Pennsylvania's second-largest city will likely see declining property tax revenue over the next few years because of a local court ruling last year, Pittsburgh's outgoing mayor said.
Mayor Ed Gainey said during his State of the City address this week that the 2026 budget will feature less spending, in part because city officials must brace for "the long-term effects of a changed real estate market post-COVID."
"Declining real estate tax revenue isn’t just a short-term setback; it’s a shift with lasting implications for this city’s financial future," he said. "Due to a court ruling on how property assessment reductions are calculated in appeal cases, we are projecting annual declines in property tax revenue for the first time since the closure of the steel mills."
Pittsburgh generated approximately $144 million in property taxes in 2025, but this figure is projected to decrease to $142 million next year and to $138 million by 2030, according to city budget projections. The revenue loss is noteworthy because Pittsburgh uses those dollars — and other funding sources — for efforts to increase homeownership.
Property taxes flow into the city's general fund, which is then used to pay for a range of services and agencies, including the Urban Redevelopment Authority. The URA plays a crucial role in helping Pittsburgh residents find affordable housing, city officials say.
"Case in point, working with the URA, we implemented the revolutionary OwnPGH Homeownership Program that has helped put over 194 new homeowners — with about 88% being women or minority heads of household and 76 being new residents to Pittsburgh — on a pathway to generational wealth through homeownership," the mayor said during his speech.
Under Gainey, Pittsburgh launched its Pilot Home Buying Program — in which city officials clear the titles from vacant properties, tidy them up, then sell them at auction to the highest bidder. Gainey also noted that the URA manages the city's Affordable Housing Bond — a pot of $32 million slated for building or preserving affordable housing. City officials want to use those dollars to produce or preserve more than a thousand homes over the next three years, and "the URA is on track to meet that goal before the end of next year," the mayor said.
A landmark court ruling is handed down
The funding source is expected to decline due to the 2024 court ruling in Bhardwaj v. Alleghany County. In this case, Pittsburgh residents Nihit Bhardwaj and Lara Shore appealed their home's assessed value, arguing that the local school district purposely raised the figure. An Allegheny County judge agreed and, in May 2024, ruled in their favor.
The ruling effectively put an end to a common practice in Pennsylvania in which cities and school districts raise the assessed value on newly purchased homes, experts watching the state's housing market said.
Bhardwaj's case in particular highlights why Pennsylvania needs to rethink its property tax calculation, said Christina Gongaware, a tax attorney at the law firm Siegel Jennings.
"The state's current system burdens taxpayers with nonuniform and outdated assessments, while taxing authorities struggle to balance their budgets," Gongaware said in a blog post about the case.
In Pennsylvania, property tax bills for residential properties are generated using a "common level ratio," in which a statewide board determines the percentage at which a home can be taxed each year by county. Local municipalities, such as cities and school districts, then use that percentage, along with a home's assessed value, to calculate how much an owner pays in property taxes. In the Bhardwaj case, he argued that the local school district did not use the common-level ratio set for Allegheny County.