Local Economy And Your Money, Part 3: Why Property Taxes Are So High

The following is a transcript of a report by Paul Van Osdol that first aired July 9, 2008, on WTAE Channel 4 Action News in Pittsburgh.

Watch Paul Van Osdol's report

Everybody complains about taxes, but in western Pennsylvania, we have more reason to complain than most. Studies show we pay more in property taxes than almost anywhere else in the country.

We crunched the numbers to tell you just how taxes here compare, and we talked to experts to find out why our taxes are so high and what can be done to bring them down.

Jeff Wengler loves his house in Pine Township, Allegheny County. He moved two years ago from Fort Wayne, Ind.

But when he closed on the house and saw what he'd be paying in property taxes?

Wengler: "I about fell out of the chair."

It was nearly $7,000 a year.

Wengler: "It was a little bit of a shock when it was about three times what we were paying."

When you look at property taxes as a percentage of home value, Allegheny County ranks 20th in the nation with an average property tax bill of $2,477.
Related: See Property Tax Assessments On Allegheny County Real Estate Web Site

Most others in the top 20 are places you'd expect -- especially New York and New Jersey. Back home, Beaver County ranks 109th, Westmoreland 158th, Butler 238th and Washington 267th.

By comparison, Allen County, Ind. -- around Fort Wayne, where Wengler used to live -- ranks 355th with an average tax bill of just $1,063.

Wengler: "It really adds to the cost of living to live in this area when you have that kind of tax bill."

We asked Allegheny County Chief Executive Dan Onorato about the county's high ranking for property taxes.

Onorato: "That number doesn't surprise me, and it actually explains why, for the last six years, I've done everything possible to avoid raising taxes."

School taxes are a much bigger chunk of the property tax bill than county taxes, and there's nothing Onorato can do about that. It has to do with the way Pennsylvania pays for its schools.

Pennsylvania is 13th highest in the nation in school spending -- more than $10,000 per student.

But the Keystone State is seventh from the bottom in the portion of state tax dollars going to education -- just 35 percent. That compares to 44 percent in Ohio and 60 percent in West Virginia.

In Pennsylvania, property taxes make up the difference.

Onorato: "That shrinkage in state funding has been shifted to the local property tax, and that's where you're seeing the problem and the burden right now."

Also contributing to the tax burden is a huge amount of red ink. Pennsylvania's total debt -- state, county, school and municipal -- amounts to $109 billion. That's $8,800 per person.

Paying off that debt -- and fixing the state's crumbling bridges and roads -- would require doubling the state income tax from 3 percent to 6 percent, according to Carnegie Mellon University economist Robert Strauss.

Strauss: "We can't keep spending and taxing the way we have, and putting off these liabilities."

One reason for all that debt is there's a lot of government in Pennsylvania, especially Allegheny County.

It's something we've all heard about, but we decided to dig deeper -- comparing government here with other places -- and the numbers we found were startling.

Allegheny County has 130 municipalities. That's more than eight states -- New Mexico, Nevada, Montana, Arizona, Wyoming, Hawaii, Delaware and Rhode Island.

Allegheny County's 43 school districts are more than you'll find in five states -- Connecticut, Rhode Island, Delaware, Utah and Nevada.

A possible solution is merging governments. Onorato and Pittsburgh Mayor Luke Ravenstahl have endorsed the idea of consolidating county and city government to save costs and cut taxes.

Strauss says that's not enough.

Strauss: "What might make a difference is if some of the municipalities decide to merge, and some of the smaller school districts decide to merge, and we start to get some newer pushes for efficiency."

Whatever it takes, Wengler says something needs to be done to bring taxes down if Allegheny County expects to attract more people like him.

Wengler: "Try to lower it, or it's going to be tough for them to recruit people to come to the Pittsburgh area."

Unfortunately, the tax burden may only get worse in the next few years.

Pensions are going to be a big drain on local and state governments as more baby boomers retire. The city has an unfunded pension liability of more than a half-billion dollars. School districts and the state are going to have to come up with more than $800 million to cover pension costs in just five years. All of that makes it difficult to cut taxes.

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