Tag Archives: property tax

What is the County’s Reassessment Policy?

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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2006 which came from a ordinance passed in 2002 prior to the base year plan, but it seems clear that this section is no longer valid and could be stricken from the code.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.

Pension Obligations Are Taxing Property Owners

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Pension problems facing school districts have come home to roost.  As we wrote in a recent blog: “Unless there is agreement on pension reform legislation…most school districts in Pennsylvania face ruinous increases in pension funding.”  To handle this increase, districts will have to raise taxes, lay off personnel, or both.  And while the Commonwealth, through Act 1 of 2006, restricts a district’s ability to raise property tax rates, in Allegheny County eleven school districts, 25 percent of the total, have petitioned for an exception to this law meaning they now have permission to increase property tax rates above the Department of Education’s prescribed limit.

 

 

Briefly, Act 1 of 2006 charges the Department of Education (PDE) with setting an inflation index each year that serves as a cap on each school district’s allowable millage increase.  Anything above this cap has to be granted an exception or go before the voters in a referendum.  There are only three allowable reasons for an exception-school construction (grandfathered debt), special education expenditures and pension obligations.  In 2012 the index was calculated to be 1.7 percent for the upcoming school year (2013-14).  Any increases over 1.7 percent, as stated above, require either a voter referendum or an exception from the PDE. 

 

As we had written about in a previous Policy Brief (Volume 12, Number 8), the fact that this is a reassessment year (or the year the reassessments are implemented) in Allegheny County, muddies the water a little bit.  As we stated then, “The act contained a section on property tax limits on reassessment and noted ‘notwithstanding any other provision of law’ that a school board ‘shall…reduce its tax rate, if necessary, for the purpose of having the percentage increase in taxes levied for that year…be less than or equal to the index for the preceding year.’ That does not mean revenue neutral, but within the index determining how much school taxes can increase under the statute.”  Thus school districts in Allegheny County have to roll back their millages to comply with Act 1 by using the index for the 2012-2013 school year (calculated in 2011 which was also 1.7 percent).  If they need to increase beyond the index, they must go before voters or apply for an exception. 

 

For the upcoming school year, 186 school districts across Pennsylvania (of 500) adopted preliminary budgets indicating that they were going to seek millage increases.  171 are seeking exceptions as their desired increase, based on their preliminary budget, exceeds the index while the remaining 15 are holding increases to within the index.  The PDE released a “Report on Referendum Exceptions for School Year 2013-2014” which provides details of the requests.  Eleven Allegheny County school districts made such a request:  Avonworth, Bethel Park, Brentwood, Clairton, Keystone Oaks, Mt. Lebanon, North Allegheny, Pine-Richland, Riverview, South Fayette, and West Allegheny. 

 

All eleven districts cited pension obligations as reasons for petitioning for the exception with three-North Allegheny, Riverview, and West Allegheny-also citing special education expenditures.  In fact statewide, 169 of 171 school districts (98.8 percent) seeking exceptions did so based on the grounds of pension obligations.  Seventy five also asked for an exception for special education expenses (44 percent) and eleven (6.4 percent) for school construction (grandfathered debt).  Clearly pension obligations, the contribution rate for the retirement system was raised from 12.36 percent to 16.93 percent, are straining school district budgets and many are looking to the taxpayers to pick up the tab. 

 

For the eleven Allegheny County school districts, a total of approximately $5.36 million additional tax revenue was being sought to pay for pension obligations.  The requests ranged from $115,200 (Clairton) to $1.38 million (North Allegheny) with an average of just over $487,000.  The PDE approved nearly all of the requests (Brentwood and Clairton were approved but for less than they requested) for an eleven district total approved exception of $5.23 million.  The PDE also has given approval for millage hikes to cover the amounts approved for each school district.  The range covers a low of 0.1987 mills (Keystone Oaks) to a high of 0.3811 (Riverview).  Clairton, which has a separate rate for buildings and land, was approved for an increase of 1.3384 mills on the buildings and 3.9359 on land. 

 

That is not to say that these districts will use their exceptions, but they have permission to do so-after all these calculations were based on preliminary budgets.  In many cases final budgets are still being worked out and may not be approved until the State budget is set at the end of June.  And of course the other districts not filing for an exception can still raise millages, they just have to do so within the parameters of Act 1. 

 

Pension obligations are straining district budgets and there are basically only two options to deal with shortfalls-eliminate programs/staff positions or pass the higher spending onto the backs of taxpayers.  Taxpayers have certainly borne the rising spending burden for a long time but now are pushing back.  How many teachers would have to be laid off to close the budget gaps caused by the increase to pension contributions?  North Allegheny’s shortfall of $1.38 million suggests that dozens of teachers would be on the block. 

 

It’s time for the state to address the issue by allowing some common sense solutions such as allowing districts to lay off teachers for economic reasons and eliminating the teachers’ right to strike.  Likewise teachers need to realize what is at stake and come to the table willing to accept needed reforms of the pension plans to save teaching jobs.

Yes, We Have No Enforcement

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A column over the weekend pointed out that while state law spells out what has to happen to tax rates after an assessment in Allegheny County and its municipalities, along with school districts in Allegheny County and across the state, it is ultimately going to fall on the citizens-possibly with the help of elected officials that watch the public purse such as county and city controllers, the Auditor General’s office, etc.-to pay attention to what has happened to their millage rates thus far and what will happen soon as school budgets are adopted for the coming fiscal year.

The primary sponsor of the law that pertains to Allegheny County and its municipalities, Act 71 of 2005, noted "There’s nothing in law that says [local officials who don’t follow procedures] get thrown in jail…The whole purpose was not to let them hide behind these windfalls".

To reiterate, any non-school taxing body in Allegheny County would have to set their millage rate at a revenue neutral level, and then, in a separate action-which contrasts with the previous law-could take a vote to raise millage so that the taxing body could get up to 5% more in revenue. If they wanted more, they could petition the courts, which happened in Monroeville.

To the point of the column, we wrote about the question of "what happens if someone violates the law" in the February 2012 Brief mentioned above. We did note that "A serious shortcoming of the laws is that they don’t spell out who is in charge of ensuring that taxing bodies follow the requirement, nor specify what, if any, punishment should be imposed for refusal to follow statutory requirements…Clearly, refusal by elected officials to comply with state laws ought to be grounds for severe punishment, including possible removal from office".

Reassessment Reforms Become Law

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When we wrote our recent Brief on the pending reassessment in Washington County we noted that legislation had passed both chambers of the General Assembly that would make significant changes to the state-level oversight and guidance of property reassessments carried out by counties. The Governor has signed that legislation and it now becomes known as Act 2 of 2013.

The press release on the Governor’s action does not say much but we did note that the most significant changes would bring some degree of uniformity to the process by creating a manual, training, and outlining best practices, but no changes to how often a reassessment has to be conducted or giving counties a tool to inform them to get ready for a reassessment.

Major Assessment Developments for Washington County

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Two big developments regarding property reassessments have occurred in the last three weeks that will have a tremendous impact on Washington County.  As we noted in our inaugural Brief of this year, the County has been in a court battle with two of its school districts since 2008 over conducting a revaluation of property, a task not carried out since 1981.

 

 

The first big development occurred this week when the Supreme Court of Pennsylvania declined to hear an appeal from the County on the matter.  In December of 2012 Commonwealth Court noted that the parties to the case had agreed in 2008 to a document containing “nine stipulations of fact and a proposed order” that stated if the Legislature or the courts had not made substantial change to the property assessment system in Pennsylvania by September 30, 2009, the County was to move forward with a reassessment.  County officials opposed to a reassessment dispute the nature of the 2008 agreement and were hoping that the Supreme Court would overturn the lower court rulings, but that was effectively ended with the April 9th decision. 

 

The second development came about three weeks ago when the Pennsylvania House of Representatives passed legislation with no opposition (as did the Senate in late January) to move the State Tax Equalization Board (STEB), an independent agency since 1947, into the Department of Community and Economic Development (DCED).  Prior to this legislation, and following the Supreme Court’s 2009 decision on Allegheny County’s base year plan, the Legislature had attempted a legislative moratorium on court ordered reassessments and created a task force to examine the issue.

 

The rationale is that by making this move DCED will, according to a fiscal note prepared on the bill, “provide appropriate administrative, legal, and technical support needed by the Board to accomplish its purpose”.  STEB will be charged with determining the market value of real estate in each school district, obtaining lists of properties transferred in each county on a monthly basis, establishing the common level ratio of assessed to market value by July 1 of each year and informing counties if their ratio has increased or decreased by 10 percent or more, among other duties.  Perhaps most important with respect to counties carrying out reassessments, STEB is to:

  1. “Create an operations manual in consultation with the County Commissioners Association of PA and the Assessors’ Association of PA for counties to utilize when completing a countywide reassessment or when valuating property”.
  2. “Create and maintain a centralized and standardized statewide database for counties to utilize and report all property values and data to the Board.”
  3. “Develop and maintain statewide basic and detailed training programs for all persons involved in the valuation of property within all counties. The programs shall be completed and passed by any person that is employed to collect, compile, compute or handle data for purposes of reassessment valuation within the State.”
  4. “Develop standards on contracting for assessment services in consultation with the County Commissioners Association of PA and the International Association of Assessing Officers.”

 

These steps should go a long way to improving the assessment process, and, according to the fiscal note, would do so for a very inexpensive sum of $35,000.  However, while making these changes, the bill does not say when a reassessment has to happen, how often one has to happen, does not call for a statistical trigger that would inform a county that its values are out of kilter and possibly violating the uniformity clause. On the other hand and to its credit, it does not recommend or dictate a moratorium on court ordered reassessments during the implementation of the STEB-DCED integration. A version of the legislation in last year’s session attempted to do that, but it did not pass the General Assembly. As we have noted on several occasions, a legislative order that contravenes a court order is a constitutional crisis waiting to happen.

 

Here’s the question. Are state and local officials from Washington County looking at the state’s bureaucratic reorganization and the development of reassessment assistance as a moratorium of another stripe?  One Commissioner was quoted as saying “[the County] will take a wait-and-see attitude. We’re going to see what this means…how this will affect us and what we need to do to become the pilot program” and a state representative stated “I don’t know how a vendor could respond to a (request for proposals) even as state law is changing under their feet…we need to sit down with DCED and estimate a timeline and find out what [the County] need[s] to do.” 

 

While this might sound like due diligence, it could also be interpreted as an opportunity for foot dragging by officials who have no desire to conduct a reassessment as evidenced by the court battle and public statements made by members of the Board of Commissioners.  It is worth pointing out again that the Commonwealth Court quoted the 2008 stipulations of fact and proposed order that said if there was no state level change by September 2009 the reassessment process would begin.  How can anyone argue with any persuasiveness that a legislative change in April 2013, while substantive, could be grounds to hold off moving forward with a reassessment?  Especially now that the Supreme Court has denied the County’s latest appeal, thereby effectively ending the judicial channel for delaying a reassessment? 

 

Clearly, the recently enacted legislative reforms are long overdue. We pointed out in a 2007 report that some state level department or agency, perhaps the Department of Revenue or STEB, be involved as an overseer of the assessment process, including bringing some standardization to the process.  And it appears there might be some movement in that direction six years later. We also argued for mandated reassessments every three years, zero revenue windfalls from reassessments, and voter approval of all millage hikes.  Unfortunately, the first of these three recommendations has yet to be adopted. However, legislation was enacted earlier requiring municipalities to take separate votes to roll back millage rates to achieve revenue neutrality after a reassessment and then another vote to take a five percent increase. If desired, municipalities can petition the courts for millage rate hikes above five percent following a reassessment. School districts are limited to a revenue increase determined by their state calculated index.

New Report on Non-Profit Payments

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Back in May of this year we wrote a blog entry on a report by the Lincoln Institute for Land Policy about the characteristics of PILOT agreements between tax exempt non-profit organizations and local governments across the country. The blog noted the value of the report but pointed out that a lot of the data was incomplete owing to the fact that many localities that may have PILOT programs may not identify them as such. Note that locally the agreements between Pittsburgh and its non-profits have just been ruled public record after a request to the state.

Lincoln has followed up with a newer, more comprehensive working paper on the topic. The data is still lacking in spots: Pennsylvania shows 24 municipalities, two counties, and three school districts having PILOT agreements. Some have a specific number of non-profits making payments, others do not. Some have a dollar amount of contributions, others do not. For 2011 the report shows Pittsburgh receiving $2.6 million from 46 non-profits, which is the consortium of non-profits under the Pittsburgh Public Service Fund. The Institute classifies the payments as either "long-term contracts", "routine annual", "voluntary property tax payments", "irregular one-time", or "unknown". The last category is which Pittsburgh’s arrangement falls into under the report’s typology.

Could Assessment Angst Been Avoided?

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“It is important to understand that a taxpayer’s tax liability will not necessarily increase when the assessed value of their property increases…One of the common misconceptions held by Allegheny County property owners about the reassessment is that the reassessment will automatically result in a higher property tax bill for the homeowner…” -Allegheny County Controller’s Sales Ratio Study, September 2012

 

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Do Homeowners Get It?

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Reaction is coming in to the County Controller’s audit of the contractor that performed the reassessment. The audit deals with four main findings: the contract provisions were satisfied, but they were weak; the project was not completed in the timeframe; the County’s Office of Property Assessments (OPA) did not adhere to its contract provisions; and various internal control deficiencies.

There’s plenty of data as the Controller’s office calculated median, mean, coefficient of dispersion, and price related differential for sales covering two time periods and displayed the results by municipality and school district. There is a response to the audit from OPA, which basically concludes that the property tax system in the Commonwealth is flawed and needs reformed.

What’s very important to note is that in at least two instances the audit goes to great length to dispel the notion that a reassessment automatically causes a tax increase. We noted earlier this year that the County’s reassessment page published a quick and handy guide to this fact, and the Controller’s audit notes that "it is important to understand that a taxpayer’s tax liability will not necessarily increase when the assessed value of their property increases" and "one of the common misconceptions held by Allegheny County property owners about the reassessment is that the reassessment will automatically result in a higher property tax bill for the homeowner…"

By detailing the anti-windfall provisions in Act 71 and Act 1 along with providing examples of homes the Controller’s office has provided another voice to counteract the drumbeat of "reassessments mean higher taxes" that has been so prevalent in the near decade long tussle over revaluations.

Is It Sayonara to Property Taxes in Allegheny County?

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Stop the reassessment in Allegheny County, no matter what it takes.  That has been the consistent mantra from the County Executive (before and after his election) who has asked for the Legislature to enact a moratorium on court-ordered reassessments and has now enlisted the support of several City Council members. This group is backing an effort of a state Senator who wants to allow Allegheny County to end assessments and in so doing end the levying of property taxes by the County, its municipalities, and its school districts. 

 

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The New Assessments: Up “Til Now

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With the release of new values for the majority of communities comprising the southern portion of Allegheny County, new values have been produced for 66 of the County’s 130 municipalities. This blog looks at the cumulative impact on the suburban communities that make up the eastern and southern sections that received new values in February of 2012.

Altogether there are 64 municipalities in the group: 37 from the east and 27 from the south. In aggregate, values are to increase 29% from $25.2 billion to $32.5 billion. The weighted average percentage change for the group (29%) will be used as a basis of comparison.

Overall, 35 communities-18 that came from the east section and 17 that came from the south section-fell within + or – 10 percentage points of the average (that is to say, assessments increased anywhere from 39% to 19% for the community as a whole). Included in this group are the some of the larger communities in the County: Mt. Lebanon (up 30%), McKeesport (up 28%), Monroeville (up 26%), Bethel Park (up 24%), and Upper St. Clair (up 22%).

Thus far the entire range of the distribution runs from an assessment increase of 86% (Dravosburg) down to an assessment decrease of 5% (Pitcarin).