Local Taxing Options For Financing Open Space Initiatives In Pennsylvania

Act 153 of 1996 (the "Act"), which amended the Pennsylvania Conservation and Land Development Act, provides certain types of local government units with a valuable financing tool as many municipalities seek the means to preserve open space in their communities. The Act allows cities, boroughs, towns and townships, as well as certain cooperative governmental units, to impose one of two taxes in addition to the taxing limitations set forth elsewhere to finance certain types of open space initiatives. Counties and county authorities are specifically prohibited from invoking either of the local taxing options. By ordinance, qualifying local government units may impose either (a) a tax on real property not exceeding the millage authorized by voter referendum, in addition to the statutory rate limits on real estate taxes in the relevant municipal code, or (b) an earned income tax on residents of that local government unit not exceeding the rate authorized by referendum, in addition to the earned income tax rate limit found in the Local Tax Enabling Act.

The Act requires that revenue from either of the two authorized tax levies be used to retire indebtedness incurred in purchasing "interests in real property" or in making additional acquisitions of real property to secure an "open space benefit" under either the Conservation and Land Development Act or the Agricultural Area Security Law. The terms "interest in real property" and "open space benefits" are defined broadly in the Act and allow municipalities significant flexibility to achieve their land preservation goals in the manner best suited to their specific needs.

A local government unit may not exercise the local taxing option unless it first provides by ordinance for a referendum on the question of the imposition of the additional tax, specifying the rate, and a majority of those voting on the question vote in favor of the imposition. The Act further provides that the ordinance calling for a referendum must be filed with the county board of elections. The referendum is further governed by the provisions of the Pennsylvania Election Code. The election official must cause the question to be submitted to the electors of the local government unit at the next primary, general or municipal election occurring not less than the thirteenth Tuesday following the filing of the ordinance with the county board of elections. The question is required to be submitted to voters in the same manner as other questions are submitted under the provisions of the Pennsylvania Election Code. The Act specifically describes how the ballot question is to be framed. Generally, the question is to read: "Do you favor imposition of a [describe tax in millage or rate] by [the local government unit] to be used to [describe purpose]?"

In addition to the local taxing options, the Act authorizes school district boards to exempt by resolution certain real property from further millage increases imposed on real property. Those types of real property that may be exempted include those whose open space property interests are acquired by a local government unit pursuant to the Conservation and Land Development Act, real property that is subject to an easement acquired under the Agricultural Area Security Law and real property whose transferable development rights have been transferred and retired by a local government unit without the development potential having occurred on other lands. The tax exemptions granted under the Act are not to be considered by the State Tax Equalization Board in deriving the market value of school district real property resulting in a reduction in the subsidy to that school district or an increase in the subsidy to any other school district. Furthermore, the exemption from further millage increases described above is only authorized for real property qualifying for such exemption under the provisions of Article 8, Section 2(b)(i) of the Pennsylvania Constitution.

A local government unit may acquire an interest in real property, defined to include "any right in real property, improvements thereto or water, whatsoever, including ... a fee simple, easement, remainder, future interest, transferable development right, lease, license, restriction or covenant of any sort, option or contractual interest ...", within its boundaries by purchase, contract, gift or otherwise for a variety of purposes including the protection and conservation of water resources, watersheds, forests, natural or scenic resources and farmland; the protection of an existing or planned park, forest or other recreation or conservation site by controlling the use of contiguous or nearby lands; the protection of scenic areas for public visual enjoyment from public rights of way; and the limiting of the use of real property by reselling it after acquiring fee simple title, subject to restrictive covenants or easements that limit its use for the purposes described above. Only counties and county authorities are authorized to acquire an interest in real property by condemnation.

For local government units acquiring interests in real property pursuant to the Conservation and Land Development Act, there are a variety of procedural requirements that must be followed. A municipality desiring to acquire an interest in real property must designate such. After such designation and prior to acquisition, the municipality must hold a public hearing and provide notice to the owners of the interest at issue and any local government unit in which the land is situated. In addition, the local government unit must meet with a number of planning requirements prior to buying an interest in real property. The land must be designated for open space uses in a resource, recreation or land use plan recommended by the planning commission of the governmental unit in which the property is located and adopted by the municipality's governing body. Local government units are prohibited from utilizing the acquisition powers in the Conservation and Land Development Act unless they have established procedures for reviewing potential acquisitions, rating relative desirability of particular parcels and establishing purchase prices.

There are specific provisions dealing with the disposition of real property interests acquired pursuant to this statute. For example, if the owners want their interest acquired by fee simple, the local government unit must do so. The local government unit is further required to offer for public resale any real property acquired in fee simple within two years of the acquisition date, subject to specified restrictive covenants or easements.

Lastly, local government units are specifically authorized to purchase open space interests on an installment basis and such payment obligations are specifically excepted from the requirements of the Local Government Unit Debt Act dealing with level debt service and the timing for the maturing of principal.

These materials are intended to furnish general information and should not be relied upon as advice in specific situations.

Saul Ewing LLP
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1500 Market Street, 38th Floor
Philadelphia, PA 19102

Suzanne S. Mayes
(215) 972-1968 fax:(215)-972-1868
e-mail: [email protected]

Kevin L. Valentine
(215) 972-7548 fax: (215) 972-2287
e-mail: [email protected]