Pittsburgh Public School plan seeks to raise tax revenue

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With many property assessment appeals still unsettled, Pittsburgh Public Schools superintendent Linda Lane is recommending the school board set a tax rate that would raise total revenue received from property taxes after 11 consecutive years of no increase.

The money generated by the increase -- $3.2 million -- would go in an escrow fund to pay refunds to property owners who win future appeals.

Whether the change would be an increase for an individual taxpayer would depend on how the individual's property value changed in the reassessment. Some may find their taxes lower, some higher and some about the same.

The revenue increase would come even as the millage falls because of a countywide reassessment that takes effect in 2013.

Under the reassessment, property values in the city have increased by roughly 50 percent, according to school officials. However, the state school code prohibits school districts from reaping a windfall from the reassessment. So, it must reduce the tax rate so that it generates the same revenue on the higher values as it did on the lower values.

PG graphic: A tale of two properties
(Click image for larger version)

Beyond that, the district is limited to an index set by Act 1, which is 1.7 percent. In the preliminary example, the allowable increase amounts to 0.15 mill.

The current millage is 13.92. The equivalent millage with the new property values would be 9.33. If the index of 1.7 percent is added, the tax rate would be 9.48.

One mill amounts to $1 of tax for each $1,000 of taxable property value.

School solicitor Ira Weiss said, "The rule of thumb is if someone's property increased in assessment at or less than the rate for the city as a whole their school tax bill will be less than it was last year."

Budget manager Ronald Joseph said the district estimates that the reduction in assessed values in pending appeals could reach $400 million, which would result in a loss of revenue of $3.6 million.

"The fact is we've got a significant number of appeals still pending," Ms. Lane said. "They'll still be pending in January. That impacts the board's ability to vote a millage rate that is appropriate."

"To me it is a smart way to go because what you do is you protect yourself in case of appeals," school board member Mr. Isler said during a committee meeting Tuesday night.

Even without the concern over pending appeals, the proposed preliminary budget for 2013 has a deficit of $9.86 million. School officials have said that if the current course doesn't change, the deficit is expected to grow so much that the district would use up its fund balance and run out of money in 2015. On top of that is now the additional burden of potentially successful reassessment appeals.

"Because of our projected finances right now, it's a much higher risk. I think it would be frankly irresponsible of me not to advise the board of this particular risk and propose a way to mitigate it," Ms. Lane said.

The board cannot readjust the millage after the appeals are resolved.

The district expects the value of property in the city to reach about $20.5 billion for 2013, an estimated increase of about 50 percent.

Here is an example of how the change in millage could affect a taxpayer.

If a homeowner's house had a taxable value of $100,000 in 2012, he or she would have paid $1,392 in property taxes that year. If the value of that house goes up by 50 percent to $150,000 in 2013, the annual tax would be $1,400 at 9.33 mills, an increase of $8 over the tax paid on the lower value in 2012, or $1,422 at 9.48 mills, an increase of $30.

If the property value stayed the same at $100,000, the taxpayer would pay $933 at 9.33 mills or $948 at 9.48 mills, a decrease of $459 and $444 over the 2012 payment, respectively.

The school district provides a homestead exemption to certain homeowners, which in 2012 exempted the $19,937 of assessed value from the property tax.

While appeals ultimately will change the percentage, the aggregate assessment increase -- covering all commercial and residential properties in the district which includes Pittsburgh and Mount Oliver -- rose 58 percent compared to the 2002 base-year values, according to a figure reported in January.

The millage rate typically must be set before the end of this month, but Senior Common Pleas Judge R. Stanton Wettick Jr. last month said he would extend the deadline and asked local officials to draft an extension proposal by Friday.

The school district's current plan calls for the board to adopt the 2013 budget on Dec. 19 and set the millage rate and homestead exemption on Jan. 23, although it proposes an extension until Jan. 31.

District officials have said they will continue to find ways to reduce the expected deficit even after the new year begins.

In the proposed $519.1 million budget, real estate revenue accounts for $164.3 million or 31.65 percent.

Other taxing bodies also are facing the challenge of setting aside money for appeals. Allegheny County has increased its account for refunds from about $2 million this year to $21 million in 2013.

Most school districts operate on a July through June year, but Pittsburgh uses a calendar year.

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Len Barcousky contributed. Education writer Eleanor Chute: echute@post-gazette.com or 412-263-1955.


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