Tag Archives: millage

What is the County’s Reassessment Policy?

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Based on the statements made by the County Chief Executive this week in response to when the next reassessment will come, we can probably say the outlook is "read my lips: no new assessments". The Exec, a longtime opponent of reassessments in general and the 2012 one in specific, said "We’re not going to be reassessing. We’re using a base-year plan like every other county…It’s tough to look 10 years down the road. It’s my hope that the Legislature will deal with this issue." That quote was taken this week but it could have been written at any point over the last decade.

We know where things stand at the state level-the Legislature has shown no desire to pass a law that mandates when reassessments have to happen and the Supreme Court has said a base year in and of itself is not bad but that eventually the assessments will become "stale" and violate the uniformity clause of the Constitution, thus necessitating a reassessment (when that happens exactly will vary). Could things be different by 2023? Maybe. The point here is to determine what the County has on their books and what it will have in the future.

The Administrative Code (Article 210) reflects the language of a base year plan, notwithstanding the fact that something funny happened on the way to the implementation of the last base year. An ordinance passed in October 2005 established the base year and another ordinance in early 2006 was enacted to clean up language that would"…otherwise impede the orderly administration of a base year…" Subsections deal with special provisions for 2003, 2004, 2005, and 2006 and the most recent section applying only to 2013 states only that appeals for 2013 had to be filed by April 1st of this year. If the County is intent on keeping a base year it might have to tweak some of that language or continue adding transitionary provisions as it has.

There is separate language on reassessments written into the County’s ordinances (Article VIII of Chapter 475 on taxation) reflects the plan to have values ready for 2006 which came from a ordinance passed in 2002 prior to the base year plan, but it seems clear that this section is no longer valid and could be stricken from the code.

Two years ago when we put together a report on some of the critical issues facing Allegheny County as a guide for office seekers and we recommended that a new policy be established after the completion of the court ordered reassessment based on the IAAO recommendations that a physical examination of property be done at least once in a six year period. The Executive and the members of Council who were on Council in 2005 and 2006 and voted for the base year would obviously be opposed to that recommendation. It could lead to another court challenge as alluded to by some in the news article, and given present conditions a court would have to determine whether the County’s base year had reached the point where it violated uniformity.

School Districts Boost Taxes

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As we pointed out recently in a blog and a Policy Brief there were around eleven school districts in Allegheny County that sought permission from the state to increase property taxes above the Act 1 index for the 2013-14 school year, a year in which reassessed values went into effect in Allegheny County. A news article today presented millage rates for 42 of the 43 school districts (Pittsburgh Public Schools operates on a calendar year) and indicates the districts that increased millage from where it would have settled within the Act 1 parameters.

Under Act 1 requirements, the school districts basically go "back in time" in the year which a reassessment goes into effect by using the Act 1 index of the year prior to the one before the reassessment took place. This is unlike Act 71, which applies to Allegheny County and the County’s municipalities. Districts can still seek exceptions to the index, raise taxes up to the index and not go over, go over the index and put the increase before the voters, or not increase taxes at all. Compared to millage rates from 2012-13, all of the districts 2013-14 millage rates were lowered to comply with Act 1 requirements (the only exception was East Allegheny School District).

Let’s start with the eleven districts we discussed in the blog and the Brief: by the article’s data, nine of those actually enacted a millage increase for 2013-14. North Allegheny and West Allegheny were granted exceptions but did not enact a millage hike.

Sixteen districts increased millage, but these districts were not listed in the Department of Education’s report on exceptions, so the assumption here is that the increases were below the Act 1 index amount.

Fifteen districts did not increase millage and none of those made any petition to the state.

If we group districts by whether they increased millage or not regardless of their position vis a vis the Act 1 index and petitioning the state, 17 districts did not increase millage while 25 did.

Certainties in Life…

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Death and school tax increases? About a quarter of the school districts in Allegheny County have applied for an exception to possibly exceed their Act 1 index that determines the degree to which school taxes can rise in a given year (both the Education Department’s spokesman and a business manager of a western PA school district made the point that even though a district is granted an exception it may choose not to use it) but this year is when new assessments have gone into effect, so homeowners who live in those districts where revenue neutral rollbacks by the County and the municipality may have minimized the tax bill bite may see that disappear. Know too that tax increases could be coming in districts that did not apply for an exception because Act 1 allows for increases up to the cap without a separate action.

The Department of Education has data on school tax rates going back to the 2002-03 school year (all districts in Allegheny County run on a July-June fiscal year except Pittsburgh) and, after tossing out a few districts that straddle the County line and Clairton, which has separate rates for land and buildings, the median tax rate that year was 18.45. Wilkinsburg had the highest millage rate at 32, South Allegheny had the lowest at 13.83. By the 2011-12 school year, the median rate had risen to 23.27 (a 26% increase, the Pittsburgh area CPI increased 33% from 2002 to 2012, so the growth was slower than inflation) and Wilkinsburg still topped the list (at a higher 35 mills) and Pittsburgh was the lowest at 13.92.

If we look at the years prior to when the Act 1 index took effect (2002-03 through 2006-07) the median millage rate for the County’s school districts rose 16%; since then, under the Act 1 provisions (2007-08 to 2011-12), school taxes have climbed 8%. Note that the pre Act 1 years from 02-02 to 03-04 and 03-04 to 04-05 saw some very big jumps (4.8% and 5.5% respectively) and that, outside of those years, the percentage change in the median school tax rate in the County does not look much different before or after Act 1. The median rate did fall in 2011-12 by 0.7% from where it stood in 2010-11, however.

That’s little consolation to taxpayers whose district may have increased taxes year after year or intends to use an exception this year, but overall the degree of increase overall has slowed over the past few years.

Yes, We Have No Enforcement

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A column over the weekend pointed out that while state law spells out what has to happen to tax rates after an assessment in Allegheny County and its municipalities, along with school districts in Allegheny County and across the state, it is ultimately going to fall on the citizens-possibly with the help of elected officials that watch the public purse such as county and city controllers, the Auditor General’s office, etc.-to pay attention to what has happened to their millage rates thus far and what will happen soon as school budgets are adopted for the coming fiscal year.

The primary sponsor of the law that pertains to Allegheny County and its municipalities, Act 71 of 2005, noted "There’s nothing in law that says [local officials who don’t follow procedures] get thrown in jail…The whole purpose was not to let them hide behind these windfalls".

To reiterate, any non-school taxing body in Allegheny County would have to set their millage rate at a revenue neutral level, and then, in a separate action-which contrasts with the previous law-could take a vote to raise millage so that the taxing body could get up to 5% more in revenue. If they wanted more, they could petition the courts, which happened in Monroeville.

To the point of the column, we wrote about the question of "what happens if someone violates the law" in the February 2012 Brief mentioned above. We did note that "A serious shortcoming of the laws is that they don’t spell out who is in charge of ensuring that taxing bodies follow the requirement, nor specify what, if any, punishment should be imposed for refusal to follow statutory requirements…Clearly, refusal by elected officials to comply with state laws ought to be grounds for severe punishment, including possible removal from office".

Letter Writer’s Shock Should Be Channeled

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A letter to the editor today from a resident of Mechanicsburg who still owns property in Allegheny County who just received his 2013 County tax bill expresses outrage over a 60% tax increase in his taxes. The letter does not divulge the location of the property (only that the writer "still own[s] property back in the Pittsburgh area, but had to move to Mechanicsburg for employment 25 years ago") or its type (if it is residential, commercial, industrial, land, etc.)

Let’s assume for simplicity sake that the writer owns a single family home in Penn Hills that was assessed at $50,000 in 2012. He could not take the homestead exemption as that is not his primary residence, so at the 2012 tax rate of 5.69 (following the millage rate hike), his Allegheny County tax bill would have been $284. If his 2013 County bill is 60% higher, or $454, that means the value of the structure would have risen to around $95,000 (almost doubling) based on the 4.78 millage rate that was printed on the County tax bill. That increase in value would be far in excess of the percentage changes for the County and all municipalities based on December assessment data.

The writer is angered as well because someone unspecified said he "…should not worry about my taxes going up quickly as there is a clause in the tax code that limits the increase to 5 percent". This is incorrect in that the state law applying to Allegheny County says after a reassessment tax rates must be rolled back to be revenue neutral and then, if the taxing body so wishes, they can raise tax rates so that they can get an additional 5% from the prior year’s revenue and then if more is desired, a petition to the courts can be undertaken. What someone at the County in person or through public pronouncements should have done is to explain that an increase in one’s property value has to be gauged against the increase of the taxing body to determine if taxes go up, down, or remain unchanged.

What is perhaps most amazing is that the letter writer, presumably as a real property owner in Mechanicsburg, which is located in Cumberland County, somehow forgot that his home county just reassessed in 2010. Maybe the reassessment did not result in a significant jump in his county taxes, which is entirely possible, or it did, which is also possible. Cumberland County, which assesses property at 100% of market value just like Allegheny County, just increased taxes in 2013 (from 2.045 mills to 2.274 mills), which meant a tax increase for him and all other taxpayers in the County.

If the letter writer really wants to get steamed he might calculate what his assumed $95,000 home in Allegheny County would pay in county real estate taxes vs. his assumed $95,000 home in Cumberland County would pay-it’s a $236 difference. There might be a lesson about the cost of county government in there.

Big Tax Hike in the Eastern ‘Burbs

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Taxpayers in Monroeville, a suburb in the eastern part of Allegheny County and one of the County’s largest communities with more than 28,000 residents, are seeing firsthand the change in post-reassessment tax policy established by Act 71, a law passed by the General Assembly in 2005.

 

 

That law, which we wrote about last year (Policy Brief Volume 12, Number 8), requires Allegheny County and its municipalities to establish revenue neutral property tax rates following a reassessment (school districts live under different statutory requirements contained in Act 1 of 2006).  If the taxing body wants to get more revenue after it sets a revenue neutral rate, it may do so, “in a separate and specific vote” but the limit is set at a 5 percent increase.  Prior to Act 71, taxing bodies could get the 105 percent in one step, leading to accusations of “backdoor increases” against school districts that supposedly dodged the limitation.

 

If a taxing body wants more than 105 percent of the pre-reassessment revenue level it can do so under Act 71.  Section 1d states “with the approval of the court of common pleas, upon good cause shown, any political subdivision may increase the tax rate [above the 105 percent limit]”. 

 

Here is what happened in Monroeville, according to ordinances posted on the municipal website: on January 8th millage was rolled back to 1.8 mills (from 2.2 mills) to comply with the Act 71 revenue neutrality requirements. At a special meeting on January 23rd Council gave authorization to the Solicitor to “prepare and submit a petition for court approval of tax levy in the excess of the 5% of windfall”. Then, on February 12th Council passed a millage rate increase of 0.084 mills which kept the municipality within the 5 percent Act 71 limit and set millage at 1.884 mills.

 

A synopsis of the timeline and events that occurred in the Common Pleas Court is available based on documents from the County’s Department of Court Records:

  • January 24th-The municipality submitted a petition requesting a tax rate of 2.431 mills, which the municipality calculated as 9.5 percent higher than the 2012 rate of 2.2 mills.  The municipality noted that it had held off on a tax increase since 1991, had shrank the size of its work force from where it was in 1998 and dipped into reserves to the point where it was no longer prudent to do so.  It is also worth noting that the municipality pointed out that its pension costs are expected to increase by close to $900,000 from last year to 2013.  That same day the Court ordered a hearing to be held February 20th on the matter.
  • February 19th-Opposition from residents of Monroeville as interveners to the case was filed.  That document noted that the municipality still maintained its own 911 call center (whereas the majority of municipalities participate in the County’s consolidated system) which could be phased out, savings that could come from enhancing revenues from the library and the senior citizen center, and that, while the municipality characterized the increase as a 9.5 percent boost the requested rate of 2.431 mills was actually 29 percent higher than the 1.884 millage rate approved on February 12th. Ultimately, the residents argued, the court should reject the municipality’s petition. 
  • February 20th-On the date of the hearing based on the order of the court from January 24th, and a day after the opposition document was filed, the court approves the request from Monroeville to increase the tax rate, with the Judge who approved the petition noting, in longhand on the order of the court template, that the “total millage does not exceed 2.431 mills”. Council is expected to take action on March 7th.

 

What did these actions mean for a homeowner in Monroeville?  Let’s use the example of a home that was assessed for tax purposes at $150,000 in 2012.  Last year’s tax rate was 2.2 mills, meaning the homeowner paid $330 in municipal real estate taxes.  Now assume that the assessed value of the home rose to $190,000 under the new assessment for 2013 (26%) and was not appealed.  When the new assessment is measured against the tax rates that have been put together by Council and the Courts here are the results:

 

Millage

Tax Bill

Difference Between 2013 Tax Bill and 2012 Tax Bill

1.8

$342

$12

1.884

$357

$27

2.431

$461

$131

 

So what recourse is there now for disgruntled taxpayers, including the ones who made their case in court, but also those whose home value might have seen its assessment increase significantly higher than the municipal average (22%) including large commercial properties that make up a large portion of Monroeville’s tax base?  Move, grin and bear it, or hope that the state gets rid of property taxes? 

 

The municipal solicitor was quoted in the newspaper as saying “the remedy is at the ballot box”.  True, but to whom is the wrath directed toward?  Four of the seven Council members will be up for reelection this year.  Did all four vote for the initial increase and to petition the court for more or both?  Are they even running again, and will there be opposition?  The remaining three members won’t run again until 2015. The judge who approved the increase above the 5 percent limit?  The state legislative officials who voted for Act 71 back in 2005, if in fact they voted for it, are still in office, and will run again?  The remedy might be at the ballot box, but that won’t be easy. 

 

Hindsight being what it is, perhaps officials should have been thinking about small property tax increases over the last few years as expenses grew.  If millage rate hikes were not acceptable, then they should have been acting to slow spending growth so they would not be facing the large cuts they are now afraid to make, opting instead to boost the millage rate 35 percent above the post re-assessment revenue neutral level.  

Examining a 2013 Tax Bill for a Home

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The County and its municipalities run their fiscal year on a calendar basis, and so in two weeks will have presumably established their property tax rates for 2013 and adjusting them for revenue neutral requirements under Act 71 of 2005. The only school district in Allegheny County that operates on a calendar fiscal year is the Pittsburgh Public Schools, and they have proposed a millage rate of 9.65 so as to comply with Act 1 of 2006 requirements, which state that in a year of reassessment a school district can’t collect more revenue than what is allowed by its Act 1 index for the previous year.

As of now, proposed rates and homestead exemptions (which lower the assessed value of a qualified owner-occupied home for tax purposes) for 2013 are as follows:

Allegheny County: 4.73 mills, $15,000 exemption

City of Pittsburgh: 7.56 mills, $15,000 exemption

Pittsburgh Public Schools: 9.65 mills, $28,685 exemption

All millage rates were adjusted downward; the County’s homestead exemption amount is unchanged, the City’s proposed exemption is up from $10,000 last year, and the school district’s amount is higher due to increased gambling receipts (it was $19,000 in 2012).

A home in the City assessed at $115,000 that took all available exemptions would have a tax bill of $3,039 in 2012. That amounts to 2.6% of the assessed value.

Assume that the assessed value for the home rose 50% and no appeal of the value was undertaken, establishing the 2013 assessed value at $172,500. The resulting tax bill for 2013 would be $3,328 for 2013, an increase of $289 (10%) over the 2012 tax bill. The tax bill would equal 1.9% of the assessed value.

December 21st: An Important Date

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And we are not talking Mayan calendar here. In our seemingly never ending reassessment story, the Judge overseeing the process has given the County that date to get total assessed values as a result of the reassessment to municipalities. The municipalities, which all run on a calendar year for fiscal purposes, will then have until the end of January to finalize their budgets (some are already done). As appeals come in, those that affect a given municipality will be forwarded on so that millage rates can be accurately calculated to comply with requirements under Act 71.

The PA Supreme Court rendered its decision on the County’s base year in April of 2009 and gave the County Court of Common Pleas the charge of determining a "reasonable time frame". Most reports this year as the process went on put December 17th as the day cities and towns would get the numbers from the County, but that is now four days later. An official from the appeals board stated that 90% of the residential appeals would be done by the 21st.

Note that school districts, with the exception of Pittsburgh Public Schools, will start their budget process in early 2013 under the Act 1 requirements.

Another Western PA County Will Reassess

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If Indiana County sticks to what has been announced as the start of a three-year reassessment process that will produce new values for 2016, it will leave the small fraternity of counties belonging to the "pre-1969" club. Those counties, according to the State Tax Equalization Board and our research, have not done a reassessment since 1969 or earlier. Indiana County did change its predetermined ratio (the ratio of a property’s assessment to its market value, used for taxation purposes) in 2006, but its last true comprehensive reassessment was done before the Apollo 11 moon landing.

Is there anything from Allegheny County’s experience that could guide Indiana County?

Some officials from Allegheny County might say that while Indiana is voluntarily going forward Allegheny was forced by the courts to reassess. Recall, however, that Allegheny County Council did pass an ordinance in 2002 that said new values would go into effect in 2006. Fear about new values led to various plans before deciding no new assessment would be the best assessment. Indiana will have a good dose of "sticker shock" with such old values.

The more education on the assessment the better, especially when it comes to state law requirements on windfalls. New laws are on the books dealing with what happens following a reassessment. In Allegheny County, since it is the only county of the second class, this is Act 71 of 2005. Indiana County, a county of the sixth class (population ranges of 45,000 to 89,999), has to follow the requirements of Act 93 of 2010. All school districts in the state fall under Act 1 of 2006. The difference between the two is that once a revenue neutral rate is established if the taxing body wants to get more tax revenue in Allegheny County the limit is 5% whereas in Indiana (and all counties other than first [Philadelphia] and second [Allegheny] class) it is 10%.

Taxpayers have to be attentive as well. Note that just as Allegheny County did in 2011 and as Butler County announced it would do last week Indiana County is planning a millage rate hike. That means everyone’s taxes will go up. In a reassessment it is possible that some people’s taxes may go down. Taxpayers need to understand that, and county government can help.

Bizarro World

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Step right up folks, you are about to encounter the topsy-turvy world that has come to southwestern Pennsylvania as a result of property assessments. Allegheny County is hurtling toward completion of a court-ordered reassessment following a state Supreme Court decision in April of 2009. It looks like certified numbers will be ready is approximately two weeks, roughly ten days before the fiscal year starts for Allegheny County, its municipalities, and the Pittsburgh Public Schools.

The County passed its budget for 2013 earlier this week. As a result of the rise in assessments and state law changes in 2005, the County had to adjust its millage rate. Presto chango, the millage rate that rose from 4.69 mills last December to 5.69 mills is now set at 4.73 mills for 2013. The County Executive stated in a press release that "I’m very pleased with the budget that Council passed this evening and am glad that we are able to move into 2013 with no tax increase and a lower millage rate and that we did so without using one-time revenues to balance our budget (emphasis added)".

Is this the same Executive who spent years on Council decrying reassessments, vowed when running for the office of County Executive that he would go to jail rather than send out new assessments, dismissed the state law on windfall adjustments, and stated, most recently at the start of 2012, "reassessments cause tax increases"? If reassessments cause tax increases, and Allegheny County is just finishing its, then how can the Executive claim the budget has no tax increase?

Here is where a good dose of clarity would have been welcome. Sure, a reassessment causes tax increases: even after millage rates are adjusted, if a property’s assessed value rose faster than the relative change in the county, municipality, and school district in which the property is located then taxes will go up. It is also possible that taxes could go down if the opposite holds. That’s what the County’s own assessment department has made available for taxpayers for some time, albeit online: enclosing such information in a mailer at the start of the process would have gone a long way to quelling a lot of fear. If Washington County moves forward with a reassessment (also a court matter), it might take some pointers from what did not happen in Allegheny.

Know what else causes a tax increase? A millage rate hike. That’s what is possibly happening in nearby Butler County, a county that has not reassessed since 1969 and changed its predetermined ratio three years ago. The proposed increase there is 8%, which is smaller than Allegheny’s 20% increase last December. Spending drives the need for tax revenue,especially when assessments are frozen in place.