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.
On December 6th, Allegheny County Council voted to increase property taxes by 1 mill, or 21 percent, resulting in a new millage for property owners of 5.69 mills. Sadly, but predictably, this action is consistent with the disconcerting pattern of recent years wherein the Council passes illegal legislation that gets overturned in court.
The Washington County community of Peters Township (population 20.3k, up from 17.5k in the 2000 Census count) could be delivering an early Christmas gift to its residents: a property tax cut of 1 mill to 13 mills (Washington County’s base year assessment year is 1985 and its pre-determined ratio is 25% of market value).
According to the township’s audited financial statement its millage rate remained at 12 through most of the decade while the rates for the Peters Township School District and Washington County increased. Its per capita debt level fell from $388 in 2000 to $351 in 2009. Based on population growth and audited expenditures per capita spending grew 20% over the decade (by way of comparison the CPI for the Pittsburgh area grew 27%).
Here’s what makes the impact of a tax cut in Peters significant, especially in comparison with Allegheny County. As an August 2007 Policy Brief illustrated county-to-county level taxes in Washington were much lower than Allegheny-per capita collections were $127 in Washington while they were $212 in Allegheny. On a per dollar of personal income basis the advantage was slanted more toward Washington, and the burden of school taxes was much higher on average in Allegheny County. A tax cut in a popular residential destination should increase the pressure on other communities to do the same.
So at a time when tax cuts are rare (only 8 municipalities and 1 school district in Allegheny County had a lower millage rate in 2010 than they had in 2003) if Peters Township follows through they are to be congratulated.
A study of property taxes paid in the nation’s nearly 800 counties with a population of 65k or more shows that Allegheny County is on the high end. Not a surprising find, and something that we have pointed out for quite some time.
The study, done by the Tax Foundation, looked at data from the American Community Survey to find that, based on the County’s median home value ($121k) and the median property tax bill for owner-occupied homes ($2,528) the taxes as a % of home value was 2.09%, which ranked Allegheny as 42nd highest on the list, the highest for Pennsylvania using that metric.
Given the wide variations in assessed value, taxes from school district to school district, municipality to municipality, and the fact that some states allow for special districts to levy property taxes the Foundation has undertaken a massive project. Obviously aiming for the median is their way of trying to paint a picture of a typical taxpayer.
But consider that in order to produce what they find to be the median property tax bill from the median home value the millage rate would be around 20.8 mills ($121k x 20.8 = $2,528 in taxes). Taking away the County millage of 4.69 leaves 16 to be split among the municipality and the school district. It is safe to say that not many places would achieve that threshold: only 7 of the County’s 43 school districts have a millage rate under 20. Obviously the self-reported ACS data missed something. The tax hit might be bigger than the ranking shows.
Based on their methodology, Allegheny County took a bigger bite than Butler and Washington Counties, and was above the U.S. average as well.