The Stimulus Trap—Allegheny County Style

Seems like only yesterday we were warning the state, school districts and municipal government about the dangers of grabbing Federal stimulus dollars and spending them as if they were permanent replacement funds for local revenue shortfalls. Now the stimulus dollars are gone and local tax revenue has not risen enough to make up the difference. Case in point; Allegheny County is facing a significant budget problem for 2012 the Chief Executive spokesperson says stems directly from the cuts in Federal and state funds that were available in 2009, 2010 and 2011.

Rather than make the spending cuts in the Executive’s proposed 2012 budget plan the majority members of County Council are proceeding with legislation to boost the County tax rate to 5.69 mills, a 21 percent increase from the 4.69 rate currently in place. As we have noted earlier, the 21 percent hike in a reassessment year is likely to run into legal difficulties.

The problem for Council is twofold. The failure to adjust spending to a lower path when the stimulus funds were arriving in anticipation of the day when they would no longer be coming in is simply inexcusable. The nearly decade long adamant refusal to allow property assessments to change to reflect market movements has locked property tax revenues for the County at artificially low levels with the major inequities frozen in place as well. Now, the Council wants to solve all the problems created by past policy blunders in one dramatic act-raising taxes by 21 percent.

Thanks goodness state law will protect property owners although it is likely to get messy and drag out any eventual resolution. The question is how far and how vigorously the new Executive and the Council will push against the law as they have all too willing to do over the last few years, resulting in expensive lawsuits that have all been lost-up to and including a Supreme Court order to reassess.

Bankruptcy for PAT? Councilman Agrees with Institute

A member of County Council plans on introducing a resolution this evening that, if approved, would call upon the Governor and the General Assembly to permit the Port Authority to file for Chapter 9 bankruptcy. Right now, under Pennsylvania law only municipalities are able to file for bankruptcy, so it would take an act of the Legislature to extend such ability to an authority like PAT.

It is an idea the Allegheny Institute first raised in a Policy Brief this past November (see Volume 10, Number 65) for the reason that the legacy cost burden for PAT was so severe "benefits" would soon be outpacing "wages". With transit workers preferring layoffs to benefit concessions and enjoying the right to strike, PAT management is left with the choices of cutting service and/or raising fares. The resolution states that "…the best interests of the Port Authority of Allegheny County and the County’s residents may be served by seeking the protections afforded by Chapter 9…"

Federal bankruptcy law allows states to permit or forbid bankruptcy filings by their local governments and to place as many pre-conditions on filing as they wish, including defining which types of local governments can file. In Pennsylvania filing is restricted to municipalities and the conditions are laid out in Act 47. Philadelphia and Pittsburgh have additional pre-conditions upon them. Since the PA Constitution prevents revocation of already granted benefits by ordinance or statute, the bankruptcy court would be an avenue under which the Authority could get pensions and benefits under control.

So will Council pass the proposal? Who knows. Given the fact that the Council stands ready to implore PAT to spend all of its bailout money ASAP they seem content to think that the state will be ready to rush in with more money. Unfortunately, recent history has proven that line of thinking to be accurate.

County Council: More Assessment Futility

An Allegheny County Council Committee has voted to instruct the Solicitor to file suit against the state Legislature in an effort to force it to rewrite Pennsylvania’s property assessment laws. It would have been wonderful if the Council had spent the time and effort trying to get up-to-date accurate assessments of properties they have spent trying to avoid doing the right thing and making ridiculous claims about the unfairness of being forced to do the right thing.

The Allegheny Institute has written for many years about the need for the Legislature to reform the state laws governing assessments. Such reform would include mandatory assessments at least every 3 to 5 years, state verification of sales price data, uniformity of assessment standards and state training for assessors.

Where was the Council when these straightforward and common sense recommendations were being offered on multiple occasions? They were busy concocting and defending assessment schemes that perpetuated well documented inequities. Now that the Supreme Court says do the re-assessment and has suggested the state reform assessment legislation to bring it into the 20th century, the Council wants to get on board and appear to be doing something to protect those who have benefitted from under assessments all these years. Cynics might conclude a political motivation is behind this latest move by Council.

Council chair keeps telling us what a competitive disaster a re-assessment will be. What about the disaster that happens every year when tax bills go out and over assessed and correctly assessed owners are forced to pay more so the under assessed can pay less than their fair share? And how has the County’s scheme protected against school and municipal tax rate hikes? In short, it hasn’t. Many schools and municipalities have been boosting their tax rates during the County’s base year freeze. The County avoided a tax hike only through being granted the drink and car rental tax. So much for worrying about the taxpayers as the Council and Executive incessantly claim to be doing. What a scam!