March, 2000

Allegheny County has suffered for years from growing inequities in its tax base, which is driving away residents, and discouraging former residents from returning. Working families have been encouraged to abandon long-standing neighborhoods for lower taxes in outlying counties, while retirees have left for low-tax regions of the Nation. The disparities in tax bases between affluent ex-urban communities in Allegheny County and long-standing neighborhoods has also encouraged regional polarization, concentration of poverty, and rising crime rates not only in core urban communities (City of Pittsburgh, McKeesport, Rankin, Clairton) but also in inner-suburban boroughs and towns (Swissvale, Avalon, Versailles). This cycle of decline is spreading in Allegheny County and encouraging further depopulation. In short, the County is not sustainable and is at risk of significant decline and decay over the next ten to twenty years.

Social and economic need has concentrated in some central-city neighborhoods, the Mon and Ohio Valleys, and other older communities. Thirty percent of the region’s population lives in such communities -- 14 percent in Pittsburgh and 16 percent in older suburbs and satellite cities. This concentration of need has led to middle-class flight, the collapse of school systems, and destruction of the social fabric along with the collapse of the tax base needed to address community needs. Another 39 percent of the region’s population lives in communities that have traditionally been middle-income, with small homes and apartments, who are beginning to feel the same stresses as the urban core (rising crime, declining schools, and out-migration of the tax base).

In all, some 70 percent of Southwestern Pennsylvania’s population live in either stressed urban centers or threatened inner-ring suburbs and/or former industrial towns and boroughs. These fiscally stressed communities represent a high risk of future decline in Allegheny County. While there is no one source of stress for these communities, it is axiomatic that as fiscal and social stress increases, available financial resources will also decline as the tax base migrates somewhere else.

While greater property tax equity by Allegheny County would be helpful, it is not a full solution. With less than a third of the average homeowner’s property taxes payable to the County, and over two-thirds paid to school districts and municipal government, the County can have only so much impact. Moreover, the county cannot by itself affect school taxes – it will need to propose a solution that the state government can implement.

Fortunately, many proposals are currently available for state reform of the property tax system. These include the Governor’s modest property tax rebate, and more through-going reforms proposed under the HOME-STAR legislation from the Senate Democratic leadership. HOME-STAR would use state revenues to abate property taxes. Perhaps the most significant proposal to date has come from Delaware County Council Chair Wally Nunn (Rep). Nunn’s proposal would shift the burden of school funding from local property taxes to state income taxes.

County Property Taxes: One of the major sources of fiscal stress in Allegheny County is the inability to share the benefits of growth among regional communities. This creates unnecessary winners and losers among local government and makes it difficult if not impossible for higher-tax municipalities to compete for economic opportunity. Basic services such as fire, police, water, roads and parks should be available equitably. County residents of moderate means should not face reduced services because they cannot afford to live in the outlying suburbs. A means of achieving tax equity, based on a similar program in Hennepin County, Minnesota, would allow the county to take in a percentage of the growth in commercial/industrial property taxes county-wide, and redistribute the funds across County municipalities based on a prior year’s total tax base. Early simulations of such proposals show that up to 72 percent of Allegheny County residents could benefit from tax-base sharing.

School Tax Reform: The process of depopulation gripping Allegheny County will require reform of school property taxes. The County can play an important role by joining with similarly situated counties around the state (e.g., Delaware County, referenced above) in advancing a shift from property taxes to state taxes or the state surplus to fund elementary and secondary education. There are many potential allies in this effort, possibly including the Pennsylvania School Reform Network, Pennsylvania Economy League, and more. Without political leadership from the counties most affected (e.g., Allegheny) it is unlikely that anything will happen.

There are few steps more badly needed in the County to make itself sustainable than stabilization of its tax base. By creating a more equitable sharing of the burdens of basic human services, the County can help reduce out-migration and lower community stress. This in turn makes communities more attractive for investment and economic opportunity. No less than Brooks Robinson, Sr., has said, "Investment will not flow where the surroundings do not enhance that investment."