One of the things that has many homeowners on edge here in Mt Lebanon and all around Allegheny County is the 2012 Reassessment. In an effort to have our residents better understand what this will mean to them, I decided to try to tackle the topic at the May 27th Audit Finance Committee Meeting.
Perhaps the most important take away from the analysis is to understand that just because your assessment increases, your taxes do not necessarily increase along with it. As you will see in the Powerpoint slides below (or available here), how the reassessment impacts you will be determined by how much your reassessment changes in relation to the Mt. Lebanon mean change.
Here is the presentation (click here if the presentation below does not show):
Basically, here are some highlights:
Slide 2- The Allegheny County real estate tax system is based on a 100% of assessed value model. Other counties determine market value and then base their assessed value on some ratio of the market value (Washington County does this). There is no inherent advantage or disadvantage to using any particular method. Personally I prefer the Allegheny County system since there is no calculating ratios to figure out what it is you owe. The thing that made Allegheny County out of compliance with the Pennsylvania Constitution was the "Base Year" Model. Tying market values to what your home would have been worth in 2002 meant that, as a home on one side of town appreciated in value and a similar home on another side of town depreciated in value, after ten years these homes would still have the same tax. That is a violation of the Commonwealth's Uniformity Clause and is what is forcing the 2012 reassessment.
Slide 3- There will be a parcel by parcel reassessment in 2012. The plan for reassessment uses County employees to perform the reassessment.
Slide 4- The Anti-Windfall provisions from Act 1 restrict school districts and municipalities from gaining any revenue due to reassessment over and above Act 1 limits. Act 1 limits have been very small the last few years due to very small CPI increases. As long as CPI stays in check, the maximum increase in revenue to the school district will be less than 3%. The school board will have an opportunity to determine whether they want to gain any additional revenue or not.
Slide 5 and 6- These slides try to mathematically show the impact on real estate taxes for fiction town. The important thing to realize here is that in the two slides you see that the revenue to the town is the SAME before and after the reassessment. This is because the millage rate is lowered to compensate for any increased assessments. The other point to take away is that homes that have their assessment increases more than the average for the community will have their taxes increase. Homes that have their assessment increased less than the community average will have their taxes decrease. And homes that have their assessed values increased the same as the community average will see no change in tax.
To further understand this point, let's look at a Mt. Lebanon home assessed at $120,000. This same home was purchased in 2009 for $180,000. If collectively assessments in Mt Lebanon increase by 50%, then in theory this home should have the same exact tax as before the reassessment. If instead the collective reassessed values of all properties in Mt Lebanon increase by less than 50%, then this home will have increased taxes due to reassessment.
The problem here is that nobody will know how much assessments will change until they actually happen. Suffice it to say that any home that has had significant upgrades to it that has not been reassessed recently will have an increase in taxes. Since the school district cannot see an increase in revenue due to reassessment (or a very small increase) this necessarily means that some other home will have their tax bill reduced.
In conclusion, the reassessment is an attempt to more fairly assess homes across Allegheny County. This will most definitely mean a change in the tax bill makeup of Mt Lebanon. There will be some homeowners that will be shocked to see their new tax bill and this shock will be from both those that have an increased tax bill and a decreased tax bill. The best way to determine the reassessment impact on your individual home is try to think about how your home value has changed versus the rest of the homes in Mt Lebanon since 2002.
The last page of the presentation has the sources I used for the meeting. They are listed below:
* http://www.youcontrolyourmoney.org/ (search for “real estate assessment process”)
* http://money.cnn.com/magazines/moneymag/bplive/2007/snapshots/PL4251704.html
* http://pubs.cas.psu.edu/FreePubs/pdfs/ua308.pdf
* http://www.alleghenycounty.us/munimap/profile.asp?muni=73
* http://www.klgates.com/newsstand/Detail.aspx?publication=5381
* http://www.post-gazette.com/pg/09339/1018698-455.stm
* http://www2.county.allegheny.pa.us/realestate/Search.aspx
* http://www.city-data.com/housing/houses-Mount-Lebanon-Pennsylvania.html
Please take a look at some of the links above. The PSU document is a great one and is where much of the information for my presentation came from.
Thanks for reading.
James
Sunday, May 30, 2010
Friday, May 28, 2010
Budgets and Lancings
Lance: To Mt. Lebanon. Its school board approved a staggering 10.5 percent increase in taxes this week. That's to pay for a poorly executed high school renovation project and to cover teacher pensions. And, apparently, there's a little something in there for a new contract with teachers, now being negotiated. The school tax bill on a $200,000 home will soar to more than $5,300 a year. And that great sucking you're soon to hear won't be the straw at the bottom of an empty cold coffee.
This is at least the third lance Mt Lebanon has received due to the tax increase. We got lanced when we passed our preliminary budget, we got lanced when we passed the $113 spend limit on the high school, and now we get lanced after we pass the final budget.
I can't say I disagree with the lances. It's unfortunate that for years this Board has known the day would come when taxes would skyrocket up in order to pay for the high school. Since the first day I sat down on this Board, I asked how we were planning to pay for it. The answer became so clear on Monday night. We decided to increase taxes to pay for 100% of the cost of the first set of bonds for the project.
I have been convinced over the last few years that it wasn't so much the renovation to the high school that was the problem, instead it was the way in which the District was planning to increase taxes to pay for it. This belief has been verified by the fact that there is a petition circulating the community asking the Board to cap a project at $75 million. Almost 4000 signatures later, it is clear that a we have a large contingent of this community fed up with the taxes the school board is asking them to pay. Our residents understand that the high school needs something done to it. But as they realize Bethel Park barely increased taxes to pay for their high school (3.5% increase in millage from 09-10 to 10-11) and Penn Hills will actually LOWER taxes when they are done with their project, the frustration with how we have managed the tax impact of this project only grows.
Knocking on doors in 2007 in my run for the Board, I met with thousands of residents who at the time said they were taxed enough already. The thought of a 15-20% millage increase for a $120 million new school (the idea out at the time) incensed them. This was before we knew about the tax nightmare that would be PSERS. Upon getting on the Board in late 2007, I worked with a number of members of the community and Board to come up with an alternative plan to fund the high school. It was a plan that would have paid down some of our outstanding debt and put us in position to better afford a project of this exact same size and scope. It called for delaying construction while building up a stockpile of money to move forward with a sizable down payment for a project. The more money we saved to put towards the project, the less our residents would pay in interest on any loan, and the better off they would be in the long run. There were other aspects of this plan that included using the Commonwealth's GESP (Guaranteed Energy Savings Program) and initiating a Community wide fund-raising campaign to go after private dollars from residents and alumni. Unfortunately, this plan received only tepid support from the Board. It was the strength of the message from our residents that convinced me supporting a $120 million project would be detrimental to the long term health of our community. It is the reason I ran a campaign steadfastly opposed to such a large expense.
After it was clear the plan was not going to get traction with the Board, four of us Board members got together to try to figure out how to pay for this thing. After long discussions, I was convinced that the Board majority would take action to reduce the budget in order to offset to some degree the increase in taxes that would be required to pay for the high school. Unfortunately, those reductions to the budget never materialized. Two of us on the Board kept sounding the alarm saying loudly that when this day comes, when we decide to raise taxes to the degree we just have, that it would have devastating consequences to our community. That is the "great sucking sound" referred to in the Lance in today's Trib.
You see, the tax increase we just passed is NOT $18 a month as some people would have you believe. The school district tax bill for a $200,000 home in Mt Lebanon is now $5326 per year or $444 per month. On that same $200,000 home we just increased your taxes $504 per year or $42 per month. That's not chump change. That $42 is a night out at at a restaurant for my family of four each and every month. It's a night at the movies. It's two piano lessons. Measuring the local economic impact of the extraction of more than $5 million additional dollars annually from the pockets of our residents and the private economy will be an interesting exercise. How do we measure it? Number of home sales? Businesses closing? Earned income tax receipts? We won't know the impact until it is too late.
The problem here is that we are not done. There will be a second bond float. We don't know what size it will be yet but we know it will be there. We have PSERS which is scheduled to hit in 2012 unless the state legislature does something about it.
With earned income receipts to the municipality and school district stagnant, our residents will collectively have to either dip into savings to pay for the increase in taxes or they will have to reduce expenditures in some other part of their budget. Well, I guess there is a third option. They could just decide not to pay. They would do this by putting their house on the market and getting out of Dodge before more tax trouble brews.
Thanks for reading.
James
This is at least the third lance Mt Lebanon has received due to the tax increase. We got lanced when we passed our preliminary budget, we got lanced when we passed the $113 spend limit on the high school, and now we get lanced after we pass the final budget.
I can't say I disagree with the lances. It's unfortunate that for years this Board has known the day would come when taxes would skyrocket up in order to pay for the high school. Since the first day I sat down on this Board, I asked how we were planning to pay for it. The answer became so clear on Monday night. We decided to increase taxes to pay for 100% of the cost of the first set of bonds for the project.
I have been convinced over the last few years that it wasn't so much the renovation to the high school that was the problem, instead it was the way in which the District was planning to increase taxes to pay for it. This belief has been verified by the fact that there is a petition circulating the community asking the Board to cap a project at $75 million. Almost 4000 signatures later, it is clear that a we have a large contingent of this community fed up with the taxes the school board is asking them to pay. Our residents understand that the high school needs something done to it. But as they realize Bethel Park barely increased taxes to pay for their high school (3.5% increase in millage from 09-10 to 10-11) and Penn Hills will actually LOWER taxes when they are done with their project, the frustration with how we have managed the tax impact of this project only grows.
Knocking on doors in 2007 in my run for the Board, I met with thousands of residents who at the time said they were taxed enough already. The thought of a 15-20% millage increase for a $120 million new school (the idea out at the time) incensed them. This was before we knew about the tax nightmare that would be PSERS. Upon getting on the Board in late 2007, I worked with a number of members of the community and Board to come up with an alternative plan to fund the high school. It was a plan that would have paid down some of our outstanding debt and put us in position to better afford a project of this exact same size and scope. It called for delaying construction while building up a stockpile of money to move forward with a sizable down payment for a project. The more money we saved to put towards the project, the less our residents would pay in interest on any loan, and the better off they would be in the long run. There were other aspects of this plan that included using the Commonwealth's GESP (Guaranteed Energy Savings Program) and initiating a Community wide fund-raising campaign to go after private dollars from residents and alumni. Unfortunately, this plan received only tepid support from the Board. It was the strength of the message from our residents that convinced me supporting a $120 million project would be detrimental to the long term health of our community. It is the reason I ran a campaign steadfastly opposed to such a large expense.
After it was clear the plan was not going to get traction with the Board, four of us Board members got together to try to figure out how to pay for this thing. After long discussions, I was convinced that the Board majority would take action to reduce the budget in order to offset to some degree the increase in taxes that would be required to pay for the high school. Unfortunately, those reductions to the budget never materialized. Two of us on the Board kept sounding the alarm saying loudly that when this day comes, when we decide to raise taxes to the degree we just have, that it would have devastating consequences to our community. That is the "great sucking sound" referred to in the Lance in today's Trib.
You see, the tax increase we just passed is NOT $18 a month as some people would have you believe. The school district tax bill for a $200,000 home in Mt Lebanon is now $5326 per year or $444 per month. On that same $200,000 home we just increased your taxes $504 per year or $42 per month. That's not chump change. That $42 is a night out at at a restaurant for my family of four each and every month. It's a night at the movies. It's two piano lessons. Measuring the local economic impact of the extraction of more than $5 million additional dollars annually from the pockets of our residents and the private economy will be an interesting exercise. How do we measure it? Number of home sales? Businesses closing? Earned income tax receipts? We won't know the impact until it is too late.
The problem here is that we are not done. There will be a second bond float. We don't know what size it will be yet but we know it will be there. We have PSERS which is scheduled to hit in 2012 unless the state legislature does something about it.
With earned income receipts to the municipality and school district stagnant, our residents will collectively have to either dip into savings to pay for the increase in taxes or they will have to reduce expenditures in some other part of their budget. Well, I guess there is a third option. They could just decide not to pay. They would do this by putting their house on the market and getting out of Dodge before more tax trouble brews.
Thanks for reading.
James
Monday, May 24, 2010
Commonwealth School Funding for 2010-2011
As I mentioned in a post a few weeks back, school districts across the State received a letter from Senate President Joseph Scarnati, Senate Majority Leader Dominic Pileggi, Senate Appropriations Chairman Jake Corman, and Senate Education Committee Chairman Jeffrey Piccola. The letter starts out as follows:
They are sounding the alarm. They go on to describe some of the details:
As I said in my post linked above, a freeze at last year's level of funding would result in a $120,000 hit to our budget. The larger fear is that this year starts the PSERS increases for every school district across the state. The Commonwealth is on the hook for 50% of all of the increases for every school district. It will be no small sum of money.
For a more thorough analysis on the problem, please see this article.
From that article is a terrific quote:
Don't forget that our 2010-2011 budget vote is tonight. I expect that this Board will approve the motion to increase millage rates by 10.5%.
Thanks for reading.
James
We are writing to advise you that the Commonwealth's financial position has changed significantly since the Governor announced his FY 2010-2011 budget proposal on February 9. Therfore, we urge you to be very cautious when preparing your FY 2010-2011 budget.
They are sounding the alarm. They go on to describe some of the details:
Specifically, the Commonwealth's estimated revenue shortfall for FY 2009-2010 has grown from $450 million to an estimated $1 billion. The Federal Department of Transportation ruled earlier this month against the state's plan to toll I-80, which resulted in a $450 million annual loss to the Motor License Fund for important road and bridge repair projects. Commonwealth Court recently ruled $800 million used in the current year budget must be returned to the MCARE Fund an Healthcare Provider Retention Account. In addition, there is no guarantee the Commonwealth will receive nearly $850 million in enhanced Federal matching funds to support welfare programs, which was assumed in the Governor's budget.
For the reason mentioned above, please understand there is no guaranteed level of funding for school districts or any other entity in the Commonwealth in the 2010-2011 budget.
As I said in my post linked above, a freeze at last year's level of funding would result in a $120,000 hit to our budget. The larger fear is that this year starts the PSERS increases for every school district across the state. The Commonwealth is on the hook for 50% of all of the increases for every school district. It will be no small sum of money.
For a more thorough analysis on the problem, please see this article.
From that article is a terrific quote:
The first thing [school boards] should do,” said Mr. Arneson, “is to look at ways to reduce costs; not to see increases in taxes as the first step, but to reduce cost as the first step. It’s something that will probably be different in each of the 500 school districts because they all have different programs, different salaries, materials, space, and maintenance. It’s unique to each school district.” Mr. Allwein said school districts are also cost-cutting through natural attrition, by not hiring when staff and faculty leave.
Don't forget that our 2010-2011 budget vote is tonight. I expect that this Board will approve the motion to increase millage rates by 10.5%.
Thanks for reading.
James
Wednesday, May 19, 2010
PSERS Presentation
I was doing some research and came across this presentation from PSERS. This was a presentation given to Upper St Clair School District in late March.
It is long and detailed but if you have the time, it may be worth it to page through the 60 page presentation. The conclusion is that there is no silver bullet that will stop the PSERS rate spikes. There are some possible options to limit the rate spikes, but nobody knows for sure what will happen.
Here you go:
http://www.uscsd.k12.pa.us/psers
It is long and detailed but if you have the time, it may be worth it to page through the 60 page presentation. The conclusion is that there is no silver bullet that will stop the PSERS rate spikes. There are some possible options to limit the rate spikes, but nobody knows for sure what will happen.
Here you go:
http://www.uscsd.k12.pa.us/psers
Monday, May 10, 2010
Dealing with Decline
This title was the name of an article in the American School Board Journal. In it, the author interviews a number of people across the country who are dealing with school district budget crises in their own way.
From the article:
I had a conversation with the Mt Lebanon Treasurer over the weekend and he did say that collections for earned income this year are coming in at about the same as they were last year for Mt. Lebanon. As I pointed out in a post last week, this does not seem to be the case at the State level. In fact, the District was sent a letter by members of the State Legislature telling us that they do not know what to expect with the basic education subsidy funding this year. If the State were to hold our subsidy even on the year, it would result in about a $120,000 hit to our projected budget.
To be fair, the new Education Secretary says that his priority is to maintain the basic education subsidy increase.
Our former superintendent has been doing some budget reductions with the help of the community in Wichita.
Please take a look at the article I linked to at the top of this post. I have been arguing for some time that our expenses need to be reduced. It seems that many other Districts around the country have had to reduce their budgets in these hard economic times.
Reductions in budgets are never easy. They are not supposed to be. But many times they are necessary to stay competitive in the long run.
Thanks for reading.
James
From the article:
“It’s too bad it take something like this to make us look at all of our options ... closing schools, reopening negotiations, canceling contracts,” he says. “Those are not easy things to do. But [times] are bad, and they’re going to get worse. ... Now is the best time to push through change.”
I had a conversation with the Mt Lebanon Treasurer over the weekend and he did say that collections for earned income this year are coming in at about the same as they were last year for Mt. Lebanon. As I pointed out in a post last week, this does not seem to be the case at the State level. In fact, the District was sent a letter by members of the State Legislature telling us that they do not know what to expect with the basic education subsidy funding this year. If the State were to hold our subsidy even on the year, it would result in about a $120,000 hit to our projected budget.
To be fair, the new Education Secretary says that his priority is to maintain the basic education subsidy increase.
Our former superintendent has been doing some budget reductions with the help of the community in Wichita.
Please take a look at the article I linked to at the top of this post. I have been arguing for some time that our expenses need to be reduced. It seems that many other Districts around the country have had to reduce their budgets in these hard economic times.
Reductions in budgets are never easy. They are not supposed to be. But many times they are necessary to stay competitive in the long run.
Thanks for reading.
James
Monday, May 3, 2010
Commonwealth April Tax Collections Almost 12% Below Estimates
The Pennsylvania Department of Revenue released its April report on receipts. Governor Rendell had been holding out hope that April would fill the large gap that had rolled up so far in this fiscal year. Unfortunately, April collections widened that gap even further.
From the report:
With an expected $1 billion 2009-2010 budget shortfall, the Governor and the legislature are going to have to make some very difficult decisions.
Much of the rest of the report shows a mixed bag of good news (PIT withholding for April was above estimates) mixed with bad news (corporate tax collections took a big hit).
Thanks for reading.
James
From the report:
Secretary of Revenue C. Daniel Hassell today reported that Pennsylvania collected $2.9 billion in General Fund revenue in April, which was $390 million, or 11.8 percent, less than anticipated. Fiscal year-to-date General Fund collections total $22.8 billion, which is $1.1 billion, or 4.6 percent, below estimate.It will be interesting to see if Mt. Lebanon tax receipts mirror this development. Being 12% behind in your biggest month of collection is no small deal.
“Revenues continued to deteriorate during the major tax collection month of April. We will have to develop options to address the shortfall to be able to enact a balanced budget for FY2010-11. It will require difficult choices by all involved in state government,” said Budget Secretary Mary Soderberg.
With an expected $1 billion 2009-2010 budget shortfall, the Governor and the legislature are going to have to make some very difficult decisions.
Much of the rest of the report shows a mixed bag of good news (PIT withholding for April was above estimates) mixed with bad news (corporate tax collections took a big hit).
Thanks for reading.
James
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