Alco ‘Base Year’ Assessment Plan Failing

Member Group : Allegheny Institute

Although Allegheny County’s base year plan has not completely given up the
ghost, the epitaph for the plan is beginning to be written. Created in
October of 2005 by Ordinance #45-05, the plan actually had its roots in the
earlier scheme to cap assessment increases which the court tossed out the
same year. After being adjudicated all the way to the state Supreme Court,
the base year was ruled unconstitutional and a reassessment was ordered.
New values are to go into effect January 1, 2012 under an agreement reached
by the County and Judge Wettick. Attempts to get the General Assembly to
pass a moratorium on assessments have thus far proven fruitless as have
efforts to persuade the Judge to agree to a postponement.

Until then, voters and taxpayers are sure to hear a lot about property taxes
and the reassessment as the race for County Executive winds through the
primary and general elections in the coming months. Topics like "fairness",
"statewide solutions", and "neighboring counties" are sure to be at the
forefront. So too will the assertion that the base year prevented property
tax increases.

Is the assertion that tax increases have been forestalled accurate? Looking
at the County’s property tax rate in 2003 (the year after the last
reassessment was done) and 2011 (the current year and the last under the
base year) shows that the same 4.69 millage rate is in place. So for the
County the assertion is true as long as only real estate taxes are
considered. However, it is important to keep in mind that, at the County’s
behest, the state created the drink tax and the car rental tax specifically
for Allegheny County. This money was used as a substitute for property tax
revenue that would have gone to the Port Authority. Moreover, the County
intercepted around $40 million in gaming revenues intended for the airport
to plug budget holes.

More importantly however, the County is not the only taxing body levying
taxes on real estate. All municipalities and all school districts in
Allegheny County tax property. In the lifespan of the base year there were
changes to Pittsburgh’s tax structure (though these changes did not affect
its real estate tax directly) while school districts came under Act 1, which
attempted to reform the severity of tax increases and provided opportunities
for tax shifting.

Data from the County Treasurer’s website permits a tracking of real estate
millage rates for municipalities and school districts from 2003 through
2011. Thus we are able to see which taxing bodies increased their property
taxes, which kept them the same, and which decreased them. Three
municipalities and one school district with separate rates on land and
structures were eliminated from the analysis, as were two school districts
that lie in both Allegheny and an adjacent county. That left 125
municipalities and 42 school districts with a single tax rate and wholly
within Allegheny County subject to the base year.

The data in aggregate shows that over 80 percent of municipalities and over
90 percent of school districts had higher millage rates in 2011 than they
did in 2003. That’s a huge majority of cases. Seven municipalities and one
district decreased their rates, and fourteen municipalities and two school
districts had the identical rate in 2011 as they did in 2003.

Millage Rates in Municipalities and School Districts, 2003-2011

Governing Body

Higher Millage Rate in 2011

Same Millage Rate in 2011

Lower Millage Rate in 2011

Municipalities (125)

104 (83%)

14 (11%)

7 (6%)

School Districts (42)

39 (93%)

2 (5%)

1 (2%)

Since schools (other than Pittsburgh) are on a July 1-June 30 fiscal year
the rates reflect those in effect as of July 1, 2003 and July 1, 2010.

The degree of the increases among those municipalities and school districts
that raised taxes varies: 66 municipalities and 6 school districts had
millage rates in 2011 that were at least 30 percent higher than the rates in
2003. Seven municipalities fell into a group that had rates at least twice
the 2003 level, and the highest increase among school districts was 37
percent over the 2003 rate.

The average municipal property tax rate rose 32 percent (from 4.78 mills to
6.3 mills) and the average school district tax rate rose 17 percent (from
19.78 mills to 23.06 mills). Compared with the Consumer Price Index for the
Pittsburgh metro area, which grew 21 percent from 2003 to 2010, the average
rate for municipalities grew well in excess while school districts stayed
just under the increase.

True, the County cannot control the tax rates of bodies other than their
own, but the willful and sustained effort to avoid a reassessment after 2003
had a significant impact on the tax rate decisions for municipalities and
school districts across the County. The bottom line is that a County imposed
assessment freeze did not protect taxpayers from higher taxes. And claims to
the contrary are simply bogus and born of political posturing.

What lessons can we learn from the base year debacle? The first lesson is
one that was known in advance, to wit, spending drives the need for revenue.
When assessments are frozen, as they were for the past nine years, and
spending is allowed to rise, millage rates must climb unless other sources
of revenue can be found. This we just demonstrated was the norm for taxing
bodies throughout the County.

Second, County officials must begin devising new procedures and practices to
carry out periodic assessments after the initial reassessment, given the
fact that the courts found the base year violated the uniformity clause of
the state’s Constitution. Implementing the 2012 reassessment and failing to
follow up with a different plan is not an option.

While some will heap praise upon the base year assessment freeze in the
coming months, its burial will open the door to more accurate and defensible
assessments-if the County’s elected officials will grasp the opportunity.

Eric Montarti, Sr. Policy Analyst
Jake Haulk, Ph.D., President


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