June 24, 2005
Pippy Bill to Prevent Windfall Tax Hikes Approved by Committee
Requires revenue-neutral millage rates following reassessment, unless approved in separate, public vote.
Harrisburg – Legislation sponsored by Sen. John Pippy (R-37) to protect Allegheny County taxpayers from tax increases following a countywide reassessment has been approved by the Senate Finance Committee. Senate Bill 726 now moves to the full Senate for a vote.
"The purpose of property reassessment is to provide accurate data for fair taxing, not to provide a back-door tax increase," said Pippy. "This legislation will stop automatic increases and require an open, public discussion."
The measure requires that following reassessment municipalities and school districts determine millage rates that are revenue-neutral compared to the previous year. To set a tax rate higher than the revenue-neutral rate, they would have to take a separate and specific vote in a public meeting. A municipality or school district that violates the limitations would have to refund with interest the excess taxes paid by homeowners.
The Second Class County Code permits a taxing body to institute a final tax rate up to five percent greater than the amount it levied on properties the year before. Under the proposed legislation, in cases of dire need – to purchase new equipment related to public health and safety, for example -- a political subdivision may petition the court for approval to increase the millage rate beyond the five percent that was approved via public vote.
Local efforts to limit tax hikes following reassessments remain bogged down. Common Pleas Court ruled May 12 that Allegheny County Chief Executive Dan Onorato's property assessments plan is illegal and would create more problems for the system. Rep. Mark Mustio (R-44) has introduced legislation similar to Senate Bill 726 in the House of Representatives.
"Representative Mustio and I began this effort in May and I'm encouraged that we're already seeing legislative action," said Pippy. "We're both going to work hard to see that this legislation is approved by the Senate and House and signed into law as soon as possible."
Everyday people don't care much if taxes are flat, held at 5-percent or increase in municipal-wide ways. Windfalls of the whole township or city are but a pimple of pain to individual taxpayers.
What matters to the individual is the specific tax bill that comes to the individual. We need to have leadership that considers the bottom line for that person as a greater force to deal with rather than the bottom line for that person's community.
They real point of pain and problem is being missed.
As it is now, when a reassessment is made, the gross value of increase is not to exceed by five percent. Pippy's plan changes the five percent to zero.
This is a yawner.
When the first major reassessment came, taxpayers were told that one third of the property values were going to go up, one third would remain about the same and the final one third of property values would go down. We were told that all in all, this reassessment would be a wash with the ups being matched by the downs. The process was just to right-size the values to make everything more fair.
That song and dance was repeated thousands of times in all of our communities.
This trend is like batting at the leaves on the tree of suffering. We need to have those in power go to the real roots of problems. One of the roots of the problem reside within the changes to the specific tax bill that individual gets.
Pippy should be talking about assessment buffering. he's not. Neither is Fontana.
If today's tax bill is $1,000 per year, and then the new tax bill comes in at $1,600 -- that is a big problem. If you are on fixed income, you can't just come up with the extra money. Banks need more money for monthly payments to cover the mortage and the taxes. These changes happen right away. Family budgets are blown out of the water with one piece of mail.
Changes, as in price increases, to a person's taxes on real property need to be made in a gradual, year-by-year basis.
A re-assessment comes with "sticker shock." That shock can be dealt with in a universal way if Pennsylvania would allow for "assessment buffering."
Let's say you are fortunate to have your assessment go sky high. You must be living in a neighborhood that is seeing the home values increase. Your home is making money, once you sell it. That's the theory at least.
But now the tax bill has shot up frmo $1,000 to $1,600 per year. With Assessement Bufferws over a three year period, the rate of increase will be something that people will be able to manage and deal with over time. Next year's tax bill goes from $1,000 to $1,200*. Then to $1,400. Then in the third year to $1,600.
* The formula is a little more complicated than 1/3 over three years. The down to the decimal change put into places is generally 1/3 plus 10-percent of the increase. But, that detail is not so important, yet can't be overlooked. A whole tutorial is available if needed, say for Pippy and others. FYI to the digit heads, 10-percent in year one (with a $600 increase) is $60.
The neighborhing state of Maryland allows for this type of tax billing to ease the changes upon new assessments.
People don't like to be jerked around. Assessment buffering calms the storm.
Another huge benefit is the time allowance factor. When Allegheny County had its new assessment a couple of years ago, it too two years or so to deal with the flood of appeals. Perhaps your property went from $1,000 to $2,500 per year. Your appeal might have only been able to be scheduled for two years later because the line was so long. The assessment might have been wrong, but you still needed to pay the inflated amount while you waited for the appeal's outcome.
With Assessment Buffering, the rush to fix broken assessment values is NOT a grave. The extra time takes plenty of stress out of the system. Refunds are less of a problem. Schedules are less pressing. Lower workforces are able to be employed. The knee jerk reactions vanish -- or at least are not as connected to the wallet.
This is not a way to lull people to sleep. But, it is a way to respect family budgets.
If you know a new assessement is in the works, you might not buy that new car, take a vacation, invest in a musical instrument, change your job, go back to school.
You might not want to buy a new house either -- because that tax bill at $1,000 might triple and then you've got a home you can't afford nor sell to any other sucker.
I think that the overall marketplace would be much more healthy if the sticker shock associated with a new assessment was always buffered.
Senator Pippy --- how about if you extend this conversation about assessment buffering to the halls in Harrisburg. In the neighborhoods in the 42nd district, as I campaigned in the past months, we were able to inject these concepts and always had favorable reactions.
Take the ball and run with it. Be "Mr. Touchdown" and score a major victory for all the taxpayers in Pennsylvania. There is no downside to this measure. Slip it on as an amendment to what you've already started.