The City Controller has suggested increasing the homestead exemption for City taxpayers. A homestead exemption allows homeowners to decrease their assessed value by a fixed dollar amount so as to lower the property tax bill. The County has a homestead exemption of $15,000 while the City’s is $10,000. While the Pittsburgh Public Schools offers one it is funded through gaming money and it is not quite at the discretion of the school board to change the amount.
In a Brief we wrote last year we showed the effects of the homestead exemption on County taxes since County Council was exploring the idea of eliminating it. The exclusion was boosted from $10k to $15k about a decade or so ago. That’s the decision point the City may come to if it decides to follow through with the Controller’s recommendation.
Using our sample of 100 properties that sold in 2011, twenty of those randomly selected homes were located in the City. If the forecast of the Property Tax Estimator holds accurate Pittsburgh’s 10.8 millage rate would fall to 6.94 mills to be revenue neutral under Act 71 requirements. If that rate held the homes in our sample located in the City would see differing results for their City property taxes: nine homes would pay more in taxes, eleven would pay less. A bigger homestead exclusion for City homeowners would obviously shrink the tax payment: going from a $10k exclusion to a $15k exclusion would result in roughly a $35 decrease in the City property tax bill.
As we have pointed out in Briefs this year, a property owner’s first bill under the new assessment will not necessarily be higher than the bill for this year and years past just because the assessment is higher. That’s despite the claims by several elected officials that make the statement that reassessments lead to tax increases. And despite the County’s own property assessment webpage that points out a taxpayer’s obligations depend on how their assessment changed relative to the taxing body overall.
With one county, 128 municipalities, and 43 school districts all levying property taxes it would be quite an undertaking to describe the present and future tax burden for all properties in the County. A new website, Property Tax Estimator, allows taxpayers to examine their property and see what to expect based on new assessed values and anticipated millage rates. Recall that the County and municipalities have to establish revenue neutral rates after values are certified. Tax hikes can happen after that.
Revisiting our sample of 100 sales that we utilized in two Briefs in 2012 (here and here) we examined the resulting impact of the assessments on County property taxes. We used the following assumptions:
- The home would take the County’s homestead exemption that lowers the taxable assessment by $15,000 for both 2012 and 2013
- The millage rate for the County currently (5.69 mills) would fall to 4.11 mills based on the Estimator’s calculation
So what happened? Of those 100 sales, 38 would end up paying more in County property taxes in 2013 than they did this year. This ranged from one home paying close to $800 more to one paying $1 more. The remaining 62 would all see a drop in their County property taxes. The range goes from a $3 cut to a $500 cut for the group.
A higher tax rate-whether a revenue neutral rate settles in at higher than what the Estimator predicts or the County increases the rate as permitted under the law-would obviously change what the final tax bill looks like. Assume that the County Council increased the tax rate by 5% in a separate vote (it would take a 2/3rds affirmative vote) and then successfully petitioned the courts to utilize the same 5.69 millage rate that is in place this year, only with the new assessments taking hold. Of those 100 properties in our sample, 9 would pay less in 2013 than they did in 2012. Their assessed values have fallen far enough for that scenario to happen.