Reassessment Battle Escalates
“Out with the new, in with the old” seems an apt description of what transpired last week. In the latest twist in the never ending reassessment story, the new County Executive told the media that 2012 property assessments will be ignored and the County will instead certify the existing 2002 base year numbers for taxation purposes in 2012 and beyond-in defiance of court orders.
The Executive’s official news release on the County’s website noted “we’ve all seen the stories about the large numbers, substantial increases, and shocking values from just the 119,000 residential properties. This is the first update of values in a decade, and the increases are simply terrifying to some property owners.” Recall that values were to be updated in 2005 for the 2006 tax year, and then annually beginning in 2009 to avoid “sticker shock”. That was tossed in favor of alternative plans (either struck down by the court or scuttled in County government) and eventually the base year.
There is no doubt that owners of grossly under assessed properties will scream the loudest when updated and more accurate assessed values are assigned to their parcels. In politics, the loud squawks are often the ones that win out, regardless of the morality or legality of that win.
Thus, the Executive’s flippant admonition to those who believe they are over assessed to appeal their assessments is another example of willful ignoring of the real problem. Folks with accurate assessments cannot win a legitimate appeal but, because all the substantially under assessed properties are not paying the taxes they ought to be, the accurately assessed have to make up part of the underpayment by paying more taxes than they should have to. Moreover, owners of properties that are under assessed are highly unlikely to appeal to have their assessments raised and then be hit with higher tax bills.
The Executive claims he is opposed to forcing people who have been paying far less than their fair share of taxes for years to pay significantly more taxes. But, in an amazing contradiction, he supports raising county taxes by 21 percent on everyone including those whose are already paying more than their fair share-property owners with currently over assessed values or accurate values.
At a news conference the day of the news release the Executive noted “what I’m worried about is taxpayers losing their homes”. If he truly believes the reassessment will cause people to lose their homes in 2012 why would he allow a reassessment in in 2013 or 2014 or ever? All the more reason the judge most hold firm with the 2012 reassessment. Delaying a year will make no difference to the Executive.
The Executive now trots out the long running argument of the previous Executive by saying “we cannot continue to allow Allegheny County to be singled-out while counties around us have gone for decades without a reassessment.” Data from the State Tax Equalization Board (STEB) shows that five counties (Adams, Perry, Bedford, Clinton, and Luzerne) have done a countywide assessment since 2009. The neighboring counties of Butler (1969), Beaver (1982), Washington (1985, but is under court order to do so) and Westmoreland (1972) have not updated assessments in a long time.
But the Executive knows-as do the legislators who joined him at his news conference-the Supreme Court did not toss out Pennsylvania’s base year law as unconstitutional. The law suit was brought against Allegheny County and the Supreme Court ruled the County’s assessments were not in compliance with the uniformity clause. Any county’s base year can be challenged if it produces assessments that are demonstrably incorrect and inequitable. (The Court wrote “it may well be true that a base year system, if unadjusted, will inevitably lead to taxing inequity. But those inequities, in a particular county, may take years to rise to the level of constitutional infirmity”). In any case, the Executive does not explain why the property owners in Allegheny County are not entitled to be correctly assessed simply because properties are inaccurately assessed in surrounding counties.
Finally, the Executive’s press release stated “Letters are being sent to all 130 municipalities and the other 44 school districts in the county asking them to pass resolutions asking the courts to stop this reassessment, as well as [to] the Governor and General Assembly to impose a moratorium on singled-out, court-ordered county reassessments until this is addressed on a state level.” The Executive for years stated that school districts were taking “backdoor increases” through windfalls (even though Allegheny Institute research shows conclusively there were plenty of “front door” tax increases in the last decade) and now wants to enlist their aid in stopping the reassessment.
The real problem is that the Executive and his predecessor know full well that Act 71 prevents windfall tax increases for counties and municipalities and other laws apply to school districts. As we have seen in recent years, frozen assessments have not prevented school district tax increases, either in Allegheny County or surrounding counties.
School tax increases are the result of spending decisions made by school boards. If spending rises, more revenue will be needed. Perhaps the Executive and his predecessor should have spent more time and effort trying to help taxpayers by lobbying the Legislature to remove upward pressure on school expenditures. A good way to do that would be to end teacher strikes and adopt measures similar to those recently adopted in Wisconsin that give school boards greater ability to manage labor costs. Rather than go to the heart of the school tax and spending problem, the Executive and his predecessor have chosen to forestall fair, updated assessments and hope to be viewed as heroes for taking that stance.
And as we have pointed out in earlier Policy Briefs, a legislated moratorium on a reassessment that has already been ordered by the Supreme Court would create a Constitutional crisis. Recall too, that the Governor vetoed a bill ordering a stop to the court ordered Washington County reassessment. Here is the problem. The General Assembly has had information about the need to address flaws in state assessment laws for a long time. The Allegheny Institute wrote a report in 2007 on assessment practices across the country; the Supreme Court decision was handed down in April of 2009, in which it noted “the General Assembly is the appropriate place…to fashion a more comprehensive and soundly constitutional scheme” and the concurring opinion by Justice Baer even outlined a standard by which base years could be evaluated; and a study by the Pennsylvania Legislative Budget and Finance Committee titled “Pennsylvania’s System for Property Valuation and Reassessment” was delivered in September of 2010.
In short, the General Assembly has had plenty of information and time to rewrite state assessment laws. Two main changes have to be made: require periodic updates of market values as almost every state does and require strict adherence to IAAO standards in each county. Sadly, it appears there is no appetite in Harrisburg to deal with the problem. And if the Legislature is not willing to fix the underlying causes of assessment problems, then it falls on the courts to handle the situation in the lawsuits brought before them.
It is incredibly ironic for elected officials to be pointing fingers of blame at the courts when it is elected officials who have failed to deal with the real issues that create so much controversy and angst surrounding property assessments. Nor have any had the courage to argue for the elimination of the uniformity clause of the Constitution, something they should do given their obstinate refusal to recognize it, let alone uphold, as they took an oath to do.
Where the Allegheny County officials and other elected officials have proved either incompetent or disingenuous is the failure to educate property owners about the effects of reassessments and the laws protecting them from windfall gains and putting school boards in the spotlight when they take reassessment windfalls. Instead they have chosen to use red herring arguments to justify maintaining a base year system that was seriously flawed from its inception and that locked in gross inequities in assessments-a situation so bad the Supreme Court ruled it could not stand.
Here’s the bottom line: if governments and taxing bodies are allowed by the Constitution and state laws to levy taxes based on fair market values, then there is a moral obligation on the part of elected officials to ensure that assessments are based on the most accurate market values possible. When a significant fraction of assessed values are far too low, economic distortions will enter into the real estate market, with under assessed, under taxed properties having their values enhanced while accurately and over assessed properties find it harder to maintain or increase value. Taxes are a cost of owning property. Artificially raising or lowering the tax costs for a property has to impact market value. Over time those distortions can magnify, making correction of the problem horrendously painful for the owners of under assessed properties-a lesson government cannot seem to learn and prefers to avoid dealing with.