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".
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.
The County Executive released what he anticipates the 2013 property tax rate to be this past week. As a result of changes to state law in 2005, the County and municipalities have to adjust millage rates following a reassessment to be revenue neutral. Subsequent tax rate hikes have to occur in a separate action. Recall that last December the County hiked millage rates from 4.69 to 5.69; with new values countywide were expected to rise 35% (that’s still what the County’s assessment webpage shows) but a newspaper article said the County is basing its new tax rate on a 20% increase in value.
How will that tax rate, if it holds, affect tax bills? Property owners can use the millage rate to calculate it against the 5.69 rate in place. Assuming no change to the homestead exemption that allows a homeowner to reduce the assessment by $15,000 for County tax purposes, a home assessed at $100,000 would apply the millage against $85,000. This year, the County tax bill for that home would be $483.65. If the assessment rose to $120,000 for 2013, the homeowner would take the homestead exemption (now the County assessment would be $105,000) and apply a millage rate of 4.73 against it and the tax bill would be $496.65, a $13 increase.
We went back to the data complied for our most recent report and applied the proposed millage rate against our 100 sales. We actually had a scenario in the report which estimated the County rolling the millage rate to 4.69 mills, so the 4.73 rate is not much different. Of the 100 sales, 57 properties would pay more in County taxes, while 43 would end up paying no more or less. The 4.73 rate moved one property in our sample (in quartile 3) from paying $2 less to breaking even.
“It is important to understand that a taxpayer’s tax liability will not necessarily increase when the assessed value of their property increases…One of the common misconceptions held by Allegheny County property owners about the reassessment is that the reassessment will automatically result in a higher property tax bill for the homeowner…” -Allegheny County Controller’s Sales Ratio Study, September 2012
This week’s Brief pointed out the rather complex process under which the County, municipalities, and school districts will have to adjust their millage rates when the 2013 reassessment is made official. The Brief points out that the old days of taking 5% above the revenue collected the year before the reassessment are no more.
So when the business manager of a south hills school district noted that "revenues in the budget were based on the county holding a countywide reassessment this year in which school districts and municipalities would have been permitted to keep a 5 percent windfall" there is going to have to be a major undertaking of school officials, solicitors, and others to ensure that the new legal obligations are being followed. The officials of the District might be wary of budgeting anything given the resistance of County leaders to move forward with a reassessment.
As a result of changes to the law in recent years, there is no ability to take a 5% windfall: the County and municipalities can vote to get 5% after they establish a revenue neutral rate and school districts are limited to the confines of their Act 1 index.
In the weeks since the 2012 assessed values were judicially postponed to become the 2013 assessed values, mailings have been sent out to property owners in some parts of the County.
Since 2003, Allegheny County has offered a homestead exclusion that reduces the assessed value of owner-occupied residences by $15,000.
As the Pittsburgh Steelers prepare for yet another AFC Championship game, chants of "Here we go" fill the air. However, while the fans bask in the football hype, we are all left listening to the hype from City boosters proclaiming the game will be a financial boon for the region. So here we go again.
While fans will certainly stock up on all manner of paraphernalia with the Steelers logo and on snacks and beverages for the big game, this does not represent new spending in the area’s economy. After all, for those who live in the area this only represents a redistribution of existing spending. The only expenditures that will make a difference will be from those out-of-town visitors who are here specifically for the game.
But will they make much of a difference for the City? VisitPittsburgh is estimating that the Winter Classic generated about $15 million and the first playoff game brought in another $19.2 million for the region. Their estimate for the AFC Championship game is about $26 million. While there may be a direct benefit for the hospitality industry as visitors pack hotel rooms and restaurants, it will not provide much directly to the City. The City will see an uptick in the amount of parking taxes, amusement taxes, and the facility usage fees collected. But these taxes represent only a small fraction of the City’s tax revenue stream, about 16 percent. There may even be a small increase to the earned income tax if City residents work extra shifts as a result of the increase in business. However other taxes such as sales, including the Regional Asset District tax, and hotel are collected by the State or County and do not come back directly to the City.
Keep in mind that this is not the first playoff game or major event hosted by the City. Over the past decade, the City has been host to a few football playoff games including two AFC Championship games, the baseball All-Star game, multiple Stanley Cup playoff series, the Winter Classic and the G-20 summit. And each time, City cheerleaders tell us how much money is being spent and how great it is for Pittsburgh. Yet the City has been mired in economic distressed status since 2004 and is having difficulty finding revenues to address legacy costs such as pensions.
Events like the AFC Championship games are certainly fun for fans and add a positive buzz to the atmosphere. But to suggest that they represent a windfall to the area is an overreach, especially for the City. And if the Steelers are fortunate enough to win this game and advance to the Super Bowl, will the same folks who are talking about the windfall for Pittsburgh then tell us how sad they are to see all the money leave Pittsburgh and go to Dallas, the host of this year’s game? After all thousands will spend money on travel, hotel, tickets, and entertainment and food while in Dallas. Probably not.