PROPERTY TAX WINDFULL WATCH

After a county-wide property reassessment, the law requires that all political subdivisions (counties, municipalities and school districts) must adjust their tax millage rates to prevent a windfall of property tax revenues.  The term “windfall” means the additional property tax revenue generated from an increase in the total assessed value of all property.  For instance, if the total assessed value of all property in a borough or township jumps from $50,000,000 in 2012 to $100,000,000 in 2013, but the tax millage is not adjusted, then the municipality would collect double the property tax revenue that it did previously.

To protect taxpayers from the “backdoor” tax increases that can occur when property values rise after a reassessment, state and local law limits the ability of taxing bodies to take such windfalls.  According to these anti-windfall provisions, a political subdivision must reduce its tax rate so that the property taxes collected in 2013 will roughly equal to the total amount of property taxes received in 2012.

Municipalities in Allegheny County are subject to the 2005 amendments to the Second Class County Code, 16 P.S. 4980.2.  The intent of the law is to prohibit hidden tax increases.  It involves a three-step process.

1.  The municipality must set the tax millage based on the reassessed property values at a rate that yields the same tax revenue as the municipality received in the year prior to the reassessment.  This is called the “equalizing millage” – and it is this millage calculation that prevents a windfall.  [Note: To establish this rate, the municipality can exclude new construction and new improvements from this calculation].

2.   Once the municipality has set the “equalizing millage,” the municipality is permitted to increase the “equalizing millage” by up to 5%.  In order to do so, however, the municipality must have a separate and specific vote to increase the millage above 5%.

3.  If the municipality wants to exceed this 5% millage rate over the windfall, it must file a public petition with the Court of Common Pleas to show “good cause” for needing to do so.

School Districts in Allegheny County must also establish an “equalizing millage” to prevent a windfall, and are permitted to exceed that amount only in accordance with an inflationary index determined by the state (approximately a 2% maximum).

Allegheny County must adjust its property tax rate to be tax revenue neutral (i.e., no windfall is permitted).  This is pursuant to an Ordinance passed in 2005 which prohibits the County from deriving any windfall benefits from a reassessment.  [Note: as is the case with municipalities, new construction and new improvements can be excluded from this calculation].

The information below is for education and informational purposes only based on data available through the Allegheny County Office of Property Assessment as of December 13, 2012.  All of the values remain approximations because the final Certified Assessed Value cannot be determined until all assessment appeals are finally determined and adjudicated, which may take one year or longer.

The new property tax millage calculation can be shown with a simple formula.

2012 Millage Rate x 2012 Certified Assessed Value
=
2013 Millage Rate x 2013 Certified Assessed Value

While the Controller’s Office understands that the 2013 Certified Assessed Value totals will be impacted by the results of pending appeals and other factors, in the interest of transparency we are providing at this time a comparison of millage rates and certified assessed values for each municipality and political sub-division in Allegheny County.

Note #1: Certified Assessed Value figures above are based upon the file of assessed values sent to municipalities for setting their millage rates on December 13, 2012.

Note #2: 2012 Millage Rates were obtained from the Treasurer of Allegheny County. 2013 Millage Rates were obtained through research by the County Controller’s office and direct contact with individual municipalities.

Note #3: Millage rates for all school districts besides the Pittsburgh Public Schools will be set for the fiscal year starting July 1, 2013. This site will be updated as those millage rates become available.

*Sought and received court permission to exceed 5% windfall limit,
  per 16 P.S. 4980.2(d).

**Sought and received court permission to exceed 5% windfall limit,
    per 16 P.S. 4980.2(d), escrow account established for excess revenue.

As of 5-12-14