Appeals of Allegheny County property assessments, unleashed by a lawsuit, are starting to bite into the revenues of governments, notably in already strained Mon Valley communities. Pittsburgh, meanwhile, has stayed above water, because rising residential value has outstripped slashed skyscraper tax bills — so far.

Unbalanced
How property tax assessments create winners and losers

As thousands of pending appeals threaten to upend municipal and school budgets, County Executive Sara Innamorato is taking a cautious path on one of her key campaign planks supporting routine countywide reassessments.

A reassessment would come with political costs for Innamorato and monetary costs for some individual property owners. (It could also cost her personally, by boosting the low tax bill on her Upper Lawrenceville house.) But experts say it’s the cure for a defective system that currently overtaxes some and undertaxes others.

Even with most of last year’s appeals as-yet undecided, some municipalities saw a drop in taxable assessed value in the last two years, with much of the downturn coming in Mon Valley communities that are hurting economically. Fifty of the county’s 130 municipalities lost taxable value since the start of 2022; Homestead (10%), West Homestead (6%) and Clairton (4%) saw the biggest percentages of their tax base disappear.

Property owners filed an unusually large number of assessment appeals last year. That’s because a court ordered a change in the math used to calculate assessments determined by appeals, making it more favorable to owners.

Owners of large commercial buildings appealed en masse and are expected to win significant cuts to their assessed values, lowering their tax bills. Already, three of the dozens of Downtown towers have won appeals and seen significant tax relief. 

When big property owners saw the new tax math, “they jumped on it,” said Dominick Gambino, a local government consultant who managed the county’s assessment office from 2001 to 2003. He added that yet another change in the tax math, taking effect this year, could cause a fresh round of appeals.

While Pittsburgh’s assessed value rose 1.87% from 2022 to 2024, a PublicSource review found, a decline has already begun Downtown. 

Assessed value in the city’s 2nd Ward, which spans much of Downtown and the Strip District, dropped 3.73% during that time period, shedding more than $112 million in assessed value. Using current tax rates — measured in mills — that $112 million represents more than $900,000 in lost tax revenue for the city and $1.2 million for the city school district. And appeals for dozens more commercial properties are still pending. 

So far, value has increased enough in residential neighborhoods to make up for Downtown’s problems. The 6th Ward, in Lower Lawrenceville, saw a whopping 30% increase in assessed value ($130.2 million in taxable value). The 5th (Hill District), 16th (South Hills) and 17th (South Side) wards each increased between 9% and 13%.

But the math is unlikely to favor taxing bodies for much longer.

Looming crisis

The successful Downtown appeals are “just the beginning” of the wave of assessment cuts Downtown, said Chris Briem, a regional economist at the University of Pittsburgh’s Center for Social and Urban Research. “I think what’s in the news of late of the percentage declines in these big buildings are probably typical of what most Downtown buildings will get in the short term.”

Six-figure tax bill decreases for dozens of commercial properties would have a devastating effect on the city and school district. The city is facing a razor-thin budget in the near future with an operating surplus of just a few million dollars. The school district is already operating at a deficit and is considering plans to close school buildings to cut costs.  

“One way or the other, property values Downtown are coming down,” Briem said. “It’s probably going to force a millage increase on everyone else.” That would effectively raise tax bills on property owners throughout the city to make up for the lost revenue coming from Downtown.

While Downtown owners will see lower tax bills, Briem said they are hardly winners in the situation. 

“They’ve lost, they’ve lost a lot and they’re going to keep losing,” Briem said, because decreased demand for office space since the start of the pandemic has crushed commercial building revenue. The assessment cuts are “reflecting that reality.”

Pittsburgh Public Schools solicitor sounded the alarm in a January interview.

“If these large reductions that have occurred Downtown and will continue to occur, they simply do not have financial wherewithal to sustain that,” solicitor Ira Weiss said.

Pittsburgh Mayor Ed Gainey’s office took a less dire tone. 

“Budget wise, the team forecasted the possibility of reduced real estate tax revenue,” said city press secretary Olga George. “Currently, Finance and [the Office of Management and Budget] are watching how real estate collections are processing.”

The mayor’s 2024 budget does not forecast a drop in real estate tax revenue. This year’s budget plans for a number slightly higher than last year’s, and the city’s five-year plan projects increases each year.

George said the city is assessing new valuations and deciding whether to contest them in court. 

Peter McDevitt, the budget director for Pittsburgh City Council, said it’s too early and there are too many variables to “hit the panic button,” but the city could eventually be forced to find new revenue or cut services. “Raising millage is not the only avenue, but it’s the most viable one” to raise revenue, he said. 

The county’s $1.1 billion operating budget, which relies on property taxes for around 37% of its revenue, is not in danger of a shortfall, according to county spokesperson Abigail Gardner.

Reassessment vs. ratios

Experts including Briem and Gambino say the fix for the county’s assessment woes lies in conducting routine, countywide reassessments — a concept Innamorato has endorsed, as long as it can be done with new protections for vulnerable taxpayers. 

Gardner confirmed that Innamorato continues to believe “that a reassessment would be a more fair and equitable way to determine values,” adding that “there are no immediate plans to engage in a reassessment.” The real estate market is shifting, she wrote in response to questions, prompting “a reimagining of how to keep our Downtown thriving.”

The last time the county reassessed all its properties was in 2013,after a judge ordered then-County Executive Rich Fitzgerald to do so. Fitzgerald never did so again.

Pennsylvania allows counties to leave decades-old assessments in place, subject to appeals where there’s evidence of rising value. 

In counties that use this “base-year” approach, properties without improvements or recent sales generally keep the same assessments each year. Where there’s evidence of a change in value, the owner or a taxing body can file an appeal.

When an appeal is filed in Allegheny County, the Board of Property Assessment Appeals and Review assigns a new fair market value. That value is multiplied by the common level ratio [CLR] to come up with an assessment.

The CLR is meant to adjust appeal-generated assessments to resemble those last set in the base year. But a lawsuit revealed that the county submitted flawed data for the calculation of the CLR, and a judge forced its reduction. 

For appeals filed in Allegheny County this year, the fair market value will be multiplied by 0.545 to determine the assessment, meaning a property with a post-appeal value of $100,000 would be assessed at $54,500. By contrast, for appeals filed in 2021, the ratio was 0.875, meaning that same property would have been assessed at $87,500. 

Property owners whose assessments were boosted in prior year appeals may appeal now, and use the lower CLR to push their assessments down. The ratio, though, won’t help owners whose property values have soared.

Your tax depends on when you bought

Despite the change in the ratio, tax bills in Allegheny County continue to be driven less by the value of the property than the date of purchase. The wild variances in assessments are evident on the streets of the current and prior county executives.

Fitzgerald arguably benefits to the tune of thousands of dollars per year from his decision not to reassess.

He bought his house in Point Breeze in 1989 for $202,000. Because the county doesn’t regularly reassess, his tax bill has remained static, even as property values have soared.

A next-door neighbor bought a similarly sized house in 2021 for $970,095. That price drew an assessment appeal by the Pittsburgh Public Schools, and a resulting fair market value of $616,000.

The neighbor’s total annual tax bill — county, city and school district — is around $3,000 higher than Fitzgerald’s.

Innamorato could lose out financially under the scenario she proposed during her campaign for executive. She has said she'd like to reassess all properties, while increasing existing tax breaks for homeowners and seniors and adding protections for longtime owner-occupants.

Innamorato bought her row house in Upper Lawrenceville for $71,000 in 2015. On the same side of the same block is a house that’s around 20% larger (though it’s not a row house). Purchased during the Lawrenceville real estate boom, it is subject to a tax bill around five times higher.

Gambino said the current system, with no reassessments and one CLR for the entire county, is unfair because different areas have appreciated at different rates since 2013 — meaning homeowners in low-appreciation markets are subject to the same ratio as those in high-appreciation areas.

The base-year system is “something Robin Hood’s evil twin would condone,” Gambino said. “All this talk about reduction and refunds, these are all symptoms of a sickness called the base-year scheme.”

Plight of boroughs

Seth Abrams feels conflicted. On a personal level, a countywide reassessment would cost him money. He bought his home 13 years ago and said it has appreciated significantly since the last time the county assessed its value.

But Abrams is the borough manager for Munhall, a place that stands to lose a lot of money in pending appeals. Just one appeal, by the Lowe’s hardware store in the Waterfront, has already cost the borough $50,000 in annual revenue, enough to wipe out a cushion he had planned for the 2024 budget.

Now, the possibility of a millage increase weighs on him as more appeals, including some from U.S. Steel, are pending.

“If [U.S. Steel] got something along the lines of what Lowe’s got and they got their assessment cut in half, that’s another $60,000 or $70,000 loss that I’m trying not to factor into things right now,” Abrams said. “That would mean that we would have to dig into the reserves, we would have to look at all of our fees and our taxes.

“People will see increased costs if this trend of losing taxable value continues.”

Despite the implications to his personal tax bill, as a professional, Abrams wants to see a reassessment. 

“I need to look out for the needs of an entire community. In Munhall, I’m looking at 5,000 or 6,000 residences. For me, I’m looking at one.”

Assessed values dropped from 2022-2024 in numerous Mon Valley communities near Munhall, showing Abrams’ problems are shared by his peers in other towns. Many of those municipalities and the adjacent school districts already have some of the county’s highest millage rates, giving them less margin to raise the levy.

Clairton will have to deal with the outcome of 32 parcels under appeals filed by U.S. Steel, which operates the Clairton Coke Works there. Clairton Mayor Rich Lattanzi told PublicSource in April that the steelmaker accounts for about one-third of its tax base, and the revenue loss from appeals could “be catastrophic for the City of Clairton.”

Charlie Wolfson is PublicSource’s local government reporter and a Report for America corps member. He can be reached at charlie@publicsource.org.

Rich Lord is PublicSource’s managing editor, and can be reached at rich@publicsource.org.

This story was fact-checked by Delaney Rauscher Adams.

The post Property tax appeals erode budgets as assessment burden shifts appeared first on PublicSource. PublicSource is a nonprofit news organization serving the Pittsburgh region. Visit www.publicsource.org to read more.

Unbalanced
How property tax assessments create winners and losers

From the Rivers Casino Pittsburgh to U.S. Steel’s Clairton Coke Works, big commercial property owners are looking to take advantage of a unique tax appeal season to save money — at the expense of schools and municipalities.

An archaic property assessment system, now reshaped by lawsuits and resulting court rulings, has created “assessment chaos,” which is making it hard for governments to budget, said Ira Weiss, solicitor for the Pittsburgh Public Schools. “The bottom line is: It’s a mess.”

Allegheny County’s Board of Property Assessment, Appeals and Review [BPAAR] has received 11,660 appeals of 2023 tax assessments. That’s notably higher than the average of around 8,000 appeals per year filed from 2015 through 2021.

This year’s appeals are 1,000 lower than the number filed last year, but there’s a key difference. Last year, nearly 90% of appeals were filed by school districts hungry for more revenue as property values rose. Appeals of 2023 tax bills, by contrast, came in almost as heavily from property owners looking to lower taxes (44% of appeals) as they did from school districts (54%). Municipalities — the only other entities that can appeal — consistently account for around 2% of filings.

Driving the change in the mix is a judge’s decision in a taxpayer lawsuit that tilted the tax math in favor of property owners — but only if they appeal. And many sophisticated property owners are doing just that. 

U.S. Steel, for instance, is appealing the tax bills on 95 properties, virtually everything it owns in Allegheny County. The steelmaker has filed the most appeals of any property owner in the county, covering property assessed at around $58.5 million.

Clairton is home to 32 of the U.S. Steel parcels under appeal. The Mon Valley city relies on the steelmaker for almost one-third of its total tax base, according to Mayor Rich Lattanzi. 

To have all of that under appeal is “huge for us,” Lattanzi said. The revenue loss could “be catastrophic for the City of Clairton,” he said, adding that U.S. Steel has helped his government and he believes the company doesn’t want to hurt the home of its coke works.

U.S. Steel is appealing its assessments to “bring its property values back into proper alignment,” according to spokesperson Amanda Malkowski, and to correct the “improper calculation” that has affected the taxes of property owners for years. The steelmaker doesn’t intend to apply any savings it achieves until 2024, so it won’t upend the current operating budgets of schools and municipalities.

But after that? “We would hope to be assessed fairly moving forward,” Malkowski wrote.

School districts contend with ‘nitroglycerin’

The genesis of the property owner appeals is a lawsuit alleging that Allegheny County engineered years of unfair property taxation for thousands of properties. It led Common Pleas Judge Alan Hertzberg to change the common level ratio [CLR], a factor used in calculating the assessments of properties that are subjects of appeals.

The effect of the new ratio on assessed values will depend on an involved property’s market value and whether it has any tax exemptions, but could in many cases bring a reduction of around 20%. That reduction would carry into future years until another appeal or a reassessment occur. The reduction is only available to owners who file appeals and prove that the market value of their property warrants the reduction. The deadline for filing appeals was March 31.

Whereas appeals under the prior ratio often brought increased revenue to districts, now they could instead “knock 30% off of the value” used to determine the tax bill, according to Weiss. For school districts, he said, an appeal is now “like picking up a container of nitroglycerin and not knowing if it is going to blow up.”

The fact that 44% of appeals were filed by property owners represents “a dramatic shift in the breakdown from last year,” said Michael Suley, former manager of the county’s Office of Property Assessments and a consultant to the plaintiffs in the lawsuit. “The pendulum is swinging the other way.”

Why didn’t even more owners appeal in a county with some 580,000 properties? “What that tells me,” Suley said, “is that the property owners still don’t know how to do the math” to determine whether they can save money via appeal.

Most of the appeals involve residential properties, but the most consequential may be those related to commercial parcels. Countywide, owners of 877 commercial properties are appealing their 2023 tax bills.

One of those properties, the Rivers Casino, carries the highest assessment of any taxable property in Allegheny County, at $240,905,100. According to Pittsburgh’s property tax calculator, that likely means around $5.5 million annually in revenue for the city, county and Pittsburgh Public Schools. 

A Rivers Casino spokesperson declined to comment.

A significant recalculation of the casino’s tax bill alone could shave $1 million or more from public coffers. And that’s one property.

“The impact is going to be significant,” said Weiss. It could cut into the budget of not only Pittsburgh Public Schools, but of other districts with large commercial properties, including Montour and Upper St. Clair, which his firm also represents. Schools could theoretically make up lost revenue by raising tax rates, known as millage, but those increases are limited by state law. “You can’t tax your way out of this problem.”

In Clairton, ‘shoestring’ budgets and big steel

Mon Valley communities like Clairton are already feeling the economic pressures of a declining tax base and the rising costs of municipal services. Clairton City School District receives about 3% of its total budget from U.S. Steel, and lower corporate contributions could mean potential budget shortfalls, said Larry Nicolette, the district’s business manager. That’s made it difficult to build up funds or include any slack in their budgets. 

The district “started at less than zero and we’re building up,” he said. “We’re trying to provide a world-class education, but we’re on a shoestring budget as well.”

The City of Clairton was under Act 47 — the state program for municipalities experiencing “severe financial difficulties” — for over 25 years starting in the late 1980s. The city exited the program in 2015 after combining jobs, using the lowest responsible bidders for contract work and implementing other cost-cutting measures, said Lattanzi, the mayor. But things are still tight.

Going back into Act 47 is “always a concern,” he said. “It’s always in the back of your mind.”

“We’re probably at the end of the rope as far as our savings,” he said.

“The cost of everything is up,” Lattanzi said. “If we lose any additional revenue through taxes, we may have to do a tax increase for the City of Clairton.”

Lattanzi noted that U.S. Steel works with the city to build playgrounds and hang banners touting veterans, plus donates funding that has helped his administration to buy and renovate a community center, purchase a dump truck, build a baseball field concession stand and prepare land for redevelopment. Nicolette added that the company’s craftspeople have helped paint and lay carpet in the school.

“With U.S. Steel,” said Lattanzi, “it’s very important to have a relationship.”

In Munhall, paving and parks at stake

Further up the Monongahela River, U.S. Steel and affiliates filed 12 appeals on properties in Munhall. The borough’s current financial outlook is stable, according to borough manager Seth Abrams, but “I wouldn’t say we’re flourishing.”

U.S. Steel makes up about 3% of Munhall’s total property tax revenue, according to Abrams, much of which comes from one property in The Waterfront. 

Abrams said the borough is looking for places to potentially cut costs in the future.

“Overall, we are concerned about the appeals in combination with the CLR that the courts have handed down,” he said. “We did budget for a potential loss of some revenue and did proactively have a small millage increase.”

Abrams emphasized that Munhall has no concrete plans to trim services, but officials have begun to take note of services and investments that could be on the chopping block, like paving projects or a park rehabilitation.

He regretted, too, the practice of many school districts and some municipalities of appealing the assessments of new homebuyers, using the sale price as evidence to wring assessment increases from BPAAR. “We need the funds to maintain the services,” he said, “but to dump it on the people who are moving into town is not the welcome we want to give them.”

Potential fix not politically popular

Generally, property taxes are supposed to be based largely on the value of the property.

Allegheny County’s system — in which most tax bills are static while schools and municipalities appeal the assessments of recently sold properties — is rooted in the county’s decade-ago decision not to regularly reassess properties.

Other than Pennsylvania, “There’s no other state out there that allows counties to go 10 years without a reassessment,” said Dominick Gambino, owner of Diversified Municipal Services, a company that consults for schools, municipalities and counties regarding assessments. He managed Allegheny County’s Office of Property Assessments from 2001 through 2003, leading a reassessment of all properties.

The common level ratio is intended to achieve rough equality between years-old assessments — like the decade-old values that still determine the tax bills of most Allegheny County properties — and newer assessments based on recent sales. 

Gambino, though, said the ratio “does not achieve equity, and it’s kind of like a Rube Goldberg machine. They took something very simple and made it so complicated that people can’t even understand it.”

The only fair system, he said, involves routine reassessment of every property.

Weiss said the county’s decision not to reassess has left the property tax system “in a shambles. … It is my hope that whoever is elected immediately addresses this problem.”

Reassessments, though, have been politically fraught, as they tend to boost at least as many tax bills as they reduce.

At an April 19 town hall debate sponsored by PublicSource and NEXTpittsburgh, all of the candidates for county executive were asked whether they would reassess all properties.

One, state Rep. Sara Innamorato, pledged to “create a system that people have buy-in to, so it needs to be transparent. It needs to be regular. It needs to be without bias.”

No other candidate, though, expressed any intention to conduct a blanket reassessment.

“Let’s acknowledge that we have a horribly unfair system of taxation here in Allegheny County,” said city Controller Michael Lamb. “… I can’t support a reassessment until we can protect homeowners from these massive increases that are likely to happen to them.”

Julia Zenkevich is a general assignment reporter for 90.5 WESA. 

Rich Lord is the managing editor of PublicSource and can be reached at rich@publicsource.org.

This story was fact-checked by Dakota Castro-Jarrett.

This package was produced in a partnership between WESA and PublicSource.

The post From slots to mills, big property owners aim for smaller property tax bills appeared first on PublicSource. PublicSource is a nonprofit news organization serving the Pittsburgh region. Visit www.publicsource.org to read more.

The thorny issue of property tax assessments has challenged Allegheny County Executive Rich Fitzgerald at both ends of his 12 years in office, culminating in a 2022 lawsuit that exposed the county for using flawed math to calculate many tax bills.

A new county executive will decide what’s next for an assessment system with damaged credibility. Fitzgerald is term-limited from running for re-election and will leave office in January. 

At least eight people are currently running to be the next executive. The winner will have to decide whether or not to do a countywide reassessment, as Fitzgerald vowed not to, and restore public confidence in the fairness of the assessment process after a lawsuit and numerous news reports showed it to be anything but.

Candidates’ plans for the system vary, but all recognize the need for change. Some, like state Rep. Sara Innamorato, said they would like to reassess across the board, a move that could level the playing field but risks raising tax bills on some residents. County Treasurer John Weinstein, on the other hand, favored a more technocratic approach, improving the current appeal system instead of mass reassessment. 

“Clearly people are going to be very, very suspect of things coming out of the assessment office, as they should, because none of this is being handled properly,” said Weinstein, who has been treasurer since the late 1990s. 

How did we get here?

Most Allegheny County property tax bills are based on the last countywide reassessment of property values, which took place in 2012. But tens of thousands of assessments have been subject to appeals, which can be filed by homeowners, school districts or municipalities who believe the assessment does not reflect current market value.

A calculation known as the Common Level Ratio [CLR] is used to roughly equalize appealed assessments and assessments set by the county over 10 years ago.

The average home price in the county has more than doubled since the last full reassessment of properties, but the CLR didn’t change as steeply as property prices did. As a result, some new homeowners are paying much higher property taxes than the long-time homeowners in the same neighborhood, or even next door.

A group of property owners across the county who had been paying the so-called “newcomer tax” filed a lawsuit in 2021. The suit alleged that the county submitted skewed data to the State Tax Equalization Board, which calculates the CLR. The resulting calculation was artificially high and allowed the county, school districts and municipalities to boost their revenues without increasing tax rates, by appealing the assessments of recently sold properties.

A judge ruled that the county “failed to administer the property tax assessment appeal system in a just and impartial manner.” County officials were ordered to send new data to the state board, but the lawsuit is still ongoing. Pittsburgh Public Schools have appealed the new CLR.

To reassess or not to reassess?

Most candidates did not rule out a countywide reassessment, placing the field almost entirely at odds with Fitzgerald’s policy. 

For Innamorato, reassessing each property anew is a matter of justice. “By us not taking action and coming up with some sort of regular, consistent system, we’re exacerbating inequality,” she said. 

Olivia Bennett, who has heard expert testimony as a county council member during the lawsuit, said the system was “so botched” and “starting from square one would have to be a reassessment.”

Dave Fawcett and Republican Joe Rockey cautioned that the assessment system should be carefully reformed before it is used to reassess the whole county. 

“I think there has to be a different approach,” Fawcett said. “And yeah, it could be a countywide reassessment, but not the way we’re doing it now. … If we’re using more objective, more scientific, more data analysis, then we’re using a system with some credibility, and yeah I would be in favor of a uniform, logical, understandable reassessment.”

“The number one thing is to get the backlog of appeals behind us, to understand the implications of that, and for us as a county to get everybody back on an equal footing, which is where they were coming out of 2012,” Rockey said.

Weinstein was the only candidate to come near echoing Fitzgerald in saying no to reassessment. He said by revamping the assessment appeal system, the county can achieve fairness without resetting the entire system.

More cautious approaches

Weinstein proposed ditching the county’s part-time appeals board and replacing it with a full-time, professional board to cut down on backlogs and boost credibility in the process. 

“We need an assessment system that is completely insulated from the political process,” Weinstein said. 

He also called for greater transparency in the process, with property record cards produced by assessors posted online and an independent review of the data the county sends to the state’s equalization board. 

Michael Lamb said it’s too early to decide on a course of action, pending decisions on who is owed a refund as a result of litigation.

Making the assessment system more fair has the potential to bring higher tax bills to some, which makes the whole idea politically tricky. 

Though he didn’t detail a plan, Lamb said he would be sure to protect longtime homeowners from “massive” tax increases. 

Innamorato said she favors a Philadelphia program, that offers property tax relief to longtime homeowners. That program caps assessment increases and “freezes” assessments for homeowners whose income is below a certain threshold and who have lived in the home for 10 years. 

Charlie Wolfson is PublicSource’s local government reporter and a Report for America corps member. He can be reached at charlie@publicsource.org or on Twitter @chwolfson. 

Julia Zenkevich is a general assignment reporter for 90.5 WESA.

This story was fact-checked by Terryaun Bell.

This package was produced in a partnership between WESA and PublicSource.

The post To reassess or not to reassess? Property tax mess awaits next Allegheny County exec appeared first on PublicSource. PublicSource is a nonprofit news organization serving the Pittsburgh region. Visit www.publicsource.org to read more.