The property tax increase
By Jake Haulk & Eric Montarti
Published: Sunday, December 11, 2011
Allegheny County Council's vote to increase property taxes to 5.69 mills -- a 21 percent increase -- is consistent with the disconcerting pattern of passing illegal legislation that is overturned in court.
Under normal circumstances, when there is no reassessment pending, a property tax increase by County Council is subject only to the Home Rule Charter language of Article VII, Section 4c, which requires "an affirmative vote of at least two-thirds of the seated members." Last Wednesday's vote was 11-4, veto-proof, along party lines.
But in the current situation, Act 71 of 2005 strips the county's power to boost property taxes in excess of 5 percent without court approval. The act requires that in a reassessment year, Allegheny County and its municipalities (school districts are subject to the subsequent Act 1 requirements) change millage rates by an amount that will hold property tax revenue at the previous year's level.
After establishing the revenue-neutral millage, the taxing body is permitted, "by a separate and specific vote," to increase its millage rate to a level at which it brings in up to 5 percent above what it collected the previous year.
Whereas prior to 2005 the county and its taxing bodies were able to take 105 percent of the previous year's revenue in a reassessment year, Act 71 mandates that that 105 percent come in a two-step process. If Allegheny County or other taxing bodies want an increase in excess of 5 percent, they must petition Common Pleas Court, which can approve an increase based "upon good cause shown" by the petitioning taxing body.
Seven years after adoption, Act 71 appears to be headed for its first court test.
Using 2011 assessment numbers and the current 4.69-mill tax rate, the county projects $294 million in property taxes -- $274 million after homestead exemptions and refunds. With the reassessment proceeding toward implementation in 2012, the county will have to adjust its millage to keep tax collections level with 2011.
It then would be permitted to take a separate vote to increase taxes to take in 5 percent above that revenue-neutral amount, an amount of roughly $14 million. If the county chooses to go after more revenue, it would take the approval of a judge.
It seems clear that the council's tax-hiking Democrat majority is heavily influenced by Chief Executive-elect Rich Fitzgerald, a former council member and president.
• Do county officials believe the reassessment is not happening?
New assessment notices are to be mailed to property owners in the Pittsburgh Public Schools District (the City of Pittsburgh and Mt. Oliver) in two weeks, something the County Council has no power to stop). And that creates a real problem for the council because there is no conceivable legal way the city will have new assessments for 2012 while the rest of the county will not.
The new assessments will require the city to go through steps mandated by Act 71 to hold revenues neutral from 2011 and then to vote for a tax hike of up to 5 percent in a separate vote -- if it chooses to raise taxes. That has to be done very soon in order for tax bills to go out in January.
But it seems the County Council and Fitzgerald are planning to set aside the new city and city school tax bills in the new year by retroactively rescinding the new assessment numbers for Pittsburgh and Mt. Oliver.
Taxpayers and City Council would be overwhelmed by uncertainty and confusion. The city and its schools would have to take out tax anticipation loans, which is the primary reason Judge R. Stanton Wettick ordered that the city assessments be completed first. A rescission of the new city assessments by the county would run dramatically afoul of the judge's orders.
• Are county officials contending that Act 71 does apply and that they can ignore it?
Fitzgerald has argued that the county can raise taxes now for 2012 and, if there is a reassessment, the revenue-neutral calculation would be based on 2011 revenue raised by 21 percent.
But that is a ludicrous argument. To be revenue-neutral compared with the 2011 collection can only mean revenue-neutral relative to the actual amount of 2011 revenue -- not the 2011 level artificially raised after the fact by applying a retroactive tax hike.
The authors of Act 71 cannot possibly have envisioned the language of the bill being so tortured and misused.
• Does County Council believe the Supreme Court will overturn its "base-year" decision?
The high court's decision will almost certainly not be revisited.
Additionally, Fitzgerald's reading of the Supreme Court ruling is in error when he argues the court should have tossed out base-year assessments for all counties. The court ruled only that the base-year system as applied in Allegheny County violated the state Constitution's Uniformity Clause.
Fitzgerald now is arguing that the courts should not have the power to force the county to do something its elected officials and the majority of voters do not want and, therefore, Allegheny County is within its rights to ignore the courts.
• Does County Council think the General Assembly will intervene?
The Legislature adopted base-year assessments. There has been virtually no appetite in the Legislature to reform the system.
Allegheny County Council's tax hike surely is headed to court. Indeed, it would be useful for Judge Wettick to issue an injunction pending the completion of the reassessment on the grounds that it will create enormous confusion and delays in a process that has already dragged on for years and perpetuated the inequities in the assessment errors that have been in place for a decade.
One can only imagine the turmoil if Fitzgerald follows through on his pledge to refuse to certify and mail out the new assessments even though new assessments are available and the county is under a Supreme Court order to do so.
Will the judge hold Fitzgerald in contempt and jail him?
One thing is sure: Allegheny County is about to witness property tax chaos if the County Council raises the millage rate by 21 percent and refuses to carry out the Supreme Court's order to reassess.
Jake Haulk is president of the Allegheny Institute for Public Policy. Eric Montarti is a senior policy analyst there.
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