The Pittsburgh City Council is considering raising property taxes for 2015. Even more tax hikes may be in store under a five-year financial recovery plan.
Meanwhile, the city is considering appealing tax assessments for some high-priced downtown buildings to try and bring in additional tax revenue.
Reassessment Leaves Budget in the Red
In 2012, Allegheny County was ordered to conduct a reassessment of all real estate. Property values in Pittsburgh increased by 48% and the property tax millage rate was cut by 30%. Ideally, the increased property values should have cancelled out the rate cut to produce the same tax revenue for the city. However, it didn’t.
In 2013, the city collected almost $7 million less in property taxes than it did before the reassessment. According to projections, the city will fall roughly $3 million short of the $123.6 million in property taxes it needs to collect this year.
A Financially Distressed Municipality
Pittsburgh has been “financially distressed” for 10 years under the state's Act 47 oversight program. The name comes from the Municipalities Financial Recovery Act (Act 47 of 1987). The Act 47 plan put together by the mayor and city council will guide the city from 2014 through 2018. It recommends a property tax increase of 5.5 percent next year.
Looking ahead, Pittsburgh could face a budget deficit of $21 million by 2018. One way to eliminate the deficit is to keep raising the property tax millage rate. The plan's recommendation does not automatically signal a tax increase. Other suggestions are made to save money in order to close the budget gap.
Appeals May Be Challenged
The City Council Finance Committee uncovered wide-ranging disparities in the values assigned to commercial properties following appeals last year. Appeals of buildings Downtown and in the Strip District resulted in taxes being lowered nearly $6 million.
In an email, Kevin Acklin, chief of staff for Mayor Bill Peduto, said, "We are concerned that the previous administration apparently entered into agreements with large property owners that resulted in substantial decreases in tax assessments for high-priced Downtown buildings."
Many owners won appeals based on factual errors with their assessments. For example, in one case, the county overestimated a building's square footage by more than 30%.
Owners of a major hotel property say even though their assessment decreased from $48.9 million to $21.5 million, their tax bill was actually higher in 2013.