OPED: All in York City should pay fair share
The financial state of the City of York has been well-publicized over the past several years. The spiraling cost of public safety pensions, coupled with a tax base where 37 percent of properties are controlled by tax-exempt entities, has forced the city to make drastic cuts to personnel and the services provided to our citizens.
But there is a light at the end of the tunnel, as evidenced by the property tax cut Mayor Kim Bracey was able to include in the 2016 budget. This is the second year in the mayor’s five-year plan that will ultimately reduce city taxes by 15 percent, making living in the City of York more affordable for residents and more attractive to people thinking about moving into the city, which will in turn drive up property values and increase tax revenues.
However, as the mayor has said many times, cutting spending is not enough. The city budget has been cut to the bone, and in order for the city to be able to continue to provide necessary services and tax relief to residents, everyone must pay their fair share. The city has instituted a payment in lieu of taxes (PILOT) program to encourage tax-exempt entities to make a meaningful yearly payments to the city to help offset the costs of services the city provides to them.
The city also began enforcing collection of the admissions tax that had been on the city’s books since the 1960s, but hadn’t been enforced for a number of years. Individuals enjoying a ticketed event in the City of York are using city services, whether they realize it or not. Police and fire protection, maintaining city streets and garages, and even powering street lights cost money. The admissions tax passes a small percentage of those costs along to the consumer, so that he/she is paying his/her fair share.
Another important piece on the revenue side of the ledger is the city’s Mercantile and Business Privilege Tax (MBPT). Much as the admissions tax is a tax on the ticket purchaser in an effort to offset the cost of city services, the MBPT is a tax on businesses for the privilege of doing business in the City of York and the attendant benefits that go along with being located in the city. The MBPT is based on a percentage of the total revenue a business generates. The MBPT rate varies between one mil (.0010) and 3½ mils, or .0035 percent depending on the type of business. In layman’s terms, this means that if a business falls under the highest rate, the business will have to pay $3.50 of MBPT for every $1,000 of revenue.
As with most taxes, there are a number of exceptions to the MBPT, which can be quite confusing. The exceptions mirror those that are found in the Local Tax Enabling Act (LTEA), which is the statute that gives municipalities the power to institute and collect MBPT. In an effort to clarify the exceptions and to make it easier for businesses to understand what their fair share of the tax is, City Council passed updated MBPT regulations in November of last year. The updated regulations incorporate several Commonwealth and Supreme Court decisions that have been made since the regulations were last updated in 2004, and should serve as a guide for businesses going forward.
The city also conducts MBPT audits of local businesses through a third-party auditor. The purpose of the audits is to ensure that businesses are paying their fair share of the tax. Oftentimes, if the auditor finds that a taxpayer under-reported MBPT, the error is promptly corrected and the business submits any difference owed to the city to bring its account current. Sometimes there is a dispute between the city and a business about the language in the ordinance, or the amount of money owed, and the parties must look to the courts to determine whose interpretation is correct.
One such case recently went all the way to the Pennsylvania Supreme Court. As a result of deregulation, many companies that previously had their rates set by the Pennsylvania Public Utility Commission (PUC) were still claiming what is known as the “Public Utility exception,” despite being deregulated and having the freedom to charge whatever rates they wish. In a unanimous decision, the court ruled that “only persons or companies whose rates are fixed and regulated by the PUC are excepted from local taxation.”
Specifically, the court stated that “(N)othing in the LTEA suggests that a person or company whose rates were once regulated by the PUC is forever shielded from local taxation.” Therefore, companies that had been claiming an exception and not paying any local taxes now have to pay their fair share. This decision allows York, and cities throughout the commonwealth, to recover taxes from corporations that have avoided taxation for decades.
It is not a silver bullet that will solve all of the city’s financial problems, but it is another tool and a valuable one. The ability to make corporations pay their fair share will help the city down the path toward meaningful property tax relief for homeowners.
There are no easy answers to solve the city’s financial troubles, but a multi-faceted approach that makes sure everyone is paying their fair share is absolutely critical to the continued resurgence of York.
— Jason R. Sabol the assistant solicitor for York City.