Just How High Did School Taxes Climb?

In the 2006-07 school year, the median school tax rate in Allegheny County for all districts (excluding Clairton, which has separate land and building rates) was 21.62 mills (2.16%). That was the first school year after which Allegheny County Council expressly declared that it would be using a base year assessment plan and would not be conducting any reassessments.

For the school year that just began at the beginning of July (the 2012-13 school year) the median school tax rate for those same 42 districts was 23.275 mills (2.32%). The median rate grew by 8% for all districts.

But not all districts boosted taxes in that time frame. As a blog last week noted, nine districts either cut tax rates or left them unchanged. Grouping together the 33 districts where taxes went up shows that the median rate for those districts went from 21.5 mills to 24.16 mills, or 12% higher, over the time period. Ten of those 33 districts had tax increases of 12% or more: ranging from 25% in South Fayette to 12% in Bethel Park. Average or above-average increases came in such districts as Elizabeth-Forward (17%), Upper St Clair (15%), and Gateway (13%). Recall too that much of this time frame was spent living under the requirements of Act 1, which tries to limit the magnitude of annual tax increases but provides ample opportunities for districts to secure exceptions for large tax increases.

Assessment Task Force Shies Away From Solutions

Nearly three years after the Supreme Court ruled Allegheny County’s base year plan to be in violation of the uniformity clause of the Pennsylvania Constitution comes the report of a Task Force on reassessments.  This latest foray into looking at the state’s seemingly insoluble assessment problem was created pursuant to a resolution passed by the General Assembly in 2011. 


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Excessively Easy Exemption Criteria for Tax Hikes

The Department of Education just granted 199 Pennsylvania school districts an exemption enabling them to raise taxes by more than the "index" calculated by the Department would otherwise allow.

Under current law, exemptions are granted for three reasons; to pay down construction debt, fund special education costs or cover pension funding. Well, isn’t that nice. Since money is fungible, revenue insufficient to cover total planned spending under current allowable tax rates can be said to represent a threat to one of the three exempted budget items. Thus, an exemption is almost automatically approved by the state. As a result, the only real constraint on school districts raising taxes beyond "index" allowed limits is the painfully skimpy sympathy school boards have for taxpayers.

School boards serve too many masters and unfortunately taxpayers are at the bottom of the list after teacher unions and parents of students who always demand top tier amenities for their students and who show excessive deference to and sympathy for teachers at contract time-don’t want any strikes you know.

So, given the state law that does not allow teacher layoffs for economic reasons and union intransigence in making concessions to help financially strapped districts, the natural inclination of school boards to avoid looking for spending cuts so as not to anger any of their preferred constituencies, it is an easy way out for them to ask for an exemption to their tax rate limitation and claim the additional funds are needed for one of the three exempted items. Mere child’s play. No real spending cuts ever need to be contemplated and taxpayers get the bill.

Referendum Finally Comes to Allegheny County

In a blog entry last week we wrote about Act 1 and pointed out that "voters have had little, if any, opportunity to vote a school tax increase up or down on a ballot". This is due to the school tax reform statute allowing for tax increases up to an index or the possibility of securing one or more of ten exceptions that allow for an above-index tax increase without having to face the voters.

Just today it was reported that the Clairton School District will put its proposed 5.57 mill increase on the ballot for voter approval. The District would be allowed to increase taxes .57 without triggering a referendum, and they have sought out exceptions from the state. But District officials viewed the state budget proposal for education and the uncertain nature of its exception requests and decided to push forth with the referendum.

County data on millage rates shows that the District, like the City of Clairton, has a bifurcated tax rate. This means land and buildings are taxed at separate rates. The District switched from a single rate in 2006. As of 2009 the district’s rates were 3.1 mills for buildings, 75 mills for land. Data for 2010 shows that the rates increased to 3.9 mills and 87 mills, respectively. That’s a jump of 25% for buildings and 16% for land. It is not clear if the 5.57 mill proposal applies to one category or the other or is split between land and buildings.

But it is an extraordinary increase based on the index and the current rates. Now the District can try and make its case to the voters why the money is needed and a clear up-or-down vote can be made on that argument.

Is Tax Foundation Comparison on Solid Ground?

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.

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.

The Tax That Really Wasn’t

As a quick follow up to our entry earlier this week on the Steel Valley school board’s discussion of a parking space tax, one of the directors argued that "Robinson Township has a similar tax on the books and it looks like Robinson Town Centre is doing just fine".

Well Robinson is doing fine, and it is likely because the township in fact does not have a parking space tax on its tax menu. It was discussed in 2008, which prompted an Allegheny Institute Brief soon after which raised the problems associated with taxing free parking. The tax was never approved, which was confirmed by both the administration office and the tax collector of that municipality. Hopefully the director doesn’t believe that the City of Pittsburgh has a tuition tax just because that tax was briefly entertained.

For now, cooler heads have prevailed in Steel Valley and the tax has been tabled.

Schools to Take Parking Tax for a Test Drive

We’ve written in previous Briefs and blog entries about the efforts of several municipalities in Allegheny County to levy a tax on supposedly free parking spaces where no transaction is carried out. Unlike the parking tax in Pittsburgh and other municipalities around the state where patrons pay for an on-street or garage space and the payment is subject to a tax, this new levy would place a flat fee on a business based on the number of spots they have.

Municipalities have taken this course of action under the presumption that parking is a taxable privilege under Act 511 and, since the Act does not prohibit taxing such a privilege (recall the same argument was made for the tuition tax) then they are free to do so. Someone wronged by the tax would have to bring a lawsuit to determine if the privilege is indeed taxable.

Well the stakes have been raised in the Mon Valley as the Steel Valley School District is prepared to discuss levying a $30 per space tax in the communities of Munhall, Homestead, and West Homestead-all three communities levy a similar tax-after exempting the first 30 spaces. Clearly, the logic for the District is either (1) since Act 511 applies to school districts as well as municipalities and nothing in the law prevents districts from having such a tax they should do it or (2) if no one has yet challenged whether this tax is permissible why leave money on the table?

Is there a limit to taxable privileges for local governments in PA? This instance might give us an a better answer to that still murky question.

Is Act 1 Temporizing School Taxes?

With all the tax talk of late-a possible boost in the state income tax, extending an extra percentage point on the sales tax to counties, etc.-the school tax provisions of Act 1 are slipping under the radar. Schools start their fiscal year on Wednesday and districts in Allegheny County are finalizing their budgets.

Recall that Act 1 utilizes gaming money to target tax relief to homeowners through an expanded homestead exemption and sets a cap on how high school taxes can go on an annual basis. It is this second component, the Act 1 index, that warrants scrutiny. It protects property owners from so-called "extraordinary" tax increases through setting a cap each year. This does not prevent a school district from enacting a tax increase-it just tries to control the size. For instance, Upper St. Clair’s 4.1 percent Act 1 index allowed them to adopt a 4 percent increase, going from 22.45 mills to 23.37 mills this year. Avonworth, Bethel Park, Fox Chapel, and Woodland Hills also plan to increase millage rates within the allowable index for this coming fiscal year.

Failing to live within the tax cap does not mean the matter goes to the voters, either. That’s because the law allows for ten possible exceptions by which a district can exceed its cap without putting it to a referendum.

In fact, it is fair to say that few voters across the state have had a referendum question on school taxes and spending come before them at the ballot box. That’s a far cry from the type of control voters in other states have and probably not what the voters of this state were thinking they would get when the Legislature went into special session on school taxes.