Senate Finance Committee Holds Hearing on Property Tax Bill

The committee held a public hearing April 30 on SB 76, the Property Tax Independence Act. Sponsored by Sen. David Argall (R- Schuylkill), the bill purports to eliminate the school property tax, shifting the burden to the state, and other tax payers, by increasing and broadening sales taxes, increasing the personal income tax, and allowing local districts to impose their own other local taxes to replace the estimated $16 Billion in school property taxes now being collected across the Commonwealth.
Committee Chairman Mike Brubaker (R- Lancaster) said “Today’s hearing marks another step in the ongoing discussion of property tax reform in Pennsylvania.” He commended the “tireless” work of his colleagues in their efforts to fundamentally change the way public education is funded in the Commonwealth by eliminating school property taxes. He highlighted past committee hearings and findings from the Independent Fiscal Office (IFO), which have yielded considerations and changes that are reflected in the proposed amendment.
Democratic Committee Chairman John Blake (D- Lackawanna) acknowledged the continuing efforts of members of the General Assembly in addressing the issue of school property taxes. He said, “I think it’s important to know at the outset of this conversation that the local tax system in the Commonwealth is flawed and obsolete.” Chairman Blake discussed the significant encumbrance of property taxes for particular demographics including fixed-income seniors and low-income households. “We are committed to a responsible solution that can eliminate the property tax burden on these lower income property owners,” he asserted. “Adequately funding public education is an urgent imperative; protecting the financial interests of aging and lower-income homeowners is also an urgent imperative.” Chairman Blake reiterated that potential negative outcomes must be carefully weighed and considered to find a “proper balance” moving forward.
Sen. Argall discussed the long history of legislative efforts to permanently remove property taxes to fund basic education in the commonwealth. “The argument used to be that it was only a regional issue, that only some regions of the state had an issue with school property taxes,” he said. “Today, with SB 76, we have 26 co-sponsors-including 13 Republicans and 13 Democrats.” Sen. Argall pointed out that the legislation was drafted in cooperation with over 70 grassroots taxpayer groups from across the Commonwealth. Furthermore, he noted that the legislation has been extensively vetted through two separate studies by the IFO, a report from the Department of Revenue and many public hearings. While some opposition groups continue to support the “archaic” status quo, Sen. Argall explained, many groups have shared in the process providing productive, positive feedback. “We were able to adopt many of the suggestions from those groups, over eight pages of clarification by the Department of Revenue, concerns from the City of Philadelphia and suggestions from other Senators,” he shared.
Sen. Argall outlined details of the legislation including an increase in the state’s Personal Income Tax from 3.07 to 4.34 percent, increase in the state’s Sales and Use Tax from 6 to 7 percent, and expansion of the Sales and Use tax to cover more goods and services (including design and construction services). “Along with revenues from gaming funds, our bill provides a dollar-for-dollar replacement for school property taxes across the state,” he asserted. “Each year, our bill will drive out more revenue through a Cost of Living Adjustment (COLA).” Sen. Argall explained the amendment provides clarification into what services are subjected to the expanded Sales and Use Tax, as well as those business-to-business services exempted from the Sales and Use Tax. Citing a variety of polling data, he argued that the majority of the public is overwhelmingly in support of eliminating school property taxes. Sen. Argall challenged his colleagues to defend the state’s current funding model for public education through property taxes, which he said was unconstitutional.
As a point of clarification, Chairman Brubaker noted the legislation would increase the Sales and Use Tax from six to seven percent across the majority of the state; however, it would increase the Sales and Use Tax from seven to eight percent in Pittsburgh and eight to nine percent in Philadelphia.
Design and construction services would be subject to the state sales tax under this proposal’s sales tax expansion provisions. The bill appears to be gaining support but its critics believe the expansion of taxable items and the rate increases called for in the bill are not sufficient to replace the billions of dollars presently raised by local property taxes. It is unclear at this time if the Senate will call for a vote on the bill.

Court Decision Prompts Mechanic’s Lien Bill

A much anticipated PA Supreme Court Decision has resulted in employee benefit funds being barred from filing mechanic’s lien claims. In the case of BRICKLAYERS OF WESTERN PENNSYLVANIA COMBINED FUNDS v. SCOTT’S DEVELOPMENT COMPANY, PA’s highest court reversed a lower court ruling that had upheld the funds right to file a lien when payments had not been received. That decision was issued in January of 2012 but was immediately appealed. This latest ruling settles the issue unless the mechanic’s lien law is changed. On that account, Representative Bill Keller, Democratic Chair of the House Labor and Industry committee has announced his intention to reverse the ruling and will be introducing a bill to do just that. In a memo to his House colleagues, Keller says “my legislation will amend the Mechanics’ Lien Law to ensure that benefit funds covered by the Employee Retirement Income Security Act of 1974 (ERISA) and related federal laws are considered subcontractors and afforded rights and remedies under the law. Health and retirement benefits are unquestionably necessary to workers and especially to those in the demanding construction industry. My legislation seeks to further safeguard benefits that are guaranteed to workers, ensuring benefit fund solvency and the availability of benefits when they are needed.”

Legislative Activity

The following bills of interest to PSPE have been introduced and acted upon in the past month.
BIDDING / CONTRACTING
NONE
BUDGET RELATED BILLS
NONE 
ENVIRONMENTAL BUILDING STANDARDS

SB 1255 RE: Storm Water Management (by Sen. Ted Erickson, et al)

Amends Title 53 (Municipalities Generally), in municipal authorities, authorizing storm water authorities to establish programs that would allow property owners to reduce their storm water rates and charges by implementing and maintaining storm water best management practices that address their own contributions to the problems caused by storm water runoff.
Reported as committed from Senate Local Government Committee, and read first time, 4/1/2014
Read second time, 4/8/2014
Amended on Senate floor, 4/28/2014
Read third time and passed Senate, 4/29/2014
LOCAL/STATE GOVERNMENT/REGULATIONS

HB 2089 RE: Building and Housing Regulations and Inspectors (by Rep. Kate Harper, et al)

Amends the First Class Township Code further providing for powers of the board of township commissioners as to building and housing regulations and inspectors; and providing for Uniform Construction Code, property maintenance code and reserved powers. The bill adds an article providing for Uniform Construction Code, property maintenance code, and reserved powers. The article states the Pennsylvania Construction Code Act and the Uniform Construction Code shall apply to the construction, alteration, repair and occupancy of all buildings and structures within a township. The commissioners may enact an ordinance to equal or exceed the minimum requirements of the Uniform Construction Code in accordance with and subject to the requirements of section 503 of the Pennsylvania Construction Code Act. Any ordinance exceeding the provisions of the Uniform Construction Code shall be required to meet the standards provided in the Pennsylvania Construction Code Act. Any construction contrary to any of the provisions of any ordinance passed may be declared, by a court of law, a public nuisance, and may be abatable as such, which exceptions. Commissioners may enact a property maintenance ordinance and may appoint property maintenance inspectors who shall have the right to enter upon and inspect any premises.
Reported as committed from House Local Government Committee, read first time, and Laid on the table, 4/2/2014

SB 1096 RE: Limits on Fees (by Sen. Don White, et al)

Amends Title 26 (Eminent Domain) further providing for limited reimbursement of appraisal, attorney and engineering fees by adding that the limit of $4,000 shall be per property, regardless of right title or interest, except where the taking is for an easement related to underground piping for water or sewer infrastructure, in which case the reimbursement is limited to $1,000, regardless of right, title or interest.
Passed Senate, 4/9/2014 (49-0)
Received in the House and referred to House Local Government Committee, 4/10/2014

SB 1319 RE: Uniform Construction Code (Sen. Ted Erickson, et al)

Amends the Second Class Township Code further providing for building and housing regulations; repealing provisions relating to building and housing inspectors; and providing for Uniform Construction Code, property maintenance code and reserved powers. The bill adds an article providing for Uniform Construction Code, property maintenance code, and reserved powers. The article states the Uniform Construction Code shall apply to the construction, alteration, repair and occupancy of all buildings and structures within a township. Any construction contrary to any of the provisions of any ordinance passed may be declared, by a court of law, a public nuisance, and may be abatable as such, which exceptions. Supervisors may enact a property maintenance ordinance and may appoint property maintenance inspectors who shall have the right to enter upon and inspect any premises.
Introduced and referred to Senate Local Government Committee, 4/2/2014

SB 1321 RE: Verification of Citing Requirements (by Sen. John Wozniak, et al)

Amends the Pennsylvania Sewage Facilities Act conferring the duty to local agencies to set and collect fees to conduct the verification of citing requirements for permit exempt systems.
Introduced and referred to Senate Environmental Resources and Energy Committee, 4/2/2014
LIABILITY
None
MANDATE WAIVERS
None
MECHANIC’S LIEN
None
MINIMUM WAGE
None
LICENSURE
None
PREVAILING WAGE
None
LOCAL/PROPERTY TAX REFORM

HB 1513 RE: Business Privilege Tax (by Rep. George Dunbar, et al)

Amends the Local Tax Enabling Act, allowing local taxing authorities to levy a tax on the privilege of doing business in the jurisdiction of the local taxing authority if business transactions occur fifteen or more days in a year and/or the transactions occur through a base of operations in the jurisdiction of the levying local tax authority. Applies to taxable years beginning January 1, 2014. Effective immediately.
Read third time, and passed Senate, 4/28/2014 (34-16)
Signed in the House and Senate, 4/29/2014
In the hands of the Governor, 4/30/2014. Last day for Governor’s action, 5/10/2014

SB 76 RE: Property Tax Independence Act (by Sen. Dave Argall, et al)

Provides for tax levies and information related to taxes; authorizes the imposition of a personal income tax or an earned income tax by a school district at a rate determined by the district, subject to voter approval; provides an exception for low income persons; imposes a statewide education tax of 0.94 percent to be deposited in the Education Stabilization Fund; implements the Sales and Use Tax for the Stabilization of Education Funding, at a rate of seven percent, which shall be a replacement for the existing sales and use tax and shall be deposited in the Education Stabilization Fund; every person maintaining a place of business in Pennsylvania, selling or leasing services or tangible personal property, the sale or use of which is subject to tax shall be licensed; imposes a seven percent hotel occupancy tax, to be deposited into the Education Stabilization Fund; the amount of additional revenues that are generated by taxes received under this chapter that are necessary to replace the revenue earmarked for transportation under 74 Pa.C.S. 1506 (relating to fund), not to exceed 4.4 percent of such additional revenues, shall be deposited in the Public Transportation Reserve Fund, which is established; provides for increase to the personal income tax, for certain licenses, for hotel occupancy tax, for procedure and administration of the tax, for expiration of authority to issue certain debt and for reporting by local government units of debt outstanding; establishes the Education Stabilization Fund; provides for disbursements from this fund and for certain rebates and assistance to senior citizens; and repeals certain provisions of The Local Tax Enabling Act, sales and use tax provisions of the Tax Reform Code and provisions relating to senior citizens property tax and rent rebate assistance in the Taxpayer Relief Act. The authority of any school district to levy, assess and collect any real property tax shall expire at midnight December 31, 2013; the authority of a city of the first class (Philadelphia) to impose or continue to provide for the imposition or continuation of any tax, including, but not limited to, the real property tax, for the use of a school district of the first class shall also expire. For fiscal year 2014-2015, the department shall make disbursements from the Education Stabilization Fund to each school district based on the base revenue of the district and the cost of living. Section 1504 (b) (2) and (7) and Chapters 3 and 6 shall take effect January 1, 2014 and the remainder of the act shall take effect immediately.
Public hearing held in Senate Finance Committee, 4/30/2014
TRANSPORTATION
None
2014 SENATE SESSION SCHEDULE
May 5, 6, 7
June 2, 3, 4, 9, 10, 11, 16, 17, 18, 19, 23, 24, 25, 26, 27, 28, 29, 30
2014 HOUSE SESSION SCHEDULE
May 5, 6, 7
June 2, 3, 4, 9, 10, 11, 16, 17, 18, 19, 23, 24, 25, 26, 27, 28, 29, 30
Copies of all bills of interest can be accessed via the Internet at: http://www.legis.state.pa.us/WU01/LI/BI/billroom.htm