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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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.

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.

 

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The Effects of a Reassessment Delay

If you are happy with your assessment and might see your real estate tax bill stay the same or fall as a result of the new numbers, you will have to wait until 2013 to reap the benefits. That’s the message delivered by Judge Wettick based on yesterday’s news that he may be open to delaying the implementation of the new assessments until next year. Additional delay brings the admonition of the Supreme Court’s 2009 decision that the overhaul of the base year be done in "a realistic timeframe" makes one wonder what is meant by realistic.

The benefit of hindsight might have moved the Judge to contract with an outside vendor completely and not the County who so opposed and continues to oppose reassessing and felt that accurate assessments can never be achieved (but are happy to tax assessments whether they be incorrect, correct, or something in-between). An Allegheny Institute recommendation that a sampling of values checked by independent appraisers or real estate experts could have gone a long way to helping with the current situation. Recall at one point in 2009 the Judge even proposed his own four district plan that would have seen the fourth district reassessed by October of 2013. Maybe that plan is coming together by hook or by crook.

Delaying the implementation until 2013 supposedly came at the behest of the Pittsburgh Public School District, which stated it would be very hard to determine its millage rate due to appeals. But that was precisely why the Judge moved the District to the front of the pack-so that it could see the aggregate changes, establish a millage, and send out tax bills.

A year-long delay basically puts Allegheny County back where it was in 2005: new values were released at the beginning of that year so that people could have a year to appeal, taxing bodies could see new values, and then get ready for January 1, 2006. When the new numbers were shown, sticker shock led to panic, which led to various plans before settling on the base year approach. What makes anyone think that the 2012 plan would not be a repeat of those earlier years?

Allegheny County’s Tax Hike: A Regional Perspective

Setting aside all the madness surrounding the reassessment process that began with the mailing of new values to property owners in Pittsburgh and Mt. Oliver, it is important to recall that Allegheny County Council voted to increase the County millage rate from 4.69 mills to 5.69 mills effective for 2012.  One member stated “the draconian cuts in the state budget” were the cause for the 21 percent millage increase.

 

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The Recent History of Assessments in PA

As is well known by now, Allegheny County mailed out its assessment notices to owners in the City of Pittsburgh and Mt. Oliver, beginning the process of its first reassessment since 2002. What may also be known, but has not gotten as much attention, is that Washington County is currently in Commonwealth Court over their planned reassessment; it has not reassessed since 1985.

The International Association of Assessing Officials (IAAO) has written "Although assessment trending can be effective for short periods, properties should be physically reviewed and individually reappraised every four to six years". It being 2012, how many counties would fit the IAAO standard? The State Equalization Board (STEB) houses all of the aggregate data on assessments across the Commonwealth and their table on the last reassessment date shows that six counties (Elk, Indiana, Montour, Northumberland, Union, and York) conducted a reassessment in 2006. Philadelphia is listed as "on going" and Allegheny County, as noted, has begun its mailing process. It is not clear what will come from Washington’s case.

What of the other counties? STEB data shows that:

•· 24 counties (not counting Allegheny’s 2002 date) reassessed between 2000 and 2005;

•· 21 counties reassessed between 1990 and 1999;

•· 5 counties (not counting Washington due to its court status) reassessed between 1980 and 1989;

  • 8 counties reassessed prior to 1980

Some ABC’s of the School Budget

On the heels of a Citywide referendum that approved a tax hike for libraries (1/4 of a mill) and the 1 mill increase by County Council Tuesday night, residents of the Pittsburgh Public School District (City of Pittsburgh and Borough of Mt. Oliver) can be relieved that the 2012 budget contains no tax increase. But they should be concerned that the trends that have plagued the District show no signs of abating.

Enrollment continues to fall; it stands at 25,031 for the 2011-12 school year but the District is planning for additional school closings, realignment, and possible additional layoffs in 2012. And the same legacy cost issues that have impacted other local governments in the region are present in the District. The superintendent’s budget message points out that "despite [headcount] reductions…benefits and pension costs will rise by $31 million over the next four years. From 2004 through 2012, our pension cost per employee increased by 82 percent.." Health care costs fared no better, and both outpaced inflation.

The budget has $508 million in revenues and $529 million in expenditures, requiring the District to dip into the fund balance. It is interesting to note two facts on the revenue side of the equation: first, the local-to-state split in funding is 53% to 46% and second, based on the assessed value of real estate characteristics outlined in the budget (taken from the state equalization board) residential value accounts for 57% of total assessed value. Of the 43 districts in Allegheny County, nine others besides Pittsburgh have less than 60% of their total assessed value represented by residential property.

Tax Increase Advances

Last night County Council’s Budget and Finance Committee advanced a 1 mill increase in the property tax, a 21% increase that defies explanation. The Committee wants to raise taxes in the face of a reassessment that, because of state law applying to counties of the second class, will require millage rates to be revenue neutral. The law permits a separate tax increase vote that would allow the County to take in 5% more than the revenue neutral amount. Anything above that requires court approval.

Of course, many on Council might be hoping that the state is going to somehow intervene and stop the reassessment ordered by the state Supreme Court. The incoming County Executive has stated he will not mail out assessment notices. So County government is treating 2012 as a non-assessment year, as silly as that sounds, and the only requirement for a tax increase would be an affirmative vote of 10 of the 15 Council members. Perhaps the Council is hoping to find a judge that will find the 1 mill increase permissible by outright ignoring the fact that the County and Judge Wettick are meeting weekly to discuss the progress of the reassessment.

A quick word on the mechanics of the tax: the County’s operating budget has four main funds-general, debt service, liquid fuels, and transit support. Only the first two partake of any property tax revenue. Right now, at 4.69 mills, the general fund gets 3.6852 mills (equating to 79% of the total millage) and the debt service fund gets 1.0048 mills (the remaining 21%). The 1 mill increase and the allocation of millage would stay roughly the same at 80/20. Council is free to change that ratio at any time by majority vote.

Enacting a 1 mill increase now would seem to muddy the waters, to say the least, since taxing bodies don’t know how much the reassessment will net. All in all a silly notion.

Another Proposal to End School Property Taxes in Pennsylvania

govt state

Every so often the idea comes up-shifting the school tax burden from property to something else such as the sales tax or the personal or earned income tax.  And as quickly as the idea comes up, it goes away quietly without any real action.  This year the House Majority Policy Committee resurrected the notion once again through House Bill 1776 that, according to a recent newspaper account, will be introduced sometime in the near future[1]

 

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