Property Tax Increase Enters through the County’s Front Door

After years of extolling the fact that the property tax rate in Allegheny County had remained unchanged from 4.69 mills, the County Executive-elect has put his support behind a proposed 1 mill County tax increase for the 2012 budget year. At the same time, unless something has changed, he remains fully in opposition to a reassessment ordered by the PA Supreme Court and at one point made it clear he was willing to go to jail rather than send out assessment notices.

The opposition was based on the belief that governing bodies-the implication, sometimes clear, sometimes not, was that it was school districts-would take in more tax revenue than permitted without having to take a clear and public vote to increase millage rates. As we pointed out numerous times nearly all of the County’s school districts and a very sizeable portion of the County’s municipalities had indeed raised their millage rates during the time period in which the County felt having a base year was the way to manage the reassessment system. No need to wait for a backdoor increase when a front door one can be enacted.

Now the County is faced with a $50 million deficit that the Executive and many members of Council feel cannot be closed without a tax increase. According to the County’s Home Rule Charter (Article VII, Section 4c) "any ordinance changing the real estate tax rates shall require an affirmative vote of at least two-thirds of the seated members". That plain language-codified in the County’s administrative code at 5-809.2-means it will take 10 members of 15 to enact the change. With 11 of the 15 members sharing the same political affiliation with each other and with the Executive-elect it is a good chance the threshold can be met and attained.

So here is the short tax record in recent years for Allegheny County, perhaps the one that might get more attention if the string of consecutive years without a property tax increase is ended: two new levies (one on alcohol, one on car rentals) begin in 2008; the County begins collecting gaming host fees by virtue of the law that awarded a license to the Rivers Casino in 2010; and now the proposed millage rate increase set to begin in 2012 if enacted. Yet the County does not have enough money to cover its spending needs.

Ding Dong, the Parking Space Tax is Dead

The attempt by Steel Valley School District to create a tax that would apply to free parking spaces serving businesses is over as the school board removed the tax after they heard rumblings that the business community raised the possibility that a lawsuit would soon follow enactment of the tax.

That was the predictable outcome based on the fact that it has yet to be established how a municipality or a school district can levy a tax on parking where there is no money paid for the transaction and how that would differentiate itself from being another tax on real estate. Calling it a "parking privilege tax" does not mean that it is a taxable privilege under Act 511. Much like the City of Pittsburgh’s tuition tax plan this past year, officials try to levy taxes based on the feeling that nothing in the law prevents them from doing so.

If the school board really believed they had this power, then they should have spent the taxpayers’ money to get the backing of the courts. After all, many on the board said they wanted to enact the tax so as to take pressure off of residential property owners, yet they exempted many types of businesses and the first 30 parking spaces from inclusion in the tax base. Instead the board passed a 2.86 real estate mill increase with enough wiggle room for the district to avoid putting the issue before those very same homeowners in an Act 1 referendum.

Thus in the last two years or so both Steel Valley School District and Robinson Township have considered the tax only to back off of it. Interestingly, the municipalities within the district (Homestead, Munhall, and West Homestead) are levying the tax and, for whatever the reason, have not faced a legal challenge.

As we have suggested previously, it would be beneficial for the General Assembly to revisit and clarify Act 511 and make it clear as to what type of taxes local governments are permitted to levy, the rates, and possibly a cap on how many tax sources they can draw upon.

Many Wild Cards in Sales Tax Debate

Under various proposals before legislative committees, PA counties could have the ability to tack on an extra percentage point on to the existing state sales tax, thus giving counties a local option tax, something that only Philadelphia and Allegheny currently have. Bills snaking there way through would either apply to all counties except the two that already have the tax, to Philadelphia only, or to third class cities only.

The most recent PA tax manual shows that of all classifications of local government counties raised the most tax money (97%) from real estate taxes, even more than school districts (many levy the wage tax) and money from a sales tax could be used to offset real estate tax revenue. No mention has been made of replicating the Regional Asset District set-up of Allegheny County or the general budget use of Philadelphia if the tax were to go into effect.

Of course, there is still the possibility that the state budget deliberations could involve the state raising the sales tax in order to pay for its own budgetary needs, which would likely forestall the counties getting the add-on. And then there is still the prevailing attitude that taxpayers don’t want any tax increases and county commissioners being reluctant to adopt the tax.