Innamorato proposes 46.5% Allegheny County property tax hike

Allegheny County Executive Sara Innamorato proposed a 46.5% property tax hike Tuesday evening to help address a growing budget deficit.

Innamorato included the 2.2-mill increase in her $3.1 billion budget proposal for 2025.

It would be the county’s first property tax hike since 2011 and the largest one in recent memory, if approved.

Allegheny County’s current property tax rate is 4.73 mills. The proposal would raise it to 6.93 mills.

One mill equals $1 for every $1,000 of assessed value.

The new rate, coupled with a proposal to increase the homestead exemption, would increase annual property taxes by roughly $182 on a house assessed at the county’s median value of $110,400.

While Innamorato announced her budget proposal, it’s Allegheny County Council that has the power to pass millage increases any year.

Allegheny County’s proposed significant tax hike comes a year after Westmoreland County raised its property taxes by 32.5%.

Innamorato said during a budget presentation to Allegheny County Council on Tuesday evening the county has an eroding tax base combined with rising costs from inflation and expiring federal aid.

“We are presenting this budget in a challenging time,” she said.

Her $3.1 billion budget proposes a 3% increase compared with the 2024 budget, which is in line with budget increases for the past few years.

She said the county has seen some strategic cuts, such as a redundant IT contract worth $3 million that she said would be winding down, but added those efforts don’t come close to covering a projected $133 million deficit for 2025.

Innamorato said the proposed tax increase and budget should keep Allegheny County on strong financial footing. County budget director Tim Cox said, with this tax increase, there would be no need for another for at least three years.

“We have a $1 billion operating fund. We are not immune to inflation,” Cox said. “It hits us hard, as well.”

The county has been running budget deficits since 2021, and Innamorato said it has been filling those with federal pandemic aid and drawing from the county’s rainy day fund. For 2024, the budget deficit will be filled by $48 million of federal aid, which must be spent by the end of this year, as well as $33 million from the county’s rainy day fund.

“The previous administration could have raised the mills more incrementally years ago,” she said. “As the money expires, we do have some catching up to do.”

Former Allegheny County Executive Rich Fitzgerald, who served for 12 years before being term-limited last year, didn’t respond to a request for comment.

Innamorato said her goal is to avoid depleting the county’s rainy day fund to cover the increased costs, which have been driven by inflation. She said maintaining and growing the rainy day fund is needed to maintain Allegheny County’s high bond rating.

She added she is proposing a millage increase instead of drastic cuts because those likely would have to come in the form of depleting staff at Allegheny County Jail and the county’s Kane Regional senior centers, and cuts in road paving.

“We cannot cut our way to a balanced budget,” Innamorato said. “We are not going to cut critical services that people rely on.”

Allegheny County Councilman at-large Sam DeMarco, R-North Fayette, said he understands costs have increased and the county has been running a structural deficit since 2021. But he asked about austerity measures that could be instituted to avoid such a high tax increase.

He said the average new home purchase is $260,000 in Allegheny County, and those new homeowners would have to pay closer to $400 more a year compared with the current millage rate.

“If there has to be a tax increase, maybe it doesn’t have to be (46.5%) increase,” DeMarco said.

Necessary pain

Allegheny County Councilwoman at-large Bethany Hallam, D-North Side, reviewed some of the proposals before the meeting and spoke with TribLive. She said she understands a tax increase will hurt some property owners. She said it would have been prudent to raise property taxes incrementally over the years instead of pushing for a large hike all at once.

She noted, however, that surrounding counties have raised their property taxes while the tax rate has remained stagnant in Allegheny County.

Hallam noted the property tax increases that took place in Westmoreland County. They went up 32.5% this year, and 2.9% in 2019. That was the first real estate tax increase in Westmoreland since 2005.

“Inflation is real for people, and it is real for governments,” said Hallam, noting county governments must balance budgets each year, unlike the federal government. “We have to pay for things.”

Innamorato reiterated Tuesday that the county is facing “challenging headwinds” caused by a lack of meaningful revenue increases over the past decade.

Hallam said that while many property owners will see an increase, some will pay less thanks to the proposal to raise the county’s homestead exemption by $3,000 to $21,000.

She said homeowners who live in properties assessed at less than $10,000 a year will see a tax decrease under the proposal.

While Hallam acknowledged that does not cover a large number of properties, she said a significant number of homes are assessed at such low values because it has been so long since the last countywide reassessment.

Dwindling revenue

In addition to being battered by rising costs, the county is seeing declining revenue.

Sales tax revenue is down about 8% for the first six months of the year compared with the same time period last year, and revenue from taxes on alcoholic beverages is down about 18%, according to the controller’s report.

Hallam also said Allegheny County saw a 1.74% decline in assessed land value, which leads to less tax revenue and refunds to some property owners.

The court-ordered reduction of Allegheny County’s common level ratio has resulted in many commercial property owners — in Downtown Pittsburgh and many suburban office centers — winning appeals on their property taxes, resulting in massive drops in property values.

Refunds resulting from property tax assessment appeals were $8 million during the first half of the year, county Controller Corey O’Connor said last week. That’s nearly double the amount budgeted for the entire year.

Millage rates, unlike income tax, are not adjusted to inflation. Several school districts and municipalities in Allegheny County have had to raise millage rates recently to account for inflation and other cost increases.

In a 2022 budget address, Fitzgerald acknowledged inflation and other factors were making the county’s finances more unstable and a tax increase likely would be needed in the near future.

“I would hope not to bring a tax increase, but I will tell you that, at some point, some council and some county executive is going to have to do an inflation adjustment on the millage,” Fitzgerald said in his October 2022 budget address. “It’s going to happen. It might not be next year … I don’t know when it’s going to be. But it won’t be able to stay that way forever as the operating budget continues to rise.”