RAD Returns to City Budget

RAD Returns to City Budget

oversight

Lost in a recent newspaper series focused on the twentieth anniversary of the Regional Asset District and the submission of the 2015 budget from the City of Pittsburgh to the oversight board is that the City is budgeting almost $8 million more in revenue from the piece of the 1 percent RAD sales tax it receives.

How is this happening?  Has there been a monumental jump in taxable sales and use in the City? That’s not the case: the 1 percent RAD tax is divided between the pool of regional assets (50% of the tax proceeds), the County (25% of the tax proceeds), and the municipalities in the County, including the City (25% of the tax proceeds).  No news of significant jumps in revenue has been reported by the RAD board, nor the County, nor the other municipalities.

Is the City subjecting other activity to the tax?  No, it does not determine the subjects of the tax and cannot alter it, so that can’t be it.

What has happened is that a two decade long agreement between the City, the Urban Redevelopment Authority, and the state to intercept a portion of the City’s RAD tax proceeds to fund development is coming to an end and the money has showed up in the 2015 budget, which shows the City’s RAD tax proceeds increasing from a budgeted $12.6 million in 2014 to $20.1 million next year, but with no explanation.

The Regional Asset District is a special purpose form of government that was accompanied by the creation of a 1 percent add on sales tax, split into three pools—the assets, the County, and the municipalities.

The law directed the use of the proceeds that was to go to the County and local governments in several ways:  the County and the City of Pittsburgh had to eliminate taxes they levied on personal property; the City had to cut its amusement tax rate in half (from 10 to 5%); municipalities other than the City and the County had to use “at least two thirds” for local tax reduction, specifically real estate taxes.  The County and the City had to create real estate tax relief programs, including senior citizen tax relief programs.

Not long after the creation of the Regional Asset District, the City and the Urban Redevelopment Authority signed a cooperation agreement that allowed a portion of the City’s sales tax proceeds to be intercepted by the state Treasurer and directed to a trustee account (the trustee was Mellon Bank) for the purpose of funding or servicing debt related to an Authority Development Fund that came to be known as the Pittsburgh Development Fund.  While a 2004 Legislative and Budget Finance Committee audit pointed out a number of projects that the Fund was involved with, it will forever be remembered as one of the key pieces that funded the long-gone Lazarus department store.  It was, as the audit pointed out, “…the largest single approved PDF project amount” and upon it hinged a major development strategy.

That’s the past—so, what to do with the money?  One City Councilman made a proposal in May of last year to fund tax relief for homeowners whose values went up significantly after the reassessment—which would be permitted as the language is in the RAD law and in the Pennsylvania Constitution for counties of the first and second class.  Ironically, money that was stipulated in the law for tax relief but diverted for two decades for economic development returns the same year as a half mill real estate tax is proposed.