Near the start of 2013 the Governor signed Act 2 of 2013, which moved the formerly independent State Tax Equalization Board into the Department of Community and Economic Development. We wrote about this change in a Brief earlier this year and the Tax Equalization Division has its own section of the DCED website.
There’s some data available (some it was there when STEB had its own site) but one interesting aspect is to look at the pages on common level ratios in 2002 and 2012. Besides showing that four other counties reassessed at the same time as Allegheny County (on the 2012 page, but they went into effect in 2013) it is interesting to see that there has been an increase in transparency since 2002 in terms of counties equalizing their pre-determined ratio (PDR). This ratio is defined by the PA Tax Manual as "the ratio of assessed to actual value". Allegheny County used to have a PDR of around 25%: that is, if a house’s market value was $100,000 it would have an assessed value of $25,000. Millage rates appeared much higher (from 1996-2000 the millage rate was 25.2). Following the 2001 assessments the PDR was changed to 100% and now assessed values are the same as market values. Only applied discounts (homestead exceptions) lower the assessed value relative to the market value.
Looking at the 2002 common level ratio page, 20 counties in Pennsylvania had a PDR of 100%. In 2012, 41 counties have moved to a PDR of 100%. Act 93 of 2010 requires counties (not Allegheny, which operates under Act 71 of 2005) to adjust their millage rates to be revenue neutral if they make a change to the PDR.
In fearful anticipation of the 2012 re-assessment figures, a County Council member has proposed softening the sticker shock by using a fractional Predetermined Ratio (PDR) to lower assessments from the 100 percent of appraised value procedure now in place. That is to say instead of a $200,000 appraised value property being assessed for tax purposes at $200,000, the County could use a ratio of say 80 percent and lower the assessed value to $160,000. For a homeowner whose property appraisal was actually increased from $160,000 to $200,000 by the reassessment that would seem to leave the tax liability unchanged. But in fact it does nothing to change the shift in tax burden that would have occurred if the 100 percent PDR is used.
Since all property values would have the same 80 percent factor applied, the relative values of properties would remain unchanged. Presumably, taxing bodies will need to maintain total revenue collections after the re-assessment somewhere close to the pre-reassessment levels. Thus, millage rates will have to be adjusted to make that happen and changing the predetermined ratio merely creates an illusion of lowering tax liabilities. Thus, property owners whose appraised value rises far more than the average increase in their school district and municipality and county will still face higher taxes while properties that have been over assessed and whose value drops relative to the average change will see decreases.
Re-assessment is about getting accurate values for purposes of taxation so that equity among property owners is achieved. Playing with the PDR is a gimmick meant to disguise the sting of sharp assessment increases. It won’t work.