EmailEmail
PrintPrint
In Twin Cities, tax-sharing gives everyone slice of development pie
Friday, February 13, 2004

For Ray Reaves, a consultant who once headed the Allegheny County Department of Planning, Century III Mall in West Mifflin is symptomatic of a problem that has bedeviled the region for years.

West Mifflin gets the bulk of the property tax revenue generated by the mall, Reaves said, while the neighboring communities along Route 51 get "all the headaches," notably traffic congestion, that come from having a popular shopping area in their midst.

Reaves would like to see this change so that the benefits and costs of development are shared by neighboring municipalities. Cooperation among the region's dozens of boroughs and towns, he believes, would limit urban sprawl and prevent the sometimes fierce competition among municipalities to lure developers to build tax-generating shopping malls or office complexes within their boundaries. But in a region where pride in one's borough and town runs deep, Reaves could be facing an uphill battle.

Undaunted, Reaves has helped organize, under the auspices of the Local Government Academy, Sustainable Pittsburgh, the Pennsylvania West chapter of the Government Finance Association and the Pittsburgh Chapter of the Pennsylvania Planning Association, an all-day workshop Tuesday to promote tax-base sharing -- one of the tools that many believe can foster greater cooperation among the region's municipalities.

Tax-base sharing isn't a new idea. Cities and towns in the seven-county Minneapolis-St. Paul metro area pioneered the idea in 1971. Under their tax-base sharing plan, local municipalities put 40 percent of the tax money raised from rising commercial-industrial property values into a regional pool that is then redistributed back to the same localities to reduce disparities between richer and poorer communities.

Commenting on the tax-sharing plan a quarter century after its adoption, a writer for the Minneapolis-based Star Tribune newspaper noted that without it, "the spread between the Twin Cities suburbs with the highest and lowest per-capita commercial-industrial tax bases" would be 22 to 1 rather than about 4 to 1.

Although the Twin Cities tax-sharing plan is often held up as a model, it has seldom been copied. "The Minnesota plan redistributes money from the haves to the have-nots. Every time there is an effort to replicate tax sharing, politics prevents this from happening," said David Miller, a University of Pittsburgh Graduate School of Public and International Affairs professor who has studied the issue.

Communities fortunate enough to attract an office complex or a shopping mall typically are unwilling to share the increased property tax revenues that come from such development with their poorer neighbors. "How to overcome the political obstacles is the $64,000 question," Miller said.

Some critics contend that an underlying premise of tax-base sharing -- that cooperation is better than competition among municipalities -- is flawed. Instead, they believe the best way to lure developers is to force local governments to compete and thus streamline operations by keeping taxes low.

Miller said the best chance for tax-base sharing plans to succeed is probably when revenue sharing among municipalities isn't an end in itself but when local officials see it as a means to other ends, such as more rational planning and a way to share tax benefits from new development in a way that doesn't take from one community and give to another.

But even if that's the goal, it's not always easy to forge an agreement among municipalities. Just ask Munhall Mayor Ray Bodnar. Munhall, along with Homestead and West Homestead, have entered a tax-base sharing agreement that allows them to share the property taxes generated by The Waterfront development.

"It's difficult getting three communities to agree," Bodnar said. "You are dealing with different zoning laws, code-enforcement. It sometimes took us three hours to discuss one sentence of the agreement.''

In this case, often cited as an example of tax-base sharing at its best, the three communities had an interest in reaching an agreement. The proposed Waterfront development, on land once occupied by the USX Homestead steelworks, would straddle all three municipalities. Things might have been different if the site had been in just one municipality.

Bodnar said he didn't know whether Munhall officials would have participated in a tax-base sharing plan if the land had been all its own. Bodnar said his preference would have been for Munhall "to do it on our own." That is, Munhall might have assumed the entire costs to improve the site as well as all the tax revenue once the Waterfront was built.

In recent years, changes in the state's Municipal Planning Code have given boroughs and towns greater incentives to adopt tax-base sharing strategies. Prior to changes in the code, when several municipalities adopted a joint plan, each town or borough had to provide all types of land uses, from commercial to residential, within its borders. "It didn't make any sense," Miller said.

Now these uses can be spread across several municipalities that have agreed on a joint plan. For example, one community might be better suited for a shopping mall, another for condominiums and apartments. If the municipalities can agree on a tax-base sharing plan, then no one town or borough has to fear it won't benefit from development within and outside its boundaries since it will get a share of the tax revenue in either case.

First published on February 13, 2004 at 12:00 am
Those who wish to register for the workshop can call the Local Government Academy at 412-237-3171 or register online at www.localgovernmentacademy.org. The cost is $50. Frank Reeves can be reached at freeves@post-gazette.com or 412-263-1565.