Tag Archives: Tax Increase

School Districts Boost Taxes

Posted on by

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.

Plum School Board Caves

Posted on by

After a May vote to hold the line on taxes and spending that would have led to 23 staff layoffs, the Plum School Board made a sharp U turn and approved a budget June 26th that raises taxes and uses nearly a million dollars of its reserves in order to save most of the jobs previously slated for elimination. All this with no concessions from the union. Remember the principal causes of the budget crisis are the additional million dollars or so required for teacher pensions and the cost of living increases for teachers.

The board has done what governing bodies have done for years: kick the can down the road. Assuming the pension payment is about the same next year and teacher cost of living increases are about the same, the budget shortfall will be back. Only next year the reserves will be too low to allow another million dollars to be tapped to close the shortfall. Than will mean going to the state for an exception to the allowable tax rate hike or a referendum to ask for permission to boost taxes for a second straight year. Alternatively, but highly unlikely, they might decide it is time to make the staff reductions needed to prevent more tax hikes.

One thing is for sure: as long as they are taking guidance from the union and the students who do not have to pay the bills, the board will keep making bad decisions that will come back to haunt them later. Leaving the May vote in place would have accomplished two important things. It would have dealt fairly with taxpayers and precluded next year’s budget angst. Secondly, it would have sent a strong signal to the union that the board will be very hardnosed at the next round of contract talks.

One thing we have learned in recent years is that school boards operate by and large on the dictates of the teacher unions. This episode proves once gain how powerful the union is and how little taxpayers are considered when spending and taxing decisions are made.

Plum taxpayers (and others across the state) will now begin to learn the reality of the underfunded pension mess as it appears the state is in no mood to make the serious reforms that will reduce the unfunded liabilities.

Letter Writer’s Shock Should Be Channeled

Posted on by

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.

Another Tax Plan for Pittsburgh’s Non-Profits

Posted on by

Noting that non-profits in the City of Pittsburgh own a lot of property and employ a lot of people but are tax exempt and not a lot of them participate in helping the City through payments in lieu of  taxes, a state Senator has supported extending Pittsburgh’s Payroll Preparation Tax (PPT) to non-profits having 250 or more employees. 

 

 

The PPT is a flat rate levy of 0.55 percent on the total payroll of businesses within the City. This tax was imposed by Act 222 of 2004, signed into law on December 1 of that year, and was part of a package of tax reforms that led to abolishing the mercantile tax and the business privilege tax-two very onerous taxes that were not based on company earnings and were quite punitive for some businesses.

 

Act 222 of 2004 does mention charitable organizations.  It says they should calculate the PPT but would only be liable for activities that do not meet the requirements of the IRS Code or the state’s law on public charities. The law also notes that nothing in the Act would prevent a non-profit from making agreements with the City to provide services or make voluntary payments.

 

The Senator’s memorandum on the proposed legislation states that his proposal would reduce the PPT on for-profits to 0.5 percent and levy the PPT on large non-profits at a rate of 0.4 percent.  The memorandum notes that non-profit employers with more than 250 employers account for over 70 percent of all non-profit employment in the City.  Governmental entities including authorities were not subject to the tax when the Act was written and will not be in the future in light of the constitutional provision exempting government entities.

 

The issue of extending the tax to non-profits was debated prior to Act 222 becoming law.  Indeed, the first Act 47 recovery plan for Pittsburgh noted “there are constitutional impediments to levying this tax on charitable organizations… [and would likely] lead to litigation between the City and the institutions.” 

 

Pittsburgh is the only municipality in the Commonwealth to have a payroll preparation tax (it was created only for Cities of the Second Class and Pittsburgh is the only one in that class) but there are large non-profits in other corners of Pennsylvania.  A 2009 study by the Legislative Budget and Finance Committee identified 183 municipalities that are home to either a non-profit general acute care hospital, a private four year college or university, a state related or a state owned college or university, or some combination of the four. 

 

Could a selected group of non-profits in one city be subject to a tax that only exists in that Pennsylvania city?  Can that city treat non-profits differently based on their size?  Why should a charitable organization with 250 employees pay the tax but those with 249 employees not?  Even more to the point, since the Pennsylvania Constitution allows tax exempt status for charitable organizations as defined in statutes adopted by the General Assembly, how would it be constitutional to allow a municipality to levy a tax on charitable organizations that have been granted exempt status under Pennsylvania law?  These are just some of the long list of technical and legal questions raised by the proposal that will have to be addressed by legislative committees if the bill ever reaches the committee hearing stage.  

 

Moreover, there can be little doubt that in the event the proposed legislation moves forward, the foundations, universities, churches and other non-profits in the cultural, educational and economic development community will be up in arms about the tax, especially the larger ones currently in the crosshairs of the proposed tax bill.  These groups have many loyal and powerful friends who will point out all the good the non-profits do for Pittsburgh to help maintain its high rankings in many desirable amenities and in their attention to community needs.  These friends will almost certainly importune Harrisburg so as to make sure this bill never gets out of committee. 

 

It is unknown and perhaps unpredictable at this point whether the proposed PPT reduction on for-profit businesses will prompt that sector to mobilize and urge the Legislature to adopt the lower tax rate planned for them as part of the scheme to levy the PPT on non-profits. 

 

None of this means there are no legitimate questions about what constitutes a qualified charitable organization.  Take for instance the rise of the mega-hospital such as UPMC where revenues have, on occasion, exceeded expenditures by large amounts or when a university steps over the line into areas of for-profit activity.

 

Now would be the perfect time for the Legislature to review and update any laws pertaining to the criteria that must be met to qualify as a charitable organization and to delineate clearly what constitutes for-profit and non-profit activities.  The Legislature can and should work on assisting taxing bodies in determining what if any for-profit activities exempt organizations are involved in. It might be as simple as requiring charitable organizations to file with state and local taxing bodies the equivalent of a Federal form (or copies of their Federal report) that contains information and explanations about for-profit activities to the state and local taxing authorities.  Does the City know how much it collects from property taxes or payroll taxes attributable to non-profit activity that does not meet the charitable test?  If not, that surely needs to be learned and quickly. 

 

Bottom line for the proposed PPT bill: Non-profits that qualify as charitable organizations and have been granted tax exempt status under Pennsylvania laws and by the IRS will not be taxable under Pennsylvania’s Constitution.  To levy any taxes on these organizations will require either an amendment regarding Article VIII, Section 2, paragraph v of the Pennsylvania Constitution or a General Assembly rewrite of laws spelling out the criteria required to be granted tax exempt status.  Neither will happen any time soon, if ever, given what is at stake for the parties involved. 

 

Something needs to be done to put a stop to the almost annual controversy over non-profits and whether they should somehow be taxed. 

Bizarro World

Posted on by

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.

The Stimulus Trap—Allegheny County Style

Posted on by

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.

Property Tax Increase Enters through the County’s Front Door

Posted on by

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.

Carnegie Library System: Comparative Operating Statistics

Posted on by

After receiving little attention in the way of research since the 1990s, the state of the Carnegie Libraries-a public trust of 19 libraries with a collection of over 5.2 million items based in the City of Pittsburgh-has been a much covered topic since 2008.

 

Continue reading →

Library Referenda: A Condensed History

Posted on by

Proponents of finding additional funding for the Carnegie Libraries within the City of Pittsburgh’s borders want to place a question on the November ballot asking voters in the City to approve a 0.25 property tax increase.

Will the measure pass if placed in front of the voters? Informal data collected by the state Department of Education’s Office of Commonwealth Libraries shows that about half of the recent library tax questions were approved in recent years. Going back to 2001 the data shows eleven referendum questions posed around the state. Five questions were approved, six were voted down. Two of those approvals came in North Apollo Township (Armstrong County); first a levy was approved and then voters opted to retain the tax four years later.

The proposed property tax millage increase for funding libraries ranged from 0.10 mill in Robinson Township (Allegheny County) to 1.5 mills in Chester City (Delaware County). Two countywide referendum proposals (Perry County in 2002 and Pike County in 2009) were defeated. Two questions in the western suburbs of Allegheny County that both went on the ballot in 2003 went in opposite directions: the aforementioned Robinson approved, Moon Township rejected theirs.

If the question does get on the ballot in the City both proponents and opponents can make their respective cases known. According to the 2009 annual report of the Carnegie Library system, its biggest source of revenue is the Regional Asset District sales tax ($17.6 million) followed by the Commonwealth ($5.9 million). The City of Pittsburgh provided $74,000 that year. Both the RAD and state contribution were up compared to 1998’s financial report, but the City’s contribution was down. So one the one hand there could be an argument that the City needs to give more while on the other hand there could be a case made that there is sufficient public sources invested in the libraries.

Goodbye Superintendent, Better Luck at Your New Job

Posted on by

In a going away interview the Pittsburgh school superintendent regaled the interviewers with how hard he worked to make a difference. He declared success in improving teacher effectiveness and creating the Promise Scholarship Program. He was more modest in regretting that only modest improvement was achieved in the high schools.

Too bad he did not mention the Promise Program’s failure to keep or attract students as its advocates predicted excitedly it would. Enrollment continues to fall, especially in the high schools. Nor has the Program helped academic progress. Indeed, as we have suggested earlier, there is a very real possibility the Promise Program has reduced incentive of serious students to work hard.

After five years, per students costs have not been reduced despite school closings and fewer teachers employed. Meanwhile, non-teaching administrative jobs have jumped sharply. Moreover, the District has maintained its spending levels without raising tax rates because of a $40 million infusion of state money provided through the Federal stimulus program. The next budget cycle will look a lot different as the Federal money is no longer available. A tax increase is almost inevitable.

So here’s wishing the outgoing superintendent better luck at his new job. Resurrecting a bankrupt college might be a snap compared to making progress in an urban school district.

One wonders if in his heart of hearts he ever thought, "You know. There might be something to this school choice, voucher idea." That could keep a person awake nights for a long time.