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.

This article is part of U.S. Democracy Day, a nationwide collaborative on Sept. 15, the International Day of Democracy, in which news organizations cover how democracy works and the threats it faces. To learn more, visit usdemocracyday.org.

Allegheny County’s property tax assessment system will effectively be on the November ballot as political and governmental calendars align to give voters a clear choice on the future of the problematic property levy.

Even as the system appears ripe for change amid litigation and criticism that it unfairly taxes lower-income communities and new homebuyers, voters are set to choose a new county executive for the first time in 12 years this November.

Out goes incumbent Executive Rich Fitzgerald, who vowed never to seek a countywide property reassessment and kept that promise for a decade. In January, either Democratic nominee Sara Innamorato or Republican nominee Joe Rockey will take over for Fitzgerald.

Innamorato said she would work toward regular countywide reassessments, with programs in place to protect certain groups from large tax bill increases. She said she sees the idea as “a way to create more consistency and transparency and predictability in the process, whereas what we have right now isn’t.”

Rockey said he opposes a countywide reassessment altogether.

“What a countywide reassessment is going to do is raise the taxes of people who are on a fixed income living in their homes in Allegheny County,” Rockey said. “And that is not in the best interest of our county, to be forcing people, retired individuals … out of their homes because their income didn’t go up but their taxes went up.”

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In neighborhoods like Mount Washington, Lawrenceville and the South Side, where property values have surged, a decision not to reassess would lock in the current situation in which neighbors often pay starkly different tax bills, while a decision to reassess would hike the levy for some and shave it for others.

Reassessing would also have big implications for municipalities and school districts that now rely on property tax appeals to raise revenue, and some of which face losses as the appeals math shifts.

The experiences of the state’s biggest municipal government, the combined city-county-school district of Philadelphia, suggest that any decision would be fraught, but that there are tools — some new and untried — to make property tax changes less jarring for residents.

Assessments, appeals and dangerous politics

For half a century, politicians in Allegheny County have struggled over when and how to reassess, torn between the desire for revenue to fuel government, fear of voter anger over tax bills and outside pressure to make the system fair.

Today, the county’s property assessment system is a subject of lawsuits and tens of thousands of unresolved appeals.

In July, the county’s Board of Property Assessment Appeals and Review [BPAAR] was still just beginning to wade through around 30,000 appeals filed last year and this year by either property owners or taxing bodies who were alleging that tax values didn’t reflect market values. Of the 31,450 appeals of 2022 and 2023 tax bills, only 1,690 had been decided. (In 3,035 of the cases, the appellant withdrew the appeal or did not appear for the hearing.)

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The appeals stem in part from the county’s decision not to systematically reassess property over the last decade, relying on individual appeals filed by school districts and municipalities to boost assessments on properties with rising values. 

Because Fitzgerald has opted not to reassess since 2012, properties that haven’t been subjects of appeals continue to be valued based on the 2012 market. State law requires that counties using “base year” assessments adjust the values generated by appeals to reflect changes in the overall market. That’s done by multiplying new, appeal-generated values by the Common Level Ratio, a calculation meant to roughly equalize the values of similar properties, whether they were generated a decade ago or via a recent appeal.

A lawsuit, though, revealed that the county’s ratio had been miscalculated in a way that inflated the assessments resulting from appeals. A judge’s order lowered the ratio, to the advantage of property owners. As a result, taxpayers ranging from homeowners to U.S. Steel and the Rivers Casino filed 44% of the appeals of 2023 tax bills.

The turmoil unleashed by the litigation and appeals places the issue of property taxes at the center of the race to replace Fitzgerald, who is barred from running for a fourth term. 

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Rockey, a retired PNC executive, favors reform of the existing system rather than a prompt reassessment. Innamorato, a state legislator, believes the county should reassess to bring justice to the property tax system, but should look to a program used in Philadelphia that protects longtime homeowners from jarring hikes in their tax bills.

“These are ways to balance out the system and ensure there’s not displacement,” Innamorato said. 

From left, Allegheny County Executive candidates Sara Innamorato (Democrat) and Joe Rockey (Republican) waving at events in August 2023, in Pittsburgh. The two have differing policy proposals for approaching property tax reassessments. (Photos by Stephanie Strasburg/PublicSource)

Philadelphia: Hikes, but also exemptions and LOOP

Philadelphia has roughly the same number of properties to assess — around 580,000 — as Allegheny County, but a very different philosophy: Reassess with some regularity, and take steps to reduce the likelihood that homeowners suffer steep tax hikes.

Philadelphia’s Office of Property Assessment evaluated all properties within that joint city-county in 2019, raising the tax values of around two-thirds of parcels effective in 2020. The city paused for the early COVID-19 era, then reassessed again in 2022.

Last year’s reassessment, coming on the heels of surging property values, doubled the taxable values for around a quarter of Philadelphia homeowners, and boosted the assessments on the city as a whole by 21%. The city, though, said it was taking the worst of the sting out of the assessment hikes with four measures:

• Philadelphia boosted the homestead exemption from $45,000 to $80,000, meaning that owner-occupied properties don’t get taxed on that portion of their values. (Allegheny County has an $18,000 homestead exemption, but school districts and municipalities aren’t bound by it.)
• Philadelphia expanded an existing freeze on senior citizen property tax bills.
• The city expanded its Longtime Owner Occupants Program [LOOP] for homeowners who have lived in the same property for 10 years or more. The program doesn’t freeze their assessments, but limits the rate of increase.
• Wage taxes dipped slightly.

Innamorato, during an April debate, touted the LOOP approach, and more recently said she would consider increasing the county’s homestead exemption and expanding an existing senior property tax relief program.

“There’s going to have to be a robust conversation with the community … so they’re not surprised, they’re not blindsided, they understand the programs that they qualify for and how to enroll in them,” Innamorato said. 

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Rockey panned the Philadelphia plan, saying it pushes the burden to younger people who are already saddled with student debt and adding “that we’re pushing all of our expenses to the youth of America.”

While he does not think mass reassessment is the solution to disparities in the current system, he did concede that something proactive may need to be done: “Where there are potential, over time, disparities that occur with that, I do think you have to pause and look at how you could address those. So I will acknowledge that they certainly can and do happen.”

A very expensive garden

The Philadelphia model hasn’t taken all the pain out of reassessment.

Patricia De Carlo has lived in Philadelphia’s Norris Square neighborhood and once ran its community organization. The neighborhood had been beset by drugs and vacancy, De Carlo said, but community-driven development restored it, and its designation as an Opportunity Zone brought even more growth.

Effective this year, she saw the assessment on her house rise from $138,300 to $306,400 — a surge partly mitigated by the city’s taxpayer protection programs. But the value of a next-door side yard she purchased in 1997, and uses for gardening, surged from $59,800 to $408,000. Because it is a parcel distinct from her home, the taxpayer protections don’t apply, and the bill for her garden is $5,711.

“The explanation is that because it’s a side yard, it doesn’t have a building on it,” De Carlo said. “It means it can get developed. So a real estate investor can come in and build on it, and that would be the value.”

She admits she could probably cash in by selling the side yard. “Excuse me, I don’t want to! When I decide that I want to, then you can tax me at that level. But I don’t want to. I don’t want to destroy my garden. I don’t want a developer coming in and building a four-story building full of apartments.”

She has not paid the hiked tax bill on her side yard, hoping that Philadelphia City Council will do something.

The side yard problem is one of several gaps in the system Philadelphia set up to protect homeowners.

“We have a lot of clients who don’t quite qualify for LOOP, they may be a few years from qualifying for the freeze,” said Kate Dugan, a staff attorney with Community Legal Services of Philadelphia. Still others aren’t getting LOOP because they inherited their homes and never bothered to get their names put on the deeds.

Dugan said her organization is pushing the city to make use of the state’s Affordable Housing Unit Tax Exemption Act, passed last year. 

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Among other provisions, the act allows governments that levy property taxes to essentially freeze the bills of households making incomes below $33,500 for a single person, or $41,500 for a couple — limits set for an unrelated state program and adjusted regularly.

“With the recent [reassessment] in Philly, we have faced some really serious property tax hikes,” said state Rep. Jared Solomon, D-Philadelphia, the prime sponsor of the law. “Let’s say you have a single mom with two kids … This is another burden. So if we can sort of ease that burden a bit and keep those property taxes level, then we’re allowing people to save money, and that money can be diverted to meet the needs of their families.”

Neither Innamorato nor Rockey endorsed an income-based cap on property taxes.

To date, no municipality has yet adopted the option, Solomon said.

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 Tanya Babbar.

This article is part of U.S. Democracy Day, a nationwide collaborative on Sept. 15, the International Day of Democracy, in which news organizations cover how democracy works and the threats it faces. To learn more, visit usdemocracyday.org.

The post Property taxes divide Allegheny County executive candidates, and Philadelphia’s experience looms large appeared first on PublicSource. PublicSource is a nonprofit news organization serving the Pittsburgh region. Visit www.publicsource.org to read more.