What is the County’s Reassessment Policy?

Based on the statements made by the County Chief Executive this week in response to when the next reassessment will come, we can probably say the outlook is "read my lips: no new assessments". The Exec, a longtime opponent of reassessments in general and the 2012 one in specific, said "We’re not going to be reassessing. We’re using a base-year plan like every other county…It’s tough to look 10 years down the road. It’s my hope that the Legislature will deal with this issue." That quote was taken this week but it could have been written at any point over the last decade.

We know where things stand at the state level-the Legislature has shown no desire to pass a law that mandates when reassessments have to happen and the Supreme Court has said a base year in and of itself is not bad but that eventually the assessments will become "stale" and violate the uniformity clause of the Constitution, thus necessitating a reassessment (when that happens exactly will vary). Could things be different by 2023? Maybe. The point here is to determine what the County has on their books and what it will have in the future.

The Administrative Code (Article 210) reflects the language of a base year plan, notwithstanding the fact that something funny happened on the way to the implementation of the last base year. An ordinance passed in October 2005 established the base year and another ordinance in early 2006 was enacted to clean up language that would"…otherwise impede the orderly administration of a base year…" Subsections deal with special provisions for 2003, 2004, 2005, and 2006 and the most recent section applying only to 2013 states only that appeals for 2013 had to be filed by April 1st of this year. If the County is intent on keeping a base year it might have to tweak some of that language or continue adding transitionary provisions as it has.

There is separate language on reassessments written into the County’s ordinances (Article VIII of Chapter 475 on taxation) reflects the plan to have values ready for 2006 which came from a ordinance passed in 2002 prior to the base year plan, but it seems clear that this section is no longer valid and could be stricken from the code.

Two years ago when we put together a report on some of the critical issues facing Allegheny County as a guide for office seekers and we recommended that a new policy be established after the completion of the court ordered reassessment based on the IAAO recommendations that a physical examination of property be done at least once in a six year period. The Executive and the members of Council who were on Council in 2005 and 2006 and voted for the base year would obviously be opposed to that recommendation. It could lead to another court challenge as alluded to by some in the news article, and given present conditions a court would have to determine whether the County’s base year had reached the point where it violated uniformity.

Bizarro World

Step right up folks, you are about to encounter the topsy-turvy world that has come to southwestern Pennsylvania as a result of property assessments. Allegheny County is hurtling toward completion of a court-ordered reassessment following a state Supreme Court decision in April of 2009. It looks like certified numbers will be ready is approximately two weeks, roughly ten days before the fiscal year starts for Allegheny County, its municipalities, and the Pittsburgh Public Schools.

The County passed its budget for 2013 earlier this week. As a result of the rise in assessments and state law changes in 2005, the County had to adjust its millage rate. Presto chango, the millage rate that rose from 4.69 mills last December to 5.69 mills is now set at 4.73 mills for 2013. The County Executive stated in a press release that "I’m very pleased with the budget that Council passed this evening and am glad that we are able to move into 2013 with no tax increase and a lower millage rate and that we did so without using one-time revenues to balance our budget (emphasis added)".

Is this the same Executive who spent years on Council decrying reassessments, vowed when running for the office of County Executive that he would go to jail rather than send out new assessments, dismissed the state law on windfall adjustments, and stated, most recently at the start of 2012, "reassessments cause tax increases"? If reassessments cause tax increases, and Allegheny County is just finishing its, then how can the Executive claim the budget has no tax increase?

Here is where a good dose of clarity would have been welcome. Sure, a reassessment causes tax increases: even after millage rates are adjusted, if a property’s assessed value rose faster than the relative change in the county, municipality, and school district in which the property is located then taxes will go up. It is also possible that taxes could go down if the opposite holds. That’s what the County’s own assessment department has made available for taxpayers for some time, albeit online: enclosing such information in a mailer at the start of the process would have gone a long way to quelling a lot of fear. If Washington County moves forward with a reassessment (also a court matter), it might take some pointers from what did not happen in Allegheny.

Know what else causes a tax increase? A millage rate hike. That’s what is possibly happening in nearby Butler County, a county that has not reassessed since 1969 and changed its predetermined ratio three years ago. The proposed increase there is 8%, which is smaller than Allegheny’s 20% increase last December. Spending drives the need for tax revenue,especially when assessments are frozen in place.

Just How High Did School Taxes Climb?

In the 2006-07 school year, the median school tax rate in Allegheny County for all districts (excluding Clairton, which has separate land and building rates) was 21.62 mills (2.16%). That was the first school year after which Allegheny County Council expressly declared that it would be using a base year assessment plan and would not be conducting any reassessments.

For the school year that just began at the beginning of July (the 2012-13 school year) the median school tax rate for those same 42 districts was 23.275 mills (2.32%). The median rate grew by 8% for all districts.

But not all districts boosted taxes in that time frame. As a blog last week noted, nine districts either cut tax rates or left them unchanged. Grouping together the 33 districts where taxes went up shows that the median rate for those districts went from 21.5 mills to 24.16 mills, or 12% higher, over the time period. Ten of those 33 districts had tax increases of 12% or more: ranging from 25% in South Fayette to 12% in Bethel Park. Average or above-average increases came in such districts as Elizabeth-Forward (17%), Upper St Clair (15%), and Gateway (13%). Recall too that much of this time frame was spent living under the requirements of Act 1, which tries to limit the magnitude of annual tax increases but provides ample opportunities for districts to secure exceptions for large tax increases.

Another Look at School Tax Increases

The newspapers reported it this past weekend: just over a third of the 43 school districts in Allegheny County raised property tax rates for the coming 2012-13 school year. The loss of stimulus funds and the state’s fiscal condition, along with the looming pension obligations for the school employee system led districts that did not increase taxes to dip into reserves, shut down programs and buildings, leave positions unfilled, and/or layoff employees. It is a similar refrain statewide.

However, Allegheny County has an additional wrinkle in that there is a pending reassessment that will require districts to adjust their millage rates so that they don’t take in more than the previous year’s Act 1 index would allow. That will happen once the new assessed values are certified. But with the new tax rates for 2012-13 we can measure the impact of school tax increases during the years of the County’s base year plan, which was adopted by ordinance in October of 2005. It is reasonable to measure from the start of the following school fiscal year, 2006-07 through the projected 2012-13 rates, for 42 of the County’s 43 districts (Clairton had a two-tier rate in 06-07 and only one rate was reported in the news report, so it was eliminated).

  • 33 districts had a higher millage rate for 2012-13 than they had in 2006-07. Obviously there is a sizeable range in the degree of how much higher. Some of the larger ones were Cornell (22% higher), Elizabeth-Forward and Northgate (17% higher), and South Fayette (23% higher).
  • 3 districts-Baldwin, Carlynton, and McKeesport-had lower millage rates projected in 2012-13 than they had in 2006-07.
  • 6 districts-Pittsburgh, Duquesne, Plum, Montour, Sto-Rox, and Brentwood-project no change in school millage rate over the years of the base year.

Recall the drumbeat that "reassessments cause tax increases" and realize that over 75% of the school districts in the County increased their tax rates over the years when the County conducted no reassessment and the argument rings hollow. Also realizing that Act 1 does not do much to prevent property tax increases makes that policy measure seem lacking.

Washington County Assessment Appeal Thrown Out

In a long running drama remarkably similar to the case in Allegheny County, a Commonwealth Court judge denied Washington County’s appeal of a November 2011 lower court order requiring the County to begin a property reassessment immediately.

 

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Allegheny’s Neighbor Joins Court-Ordered Reassessment Frat

The complaints levied by Allegheny County officials that they have been "singled out" by the state’s courts in having to conduct a reassessment have been long and loud, but the County has company from its neighbor to the south, Washington County. It just received word that the Commonwealth Court tossed its appeal of a Common Pleas decision that it had to reassess. The Governor vetoed a bill in 2011 that would have permitted a moratorium on the Washington County reassessment.

So where does the issue go from here? Obviously there could be a Supreme Court appeal or another motion to the Commonwealth Court, but based on the Allegheny County decision if the issue at hand is the underassessment of commercial properties due to a base year that has become "stale", then it is quite simple to predict what is going to happen. The Supreme Court held that it could take a long time for inequities to arise in some counties; Washington County might be there.

A January article quoted one of the County Commissioners who referred to "the mess in Allegheny County" as reason to hold off. Sounds a lot like the desire of Allegheny County officials to have "predictability and stability", twin goals that the courts did not agree with.

A Microcosm of Tax Policy

A newspaper article over the weekend provided an in-depth and interesting take on what it means to homeowners who have their street split down the middle between two taxing jurisdictions. In this case the purpose of pointing out the split is the looming reassessment in Allegheny County, with new values expected to take effect countywide in 2013, and Butler County, which has not reassessed since 1969 (that was the last year of a full reassessment, but the County did change its predetermined ratio [the ratio between assessed and market value] in 2009).

Noting that home #1, within Allegheny County, pays more in taxes than home #2, who lives in Butler County (about $3,000 more), the Allegheny County Executive opined that by not reassessing for ten years "[Allegheny County] brought stability into the system, and people could predict what their taxes were going to be." The Executive stopped short of saying that owners could predict their taxes would be "high". Stability and predictability were two themes the Supreme Court considered before tossing out Allegheny County’s base year plan, uniformity trumping both.

With two "real world" examples-the current assessments of both homes mentioned in the piece are available on the respective real estate websites for both Allegheny and Butler counties-we can see how the current millage rates (2012 for county and municipal, 2011-12 for schools) of each county and the municipality and the school district affect each home. Keep in mind that neither property has been officially reassessed in some time (home #1 since 2002, home #2 since 1969) though home #1 should be getting a reassessment notice in the coming months.

Home #1-Allegheny County, Pine Township, Pine Richland School District

Current assessed value: $391,900 ($376,900 for County tax purposes after applying homestead exemption, and according to the PA Department of Education the average home in the school district received $200 off school taxes as a result of Act 1 gaming refunds [also a homestead exemption])

County Taxes: $376,900 x 4.69 mills = $1,763

Municipal Taxes: $391,000 x 1.2 mills = $469

School Taxes: $391,000 x 21.9084 mills = $8,566 (less $200 from Act 1) = $8,366

Total: $10,598

Home #2-Butler County, Cranberry Township, Seneca Valley School District
Current assessed value: $55,480 (no County homestead exemption, and the PA Department of Education puts the average Act 1 tax reduction for a homestead in Seneca Valley School District at $100)

County Taxes: $55,480 x 23.63 = $1,299

Municipal Taxes: $55,480 x 13 = $715

School Taxes: $55,480 x 105.60 = $5,808 (less $100 from Act 1) = $5,708

Total: $7,722

The Allegheny County home is paying $3,000 more in taxes as a result of a higher County tax bill ($464) and a higher school tax bill ($2,758). The Butler County home is paying more to the municipality than their neighbor. Both are paying more than 75% of their total tax bill to fund public education.

So obviously the Butler County home, according to the County Executive, must be free from worry about their taxes. A quick look back to 2005-that’s when Allegheny County adopted its base year-shows that Butler County increased its taxes then cut them in 2009 after a change to the predetermined ratio; Cranberry increased its taxes this year, and Seneca Valley school district had increases in 2006, 2007, 2010 and 2011. It is planning an increase for the coming school year according to its preliminary 2012-13 budget.

Just down the street in Allegheny County, home #1 will see a higher County tax bill this year as a result of the millage hike; his municipal taxes have not changed since 2005; and his school tax bill went up in 2010 and is expected to go up again according to the preliminary 2012-13 budget. Home #1 might see a tax cut when rates rolled back once the windfall provisions are applied and the new values go into effect.

Can we once and for all stop the talk that reassessments lead to tax increases? There is enough hard evidence of tax increases happening without them to believe otherwise.

It’s Like 2005 All Over Again

Yesterday Judge Wettick essentially said "keep going, but let’s slow down" when he allowed for a one year delay in the implementation of the 2012 assessed values until 2013. The ruling dealt with the Pittsburgh Public Schools-the district that was moved to the front last year so that the budget and tax rates would be ready to go based on the 2012 assessments-but by extension would have to affect all districts, municipalities, and County government going forward.

That means the 1 mill increase by the County and any other local real estate tax hikes will stay in effect since they don’t have to deal with the pesky effects of Act 71, which says millage rates have to be rolled back to be revenue neutral in reassessment years. The County Executive was partially right when he said that law "has no teeth"; it is hard to bite when muzzled, after all.

The delay means that the owners who would have seen a tax decrease-about 2/3rds of the city according to one analysis-will have to wait until next year. And those loud voices that complained about their values will have a year to appeal and absorb the sticker shock.

In other words, we have just gone back seven years in the process. From a news article dated December 27, 2004 "In 2005, though, property owners will receive their assessments a year before they go into effect. That means property owners will pay taxes on their old assessments and will have time to appeal the new ones before school districts, municipalities and the county begin using them."

In a great bit of foreshadowing the shape of things to come, the former County Executive noted that the legalization of slots for school property tax reductions was "…relief but it is not enough" and the article remarked that "large increases in valuations are expected, because three years have passed since the last reassessment." Well, now it will be been ten years-make that eleven-before new values will go into effect, if indeed they actually do in 2013. Given the ability of the County to extract concessions from the Judge, the reassessments might never happen.

Since many of the new assessed property values will reflect 2010 prices-since that was the year the process was started- by 2013 the values will already be three years old.