U.S. Steel's lower taxes causing budget headaches for local governments and school districts

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A succession of successful tax appeals by U.S. Steel earlier this year, resulting in the assessed value of some of its major properties in Allegheny County plummeting by millions of dollars, has put big dents in municipal and school budgets.

The drop in real estate tax revenue has prompted three school districts -- Woodland Hills, Clairton and West Mifflin -- to file court challenges to the appeals granted to U.S. Steel by the Allegheny County Board of Property Assessment, Appeals and Review, and is pushing Braddock to consider an earned income tax increase.

Ira Weiss, solicitor for the Clairton City School District, called U.S. Steel's new assessments, which resulted in the value of its coke plant in Clairton dropping from nearly $10.6 million in 2012 to just above $2 million this year, "laughable."

"We believe the approach of [U.S. Steel] in these appeals with these communities where they've been longtime partners is deplorable, really," Mr. Weiss said. "It was devastating. ... [Clairton's] a small school district in a small town and no local government can sustain this kind of hit from an ongoing concern."

The reassessment will cost Clairton schools about $415,621 in revenue out of its $14 million budget.

The steel company, which has been looking to cut costs, successfully appealed the results of the court-ordered countywide reassessment by employing a "take-no-prisoners approach" and using "unreasonably low" appraisals, Mr. Weiss said.

"When you appraise industrial property, it's all in the assumptions you make and the comparable properties you use," said Mr. Weiss, who grew up in Clairton. "This is a throwback to the Gilded Age where these large corporate entities did what they wanted to do."

U.S. Steel, Mr. Weiss said, has invested millions of dollars into the coke plant, the largest coke-making facility in the country and "an ongoing concern that is producing significant profit."

Clairton's city manager, Howard Bednar, said the reduction in value of the coke works will cost the city coffers an estimated $214,372 if the new assessment stands.

With increases in income and business tax collections, the city can absorb the loss for 2014 and no tax increases are contemplated right now, Mr. Bednar said. Still, the loss in revenue from the city's highest-value commercial property could start to strain Clairton's city budget, which was $3.5 million this year.

"Long term, it would have an impact," Mr. Bednar said. "You never know what your fund balance at the end of the year is going to be."

In West Mifflin, the value of two U.S. Steel properties, including the Irvin Plant on Camp Hollow Road, which rolls and treats steel slabs, dropped from nearly $39.7 million in 2012 to about $9.4 million this year. It will cost the West Mifflin Area School District about $700,000 and the Borough of West Mifflin about $230,000.

"It's not a good thing, but we've prepared for these occasions," borough manager Brian Kamauf said. "You hate to lose revenue."

Mr. Kamauf said borough officials anticipated that many of the assessments would be successfully challenged and added that the borough is not considering a tax increase.

"We assumed a lot of this value was going to come down and we planned accordingly," Mr. Kamauf said.

North Braddock, where part of U.S. Steel's Edgar Thomson plant is located, also won't be adjusting tax rates to deal with a drop in real estate tax revenue of about $37,000, said borough manager Doug Marguriet.

"We were fortunate that our earned-income taxes have increased a bit. That offsets some of it," said Mr. Marguriet, adding that officials have "tweaked" other accounts to make up the rest.

Not so in Braddock, where the borough council is weighing an earned-income tax increase to plug a budget hole of about $164,000. The value of the portion of the Edgar Thomson plant in Braddock went from about $12.1 million in 2012 to $517,000 this year.

"We're working on the best solution in a very difficult environment right now financially," said council President Tina Doose. "This is an incredible hit for us."

Ms. Doose said the budget gap is equivalent to about 30 percent of the borough's police budget and will mean a 30.5 percent reduction in total real estate tax revenue, according to a petition filed last week in Allegheny County's Court of Common Pleas seeking permission to enact the increase. Braddock's yearly budget is about $1.8 million, Ms. Doose said.

Braddock, which is a state-designated "financially distressed municipality," is permitted to exceed the 1 percent earned-income tax threshold imposed on most municipalities and charge the tax on nonresidents, although it must get court approval yearly, said borough solicitor Falco A. Muscante.

At its Tuesday meeting, council will consider an ordinance that would raise the earned-income tax rate from 1.1 percent to 1.5 percent for residents and from 1.05 percent to 1.2 percent for nonresidents.

"I don't want to just increase the millage and put the burden on elderly and fixed-income homeowners in the area," Ms. Doose said.

Braddock Mayor John Fetterman said he intends to veto the tax increase if it passes.

"I just don't believe that's the right approach, to raise the tax on those here in town," Mr. Fetterman said. He said the town is in talks with U.S. Steel over the new assessments and that it would be "premature" to raise taxes before knowing the outcome.

"They understand the effect it would have in the community," Mr. Fetterman said. "I have enormous respect for Tina. ... I have faith that U.S. Steel will be a good partner through this and it will ultimately not be necessary to raise taxes."

Sarah Cassella, a U.S. Steel spokeswoman, said in an email last week that the company is "continuing our conversation regarding the assessment with the borough and [hopes] to reach a resolution."

Ms. Cassella would not say whether the company also is working with the other municipalities and school districts affected by the new assessments.

In Braddock, those talks have not yet generated a plan and the council needs to pass a budget in December, Ms. Doose said.

"This is definitely a hard situation. If the mayor is going to veto this ... I welcome the mayor to say where he wants to see cuts," she said, noting that four of the six council members can vote to override a mayoral veto.

Ms. Doose said the increase would be in line with most and lower than some local municipalities. Monroeville's rate is 1.5 percent, McKeesport's is 1.7 percent, Rankin's is 1.5 percent and Pittsburgh's is 3 percent, she said.

"We have to continue to function as a municipality," Ms. Doose said. "The role of council is to oversee the government and the budget and that is what I'm doing."


Correction (posted Nov. 30, 2013): An earlier version of this story stated an incorrect amount that the reassessment would cost Clairton schools.

Robert Zullo: rzullo@post-gazette.com or 412-263-3909.

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