Mechanics of the Library Tax

With voters in the City of Pittsburgh approving an additional 0.25 mill to provide dedicated funding for the Carnegie Library system in a referendum this week the logistics of moving from ballot question to handing over money from City coffers to the Carnegie system will commence forthwith.

The ballot question said that the tax would be levied "effective January 1, 2012 and thereafter" and the "plain English" explanation stated "all money raised as a result of this tax can be used to aid in the maintenance and operation of the Carnegie Library of Pittsburgh and cannot be used for any other purpose".

Four communities in Allegheny County currently have dedicated millage for their local library-Brentwood (0.5 mill out of 8.5 mills), Castle Shannon (.514 mill out of 9.4 mills), Robinson (0.1 mill of 3.05), and Wilkinsburg (0.71 mill out of 14 mills). In 2010 those communities raised anywhere from $150k to $389k for their libraries. Pittsburgh anticipates raising over $3 million annually.

How will this money be accounted for? The additional millage will presumably be tacked on to property tax bills and the money will flow back to the City’s treasury. But then what happens? Will there be a separate library fund, or will the money be counted in the general fund? A quick phone survey of the four communities with a dedicated library tax found that only one (Castle Shannon) has a separate library fund for accounting purposes. The others write a check annually or quarterly to transfer tax money from the general fund to the library. Some provide space and cover utilities for the library as well.

Given the sheer size of the City’s Carnegie system, with 19 branches and 5.2 million items, and a budget of more than $20 million with various public, corporate, and foundation sources currently, and the amount of the tax to be generated, it would be reasonable to assume that the City might create a separate library trust or fiduciary fund. The County created a Transit Support Fund once it began to receive monies from the drink and car rental taxes. Perhaps the City will use that same accounting practice.

How Would Library Tax Affect Corporate Giving?

Recommendation Three by the Public-Private Task force concerned with the finances of the Carnegie Libraries of Pittsburgh said this: "provide the citizens of Pittsburgh an opportunity to vote on whether dedicated funding support should be provided to the library". All reports point in the direction that there will be a ballot question in November asking voters if the City’s millage rate should increase .25 of a mill to support the libraries.

Of course, the impact of a voter-supported tax increase goes far beyond those who get to pull the lever. Much of the property value in Pittsburgh is tied to commercial uses, and that includes corporations that may donate voluntarily to the library system. For instance, the ten largest property taxpayers in the City are commercial in nature, accounting for $1.6 billion, or 12% of the total taxable assessed value in the City.

The 2010 annual report for the Carnegie system shows that "unrestricted corporate donations" were $129k, and the overall total from corporations was $818k. How will this giving be affected if a dedicated property tax were to be levied? Will there be a "side effect" on other charitable organizations that receive money from those that give to the libraries voluntarily?

The quarter mill proposed tax increase would raise just under $3 million, of which $2 million would come from non-residential sources (based on previous work on City market values and land use). It is possible that some corporations might view a compulsory tax as a substitute for their voluntary giving. It is also possible that some corporations might keep committing to restricted giving for specific projects while focusing less on unrestricted or general contributions. How the corporate community at-large comes down on the issue of a tax increase will be determined at the time the merits of the tax are discussed.