Are new mass transit and infrastructure taxes on the horizon?

Summary: Proposed legislation would enable certain counties in Pennsylvania to enact new taxes, surtaxes and fees to subsidize mass transit and fund transportation infrastructure.  This is the wrong approach given the need to align mass transit operations and costs with post-pandemic ridership.



In 2019 two reports, one issued by the Pennsylvania Turnpike Commission (PTC), the Pennsylvania Department of Transportation (PennDOT) and the Southeastern Pennsylvania Transportation Authority (SEPTA) and the other by PTC, PennDOT and the Port Authority of Allegheny County (now Pittsburgh Regional Transit, PRT) advocated for expanded tax and fee options for local governments to support mass transit agencies.


The issue at the time was the change in 2022 when the payment from the PTC to the Public Transportation Trust Fund was to drop.  That funding change has occurred; from fiscal year (FY) 2021-22 to 2022-23, the transfer of sales and use tax revenue rose from $649.2 million to $1.1 billion while the PTC’s deposit fell from $420 million to $50 million.


With the coming expiration of federal COVID dollars for mass transit agencies, there should be no surprise that agencies are starting to look for new money.  A Center Square news article from Apr. 18 notes that leadership at SEPTA is raising the possibility of fare hikes and service cuts once the federal money is gone.


Legislative proposal


The article describes a legislative proposal introduced in the House of Representatives that would expand county options for subsidizing mass transit and funding transportation infrastructure.  Many of the options were included in the 2019 reports. The legislation intends to “enable new county-level investment options to advance transportation projects that drive local priorities” according to its findings. It would apply to counties of the first class (Philadelphia), second class (Allegheny), second class A (Bucks, Delaware, Lancaster and Montgomery) and third class in a specific population range (Chester).


If approved by the General Assembly, taxes, surtaxes and fees on deed transfers, motor vehicles, personal income, sales and use, local services and rides originating in a county from transportation network companies (arranged through an app) could become real if a county chose to enact any.


Some of these items are already taxed by the state, municipalities and/or school districts and would be collected under the same arrangements. The $5 fee on motor vehicle registrations that counties were permitted to levy by Act 89 of 2013 (25 counties have the fee, including six of the seven mentioned in the proposal) could double to $10. Counties could make annual grants to mass transit agencies for operations, maintenance and debt service or for a specific project or for purposes including roads, bridges, traffic signals and traffic signs.


Effects on Allegheny County


How would Allegheny County be affected by the legislation? It would be the only county able to continue to levy taxes on alcoholic beverages and car rentals as permitted by Act 44 of 2007.  Those taxes are budgeted at a combined $49.5 million for this year. The county levies a sales and use tax of 1 percent, and a portion of the revenue received by the Regional Asset District is made as an annual grant to PRT, budgeted at $3 million this year. County revenue from the registration fee is budgeted at $5.5 million this year.


The bulk of the collections are for the tax on alcoholic beverages; collections have fluctuated through the pandemic and after.  Inflation has also had an impact.  The change in the Northeast Consumer Price Index from 2021 to 2022 was 6.9 percent, well above the previous three years.  If county drink tax collections came in at the 2022 budget level ($42.2 million), the 14 percent growth from 2021 likely would have been impacted by inflation’s effect on the price of alcoholic beverages.

Transportation Revenue Collections in Allegheny County, 2017-2021 ($, millions)

There likely would be a negative impact if Allegheny County were to adopt any of these revenue options on individuals, businesses and on its position relative to border counties.


As mentioned, the proposed legislation would allow revenue to be utilized for “transportation infrastructure.”  In 2009, Allegheny County attempted to use drink and car rental tax revenues for debt service on roads and bridges, noting that the buses used this infrastructure.  The county lost a lawsuit and abandoned the idea.  Now, many years later, using drink and car rental taxes for infrastructure could happen.


To be sure, ridership has yet to return to pre-pandemic levels for many agencies.  This includes PRT, where, as of February 2023, average bus and light-rail ridership are 31 percent and 63 percent, respectively, below where they stood in February 2020.


PRT has done very little in the way of layoffs (this year’s budget added 49 employees), service reductions or utilizing smaller vehicles as a way to adjust to low ridership. PRT’s FY 2021-22 Annual Service Report shows the cost per rider on bus was $11.94 and $33.64 for light-rail; both topped PRT’s peer group of transit agencies in FY 2020-21.  The same report notes “significant legacy costs, significant congestion, long-standing collective bargaining agreements that are difficult to change, and the region’s unique topography” as prime factors of PRT’s high costs.




So where is the insistence on cost reductions? How about eliminating the right of transit workers to strike and eliminating prevailing wage? Hopefully the General Assembly takes these into consideration before providing counties with a menu of new levies which would exacerbate issues with mass transit spending.

2011 County Budget: A Shell Game

Continuing on the subject of yesterday’s blog, we now turn our attention to what is reported as the plan for two of the revenues received by the County for specific purposes, the drink tax and the hotel tax.

Printed reports state that first, the County Executive "would need [the] county Controller…to sign off on the use of $5 million in hotel tax revenues to help support the county’s parks. Such use would be defined as ‘tourism promotion activities’". Hasn’t the County learned from its 2009 debacle of trying to define roads and bridges as "transit support systems"? Recall that the County wanted to use a share of drink tax money for purposes other than what Act 44 permitted, and the Common Pleas Court denied their request.

The hotel tax generated $24 million in 2010 and is used for "convention related purposes" according to the County Treasurer’s website (the Treasurer is responsible for collecting the tax). So what is the Executive going to argue: that the parks have enticed convention business here? Or that convention-goers venture to one of the County parks when they are in town? If that is the case, spare the expense of a new hotel next to the Convention Center and add greenspace.

Second, "County council would have to approve taking $5 million from the drink-tax fund and making a $5 million supplemental appropriation to the Port Authority". The drink tax is expected to raise $27.2 million this year and is part of the County’s Transit Support Fund, separate and distinct from the General Fund, Debt Service Fund, and Liquid Fuel Fund.

The argument for the drink and car rental taxes to fund PAT was that the County no longer wanted to use property tax revenue and the state would not permit them to dedicate a share of the 1% RAD tax. So what, exactly, will be the source of the $5 million when the right time comes? If it is not the aforementioned taxes, the only other sources could be a piece of a tax lien sale or the host fees the County gets from the Rivers Casino. Beyond that revenues are from Federal or state sources, and we have heard long and tiresome arguments about how that money cannot be used for other purposes (see, Connector, North Shore).

Charter Members

The respective partisan caucuses of Allegheny County Council will soon be meeting to select members to fill the two vacancies caused by Council members who vacated their seats in order to run for the office of County Chief Executive.  The Home Rule Charter of the County, in essence the local “Constitution”, spells out how vacancies on Council have to be filled (Article III, Section 9b) and that Council members who want to run for another office must first resign their seat (Article III, Section 6b).  Therefore, by all indications we have an instance of the Charter being followed as written.


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Whose Bluff is Council Calling?

At last night’s County Council meeting a resolution to amend the 2011 County budget was proposed and sent to committee for further discussion. There is nothing too unique about the fact that Council wants to make an budget amendment, as the Home Rule Charter sets out the requirements for doing so (a 2/3rd vote and the approval of the Executive, and the amendment cannot unbalance the budget) but the subject and the timing of the proposal are quite peculiar.

The County’s 2011 budget (its fiscal year is the calendar year) approved $27.6 million for the Port Authority: that amount shows up under "miscellaneous agencies" in the operating budget. It constituted the County’s local match under Act 44, a 15% requirement that was based on what PAT was to receive from the state for its 2010-11 budget (PAT’s fiscal year is July-June).

Because the state money was predicated upon the ill-fated I-80 tolling plan, PAT’s state allocation for this coming fiscal year was reduced. According to the resolution, Council was told "in November 2010 the Authority’s state funding derived from Act 44 was reduced by an additional $6.8 million for FY2011-12", bringing PAT’s state allocation to $150.3 million. On December 6th Council approved their 2011 budget with the $27.6 million for PAT intact. Based on the state funding the County match would be 18%.

Now, three months after passing its budget, Council proposes reopening the issue and revising its match to $22.5 million, making it 15% of the amount they knew about before they adopted the budget. What’s changed? For one thing, there is a pitched battle over the bailout money funneled through SPC: the transit union is advocating for all the money to be spent now to avoid any of the planned service cuts and layoffs at the end of March, while the PAT management wants to spread the money over 18 months as per the sentiment expressed by the SPC. In addition, the PAT board is set to decide in about a week on allowing a private company to operate service PAT wants to abandon in the North Hills. This measure is too opposed by the transit union and its allies.

So who is Council trying to bluff in this latest standoff? Do they want PAT to capitulate on the bailout money and the competitive service offer in order to keep the $5 million? Do they want the state to intervene and come through with more money for PAT? In either case, Council is playing a losing game as they are trying to bluff with a weak hand, not realizing that the other players likely know it is a bluff. And what does Council plan on doing with the rescinded $5 million if the amendment is successful? Hold it in escrow until PAT and/or the state meets their demands? Maybe the state will react by lowering the top rates at which the drink and car rental taxes are levied. That will create a standoff no one wants to see.

Voter Approval of Taxes Still Out of Reach

Should voters in the City of Pittsburgh have the right to approve or reject property tax increases?  A majority of City Council does not think so, and have effectively killed a measure that would have put a question on the ballot asking voters if the City’s Home Rule Charter should be amended to require a referendum for tax increases. A petition containing the requisite number of signatures could override the Council’s decision and place the measure before voters.

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Improving Home Rule in Allegheny County as the Second Decade Begins

As home rule government begins its second decade in Allegheny County-the effective date of the Home Rule Charter was January 1, 2000-taxpayers and residents of the County have several big issues coming at them related to their government. 

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Onorato Hammers Corbett’s Support of Obamacare Lawsuit

Commenting on Attorney General Corbett’s joining the lawsuit by twelve other AGs from around the country aimed at having Obamacare declared unconstitutional, Allegheny County’s Chief Executive called the move "a taxpayer-funded political stunt with the goal of denying more people coverage and making affordable health care less accessible."

How utterly ironic. This from the Executive who: spent years thwarting rulings handed down by a local judge and the Supreme Court requiring the county to reassess properties, standing down only after facing a possible contempt citation; signed an illegal smoking ban bill into law only to have it thrown out by the courts; tried illegally to take money from the liquor tax for purposes forbidden by law-another action overturned by the courts; sponsored an illegal referendum question; surreptitiously grabbed gaming money late on the afternoon of New Year’s Eve that was intended to help the airport lower its costs to carriers, etc.

Almost all of these actions have resulted in the expenditure of taxpayer funds, especially for legal costs for those involving the courts. And what could be more political than holding up needed corrections to errors in assessments simply to improve his political standing?

And one might want to know who will get the bill for the "affordable health care insurance" that will now be available to virtually everyone under the recently passed health care bill?

More Choices on the Tax Menu

The real estate tax; the wage tax; the Local Services tax; the realty transfer tax; the parking tax; the poured alcohol tax; the gross receipts tax; the parking tax; the mechanical devices tax; the amusement tax…

You get the idea: there is a plethora of tax sources available to local government in Pennsylvania. That’s why it is always surprising to hear calls for even more sources of tax revenue, particularly when there is a call for layering more taxes upon the existing ones instead of phasing them out.

Just last week the PA League of Cities and Municipalities called for counties to get an additional 1 percent on the sales tax (except in Allegheny County and Philadelphia, which already have local add-ons) for "easing school property taxes (remember Act 1?) and helping county government and municipalities pay their expenses".

Or counties could get a poured alcohol tax like Allegheny County has or, failing those options, the state could just hand out revenue to offset the presence of tax-exempt property (which often generates much of the taxable activity that is captured by one of the many taxes listed above.

Maybe a better option-in light of the massive state budget shortfall, the looming problems with the two statewide pension systems, and the impact of legacy costs at the local level-would be to try and control the spending side of the equation with a spending cap that is tied to inflation and/or population, referenda on tax increases and creation of new tax sources, and a movement to a defined contribution system of pensions for new employees. Otherwise there might not be enough room in the local tax code to list all of those tax sources.

Some Ideas for Taxable Privileges in the ‘ BURGH

With the proposed tax on the privilege of attending college within the City limits on hold, Pittsburgh City Council is exploring other ways to increase tax revenues. They are currently floating a proposal to seek part of Allegheny County’s seven percent drink tax because most of it is collected in the City. Despite an earlier court ruling stating that the revenues from the County’s drink tax can only be used for mass transit (Port Authority), City Councilwoman Harris said that since most of the revenue is generated in the City "a portion of that money should come back to the city." Obviously the Councilwoman has no knowledge of Court rulings and has forgotten the fact that a large fraction of the beneficiaries of the Port Authority’s services are City residents. She might even consider that many Allegheny County residents who pay the tax live in areas not served by PAT.

Since desperate times call for desperate measures, we will assist Council and the Mayor and suggest other privileges they can tax. After all, if getting an education is a privilege surely there must be many other privileges that are taxable.

Take for instance consuming alcohol in the City. If the City cannot share in the drink tax money from the County, they could enact their own alcohol consumption privilege tax. This tax could not only cover those bar tabs, but also anyone who drinks alcohol in the City’s jurisdiction. This would effectively cover tailgaters who have been known to have the occasional beer before a game. City tax collectors could walk through the parking lots before games and collect money. Incidentally, this tax may also catch a large number of the college students who escaped the tuition tax.

Since the Mayor wants those who consume City services to pay their fair share, we suggest a fireworks privilege tax. The City has a handful of fireworks displays per year (mostly courtesy of the Pirates) that draw thousands of viewers each time that are consuming City services they should be paying for. This new tax could be collected by having tax agents roaming along Mt. Washington and Point State Park and in boats along the rivers collecting fees for this privilege. The same could be done for Light up Night and any number of parades.

This of course is only the beginning. There could be many other privileges that can be taxed. The City could easily exit its financially distressed status with some imaginative privilege taxation. Of course this will discourage folks from venturing into the City. But isn’t that the notion behind the City’s drive for new revenues-figuring out how to stop those Treasury draining outsiders from bankrupting the City?