Less real estate money coming into Connellsville than budgeted over the years
EDITOR'S NOTE: This is the second in a series of articles concerning the City of Connellsville, its financial problems and what the future might hold. Today, what's coming to Connellsville in real estate and residential taxes.
From 2008 to 2012 real estate taxes and residential taxes collected in Connellsville were less than what was budgeted by city officials for each of those years.
Real estate taxes are made up of three revenues.
The first is the current year levy, which is the money the city expects to collect for the year.
The second is the prior year levy, which is the money the city processes right after the Christmas holiday.
Connellsville City Treasurer Judy Keller said the city accepts a Dec. 31 postmark even if it arrives in the tax office in the new calendar year.
“So it is usually a smaller amount, because it is what is ‘processed' right after Christmas and still not considered ‘delinquent,'” Keller said.
The third is the delinquent levy, which are the late taxes collected by the tax-claim office for the prior year and earlier.
In 2008, the city budgeted $1,029,000 in real estate tax revenue, but only received $979,355.35, a difference of $49,644.70. Every year since, the city has received less than what was budgeted.
The differences include $48,227.45 in 2009; $48,051.06 in 2010; $32,538.01 in 2011; and $53,142.55 in 2012.
In 2013, $1,109,516 was budgeted for real estate taxes and as of July 31, the city had received about $928,000.
Residential tax is the $5 that comes out of the $10 per capita tax, which is taxed to every city resident over the age of 18 and who receives at least $5,000 in annual income.
Who pays what?
Keller said the average homeowner is paying between $275 and $400 annually in taxes.
Some vacant lots in town are taxed anywhere between $0.66 and $2.28 and $36 per year.
Very few homes are taxed as high as $1,500 to $1,700.
There are also business complexes in the area, like the Connellsville Shopping Center, which pays as much as $9,868 per year, she said.
Those numbers come from the millage rate the city sets and calculates by applying the percentage to all the taxable properties that are assessed.
What a mill is worth comes from Fayette County each November and varies from year to year. For example, for 2013, one mill in the city equals $166,884,67. That dollar figure is based on the total value of all taxable property inside the city.
Every one dollar of tax is produced for every $1,000 worth of assessed value from county assessment figures.
“So, at the 6.66 current city tax rate, a home assessed at $100,000 would pay $666 each year to the city,” Keller said, adding that the assessed value is not the same as what it might sell for on the real estate market.
The city has not had a tax increase since the late 1980s.
“I would say most cities have raised their millage in that time frame,” said Richard J. Schuettler, deputy executive director of the Pennsylvania Municipal League, a nonprofit, nonpartisan organization established as an advocate for Pennsylvania's third-class cities. “But that does not mean that Connellsville should or should not have.”
Eric Montarti, senior policy analyst at the Allegheny Institute for Public Policy, a nonprofit advocacy group to defend taxpayers and businesses against the intrusiveness expansion of government, said he cannot make generalities on third-class cities on whether it's beneficial or not for a city not to raise its millage rate for such a long stretch of time.
For example, Montarti said Monroeville voted to raise millage for the first time in 21 years in the same year there was a reassessment.
Monroeville's tax rate for 2012 was 2.2 mills. But the increase in property values from reassessment required the municipality to reduce last year's 2.2 mill rate to 1.8 mills. This year, an Allegheny County Common Pleas judge approved a tax-rate hike for Monroeville that exceeds a state anti-windfall provision intended to protect taxpayers after property reassessments. The judge ruled that the municipality could exceed the cap set by state law by setting the real estate tax rate at 2.431 mills, which is 0.547 mills higher than the 5 percent limit would permit.
“Now some would say ‘that's great, look how long they held off on a tax increase,' despite the fact that they got slammed with one big hike all at once,” Montarti said. “While others might argue that if expenses were growing year after year, then it might have been better for the town to be enacting smaller increases over time if they were not willing to cut expenditures.”
The number of taxable parcels for Connellsville is 3,279 for 2011; 3,280 for 2012; and 3,267 for 2013.
For 2013, the total assessed value of all taxable property in Connellsville is $167,051,320. Applying the millage rate set by the city at 6.66 percent, the total amount that can be brought in is $1,112,561.79, and that's only if everyone pays real estate tax, Keller said.
With a collection rate of 87 percent applied to match the 2012 collection percentage, the estimated total to be collected is $967,928.75.
Residential taxes are broken down into two categories: residence tax (current year), which are taxes due and owed for the current year, and residence tax (prior year), which are taxes due the year before and earlier.
In 2008, the city underestimated the residential taxes, budgeting $14,000 and receiving $14,391, leaving a difference in the black of $391.83. However, a trend of overestimation came the following years, leaving the city in the red in residential taxes collected.
In 2009, the city budgeted $16,000 in residential taxes, but received $13,498.83, which was $2,501.17 less than budgeted. In 2010, the city budgeted $16,200; 2011, $16,200; and 2012, $13,200.
The city received $4,392.40 less in 2010; $3,146.07 less in 2011; and $2,033.41 less in 2012. As of July 31, the city received $9,963 of the budgeted $13,200 for 2013.
“They are the best guesses we can make,” said Connellsville Councilman Brad Geyer, who is also the city's director of finances. “Usually, we take the value of taxable property (given by the county) and figure out what an 88 percent or 89 percent collection rate would be, and that gives us a starting point.”
According to Keller, the collection rate for real estate taxes has shown an average in the high 80 percent range.
For example, there was $1,111,015.21 in collectable taxes to be paid in 2007 and $123,490 in uncollected taxes was turned over to the tax claim bureau for collection, creating a collection rate of 88 percent. The collection rate remained at 88 percent until 2011 when $118,986.05 was not collected out of the $1,106,597.63 in collectable taxes, ending with an 89 percent collection rate.
In 2012, the collection rate percentage dropped to 87 percent when the city did not receive $134,340.51 from the $1,106,597.63 in collectable taxes.
“Many cities have seen at least a stagnation of real estate revenues,” Schuettler said. “There are a few reasons: Most cities are built out and not experiencing much growth, reassessments have not occurred in all counties on a timely basis, and the overall real estate downturn has affected cities negatively.”
Schuettler added that it's hard to say if raising taxes in a third-class city after a long period of time would be beneficial or detrimental to a municipality.
“Whether it helps or hurts is really unique to the municipality,” Schuettler said.
NEXT: Connellsville's 511 taxes collected in red since 2009.
Mark Hofmann is a staff writer with Trib Total Media. He can be reached at 724-626-3539 or email@example.com.