Committee moves tax‑exempt property relief bill after amendment creating tiered grant caps; debate centers on targeting and budget impact

House Bill 9 85, sponsored by Chairman Freeman, would establish the Tax Exempt Property Municipal Assistance Act and create a Tax Exempt Property Municipal Assistance Fund to distribute liquor tax revenues (Act 4 of 1936, the Johnstown flood tax) to municipalities with high percentages of tax‑exempt property.

Under the bill’s base eligibility criteria, a municipality qualifies if either (1) tax‑exempt property equals or exceeds 15% of its total assessed value, or (2) the municipality’s median household income is within 115% of the statewide median, according to the U.S. Census Bureau’s American Community Survey one‑year estimate. The original draft capped award amounts at $100 per resident and a municipality could not receive more than 10% of total funds in a year.

Amendment A01300 (offered by Chairman Freeman) replaces the uniform $100 cap with a tiered per‑resident maximum tied to a municipality’s median household income relative to the state median and its tax‑exempt percentage. Under the amendment, municipalities with median household income greater than 85% of the state median remain capped at $100 per resident. For municipalities below that income threshold, the per‑resident cap increases with the tax‑exempt rate: $100 for 15–25%; $125 for 25–50%; $150 for 50–60%; $175 for 60–70%; and $200 per resident above 70% tax‑exempt. The amendment also requires DCD to perform iterative recalculations if at least $1 million remains undistributed, reallocating remaining funds until allocations meet caps or less than $1 million remains.

“The per person thresholds and iterative reallocations provide the most equitable distribution of the available funds,” said Vinny Cannizzaro, who presented spreadsheets modeling the amendment’s formula and its reallocations. He described three rounds of reallocations under the amendment and said the approach directs more funding to the most needy municipalities as caps are met and funds are reallocated.

Committee debate was sharply divided. Supporters, including Representative Probst, said the bill targets municipalities with concentrated tax‑exempt properties that constrain their tax base and can drive local tax burdens higher. “We have communities that are failing… Not one of [the Act 47 municipalities] was below 25% tax exempt,” Chairman Freeman said, arguing relief would stabilize host municipalities and could reduce reliance on more costly Act 47 interventions.

Opponents raised fiscal and equity concerns. Chairman Miller argued the amendment and bill would not benefit all Commonwealth citizens and flagged the bill’s budget impact, calling out a possible $450 million hole in the general fund if the liquor tax revenue were redirected without offsets. Miller also objected to exemptions from deduction requirements for municipalities receiving Commonwealth EMS or fire funding, calling it potential “double dipping.”

Representative Seacole said the amendment’s tiering is intended to drive funds to lower‑income municipalities and noted the PLA exemption and other criteria are optional for local taxing jurisdictions. Representative Probst and other supporters urged yes votes, citing examples of municipalities with very high tax‑exempt rates, such as East Stroudsburg.

Amendment A01300 was inserted by roll call vote, 14-12, and the committee then voted 14-12 to report HB 9 85 to the House for consideration. Supporters urged floor consideration and said the proposal could enter budget negotiations; opponents emphasized fiscal constraints and urged caution.

The bill directs DCD to develop written guidelines within 180 days of the act’s effective date and to implement the recalculation process described in the amendment. Next steps include House scheduling and potential budgetary review given the bill’s proposed revenue redirection.