This article is adapted from Buy-in for Buyouts: The Case for Managed Retreat from Flood Zones, a Policy Focus Report to be published in September 2016 by the Lincoln Institute of Land Policy in conjunction with Regional Plan Association.

Hurricane Irene and Superstorm Sandy cost the New York metropolitan area an unprecedented number of lives and properties. In the span of 14 months, between August 2011 and October 2012, the storms killed 83 residents and caused $80 billion of damage in New York, New Jersey, and Connecticut. More than $60 billion in recovery funding was allocated to local governments, home owners, and facilitators to repair roads and seawalls; elevate, secure, or acquire buildings; restore dunes and wetlands; and reconstruct communities. 

The hurricanes generated a regional dialogue about how to prepare for and respond to extreme weather events. These conversations led to state-of-the-art, government-sponsored design competitions such as Rebuild by Design. And at the federal level, the U.S. Army Corps of Engineers (USACE) conducted the two-year, $19.5 million North Atlantic Coast Comprehensive Study, which focused on how to protect Northeast residents from hurricanes. 

Yet nearly five years later—after recovery efforts have been completed and appropriate programs implemented—many communities in the region still could not withstand the surge levels of another Sandy or the riverine flooding of another Irene. And by 2050, the number of residents vulnerable to flooding in the region will likely double to 2 million people, due to rising sea levels, the increasing frequency and magnitude of storms, and steady population growth. One third of the victims will be socially vulnerable. 

The Case for Buyouts

Rebuilding and restoring are the most common and popular adaptation tools for strengthening community resilience in the face of climate change, but the strategy that most effectively eliminates risk is managed retreat through the use of buyout programs. Yet, because of the social and political complexity of managed retreat, governments and communities across the United States have largely dismissed it as an adaptation strategy. 

Typically funded by federal or state dollars and managed at the state or county levels, buyout programs are designed to provide a mechanism for residents to sell their homes and move to safer locations if they no longer want to live in high-risk flood zones. New York, New Jersey, and Connecticut all employed buyout programs on a limited scale following Hurricane Irene and Superstorm Sandy, but too often this approach was considered controversial even for the hardest hit areas.

Indeed, managed retreat poses considerable challenges. For home owners, the decision to leave a community can be traumatic, especially if adequate and affordable housing is hard to find nearby. For municipalities, the loss of tax revenue from bought-out properties can have a serious impact on the local budget. On a higher level, urban planning’s dubious history of relocating low-income communities, ostensibly for the greater good, stands as a reminder of how well-intentioned, even necessary measures such as managed retreat can have disproportionate negative impacts if they are not carefully considered in close consultation with residents. 

But if these problems are carefully considered during the design and implementation process, the benefits of buyouts can outweigh the risks. Unlike other adaptation measures, retreat is a one-time investment that requires no further action beyond providing relocation assistance to participants and protecting the natural landscape left behind. Managed retreat also has the potential to create synergies with other resilience and adaptation strategies. Since development is not permitted on acquired land, buyouts can be used to implement projects such as sea wall construction, wetlands restoration, and many other engineered and nature-based resilience measures. Residents can forge new beginnings on safer ground and help create public amenities by allowing for the acquisition of homes in flood-prone areas and restoration of the land to natural floodplain functions.

While the promise of buyouts is great—yielding 100 percent risk reduction, a greater return on public investment, and other benefits to communities and habitats—they have attracted only $750 million of the billions in federal aid allocated for resilience and recovery in the New York metropolitan region. The vast majority of recovery efforts have focused on more popular adaptation measures.

Buyouts in the New York Metropolitan Region

This article highlights the experience of three cities in Connecticut, New York, and New Jersey that adopted buyout programs after suffering major property loss from Hurricane Irene or Superstorm Sandy. The case studies demonstrate that buyout programs are a useful tool for moving residents in flood zones out of harm’s way, but they also illustrate the limitations of current programs. 

Buyout Programs in the New York Region

NY Rising
New York State established the New York Rising Buyout and Acquisition Programs (NY Rising) in order to address the damage caused by hurricanes Irene and Sandy as well as Tropical Storm Lee between 2011 and 2013. In a handful of designated “enhanced buyout areas,” including Oakwood Beach on Staten Island, home owners were offered the pre-storm value of their homes, plus incentives for group participation to prevent the so-called “checkerboarding” of bought-out properties. 

Blue Acres
The Blue Acres program, run by the New Jersey Department of Environmental Protection, predates hurricanes Irene and Sandy, but it has benefited from the funding made available after those storms. In recent years, the program has mainly targeted neighborhoods in Sayreville and Woodbridge, and identified individual properties or clusters of properties that experienced repetitive or severe repetitive losses.

Other Federally Funded Programs
In many cases, buyout programs are administered on the local level and funded largely through federal grant programs such as FEMA’s Hazard Mitigation Grant Program (HMGP) and the USDA’s Emergency Watershed Protection Floodplain Easement Program (EWP-FPE). Typically, federal grants for buyouts require a local funding match of 25 percent.

Oakwood Beach, New York

Oakwood Beach is located on the central part of Staten Island’s South Shore. The lowest-lying portion of the neighborhood is situated next to the marshes of Great Kills Park. The most serious flood risks come from storm surge off the Raritan Bay and Lower New York Harbor. Additionally, sections of the neighborhood experience nuisance flooding following even modest rainfall. Along with the neighboring upland community of Oakwood, Oakwood Beach has a population of 22,000, and nearly 3,000 residents live in current FEMA Special Flood Hazard Zones. The number of people within high-risk flood zones is expected to increase nearly 150 percent, to 7,300 by 2050. 

Oakwood Beach is a middle-class community with a median annual household income of $89,000. The neighborhood is 31 percent low-to-moderate income, 16 percent nonwhite, and 69 percent owner-occupied. The neighborhood was largely developed in the 1960s and 1970s; nearly half its residents have lived in the community for more than 25 years. In general, the homes built closer to the water are smaller and cheaper than those located farther upland. Single-family homes dominate the neighborhood, but there are a handful of apartment buildings inland.

Hurricane Sandy severely impacted Oakwood Beach. The storm surge overtopped the boulevard that runs along the coast and damaged the berm between the neighborhood and the Atlantic Ocean. The surge inundation was exacerbated by the floodwaters trapped within the “bowl” topography of the South Shore (SIRR 2013). In Oakwood Beach, some homes were swept off their foundations; others were flattened. Staten Island as a whole was among the hardest hit areas, with 23 storm-related deaths in the borough (SIRR 2013; Koslov 2014). Prior to Sandy, Oakwood Beach withstood several other historic floods, including intense inundation from a nor’easter in 1992 and flooding from Hurricane Irene in 2011 (Oakwood Beach Buyout Committee 2015; Koslov 2014). After the 1992 storm, residents organized a Flood Victims’ Committee to petition for better flood protection from the state and federal government. Although the USACE somewhat addressed their concerns by constructing a berm, it was not completed until ten years after the nor’easter (Koslov 2014).

Building on their experience organizing for flood protection in the 1990s, Oakwood Beach residents moved quickly to plan their recovery after Hurricane Sandy. At an early community meeting devoted to immediate disaster response and aid, one organizer asked if residents would support a buyout program. Nearly all community members in attendance said yes. Residents then formed the Oakwood Beach Buyout Committee, which began to draft an application for a state buyout. The committee conducted outreach to gauge interest and provided information to residents about what a buyout program might entail. The committee collected signatures from nearly all the neighborhood’s residents to indicate their interest (Lavey 2014). Additionally, committee members surveyed residents about where they felt safe living within the neighborhood, in order to generate maps of priority acquisition areas. 

This mapping effort is a powerful tool for communities organizing to receive buyouts. However, some populations that are considering buyouts are settling in marginal flood-prone areas because they have suffered government-imposed relocations and disinvestments in the past. If buyout program plans are not community-driven, they risk continuing this pattern of marginalization. As we observed in post-Katrina New Orleans, residents understandably opposed buyout programs proposed by outside planners who hadn’t consulted with the local population. By contrast, Oakwood Beach residents collaboratively created their own “green dot” maps to convey their goals for a buyout program and to confirm that they did not want redevelopment in their flood-prone area. 

The NY Rising Program heeded residents’ requests and launched a buyout program for Oakwood Beach. As of June 2015, nearly 99 percent of the neighborhood’s residents have participated. The state plans to purchase 326 properties, an acquisition process that will be completed in 2016. As of February 2015, the state owned 296 properties and had demolished 60 (Rush 2015; Governor’s Office of Storm Recovery 2015). 

The relative success of Oakwood Beach’s buyout program is not surprising considering the fiscal context. Factoring in the projected sea level rise by 2050, a single 100-year flood event could cause $216 million of damage across 1,837 properties, and 830 would have to be demolished. As summarized in table 1 (p. 32), a buyout of only those 830 properties would save community residents $817,000 per year in flood insurance premiums and an annualized average of $5.7 million in damages and dislocation costs. In terms of the potential costs to communities, Oakwood Beach benefits from being only one neighborhood in a very large city. The loss in tax revenue is quite negligible in the context of New York City’s $75 billion budget.

Wayne, New Jersey

Wayne is a township of 55,000 people in the outer ring of northern New Jersey suburbs. Twenty percent of households are low-to-moderate income, 20 percent of residents are nonwhite, and 80 percent are home owners. The town is landlocked but lies within the Passaic River Basin. Approximately 12 miles of Wayne’s western border is formed by the Pompton River, which has a history of flooding. Additionally, the township has several lakes and streams with development encroaching on flood zones. Approximately 5,400 people (nearly 10 percent of the total population) currently live in Special Flood Hazard Areas. Wayne is the wealthiest of the case studies, but the town has experienced the slowest property value growth since 2000. FEMA has provided $6.9 million in individual assistance to Wayne home owners since 2007, and 15 percent of registrants occupy repetitive-loss properties.

Wayne has experienced severe flooding since colonial times. The most severe flood to impact the entire Passaic River Basin occurred in 1903. Since then, several major floods have occurred each decade. Although the USACE began plans to reduce flooding in the Passaic River Basin in 1936, a comprehensive plan for the area has yet to be implemented.

The first buyouts in the Passaic River Basin began in 1995, after the New Jersey Department of Environmental Protection (NJDEP) formed its Blue Acres Program. They have continued through various funding sources, including NJDEP, FEMA, and open space taxes, in the case of municipalities in Morris County. However, Wayne was not included in the first round of buyouts through the Blue Acres Program in the late 1990s. As a result, municipal officials approached the state about funding the town, which led to several other programs. In 2005, the NJDEP and USACE identified the Hoffman Grove neighborhood in Wayne as a priority area for buyout funding (USACE 2005). A series of allocations since 2005, including additional funding after hurricanes Irene and Sandy, allowed for the purchase and removal of 96 homes in the Hoffman Grove neighborhood. FEMA was the primary source of funding for these purchases; the Blue Acres Program provided the nonfederal match. Despite these significant subsidies, news sources reported that “there is no immediate funding to buy and raze the houses that are left standing” (McGrath 2011). Nevertheless, all but 29 homes in this neighborhood have now been purchased and removed.

In May 2015, the USACE, together with NJDEP, released a follow-up to that 2005 study and identified 27 additional properties within Hoffman Grove as priorities for acquisition. Municipal officials in Wayne are now working to identify willing residents in order to move the program forward. Once these buyouts are complete, the entirety of the Hoffman Grove neighborhood will return to a floodplain.

The buyout programs in Wayne more closely resemble the FEMA buyout programs that began in the 1990s in response to the Great Flood of 1993, given Wayne’s vulnerability to seasonal and storm-related riverine flooding. Buyouts have undergone greater testing in riverine settings, leading to simpler program designs. Additionally, lower property values in inland riverine areas make it possible for buyout programs to purchase a greater number of homes. (Following disasters, property values of riverine flood properties are less resilient than coastal property values.)

The fiscal impact analysis for Wayne reveals that, after the acquisition of 96 Hoffman Grove properties, the township has a relatively small number of properties vulnerable to severe flooding compared to the other case studies. Even so, a 100-year flood event could still severely damage 127 homes, costing $25 million, as shown in table 1 (p. 32). It is worth noting that applying Wayne’s buyout program to the remaining most vulnerable properties may lead to an average of $840,000 in lost tax revenues per year. 

Milford, Connecticut

Milford is a coastal city of 52,000 people, midway between Bridgeport and New Haven on Long Island Sound. Milford has the longest coastline of any town in Connecticut (14 miles) plus two significant rivers, the Wepawaug and Housatonic, leaving residents vulnerable to both coastal and riparian flooding. Oceanfront property is one of Milford’s most prized amenities, and the town has more waterfront homes than any other case study in this article. Currently, there are 8,100 Milford residents in the 100-year flood zone, with a 26 percent increase projected by 2050. Milford also has the most repetitive-loss properties of any municipality in Connecticut. Since 2007, Milford residents have made up 20 percent of registrants in FEMA’s individual assistance program; FEMA awarded them $3.5 million. The town is 25 percent low-to-moderate income, 15 percent nonwhite, and overwhelmingly owner-occupied.

Milford’s own analysis confirmed the city’s extreme vulnerability. A Category 2 hurricane has the potential to inundate more than 2,000 properties, including 35 city facilities. More than 1,500 homes were damaged by Irene and Sandy, over 200 severely (Daley 2014). An excess of $60 million in flood insurance claims were paid to Milford residents in 2011 and 2012 (City of Milford 2015). A year after Sandy, entire streets and dozens of homes remained empty, while many others were elevated on piles and rebuilt. As in many areas damaged by Sandy, government funding came slowly, which retarded recovery (Zaretsky 2013). An estimated 4,000 to 5,000 homes in the city may still need to be elevated to satisfy building code requirements (Buffa 2013).

The primary strategies for combating flood risk in Milford have included beach nourishment projects, building retrofits and elevations, revetments, jetties, and groins. The city’s 2013 Hazard Mitigation Plan outlined over $14.4 million in flood mitigation projects, including elevating structures, protecting or upgrading critical infrastructure such as the wastewater treatment plant, and replenishing dunes (City of Milford 2013). The highest-priority projects were neighborhood drainage systems and catch basins. Due to lack of funding, however, many proposed projects either stalled or have not begun. 

The USACE evaluated the coastline of Milford for the North Atlantic Coast Comprehensive Study and found that the implementation of structural measures, like beach fill or dune projects, may be limited due to space constraints even in areas where these approaches might normally be most cost effective. If these measures are not applicable, flood proofing, and even acquisition and relocation, might be the most economical long-term strategies (USACE 2015). These challenges are shared by many highly developed areas along the eastern Atlantic coast. Buyouts can be difficult to secure in the short term, and structural solutions do not effectively reduce risk. 

Yet buyouts have received some attention from the city’s residents. FEMA Hazard Mitigation Grant funds were used to buy several properties. Additionally, Milford has received $1.4 million from the USDA Floodplain Easement Program to buy at-risk properties (USDA n.d.). Despite available funding, however, the programs received only seven applicants in 2013. Furthermore, the city’s official position was “unenthusiastic” (Spiegel 2013). Milford stakeholders interviewed for this report cited concerns over the loss of the municipal tax base as the primary cause of resistance to buyouts, as coastal property owners pay the highest property taxes.

From the state’s perspective, Milford presented a promising case for a buyout program since many of the repetitive-loss properties were adjacent to the Silver Sands State Park, and acquired parcels could be incorporated into the park. Stakeholders indicated that positive alternative models for development are needed to encourage participation in buyout programs. The fiscal analysis performed for this study reveals that, while buyouts would impact property taxes, the effects would not be as severe as perceived by municipal officials. As a percentage of the most recent budget, buyouts of the most vulnerable properties would result in only a 1.36 percent loss in revenue, as indicated in table 1 (p. 32). 

Milford’s vulnerable properties have the highest average value among the case studies. Factoring in 2050 sea level rise projections, Milford’s most vulnerable homes—those that could suffer over 50 percent damage—could face $204 million in damage and dislocation costs over the next 100 years. Relocating home owners from just these properties that are most at risk could save $435,000 in annual flood insurance premiums. 

Conclusion

Buyout programs have long been avoided in public dialogue. Yet when weighed against the magnitude of risk faced by some U.S. coastal and riverine communities, they can be a viable and effective way to enable retreat from flood zones. As tools to preserve communities and strengthen resilience, they deserve serious consideration.

The three case studies highlight both the potential value of buyout programs and the political, social, and economic challenges of implementing them. Many factors contributed to the relative success of buyout participation in Oakwood Beach and Wayne and to the failure in Milford. The timing of the program, the level of program engagement with residents, the attachment to place, and the availability or lack of alternatives all played a role. In order to meet the needs of residents and municipalities, we must rethink the goals, strategies, and time frame of buyout programs, improve the administration of funding, reform the planning process, and design minimally disruptive programs. 

For an in-depth exploration of managed retreat in the New York metropolitan region, see the forthcoming Policy Focus Report, Buy-in for Buyouts: The Case for Managed Retreat from Flood Zones, to be published in September 2016 by the Lincoln Institute of Land Policy in conjunction with Regional Plan Association.

Robert Freudenberg is director of Energy and Environment at Regional Plan Association (RPA), where Ellis Calvin is an associate planner in the same department. Laura Tolkoff is a former senior planner for Energy and Environment, and Dare Brawley is a former research analyst at RPA.

Photograph: Tom Pioppo/FEMA (2011)

References

Buffa, Denise. 2013. “Storm-Battered Shoreline Gets a Lift, One House at a Time.” Hartford Courant. August 3. http://articles.courant.com/2013-08-03/news/hc-houselifter-20130803_1_houses-milford-contractor-coastline.

City of Milford. 2015. “Flood Insurance Claims Paid to Milford Residents by Year.”

Daley, Beth. 2014. “Milford, East Haven Top Connecticut in Costly Flood-Prone Homes.” New Haven Register. March 21. http://www.nhregister.com/general-news/20140321/milfordeast-haven-top-connecticut-in-costly-flood-prone-homes.

Governor’s Office of Storm Recovery. 2015. “Notice of Change of Use of Acquisition Properties by NY Rising.” New York.

Koslov, Liz. 2014. “Fighting for Retreat after Sandy: The Ocean Breeze Buyout Tent on Staten Island.” Metropolitics. April 23. http://www.metropolitiques.eu/Fighting-for-Retreat-afterSandy.html.

Lavey, Nate. 2014. “Retreat from the Water’s Edge.” The New Yorker. http://www.newyorker.com/news/news-desk/hurricane-sandy-retreat-waters-edge.

McGrath, Matthew. 2011. “Hoffman Grove is More Wilderness than Neighborhood.” NorthJersey.com. December 30. http://www.northjersey.com/news/wayne-neighborhood-surrendering-to-the-river-1.276454.

Oakwood Beach Buyout Committee. 2015. “About Us.” http://foxbeach165.com/about-us/.

Rush, Elizabeth. 2015. “Leaving the Sea: Staten Islanders Experiment with Managed Retreat.” Urban Omnibus. http://urbanomnibus.net/2015/02/leaving-the-sea-staten-islanders-experiment-with-managed-retreat/.

Special Initiative for Rebuilding and Resiliency (SIRR). 2013. “A Stronger, More Resilient New York.” City of New York. http://www.nyc.gov/html/sirr/html/report/report.shtml.

Spiegel, Jan Ellen. 2013. “Despite Storms, Few Coastal Homeowners are Open to Buyouts.” Connecticut Mirror. September 16. http://ctmirror.org/2013/09/16/despite-storms-few-coastalhomeowners-are-open-buyouts/.

U.S. Army Corps of Engineers (USACE). 2005. “Passaic River Floodway Buyout Study Limited Update: Final Report and Environmental Assessment.”

U.S. Army Corps of Engineers. 2015b. “North Atlantic Coast Comprehensive Study: Main Report.”

U.S. Department of Agriculture (USDA). n.d. “Emergency Watershed Protection Program — Floodplain Easement Option.” http://www.nrcs.usda.gov/wps/portal/nrcs/detail//?cid=nrcs143_008225.

Zaretsky, Mark. 2013. “1 Year After Superstorm Sandy, Recovery Moves Slowly on Connecticut Shore.” New Haven Register. October 26. http://www.nhregister.com/generalnews/20131026/1-year-after-super-storm-sandy-recovery-moves-slowly-on-connecticut-shore.

Property taxes have become such a contentious issue in Pennsylvania that residents from at least 84 different grassroots groups have banded together to push for changes that include eliminating the school property tax—even if it means funding education through other sources that might not be as reliable.

A Decade of Failed Reform

Especially in more recent years, residents and other property owners in the nation’s sixth-most populous state have filled meetings, written their legislators, and spoken out loudly against the tax that local governments levy on houses, land, and other property. Pennsylvanians shoulder one of the largest overall tax burdens in the country, and many frustrated home owners there complain that property taxes are too high. Property tax rates have risen even as median household incomes have remained stagnant or declined in most cities in the Keystone State. Meanwhile, a property tax reform bill passed by the state legislature in 2006 has failed to live up to expectations, partly by failing to give residents the control they wanted over the largest portion of their property tax bills—the part that funds public schools and, in some communities, makes up more than one-half of the total tax bill. Under the Taxpayer Relief Act, each school board is required to get voter approval before it can adopt a tax rate that exceeds a cap tied to inflation. For years, however, dozens of school districts have avoided a voter referendum by asking the state Department of Education for special exemptions.

These concerns are priorities for lawmakers. But state leaders acknowledge that changing their property tax system is much more complex than it seems. Cutting taxes for some groups of people means boosting them for others, unless leaders can identify new sources of revenue able to generate at least the same amount of money needed for public education, police protection, waste management, and other local government services. Today, Pennsylvania school districts, counties, and municipalities rely heavily on property taxes. In fact, schools in the commonwealth rely on property taxes more than schools in most other parts of the United States. About 45 percent of the funds that pay for public schools in the commonwealth come from property taxes, according to data from the U.S. Census Bureau for fiscal year 2013. Nationwide, about 37 percent of school district revenue came from property taxes that year.

While Pennsylvania lawmakers acknowledge the need for reforms, they have not yet developed a plan that residents, local governments, the business community, and other stakeholders can agree upon.

Property Tax Independence Act

During the last several years, multiple proposals have come forward and then been rejected. A controversial bill introduced in 2015 offers some of the most drastic changes of any property tax reform measure to come before a state legislature in recent years. Pennsylvania Senate Bill 76—also known as the Property Tax Independence Act—aims to slash property tax bills by eliminating school property taxes. By a very narrow margin, the measure failed to garner enough votes last year to get through the Pennsylvania Senate, and its sponsors plan to push for another vote this year. The bill enjoys bipartisan support as well as backing from the Pennsylvania Association of Realtors and groups such as the Tri­County Campaign for Liberty and the Lower Bucks County Taxpayers Association. Under Senate Bill 76, school property taxes would be abandoned over time. Districts with debt would be able to continue charging a small amount, but only enough to finance the annual payments on their debt service, and only until that existing debt is paid off. The legislation does allow districts to levy a local Earned Income Tax or Personal Income Tax for specific projects and programs, but those plans would require voter approval.

School property taxes would be replaced by a higher sales tax, a higher personal income tax, and other changes. The bill’s sponsors expect these new funding sources to generate the billions of dollars a year needed to help pay teachers and staff and otherwise keep the state’s 500 public school districts running. This academic year, education property taxes will raise an estimated $13.7 billion statewide, according to projections that the Legislature’s Independent Fiscal Office released in late 2014.

State Senator Mike Folmer, a father of two and grandfather of seven who is among the bill’s most vocal proponents, said a drastic change is needed because taxes have risen sharply in parts of Pennsylvania, leaving some residents struggling to pay their bills. Families want help. “When I go to houses and knock on everyday folks’ doors, and I say ‘Hi! I’m here to educate you about Senate Bill 76’, and I go into it with them . . . they say, ‘You know what? I’m with you. I get this,’” says Folmer, of Lebanon City. “They’re overwhelmingly in favor. Actually, I cannot remember a ‘no.’”

Pennsylvanians have indicated property taxes are a key concern. A spring 2015 poll conducted by Franklin & Marshall College, in Lancaster, found that 77 percent of voters think the tax system needs to be overhauled. Most Pennsylvanians who participated in that poll—60 percent—said they would favor a plan that would increase the state income tax from 3.07 percent to 3.7 percent if it meant their property tax bill was chopped by $1,000.

Among those who feel strongly about the issue is Kelly Sharp, of Grantville, who says she almost lost her house a few years ago because she was unemployed and could not pay her property taxes. At the time, she had enough money to cover her mortgage but not enough for her mortgage and property taxes. After battling her bank for months, Sharp finally was able to negotiate monthly payments she could afford. Today, the mother of five is manager of the canteen at her local VFW Post. Although she and her husband now work full-time, it still will be tough, she says, to come up with the $6,814.80 she owes in property taxes this year on her five-bedroom home. Sharp says she wants to move to a less expensive state. “We just can’t afford it anymore,” she says. “These taxes are just crazy on so many different levels. Not just the amount, but the power and authority people have to destroy you with these taxes.”

There are multiple reasons why Senate Bill 76 has gained support among tens of thousands of property owners statewide, says David Baldinger, a spokesman for the Pennsylvania Coalition of Taxpayer Associations, an umbrella organization representing the grassroots groups that are fighting education taxes. While many people cite frustrations over rising property taxes and fears about losing their homes, a number of people also think it is more fair to fund schools using sales and income taxes—because a larger share of individuals pay those taxes, Baldinger says. He points out that residents can control the amount they pay in sales taxes, which are paid by the tens of millions of visitors traveling to Pennsylvania each year as well.

“Without question, [property owners] know they will save money by getting rid of education property taxes,” says Baldinger, a retiree from Reading who said his total property tax bill is about $8,000, with about $6,500 levied by the local school district. No recent legislative analysis has been done, however, to gauge whether and how much property owners would save if the state were to replace education property taxes with a higher sales and income tax.

Opposition to Senate Bill 76

Despite support from many property owners, Pennsylvania Governor Tom Wolf opposes Senate Bill 76, and dozens of organizations have rallied against the measure as well. Among them are advocacy groups for children and the poor, such as the Pennsylvania State Education Association, Public Citizens for Children and Youth, Pennsylvania Council of Churches, and Coalition Against Hunger. At least some opponents object because the bill would raise the personal income tax from the current 3.07 percent to 4.34 percent. The bill calls for increasing the state sales tax from 6 percent to 7 percent, as well as expanding the scope of taxable goods to include some clothing items, some types of food, child care services, and nonprescription medications.

The business community has spoken out against the measure, too. The Pennsylvania Chamber of Business and Industry has expressed concerns that increased sales taxes will affect local businesses, especially retail stores in communities that border Delaware, which has no sales tax, and Maryland, where the tax rate is 6 percent.

Kathy Swope, president of the Pennsylvania School Boards Association, criticized the bill for allowing large corporations and other businesses to stop paying education property taxes. A significant portion of school property taxes come from commercial and industrial property in the state. In the Philadelphia city school district, for example, more than 44 percent of property was assessed as either commercial or industrial in 2012, according to an analysis from the Pennsylvania Budget and Policy Center. “Taxation works best when it is spread across many contributors,” Swope says. “Completely relieving businesses of the obligation of any contribution—I’m not sure that is the best way to approach this.”

In November 2015, Senate Bill 76 came up for a preliminary vote and almost passed the Senate. Following more than an hour of debate, legislators cast a tie vote of 24 to 24. The state’s lieutenant governor, Mike Stack, in his role as Senate president, broke the gridlock by casting an opposing vote, which made front-page news across the commonwealth. But the bill’s sponsors will try again. The primary sponsor, Senator David G. Argall, has said the close vote demonstrates how important tax cuts are to Pennsylvanians. A spokesman for Argall says Argall hopes the Senate will vote on the measure again in the coming months. And Senate Bill 76 might have a better chance of passing this time around. One of the cosponsors was absent for the last vote, as was a newly elected senator who is likely to favor the bill, according to local news reports. “Each session, we continue to pick up support in all parts of the state,” Argall, a Republican representing 95 municipalities in Berks and Schuylkill counties, says in a prepared statement. “I’ve got news for the governor and the lieutenant governor who voted against us: We are not giving up.”

It was not immediately clear how much support Senate Bill 76 has in the House. But Governor Tom Wolf has said he is concerned that Senate Bill 76 would not bring in enough money, said Wolf’s press secretary, Jeffrey Sheridan. While Wolf wants to offer residents property tax relief, he also wants to improve school funding—beyond the revenue raised through property taxes. The governor has spent the past year pushing to increase education funding in an effort to reverse the $1 billion in cuts that were made to school budgets before he took office in early 2015. Sheridan says those budget cuts were, in large part, the reason why school districts have had to boost property tax rates as well as increase class sizes and cut teaching positions.

Last March, Wolf unveiled a budget proposal for 2015­–16 that called for boosting the state’s share of public school funding to 50 percent for the first time since the 1970s, a press release from his office states. Today, the state pays considerably less—about 36 percent, according to data collected in fiscal year 2013, the most recent available from the National Center for Education Statistics. A joint report issued last summer by the Pennsylvania Association of School Administrators and the Pennsylvania Association of School Business Officials indicates that the state’s share of education funding has slipped since 2008–­09, even as school districts must cover increases in the cost of such things as special education and employee pensions and health benefits. “The reason that, in Pennsylvania right now, we couldn’t just eliminate property taxes is because the state’s share is inadequate,” the governor’s spokesman says. “That’s something we inherited. It’s unfortunate that districts are being forced to raise property taxes, and that’s what he is trying to fix.”

Wolf’s original 2015–­16 spending plan included changes to property taxes that would have resulted in tax cuts specifically for home owners. He had aimed to reduce property taxes by $3.8 million statewide and shrink the average home owner’s school tax bill by more than half. Nearly 300,000 senior citizens’ households would not pay school property taxes. Like Senate Bill 76, Wolf’s proposal would have relied on increases in sales and income taxes to cover the cost of the change. That spending plan, however, was taken off the table in the midst of tense, ongoing budget negotiations with the legislature. Wolf introduced a second state budget proposal in February that did not include changes to property taxes.

The Dependability of the Property Tax

While Pennsylvania policy makers debate the best ways to revamp the state’s property tax system, officials in other parts of the country are wrestling with similar issues. For example, a Texas Senate committee is holding meetings statewide to examine options for property tax relief before making recommendations to legislators. Nebraska Governor Pete Ricketts recently unveiled a property tax relief package that, among other things, aims to limit how much the value of agricultural and horticultural land can grow. Late last year, Florida’s House Finance and Tax Committee briefly considered pursuing a plan to replace property taxes with a higher state sales tax.

As debates take place, economists and other experts have reached out to state leaders to help them understand the research behind tax strategies while also warning them of the consequences of cutting back on property taxes as a key revenue source, especially for public schools. Andrew Reschovsky, an economist and fellow at the Lincoln Institute of Land Policy, says the property tax is generally a much more stable and reliable funding source during a recession than sales and income taxes. He advises against decoupling education funding and property taxes.

Reschovsky, who also is professor emeritus at the University of Wisconsin­–Madison, has written extensively about property taxes. In a report published in 2014, he explores states’ reliance on property taxes to fund public education and concludes that tax revenue data demonstrate “the abiding stability of the property tax.” In addition, he and public finance consultant Daphne A. Kenyon, who is a Lincoln Institute fellow as well, co­edited a special issue of the academic journal Education Finance and Policy on the property tax and school finance, which included several papers focusing on property tax changes in states such as Michigan, Massachusetts, New York, and Iowa.

For example, in 1996, Michigan reformed its school finance system by reducing reliance on residential property taxes while raising new state revenue primarily from the sales tax. The new system for financing education is highly centralized at the state level, with state revenue distributed relatively evenly across the state’s 540 local school districts. In recent years, however, the richest 20 percent of districts have been receiving about $600 per pupil more in state revenues than other districts. Substantial funding problems remain. Last September, a senior associate from the Citizens Research Council of Michigan reported that wide disparities exist in special education spending among the districts and that there are significant inequities in school construction spending.

South Carolina is another state that changed its tax system in response to demands from property owners. Under Act 388, passed in 2006, the state eliminated the school property tax on owner-occupied homes and replaced it with a new penny sales tax. Laura Dawson Ullrich, an economics professor at Winthrop University, says the trade has not been good for the state. “The sales tax increase has never made up for the reduction” in property taxes, Ullrich says. “Jurisdictions have increased taxes on businesses and owners of non­-owner-occupied homes to make up for the gap.” According to The Greenville News, lawmakers blame a combination of factors, including the Great Recession, overly optimistic revenue projections, and reliance on a revenue source that is not as stable as the one it replaced.

Circuit Breakers and Other Solutions

Reschovsky says that instead of abandoning school property taxes, Pennsylvania legislators should try to make the tax more attractive to property owners. One way to do that, he says, is through “circuit breaker” programs, which offer relief to individuals with high tax burdens in relation to their income. “Pennsylvania has a modest circuit breaker program that is available only to taxpayers over the age of 65 and to the disabled,” Reschovsky says (figure 1, p. 14). “Making the circuit breaker available to all taxpayers, independent of age, who are facing high tax burdens would likely reduce opposition to the property tax.”

Expanding Pennsylvania’s circuit breaker program is one of the recommendations made by the Pennsylvania Budget and Policy Center, a progressive policy research project based in Harrisburg that calls the elimination of school property taxes “an extreme response to a limited problem.” It has been urging legislators to reform the tax system by making targeted changes that will not hurt schools. The center also suggests requiring counties to reassess property regularly.

This is important because property taxes are based both on the tax rates set by local governments and an assessment of the value of the land, structure, or other property on which the tax is being imposed. A report that the Pennsylvania Budget and Policy Center released in 2014, when lawmakers were considering an earlier version of the Property Tax Independence Act, found that 43 percent of counties had not conducted reassessments in more than 20 years and that only one-third had reassessed property within the past decade.

The Pennsylvania Budget and Policy Center report also suggests that high property taxes are the exception in the commonwealth. The center’s analyses show that, for most counties, total property taxes average less than $2,000 a year, with tax bills ranging from a low of $850 annually in rural Forest County, which includes part of the Allegheny National Forest, to a high of $4,364 in Chester County, a wealthy suburb of Philadelphia. Data from the 2014 Census’ American Community Survey, however, indicate that a larger proportion of home owners pay high property taxes in Pennsylvania compared to the United States as a whole. Nationally, about 34 percent of home owners paid $3,000 or more in property taxes. Meanwhile, about 41 percent did in Pennsylvania.

But tax bills are not always the best measure of property tax burden. Many economists prefer to look at property taxes as a percentage of personal income. In Pennsylvania, property taxes made up 3.0 percent of personal income in 2013—just below the national average of 3.1 percent, according to the latest available Census data. Taxes are considered high in 30 of the state’s 500 school districts, as property taxes exceed 4 percent of the districts’ total taxable personal income. Meanwhile, an analysis released in December 2015 by the Pennsylvania State Data Center reports that median household income declined or stayed the same in 55 of the 57 Pennsylvania cities surveyed by the U.S. Census Bureau between 2005–2009 and 2010–2014.

Sarah Cordes, a professor of educational leadership policy at Temple University in Philadelphia, asserts that the most pressing problem in education finance is not funding sources. It is the fact that Pennsylvania is one of the few states that do not have an education funding formula that allocates state funds based on the current characteristics of a district—for example, a district’s wealth, student characteristics, and changes in different categories of enrollment. Cordes says Pennsylvania’s system for distributing state money to schools is “basically an automatic allocation,” based primarily on how much money schools received in the previous year. A 2015 report from the Center for American Progress notes that Pennsylvania’s highest-poverty districts spend more than 30 percent less per student than the lowest-poverty ones. But when comparing Pennsylvania to the rest of the country, Education Week’s Quality Counts 2016 report assigned Pennsylvania a grade of B in education spending and funding equity. Meanwhile, it gave the state a C in K–12 student achievement. Says Cordes: “If the goal is to produce better and more equitable educational outcomes for children across the state, then . . . the most important thing that needs to happen is that the state needs to come up with an education funding formula.”

Kenyon, the public finance consultant, recommends that policy makers address school funding and property tax reform as two separate issues. She suggests targeting state aid to needy school districts to tackle the biggest student achievement challenges. Meanwhile, she urges lawmakers to target property tax relief to those property owners with hefty property tax burdens. “The consensus among public finance researchers is that property tax relief should be targeted to low- and moderate-income households through a mechanism such as a state-funded property tax circuit breaker program,” Kenyon wrote in a 2007 report that summarizes some of the more pertinent research findings related to property taxes and school finance.

Kenyon, who served on New Hampshire’s State Board of Education and on the Education Commission of the States, would urge Pennsylvania lawmakers to reconsider their property tax problem. “I’d say that they feel the need to eliminate the property tax because they haven’t taken the more sober and precise measure, which I would highly recommend, of expanding their circuit breaker,” she says.

Denise-Marie Ordway is a longtime education reporter and 2015 fellow of Harvard’s Nieman Foundation for Journalism. Currently, she is an editor at Journalist’s Resource, a project of Harvard’s Shorenstein Center on Media, Politics and Public Policy in Cambridge, Massachusetts. She can be reached by e­mail at denisemordway@gmail.com or via Twitter at @DeniseOrdway.

Photograph: Office of Pennsylvania Governor Tom Wolf

References

Center for American Progress. 2015. A Fresh Look at School Funding. May.

Education Week. 2016. Quality Counts 2016: Report and Rankings.

Kenyon, Daphne A., and Andy Reschovsky. 2014. “Special Issue: Property Tax and the Financing of K–12 Education.” Education Finance and Policy 9(4). Fall 2014.

Kenyon, Daphne A. 2007. The Property Tax-School Funding Dilemma. Cambridge, MA: Lincoln Institute of Land Policy.

National Center for Education Statistics. 2013. National public education financial survey.

Pennsylvania Budget and Policy Center. 2014. Reform Not Repeal: Pennsylvania Can Provide Property Tax Relief and Protect Public Schools. October.

Reschovsky, Andrew. 2014. “The Future Role of the Property Tax in the Funding of K-12 Education in the United States.” Working paper. Cambridge, MA: Lincoln Institute of Land Policy.

Significant Features of the Property Tax. 2014. Lincoln Institute of Land Policy and George Washington Institute of Public Policy.