Tag Archives: reassessments

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.

Belief in the End of Assessments

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Four years after the state’s highest court had the issue of base year assessments before them they said that the base year idea in and of itself was not bad, just that the way Allegheny County applied it violated the uniformity clause of the PA Constitution. Problems with a base year would arise across the state, but that would happen at different times for different counties.

Not long after a state senator from Allegheny County was quoted as saying "the impression I got from other colleagues around the state is, ‘If the court’s not going to make us do it, we’re not going to do it,’…It just seems like no one’s going to step up here." One long time assessing official from southwestern PA once quipped that upon starting his job colleagues told him that the state would soon be getting rid of property taxes.

That was in 1969.

So a huge grain of salt has to be taken when officials in Washington County prep for a hearing this month on moving forward with a reassessment note "We don’t want to be the last county to go under this process. We want to fight to get it changed." The County last did a reassessment in 1981, but don’t want to spend money on updating values that "might be outdated in three to five years". One official even jested that imprisonment might be on the table, a possibility that residents of Allegheny County who followed the most recent County Executive race might remember.

Why the argument if the County agreed to go forward in 2008 if the state had not yet reformed the assessment process in the state? Nothing happened, and now the County feels that it will?

County Property Taxes: Up, Down, or Same?

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As we have pointed out in Briefs this year, a property owner’s first bill under the new assessment will not necessarily be higher than the bill for this year and years past just because the assessment is higher. That’s despite the claims by several elected officials that make the statement that reassessments lead to tax increases. And despite the County’s own property assessment webpage that points out a taxpayer’s obligations depend on how their assessment changed relative to the taxing body overall.

With one county, 128 municipalities, and 43 school districts all levying property taxes it would be quite an undertaking to describe the present and future tax burden for all properties in the County. A new website, Property Tax Estimator, allows taxpayers to examine their property and see what to expect based on new assessed values and anticipated millage rates. Recall that the County and municipalities have to establish revenue neutral rates after values are certified. Tax hikes can happen after that.

Revisiting our sample of 100 sales that we utilized in two Briefs in 2012 (here and here) we examined the resulting impact of the assessments on County property taxes. We used the following assumptions:

  • The home would take the County’s homestead exemption that lowers the taxable assessment by $15,000 for both 2012 and 2013
  • The millage rate for the County currently (5.69 mills) would fall to 4.11 mills based on the Estimator’s calculation

So what happened? Of those 100 sales, 38 would end up paying more in County property taxes in 2013 than they did this year. This ranged from one home paying close to $800 more to one paying $1 more. The remaining 62 would all see a drop in their County property taxes. The range goes from a $3 cut to a $500 cut for the group.

A higher tax rate-whether a revenue neutral rate settles in at higher than what the Estimator predicts or the County increases the rate as permitted under the law-would obviously change what the final tax bill looks like. Assume that the County Council increased the tax rate by 5% in a separate vote (it would take a 2/3rds affirmative vote) and then successfully petitioned the courts to utilize the same 5.69 millage rate that is in place this year, only with the new assessments taking hold. Of those 100 properties in our sample, 9 would pay less in 2013 than they did in 2012. Their assessed values have fallen far enough for that scenario to happen.

County Exec, State Senator and City Councilman Oppose “Unfair” Assessments

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In a tour de force of irony, County Exec Fitzgerald, Councilman Peduto and Senator Fontana will take a stand against court ordered reassessments on the grounds they are unfair. Presumably, they are perfectly willing to continue the unfairness of allowing owners with egregious undervalued assessments to pay far below their fair share of property taxes while at the same time forcing those with correct or too high assessments to pay far more than their fair share of taxes. How interesting it is what some call unfair.

The gentlemen will be supporting Senator Fontana’s bill that would give Allegheny County the opportunity to do away with property taxes and replace school, municipal and county taxes with other taxes. Great idea except for two things. The level of sales taxes (almost double its current level) required to replace all property taxes including schools would drive retail out of the County as non-residents stop coming into the County to shop and residents go to other counties to purchase non-essentials and avoid sales taxes. Higher income taxes? Could non-residents be required to pay? If so, jobs would begin leaving the county. Why would residents of Butler County pay taxes to their schools, county, and municipality and then be saddled with a big tax bill from Allegheny County to pay for schools and municipal services in Allegheny County? Likewise, Allegheny residents who work in a neighboring county would have a big incentive to move to that county.

Non-residents who own real estate but do not shop or work in the County would benefit enormously from not having to pay property taxes to the county, schools or municipalities. Think of out-of-state pension funds for example that own office buildings. That revenue has to be made up somehow. Is that fair to residents? It appears the Senator has not thought through his plan very carefully if he is truly interested in fairness.

Finally, how would countywide sales tax revenue be allocated to schools and municipalities? There would be no way to assign the money by point of collection. Some areas have very little retail sales activity while others are chock full of malls and retailing.

In short, such a dramatic tax shifting cannot be done at just the county level. Pennsylvania school districts have held referenda to shift property taxes to income taxes under Act1. Not one vote has come close to approving such a shift. Property taxes are unpopular but so are high local income taxes. A major shift in tax structure will have to be done statewide if at all.

The aforementioned gentlemen could spend their time in Harrisburg urging the Legislature to rewrite Pennsylvania’s preposterously out-of-date and inadequate assessment laws to require periodic updating of assessments. Or they could urge the amending of the Constitution to eliminate the "uniformity clause" that is the source of all their angst. Or they could join others who want to restructure taxes at the state level to reduce the burden of property taxes.

Sadly, they would rather attempt to make political points than to work for changes that would actually address the sources of inequity explicitly not permissible under the constitution. Posturing while elected–a terrible, perhaps fatal disease in a self-governing polity.

Bye, Bye Property Taxes?

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Can Allegheny County, by virtue of being home rule, eliminate property taxes for the County, its municipalities, and school districts?

It seems like the chances are slim, but there may be legislation to try just that in the near term. Spurred on by the current reassessment, the legislation would apply only to Counties of the Second Class, in other words Allegheny County. The legislator sponsoring the proposal noted that "the best option for the assessment situation is to apply the Home Rule Charter if our local government cannot determine a long-term solution".

Leaving aside the issue of what a tax shift involves, problems abound with the proposal. The language in Section 2962 of the state’s home rule law-the section that prevented petitioners from rolling back the rate of the drink tax a few years ago-rears its head because the section prohibits a charter from giving a home rule entity powers regarding "regulation of public schools", "fixing the subjects of taxation", and "the assessment of real or personal property and persons for taxation purposes". It would take an act of the General Assembly to remove that language from the home rule law.

But there is language in the Allegheny County Charter itself that prevents the proposal from moving too far forward as well. Article I of the Charter says that "this Charter shall not limit in any way the jurisdiction, rights, powers, or autonomy of the municipal governments in the County". Prescribing a cessation to property taxes and a shift to a new menu of taxes via a County driven referendum as opposed to state legislation for municipalities seems to do that. In addition school districts are not mentioned anywhere in the Charter.

Additionally, the legislation would allow County Council to pass an ordinance eliminating assessments. If Council does not do it by a simple vote, "the county council, or the voters of Allegheny County, will have the ability to propose the ordinance through a public referendum." That’s where other problems arise. Article XII of the Charter says that voters can ask for a referendum on an ordinance as long as the requisite number of signatures is gathered and the issue is singular and germane to County government. While property assessments are the domain of the County, can voters put an issue on the ballot that would affect the taxing powers of the municipalities and school districts in the County? Seems unlikely given the 2962 language. And since the Charter says Council can only call for a referendum by ordinance to amend the Charter, is the proposed law going to spell out that Council would be able to ignore that language so they could put a general question on assessments and tax mixtures on the ballot?

Other home rule counties could provide guidance here. There are six, not counting Philadelphia and Allegheny. Many have been home rule since the 1970s, and all still levy property taxes, as do their municipalities and school districts. It is not clear if the General Assembly has tried something like this proposal for them, but if the referenda and initiative powers vested in them by home rule would allow for the elimination of property taxes and replacement of other sources, one would think they would have done it by now. Curiously, two of them-Lehigh and Erie-have new assessments scheduled to go into effect for 2013, just like Allegheny County, which was to have them ready for 2006 before embarking on the present course.

Long story short, if the goal is a tax shift away from property taxes to something else, particularly giving taxing powers to entities that don’t have them now (like sales taxes to schools or wage taxes to counties), it is going to have to be a statewide plan.

Assessing the Allegheny Reassessment Accuracy: The Good and the Bad

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In mid-2011-when all indications were that the County was on pace to complete the court-ordered reassessment and taxpayers would be getting notice of their new values as early as July-the Institute obtained two months of sales data on single family homes in order to compare the existing assessments on the homes with the new assessment as soon as it became available. Similar analysis was carried out in 2005 when the County was scheduled to unveil new assessment values for 2006. Unfortunately, the County chose to scrap the 2005 assessments leading to prolonged court cases ending in a Supreme Court order to reassess.

 

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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).

It’s Like 2005 All Over Again

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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.

Gearing Up for the New Assessments in Allegheny County

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“Assessments” and “fatigue” are two words normally not linked together, but they are forever joined in Allegheny County thanks to the events of the past decade. Since the revaluations of 2001 and 2002 the County’s property assessments have been on a tortuous journey only a fiction writer could have constructed before the fact. In 2005, County officials began conjuring up schemes to avoid a promised reassessment due in 2006 resulting in an initial effort being overturned by the Courts followed by the adoption of a base year system that was challenged in a case that went all the way to the Pennsylvania Supreme Court.

 

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Did Legislators Stop By for Moratorium Meeting?

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In a blog from mid-February we wrote about a meeting of the County Council’s Government Reform Committee on the issue of a state moratorium on court-ordered reassessments, an issue that keeps bouncing around Council. That meeting invited the Governor and 31 state legislators (8 state senators and 23 state representatives) to discuss the issue.

We closed that piece with stating "a sure sign of how serious legislators from the County take the Council’s request will be reflected by how many show up to the meeting".

Well, how many did? The corresponding action minutes from Council’s website show that the Governor did not attend, nor did anyone from his staff. No state senators showed up, but a staffer for a senator’s office did. Two elected state representatives showed up, and so did staffers for four other representatives. With seven legislative offices present of the 31 invited, the attendance rate was 23%. Not a stellar showing.

If Council can take any consolation it would be that their own attendance rate was somewhat better. Of the nine members of the committee, three showed up and were recorded as present. That’s 33%, better than the invited list but no great shakes either. One Council member not on the Government Reform Committee showed up as well.