commute time? Sure, on many of these measurements some public sector hand is involved, but WalletHub utilizes “the total budget per capita amount for each city” in order to measure effectiveness and rank the cities.

So Pittsburgh’s 2016 budget ($518.9 million) and its population (305 thousand) results in per capita spending of $1,701 but why assign that spending to items that the City does not directly manage or fund?

That WalletHub’s highest score for Pittsburgh out of the six categories came on education (15th out of 150 cities) is dubious due to what the organization measured and how its spokesperson addressed its findings in the media.

Education, like the other five categories, had a possible 16.66 points in play. Two metrics were used: first “Great Schools Score: Full Weight (8.33 points)” and second “high school graduation rate: full Weight (8.33 points)”. A quick look at the website of Great Schools shows that the District was given a rating of 3 out of 10. A look at the Pennsylvania Department of Education website on cohort graduation rate shows that for 2014-15 the four year cohort graduation rate for the Pittsburgh Public Schools was 70.44 percent. In 2013-14 it was 73.59 percent, in 2012-13 it was 77.43 percent.

Yet in a published report on reaction to the rating a spokesperson from the organization said “the city offers a good education system with a top high school graduation rate at 90 percent, 13th best overall”. Obviously something is amiss.

So Pittsburgh’s best ranking comes from service the City itself does not directly manage and seems to be measured inaccurately by the organization doing the ranking.

Other scores were, in descending order, 19 (health), 36 (safety), 48 (infrastructure/pollution), 76 (economy), and 144 (financial stability).