The Missing Tax Piece
This week the Allegheny County Chief Executive presented the County’s operating and capital budgets for 2017. The real estate millage rate won’t be increased and the Executive’s message in the Comprehensive Fiscal Plan duly notes that “for the 15th time in 16 years, the 2017 Comprehensive Fiscal Plan accomplishes [a balanced budget] without an increase in the property tax millage rate.”
In media coverage of the presentation, the Executive was quoted as saying “…the owners of the typical $100,000 house in 2002 paid $422 in county property tax. This year, that same house is worth $180,000, but the owners would pay only $468, a $46 increase amounting to 0.7 percent per year.”
In 2017, with no changes to the current millage rate of 4.73, and, no change to the current homestead exemption of $18,000 (last increased by ordinance in February 2013), a $162,000 assessment would throw off $766 in County property tax ($162,000 x 4.73 mills), a $344 increase in taxes.
The original scenario sounds pretty good, doesn’t it? Who would not want to live in a $180,000 home and pay about $300 less in taxes than that value would stipulate? Alas, some information was missing in the article.
For certain, in 2002 a $100,000 assessment would have generated $422 in County property tax. That year, the millage rate was 4.69, the homestead exemption, established under a County Council ordinance in April of 2002, was $10,000. Applying a $90,000 assessment against 4.69 mills means the tax bill would be $422.
In order to have a $468 County property tax bill currently, the assessed value of the house would be closer to $99,000, and that’s after applying the current homestead exemption. That was the missing piece.
And what of the point that such a home would be worth $180,000? That takes a lot of assumption: the demand for homes in the particular area would be important, but also what the market value of the home in 2002 was. If it was close to $100,000 (since that was right after a reassessment), then we are talking about an 80% increase in value in fifteen years, an increase that far outpaces what County budgets list as certified taxable value in 2002 ($61 billion) and in 2016 ($76 billion) and the resulting 24% increase. That’s a pretty extraordinary jump, assuming no change to the characteristics of the house or the property in fifteen years.
If the market value of that home was higher than the assessed value back in 2002, which is what the statement about the “worth” of the home currently implies, then the “worth” of the home in 2002 may have been closer to $153,000 (based on the % of “worth”/assessed in the current example). Then we are talking closer to a 17% increase since 2002.