Revenue Narrative

Revenue Narrative

The following revenue forecasts are intended to provide policy makers and the public with a revenue baseline to inform the budget process. The forecasts are based on economic assumptions, recent collection trends, and current laws and policies. However, actual revenues could vary from forecasts due to unforeseeable economic and technical factors.

2027 Operating Budget Revenue

Revenues are divided into tax and non-tax revenues. In 2027, tax revenues are budgeted at approximately $563.0 million and non-tax revenues are budgeted at $135.8 million, comprising approximately 77.4 percent and 18.7 percent of total revenues, respectively. Total revenues are forecast to decrease by 2.0 percent in 2027 over the 2026 budget.

Tax Revenue

Tax revenues incorporate all major taxes that are levied by the City of Pittsburgh. For each tax, total revenues include current year collections, prior year collections and penalties and interest. Tax revenues are forecast to decrease by 1.6 percent in 2027 over the 2026 budget and to increase by 1.2 percent each year through 2031.

Real Estate Tax

Total real estate tax revenues are budgeted at $171.4 million in 2027, an estimated 0.1 percent increase from the prior year. The real estate tax comprises approximately 30.4 percent of tax revenues and 23.6 percent of total revenues. Current year real estate tax liability (the amount billed at the beginning of the year) is calculated by applying the millage rate (9.67 mills as of 1/1/2026) to Allegheny County's assessed value of property. On average, residential property comprises 53 percent of the total assessed value of property in the City of Pittsburgh and non-residential property comprises approximately 47 percent. Due to decreases in the common level ratio which has promoted appeals to assessed values by residential and commercial property owners, the City's total assessed value of property has decreased by approximately 1% year over year since 2024. This trend is expected to continue in 2027 and future years until there is a County-wide reassessment. The largest taxpayer incentives that reduce current year real estate tax liability are the homestead exemption, the Allegheny County Act 77 of 2000 property tax relief (for senior citizens who meet certain requirements), and the 2 percent early-filer discount. Non-profits are exempt from this tax. Real estate tax incentives for future years are estimated as an average percentage of tax liability based on data. Total real estate tax revenues are forecast to decrease by 0.2 percent each year through 2031.

Earned Income Tax

Total earned income tax revenues are budgeted at $150.5 million in 2027, an estimated 1.7 percent increase over the prior year. The City's earned income tax is a 1 percent levy on the wages and net profits of residents of the City of Pittsburgh. The earned income tax forecast projects tax year liabilities based on a varying growth rate, with a downward adjustment for the City of Pittsburgh, and splits current and prior year liabilities based on historical collections. Total earned income tax revenues are forecast to increase by 2.3 percent each year through 2031.

Payroll Preparation Tax

Total payroll preparation tax revenues are budgeted at $72.1 million in 2027, an estimated 17.9 percent decrease over the prior year. The payroll preparation tax is levied at a rate of 0.55 percent on the gross payroll of employers and net income from self-employed individuals, members of partnerships, associations and joint ventures who perform work or provide services within the City of Pittsburgh. Non-profits an exempt from this tax. The payroll preparation tax forecast uses total non-farm wages for Allegheny County to forecast future revenues. Total non-

farm wages for Allegheny County are forecast to increase by 2.2 percent on average. Total payroll preparation tax revenues are forecast to increase by 1.0 percent each year through 2031.

Parking Tax

Total parking tax revenues are budgeted at $58.5 million in 2027, a 2.0 percent decrease from the prior year. The parking tax is levied at a rate of 37.5 percent on fees charged for parking or storing cars within the City of Pittsburgh. The parking tax forecast uses a multivariate regression with collections as the dependent variable and the tax rate and gross Allegheny County product as independent variables. Estimated gross Allegheny County product is the total value of goods produced and services provided in the county, and serves as a broad economic indicator of activity in and around the City. Total parking tax revenues are forecast to increase by 1.3 percent each year through 2031.

Deed Transfer Tax

Deed transfer tax revenues are budgeted at $48.4 million in 2027, an estimated 24.1 percent increase compared with the prior year. The tax is levied at a rate of 3 percent on real property transfers within the City of Pittsburgh. The total tax paid, which is typically split between the buyer and seller of a property, is 5 percent as of 2020, as the state and School District each also levy 1 percent taxes of their own. The deed transfer tax forecast uses a multivariate regression with collections as the dependent variable and three independent variables. The first independent variable is the residential tax base, which consists of existing single- family home sales multiplied by the average price of an existing single-family home. The other independent variables are the tax rate and a dummy variable for years in which the sale of a non-residential property exceeded $100 million. Total deed transfer tax revenues are forecast to hold steady on average each year over the next five years.

Regional Asset District Tax Relief

Regional Asset District tax relief is budgeted at $28.5 million in 2027, an estimated 0.8 percent increase over the prior year. This relief, created by Pennsylvania Act 77 of 1993, provides the City of Pittsburgh with a percentage of 1/4 of the 1 percent additional sales tax in Allegheny County. The City of Pittsburgh’s percentage is determined by a formula that compares the City’s tax revenues and the market value of property per capita with that of all municipalities in Allegheny County. Retail sales (a proxy for sales tax collections) are forecast to grow by 2.4 percent on average over the same period. Act 77 tax relief is forecast to increase by 3.2 percent each year through 2031.

Amusement Tax

Total amusement tax revenues are budgeted at $19.5 million in 2027, an estimated 14.2 percent decrease over the prior year. The amusement tax is levied at a rate of 5 percent on the gross admission to events that provide entertainment within the City of Pittsburgh, excluding non-profit performing arts organizations. Amusement tax collections are primarily motivated by sporting events within the City. Revenues from the three professional sports teams have historically comprised 70 percent of amusement tax revenues on average per year. Revenues from opposing teams and non-resident performers comprise the remainder of the amusement tax revenues. A sports teams and clubs economic indicator is used to forecast 70 percent of amusement tax revenues. The remaining 30 percent is forecast with consumer price index (inflation) to generate a more conservative forecast. Total amusement tax revenues are forecast to increase by 5.0 percent each year through 2031.

Local Service Tax

Total local service tax revenues are budgeted at $12.2 million in 2027, an estimated 11.7 percent decrease over the prior year. The local service tax is a weekly tax of $1 per employee working within the City of Pittsburgh earning greater than $12,000 annually. The local service tax forecast uses annual employment forecasts for the City of Pittsburgh to project revenues. Total local service tax revenues are forecast to decrease by 0.9 percent per year through 2031. 36

Non-Resident Sports Facility Usage Fee

Following the September 2025 ruling of the Pennsylvania Supreme Court, the City has ceased collections of the non-resident sports facility usage fee. The budget each year is now $0. Individuals who had previously paid this fee are now liable for any owed earned income tax.

Telecommunication Licensing Fee

The telecommunication licensing fee is budgeted at $1.2 million in 2027, a 2.5 percent increase compared with the prior year. The fee is levied on telecommunications companies for the privilege of running lines under public streets, bridges and sidewalks. Total telecommunication licensing fee collections are forecast to decrease by 1.0 percent each year through 2031.

Institution and Service Privilege Tax

The institution and service privilege tax is budgeted at $76 thousand in 2027, an estimated 17.9 percent increase over the prior year. The tax is levied on the gross income of foundations, partnerships and non-profit organizations that provide a public service. Total revenues are forecast to hold steady each year through 2031.

Non-Profit Payments for Services

Non-profit payments for services are contractual payments from the Housing Authority of the City of Pittsburgh for some of their properties that have been taken off the tax rolls. The total budget for this line item is $673 thousand in 2027.

Non-Tax Revenues

Non-tax revenues are divided into six categories: licenses and permits, charges for service, fines and forfeitures, intergovernmental revenue, interest earnings, and miscellaneous revenues. Non-tax revenues are forecast to decrease by 3.6 percent in 2027 over the prior year and increase by 1.2 percent each year through 2031.

Licenses and Permits

Total revenues for the licenses and permits category are budgeted at $17.5 million in 2027, an estimated 6.0 percent increase over the prior year. Licenses account for 6.4 percent of this revenue and permits account for 92.8 percent in 2027. Licenses are issued to businesses and vendors for a variety of purposes. The largest source of license revenue is liquor and malt beverage licenses, budgeted at $424 thousand in 2027 and increasing by 2.0 percent per year thereafter. Permits are generally issued for building construction and renovation. The largest source of permit revenues are commercial building permits, budgeted at $3.4 million in

• Total license and permit revenues are forecast to increase by 2.0 percent each year through 2031. Chapter 170 of the City Code requires City Council to annually authorize a fee schedule for all licenses and permits. The master fee schedule is a separate piece of legislation from the appropriations and salaries resolutions. Charges for Service Total revenues for the charges for service category are budgeted at $52.3 million in 2027, an estimated 3.2 percent increase over the prior year. The City of Pittsburgh charges various entities to recoup costs for services provided throughout the year. The largest source of revenue in the category is medical service revenues, budgeted at $29.8 million in 2027 and forecast to increase by 1.4 percent each year thereafter. Other large revenues in the category include daily parking meters, budgeted at $10.6 million in 2027, and cable bureau revenues, budgeted at $3.2 million. Total charges for service revenues are forecast to increase by 1.2 percent each year through 2031.

Fines and Forfeitures

Total revenues for the fines and forfeitures category are budgeted at $11.3 million in 2027, an estimated 24.4 percent increase over the prior year. The largest sources of revenue in the category are parking authority tickets ($10.5 million in 2027) and traffic court ($0.7 million). Total revenues for the fines and forfeitures category are forecast to increase by 2.0 percent each year through 2031.

Intergovernmental Revenues

Total intergovernmental revenues are budgeted at $50.6 million in 2027, an estimated 1.0 percent decrease compared with the prior year. The largest payment in the category is state pension aid, budgeted at $34.8 million in 2027, an estimated 5.7 percent increase over the prior year. The City receives an annual payment based on its number of police, fire, and municipal employees. The state’s allocation per employee is determined by the insurance premiums tax on foreign casualty insurers. The 2 percent share of local slots revenue is budgeted at $10.0 million per year through 2031 and the liquid fuels tax transfer is budgeted at $4.0 million per year. Total intergovernmental revenues are forecast to increase by 2.1 percent each year through 2031.

Interest Earnings and Miscellaneous Revenues

Total revenues from interest earnings are budgeted at $3.9 million in 2027, an estimated 70.2 percent decrease from the prior year. Interest earnings are forecast to decrease by 28.2 percent each year through 2031. Miscellaneous revenues are budgeted at $120,500 in 2027. Miscellaneous revenues include proceeds from the sale of public property and scrap metal.

Four Major Tax Revenues Comprise 62% of the 2027 Budget Parking Tax 8.0% Payroll Preparation Tax 9.9% All Other Revenues 37.8%

Four Main Non-Tax Revenues Comprise 18% of the 2027 Budget Licenses & Permits Fines & Forfeitures 2.4% 1.6% Charges for Services 7.2% Intergovernmental 7.0%