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.”

Read more: URA amps up housing initiatives, focusing on Downtown office conversions and neighborhood development

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.)

Read more: With annexation ‘dead,’ Wilkinsburg looks toward possible home rule and tax changes

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. 

Read more: Many tools, little impact: Abandoned property programs struggle to address vacancy problem, but change may be coming

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. 

Read more: Updated: Pittsburgh City Council approves land bank agreement, hoping for more property reuse

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. 

Read more: Pittsburgh creates new policy addressing tent encampments

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.

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.

When Aaron DeLeo bought his house in Verona in October 2020, he thought he’d lucked into a great deal.

Unbalanced
How property tax assessments create winners and losers

DeLeo had been looking for months and hadn’t found anything suitable. But the owner of the house in Verona was in a hurry and accepted DeLeo’s offer at the asking price, even though many other homebuyers at the time found themselves in bidding wars. 

The house had everything DeLeo wanted. Close to work, with a fenced-in backyard and an extra garage, it featured cherry kitchen cabinets, hardwood floors and a gazebo in the backyard.

For a decade, DeLeo had been trying to put himself in a position to buy a house. He worked in a science lab and made an extra $100 a pop leading local trivia games at night. He even sold some of his oldest and most valuable Magic: The Gathering game cards to pay the down payment. 

His monthly payment would be just under $1,000, and he thought he could handle it. He didn’t factor in Allegheny County’s property assessment system.

Soon after moving in, DeLeo started receiving letters from lawyers offering to help him appeal his tax bill. He didn’t know what they were talking about until he received another letter saying that the Penn Hills School District believed his house should be valued for tax purposes at $126,000 — a 64% increase – if he didn’t challenge the new valuation. 

DeLeo expected his monthly payment to go up, maybe by $100 a month or so. Instead it jumped by $400 a month, a 44% increase. 

“The value of my house is more than when the last person lived here. I get that part of it. So, yes, I think the taxes should go up partially,” he said. “But not that outrageous amount.”

DeLeo received a new letter in the mail last year from a lawyer letting him know that after a lawsuit ruling, he would be in a good position to lower his tax bill by well over $1,000 per year.

Things are looking up now for DeLeo and potentially thousands of other homeowners like him across the county, after a lawsuit last year changed how some properties are assessed. DeLeo and people like him have until March 31 to appeal and potentially lower their tax bills by hundreds or thousands of dollars per year. If many of them do appeal, school districts and municipalities could be facing a major shock to their finances.

A generational change in property taxes

A judge ruled last year that the county had skewed a calculation known as the Common Level Ratio [CLR], meant to roughly equalize assessments determined through appeals and those the county assigned a decade ago.

As a result, a home that sold for $100,000 — if it became the subject of a property tax appeal — would likely have been valued at around $81,000 in 2022 for taxing purposes. But after the judge’s ruling, it would be valued around $64,000 this year. For a house in Penn Hills, that would mean a savings of more than $700 per year.

“It’s like a generational drop” in the ratio used in assessment appeals, said Jason Yarbrough, a Pittsburgh lawyer who has worked on real estate appeals for more than a decade. “I don’t think there’s ever been as significant of a drop year-over-year than what we are seeing in 2023 as we try to catch up to years of adjustments that should have been made.”

DeLeo is one of many new homeowners across Allegheny County who had been paying what is sometimes referred to as the “newcomer tax” in recent years. 

The average home price in the county has increased by more than half since the last time the county conducted a full reassessment of properties in 2012. The ratio applied in appeals did not keep pace. So it had become increasingly lucrative for school districts to appeal the assessments of newly sold homes in order to tax them at higher values. Between 2015 and 2021, school districts across the county tripled the number of assessment appeals they were filing on homes in an attempt to collect more tax revenue.

The lawsuit has reversed that calculus. Tax experts say that many people who bought their homes in the past couple of years will have an opportunity to appeal their assessments and reduce their taxes. 

“Most people in the real estate world are predicting there will be many fewer school district or municipal-initiated appeals in 2023 and many more property-owner appeals,” said Michael Werner, a lawyer who has been working on appeals for two decades.

In a more typical year, most property assessment appeals would target properties sold in the previous year. But Werner thinks that homeowners who have bought in the last several years — and saw their assessments increase through appeals — might be in a position to appeal this year. It will be more difficult for people who purchased homes five years ago, when prices and resulting assessments were lower, he said.

The new math will be especially beneficial for commercial property owners, which have more ways of appealing their property values than relying on a recent sales price, Yarbrough said. For example, commercial properties may be able to use a loss of revenue since the pandemic to argue that their properties are not worth as much now. Some of his larger corporate clients could save hundreds of thousands of dollars per year with an appeal. 

But both commercial and residential owners have one thing in common, he said: “I think some people believe that this will happen automatically,” he said. “It won't, and it will require them to take some kind of an affirmative step and filing an appeal if they think that their number is wrong.”

Who is most likely to win a property tax cut?

People who bought houses in the last two or three years could have an easier time winning an appeal, according to Werner. That’s because it will be easier to show that their house now is worth a similar amount to what they paid for it. And then they could get their tax bill reduced by applying the new, lower CLR.

Owners of property in areas that have had more real estate transactions in recent years and have seen a lot of appeals will tend to benefit the most.

“You have to look at Lawrenceville. You have to look at Squirrel Hill. You look at probably Point Breeze, Highland Park, Morningside,” said Michael Lamb, the City of Pittsburgh’s controller. “The Strip District would be probably the biggest one: People who bought homes or condos in the Strip during the pandemic paid top price.”

The more expensive the home, the more savings potential. For example, the owner of a home that sold for $700,000 in Pittsburgh and saw its assessment hiked to that level through an appeal could save about $6,000 per year in taxes by appealing and applying the new CLR.

Lamb warns that people need to carefully look at their own situation before deciding to appeal. 

“This could backfire on you,” he said. “You can go in and come out of there with a bigger valuation.”

County Controller Corey O’Connor’s office held meetings last year about changes to property tax assessments. O’Connor said the most well-attended meetings were in the North Hills. His office has created a calculator to help residents decide whether or not to appeal.

Longtime homeowners could benefit, too, if they live in an area where prices have remained flat or have been falling through time. But if they purchased their home five years ago or more, they may have to get an appraisal or research sales of similar houses during the appeals process to prove how valuable their home is now.

The biggest losers? Governments, especially schools

School districts and other taxing bodies, which have relied on property appeals to increase tax revenue in recent years, could lose out on millions of dollars in the coming years. They may have to pay refunds to people like DeLeo, and they won't reap new revenue because the appeals they file won't be as lucrative under the new ratio.

The sticker shock that homeowners like DeLeo have been hit with in recent years will instead fall on municipalities and school districts. Ira Weiss, whose law firm represents a half-dozen school districts in the county including Pittsburgh Public Schools, said this has “put every school district and every municipality in Allegheny County on knife's edge.”

“They're going to have to wrestle with the fact that they're going to lose real estate tax revenue” when they set their budgets in 2023, he said.

Appeals filed by owners of commercial and industrial properties alone could reduce tax collections across the county by tens of millions of dollars, Weiss said.

“We have told clients that they have to be very conservative in their budgeting for next year,”  he said. 

Many school districts will have to raise their tax rates to make up the difference, he said.

“I'm not saying they're all going to do it,” he said. “But if they don't do it, many local governments — that is, municipalities and school districts — will have to cut programs.”

Lamb, the city controller, said he’s not sure how many individuals will end up appealing, so it’s difficult to say how big of a hit Pittsburgh’s finances will take. But he said he expects most longtime residents will not appeal and some newer homeowners will. 

“I don't know that we have a sense of the full impact of it, but it could be a pretty major hit to what is our biggest revenue source,” he said. 

The city's $686 million budget relies on $159 million from the property tax.

The county’s current property value assessment system has led to stark inequality. Owners of similar homes in the same neighborhood and even on the same block can be charged radically different tax bills, largely depending on when they bought their houses, or in some cases, when they did serious renovation work. Neighborhoods like Lawrenceville have become centers of inequality, where some homes are still valued at 2012 prices and others are taxed at much higher rates.

The current system also has led to inequalities between municipalities and neighborhoods. Areas with depressed home values should have seen their tax bills go down, as richer areas take up a larger share of their tax bills, according to Lamb. But this hasn’t happened. 

“Generally what you see is that you've got very wealthy communities that are assessed at a fraction of their value, and you have poorer communities that are assessed at most of their value,” said Lamb. “So it's unfair.”

The lawsuit that changed everything isn’t over

The lawsuit that brought property owners the new ratio and the opportunity to lower some tax bills continues. The Pittsburgh Public Schools have appealed the finding that compelled the new CLR. The plaintiffs, meanwhile, have filed motions alleging that the county's newly hired chief assessment officer fails to meet a requirement in the county code that demands 10 years of property valuation experience.

The case started in the summer of 2021, when a group of residents and a property investment firm filed a lawsuit challenging the county’s assessment practices.

The plaintiffs had recently purchased properties in Wilkinsburg, McKeesport, Pittsburgh, Forest Hills and Franklin Park. Not long after, local school districts or municipalities had appealed their property values.

The lawsuit alleged that the county had submitted incorrect real estate data to the State Tax Equalization Board in a way that “artificially overstates, or inflates” the Common Level Ratio.

Plaintiffs claimed that sales records sent to the state board weren’t an accurate sample of arms-length transactions between buyers and sellers, but instead were chosen because the sale prices were close to the assessments, according to John Silvestri, a lawyer for the plaintiffs. Because the data was skewed toward properties with sale prices that were close to their assessments, the state board calculated a CLR that didn’t reflect rising property sale prices. That kept the CLR high and exposed new homeowners to much higher property taxes than neighbors who purchased their houses years ago.

At stake were millions of dollars’ worth of property taxes. With an increased CLR, the county, school districts and municipalities were able to increase revenues without increasing the tax rate by filing appeals against owners of recently sold properties.

Allegheny County Common Pleas Judge Alan Hertzberg ultimately ruled that the county “failed to administer the property tax assessment appeal system in a just and impartial manner” and ordered officials to send new data to the state.

Evidence showed “there could be no doubt that Allegheny County’s Office of Property Assessment had been ‘cooking the books,’” Hertzberg wrote in his opinion. He ordered a CLR of 63.53% instead of 81.1%.

A spokesperson for the county declined to comment, citing pending litigation.

Lawmakers push for reforms — but not mass reassessments

The litigation also spurred lawmaking efforts that continue, and that could further improve the landscape for property owners.

Last year county council President Pat Catena created a Special Committee on Assessment Practices to hear evidence from the lawsuit and gather information about county assessments in the past.

In January, council passed an ordinance to create a second-chance window for taxpayers to challenge recent property assessments. Those who want to appeal their 2022 property assessments now have until March 31 to do so.

If a court orders a change in the 2023 common level ratio, the ordinance would also give homeowners a second chance to appeal assessments from this year.

Two additional pieces of legislation were introduced but are still sitting in a county council committee.

If a court adjusts the CLR again, one proposed ordinance would direct the county Office of Property Assessments to identify affected properties and recalculate their assessed values. It would also direct the office to alert property owners, municipalities and school districts to any such change and require that the county issue refunds for taxes it collected based on appeals decided using any incorrect assessments.

Another ordinance would allow council to appoint a candidate to the post of chief assessment officer if that position is ever vacant for 90 days or more.

The litigation and legislation are altering a system that has frozen many property owners’ tax bills for a decade. But so far, the changes do not entail the kind of full reassessment of all properties that has proved contentious in decades past.

Oliver Morrison is a general assignment reporter at WESA and can be reached at omorrison@wesa.fm.

Julia Zenkevich is a general assignment reporter at WESA and can be reached at jzenkevich@wesa.fm.

This story was fact-checked by Sophia Levin.

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

The post Tables turn on Allegheny County assessments, as new math favors owners over tax collectors, schools appeared first on PublicSource. PublicSource is a nonprofit news organization serving the Pittsburgh region. Visit www.publicsource.org to read more.

Through March 31, Allegheny County property owners have unusual opportunities to reduce their tax bills. But not everyone will benefit.

Unbalanced
How property tax assessments create winners and losers

Normally, owners have until March 31 of any given year to challenge the assessment underlying that year’s property tax bill. That remains the case this year.

But in addition to being able to challenge 2023 bills, property owners also have until March 31 to challenge their 2022 bills, if they desire. Links to forms to appeal both years are found here.

Why can taxpayers appeal two years in one season? Because a lawsuit successfully challenged the validity of data the county submitted to a state agency that calculates a ratio used in property tax appeals. County Council then voted to provide owners with a second chance to appeal their 2022 tax bills.

What did the assessment lawsuit do?

Allegheny County property tax bills are based on a decade-old mass reassessment using property values in 2012, except for properties for which the assessment has been modified through appeals. Owners, school districts and municipalities can file appeals — often after a property is sold — if they believe assessments don’t reflect market values.

The Common Level Ratio is a calculation meant to roughly equalize the assessments of similar properties whether they were last assessed during the base year (2012) or assessed more recently via appeals. The ratio is set by the State Tax Equalization Board based on data submitted by the county.

The lawsuit showed that the county submitted flawed data and pushed the ratio used in appeals of 2022 tax bills down from 81.1% to 63.53%. That means a property deemed, upon appeal, to have a recent market value of $100,000 would be taxed at $63,530, whereas it would have been taxed at $81,100 if the lawsuit had not succeeded. 

The ratio applied to appeals of 2023 tax bills is set at 63.6%, though that could yet be subject to legal challenge. 

The ratio affects only assessments determined through property tax appeals and is not applied to properties whose owners do not appeal.

Who will benefit from the new Common Level Ratio? 

Potential winners include owners of properties that could likely be sold today for an amount less than, equal to or not much greater than their current county assessments.

To find a property’s assessment, go to the county’s Real Estate website, search up the address, and under the “General Information” tab, look at the “Total Value” figures under the “Full Base Year Market Value” headings for each year. Those “Total Value” figures are the basis for the assessment and tax bill. (Note: The “Total Value” on the right takes into account a Homestead Tax Exemption, which is relevant to the tax bill, but not to the likelihood of success upon appeal.)

Appeals go before the Board of Property Assessment Appeals and Review. To appeal successfully, an owner needs evidence of the property’s market value, which may include its recent sales price, a professional appraisal or records showing sales of comparable, nearby properties.

What are some examples of potential appeal outcomes?

Example 1: If the county assessment totals $100,000, and the appeals board decides that the property would sell for only $50,000, then under the new Common Level Ratio, an appeal could result in a new taxable value of around $32,000. For an owner-occupied house in the City of Pittsburgh, that cuts the total city, county and school district property tax bill from around $1,790 to around $230.

Example 2: If the assessment totals $100,000, and the board decides that the property would sell for that same amount, an appeal could result in a new taxable value of around $64,000. For a homeowner, that $1,790 bill drops to just over $960.

Example 3: If the assessment totals $100,000, and the board decides that the property would sell for $150,000, then an appeal could result in a new taxable value of around $96,000. That’s a reduced assessment even though the value has gone up, but it results in only around $90 in annual tax savings for an owner-occupied house. For some homeowners, that might not be worth the time and effort or the optional expenses of an appraisal and a lawyer.

The new ratio, as it stands today, won’t help owners whose properties could be sold in today’s market for a lot more than their county-assigned Total Value.

Example 4: If the assessment totals $100,000, and the board decides that the property would sell for $200,000, then an appeal could result in an increase in the tax assessment to around $128,000, resulting in a higher tax bill by about $650.

In fact, school districts often appeal — jacking up tax bills — when they see a property sale price that is far higher than the assessment.

The Allegheny County Controller has set up a worksheet to help property owners to estimate whether they might save money through a property tax appeal.

Which neighborhoods might be ripe for successful appeals?

Assessment appeal results depend on the evidence regarding the market value of the individual property. Properties in some areas, though, may be more likely to be good candidates for downward adjustments, for a variety of reasons. If a neighborhood’s market values have stayed close to 2012 values, then the new ratios driven by the lawsuit may result in reduced assessments for those who appeal. Similarly, if appeals filed in recent years by school districts or municipalities have pushed assessments up close to market values, then the new, lower ratio could bring tax bills down.

PublicSource and WESA analyzed 7,305 residential properties throughout Allegheny County which sold from Jan. 1, 2022, through Sept. 1, 2022, at what the county considers “valid sales” prices — meaning they are deemed representative of market values. 

In the maps below, red areas saw sales prices that were relatively close to county assessments, suggesting that appeals are more likely to lead to tax bill reductions. Blue areas had 2022 sales prices that were significantly higher than assessments, suggesting that appeals are more likely to lead to higher tax bills. Areas in the middle are colored white. Gray areas saw fewer than 10 “valid sales” during the time period studied and were not analyzed.

Rich Lord is PublicSource’s managing editor. He can be reached at rich@publicsource.org or on Twitter @richelord.

Charlie Wolfson contributed.

This story was fact-checked by Betul Tuncer. 

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

The post Assessing the odds: This year’s unusual property tax appeal season, explained 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

Many Allegheny County property owners will soon have the opportunity to appeal and cut their taxes, and the county controller has released an online worksheet that suggests whether a given parcel could qualify for a shaved bill.

The county is in the midst of a courtroom battle with property owners and their advocates over the way assessments are calculated in the cases of more than 12,000 property tax appeals filed this year. Decisions made by Allegheny County Court of Common Pleas Judge Alan Hertzberg, which could result in lower 2022 tax bills for thousands of properties, have been appealed to the Commonwealth Court.

It’s unclear how that will end. But it’s nearly certain that many property owners will have a historic chance to reduce their tax bills next year.

That’s because a factor in the calculation of tax bills following appeals — known as the Common Level Ratio [CLR] — is about to plunge.

The CLR is used to roughly equalize the tax bills of properties reassessed recently and those last reassessed years ago. When property sale prices rise, the CLR falls, tilting the property assessment appeal playing field in the owner’s favor.

The State Tax Equalization Board had calculated a CLR of 81.1% for this year’s appeals in Allegheny County, and that is the subject of the current litigation. Next year’s CLR — not currently the subject of litigation — is set at 63.6%.

For properties whose values have declined, the new ratio could result in deep cuts in tax bills. But even for a property that’s currently assessed at, say, $100,000, and has seen its value rise to $150,000, the new ratio allows the owner to appeal and cut the tax bill, according to the controller’s Property Tax Estimate Worksheet.

“It’s going to give you a rough guess of what your options are going to be,” said County Controller Corey O’Connor. “I would say, if you do this calculation, and it turns out that … you’re going to save x amount of dollars, have that in your back pocket for when other people start appealing.”

The county typically allows property owners and taxing bodies to file assessment appeals from January through March.

To use the worksheet, a property owner should:

• Have handy your current Allegheny County property tax assessment, municipality name and school district name, all of which can be found here.
• Check — on the same county website — whether you have a homestead tax exemption.
• Develop some estimate of the current value of your property. One way is to find the prices of similar properties in your neighborhood that have sold in the past year. The controller’s calculator also provides links to other sources of property value estimates.

The worksheet can’t estimate for properties in McKeesport, Clairton or Duquesne because they tax land and buildings at different rates. And it doesn’t work for the two municipalities — McDonald and Trafford — that straddle the county line. Plus, if you input the data for an owner-occupied home, the worksheet won’t give you accurate figures for your local and school district property taxes because it does not account for the various exemptions offered by those taxing bodies.

But it will tell you whether you have a decent chance of lowering your assessment.

“It’ll at least give you a ballpark for where you stand,” said O’Connor.

This week, O’Connor led the first of eight planned community information sessions on the property tax situation, alongside the Pittsburgh Community Reinvestment Group and the Realtors Association of Metropolitan Pittsburgh.

Upcoming sessions, most of which start at 6 p.m.:

• Monday, Sept. 19, at the Carnegie Library of McKeesport
• Thursday, Sept. 22, at the Westinghouse Lodge, Forest Hills
• Thursday, Sept. 29, at the Kingsley Association, Larimer
• Monday, Oct. 3, at the Northland Library, McCandless (starts at 5:30 p.m.)
• Tuesday, Oct. 11, at the Penn Hills Library
• Thursday, Oct. 13, at the South Fayette Library
• Tuesday, Oct. 18, at the Brentwood Civic Center

O’Connor noted that his office’s “responsibility is to be as transparent and open with the taxpayer” as possible, even though a flood of appeals could mean a loss of millions of dollars to the county treasury, not to mention the coffers of municipalities and school districts.

What if the appeals generated by his outreach contribute to a tax shortfall? “Then we have to recalculate what our priorities would then be in the county if there wereas a couple of years of seeing that loss.”

Rich Lord is PublicSource’s managing editor. He can be reached at rich@publicsource.org or on Twitter @richelord.

The post Should you appeal your property taxes? The Allegheny County controller floats an online worksheet appeared first on PublicSource. PublicSource is a nonprofit news organization serving the Pittsburgh region. Visit www.publicsource.org to read more.

Update (9/1/22): Allegheny County Court of Common Pleas Judge Alan Hertzberg issued an order setting the Common Level Ratio at 63.53%, and ordering the county to “immediately” submit supporting data to the State Tax Equalization Board.

Unbalanced
How property tax assessments create winners and losers

Many Allegheny County property owners will get the opportunity to slash their real estate taxes. The open questions: By how much? And when?

A lawsuit pitting property owners and their advocates against the county and school districts appears to be winding down, bringing a change in how taxes are calculated after assessment appeals.

For taxpayers who appeal their assessments, the lawsuit is likely to result in tax bills roughly 20% lower than they would have been under the county’s prior tax math. For homeowners who appeal, potential reductions could be even steeper because they can also tap the homestead tax exemption.

That prospect could bring a flood of property tax appeals. “Everyone’s going to say: ‘What about me?’” predicted Michael Suley, a real estate consultant who led the county’s Office of Property Assessments from 2006 through 2012 and is working with the lawsuit’s plaintiff property owners.

For owners of large commercial properties, appeals could bring big savings. For taxing bodies, especially school districts, it could mean budgetary pitfalls.

The impact is “alarming. Do the math,” said attorney Ira Weiss, whose firm serves as solicitor for the Pittsburgh Public Schools [PPS] and five other districts within Allegheny County. PPS relies on property taxes for around $189 million this year, covering more than one-quarter of its budget.

Depending on how it’s implemented, the impending change in the county’s property tax math could start cutting into revenues this year or next.

Said Weiss: “And there is no local government – school district or municipality – that can cope with that.”

Challenging the ratio

The lawsuit’s lead plaintiff is Maddie Gioffre, a systems engineer living in Wilkinsburg, whose house’s assessment more than doubled after she moved to the borough and the school district appealed its value. Thirteen months after filing in the Allegheny County Court of Common Pleas, and following lengthy negotiations and orders by Judge Alan Hertzberg, many of its issues were resolved with a July 19 order he issued.

Understanding that order requires a sense of the basics of property taxation in Pennsylvania and Allegheny County. (If you already know what a Common Level Ratio is, click here to skip to the next section.)

Even as some lawmakers try to eliminate or curb property taxes, the levy remains the single largest source of revenue for many of the state’s local governments.

Counties assign tax values to properties. Some counties revise all property values regularly, but Allegheny County hasn’t done so in a decade. Counties, school districts and municipalities decide on property tax rates, referred to as millage.

A property’s value (minus any applicable break for homeowners, farmers and low-income seniors) times the millage rate, divided by 1,000, determines the tax bill.

The owner, the school district or the municipality can appeal the value.

When someone appeals, the Property Assessment Appeals & Review Board [BPAAR] decides on the fair market value of the building and land, based on evidence of the recent sales of comparable properties. To get the property assessment, BPAAR then multiplies that market value by a factor called the Common Level Ratio [CLR].

The CLR is intended to reduce the tax bill to an amount comparable to those of similar properties. In Allegheny County’s case most assessments stem from 2012 market conditions. The CLR is calculated by the State Tax Equalization Board [STEB], based on a representative sample of recent market-rate property sales provided by the county.

More sales data could shave tax bills

STEB calculated a CLR of 81.1% for this year’s appeals, meaning that 2012 values were deemed to be around 81.1% of current values. Therefore, to be fair, a property with a market value of $100,000 would pay taxes based on $81,100.

The plaintiffs, represented by attorney John Silvestri, allege that the county provided STEB with a skewed sample of 5,357 sales, resulting in an inflated CLR. Hertzberg’s order last month compelled the county to give STEB a new sample including purchase prices of 10,114 properties.

Suley expects that the new data will result in a revised CLR in the “ballpark” of 64% once STEB gets the new data and finishes its calculations.

For an owner-occupied house in Pittsburgh with a value, determined via appeal, of $200,000, the total school, city and county tax bill with the faulty 81.1% CLR would be around $3,200. At a CLR of 64%, it would be around $2,400, according to the city’s property tax calculator. Suburban and commercial property owners would see different levels of savings because of varied tax rates and exemptions.

All owners who choose to appeal will have one thing in common, said Suley: “Everything moving forward will favor the property owners.”

Just maybe not yet.

Reopen the window?

BPAAR accepted appeals starting Jan. 1 and ending March 31, long before the court had compelled the calculation of a new CLR. It received 12,659 appeals of which 89% were filed by school districts and 92% related to residential properties.

That represents just a tiny fraction of the roughly 580,000 parcels in the county.

Many of those appeals have been put on hold, said attorney David Montgomery, BPAAR’s solicitor. He said the school districts are waiting for the new CLR calculation. “If the CLR drops in a significant way, the school districts may reconsider whether the appeals that they’ve filed are beneficial,” he said.

Take, for instance, a house that is now assessed at $200,000, but recently sold for $300,000.  An appeal under a CLR of 81.1% would likely yield an assessment of $243,300, and an increase in the taxes due to the schools, municipality and county. But an appeal and a CLR of 64% would result in an assessment of $192,000 – and lower tax bills.

While districts can withdraw their appeals if the lower CLR undercuts them, there’s as yet no mechanism for the owners of properties in the county to slash their bills this year. That’s because the window for appeals closed at the end of March.

“They should definitely open up the period again,” said John Petrack, executive vice president of the Realtors Association of Metropolitan Pittsburgh [RAMP], which has supported the lawsuit. He said Hertzberg could conceivably order a new appeal period.

Suley argues that County Executive Rich Fitzgerald and County Council “should open the window” and allow another round of appeals, this year.

A spokesperson for Fitzgerald’s office wrote in response to questions that the administration would abide by any orders from the court regarding appeals.

County Council President Pat Catena said it’s premature to comment on potential courses of action since the litigation continues. “As soon as we have a bit more clarity surrounding the court case I will be suggesting additional action to my colleagues on County Council to not only get to the bottom of the previous breakdown in process but also what is the fairest and most equitable way we move forward,” he wrote in response to questions.

Regardless of what happens this year, next year will bring another opportunity to appeal assessments. The CLR is expected to be 63.6% – unless litigation forces another recalculation.

This year or next, said Suley, the “historic drop in the ratio … will be a lightning bolt to the school districts and other taxing bodies.”

‘Many adverse consequences’

Weiss did not dispute the lightning bolt characterization.

“The implication of this for school districts – and municipalities really – is that this can result in local governments and school districts taking a hard look at programs and necessary capital improvements,” the PPS solicitor said. 

He added that school districts factor property tax appeals into their budgets, assuming a given CLR. When those budgets are set in stone, only to have the assumptions change, “there are many adverse consequences” that can emerge.

The City of Pittsburgh’s 2022 operating budget includes $657 million in revenue of which the biggest component is $151 million in property taxes. A slew of appeals could whittle that down.

Mayor Ed Gainey’s administration is watching the litigation closely, according to Jake Pawlak, the city’s deputy mayor and director of its Office of Management and Budget. He said the city is preparing revenue estimates based on several possible scenarios, but isn’t panicking.

“Overall, while we are taking the potential impacts of this case seriously and are monitoring them closely, we believe the City’s financial situation is stable and are cautiously confident in our ability to absorb revenue reductions resulting from a round of appeals without any major disruptions,” he wrote in response to questions.

How-to sessions on the appeal system

Lawyers, public officials and larger property owners are all preparing for the emerging appeals landscape.

‘“There’s a lot of interest regarding the lawsuit regarding the Common Level Ratio that may give thousands of people reason to appeal their assessments,” said attorney Bob Peirce, whose firm handles many property tax cases. He is leading an Allegheny County Law Library educational session on assessment appeals, open to both lawyers and the general public, at 1 p.m. Aug. 15. (There’s limited space for in-person attendees, but also a virtual option, and there’s no cost to the general public.)

Joined by Montgomery, Peirce plans to talk through a process that, for a homeowner, would likely include:

• Finding properties in your general neighborhood that are comparable to yours and that sold recently for market prices, so you can approximate your market value
• Taking out the calculator and figuring out whether – given the CLR – an appeal that resulted in that market value would raise or lower your tax bill
• Considering whether it’s worth going the extra step of hiring an appraiser to professionally estimate the market value
• Deciding whether to hire an attorney – which might run $1,000 – or appeal on your own.

Peirce said people like him, who live in homes they bought before 2012, might not be able to use the new CLR to shave their tax bills, which are already based on decade-old values. But property owners who bought in more recent years and then saw their assessments increased may benefit from appealing. 

Expect the law library’s event to be one of several efforts to educate the public about the changing process.

County Controller Corey O’Connor has announced that he will work with the Pittsburgh Community Reinvestment Group [PCRG] and RAMP to hold information sessions on the assessment appeal process. Dates have not been announced, but the sessions could start in September.

“Unfortunately, we have witnessed the inequities of the current assessment system play out in some of our neighborhoods,” said PCRG Director of Policy Chris Rosselot, in a press release. 

Those inequities, detailed by PublicSource in its Unbalanced series, stem from the sometimes-vast differences between the 2012 “base-year” assessments for some properties and much higher, appeal-driven assessments on others.

“The base year,” Suley said, “is a house of cards that is about to tumble.”

The Gioffre litigation makes no attempt to force the county to reassess all properties, nor does it seek what Suley called “reparations” for any taxes paid based on any inflation of the CLR in past years. He suggested, though, that the case, by undermining the county’s tax math, could set the stage for other challenges.

Petrack said there is now “a distinct possibility of a class-action suit” challenging the county’s CLR calculations and tax bills for several prior years.

He said the litigation has exposed, again, the shortcomings of the base-year tax system, and the need for regular reassessment of all properties.

RAMP has “advocated for a biennial or triennial reassessment for many, many years,” Petrack said. Compared to a system built on base-year values and appeals, regular, modest increases in property assessments are “much more palatable to the consumer and, coincidentally, much more budget-friendly to the taxing bodies,” he said. “It would be a win-win.”

Rich Lord is PublicSource’s managing editor. He can be reached at rich@publicsource.org or on Twitter @richelord.

The post Updated: A lawsuit could lower thousands of tax bills and threaten Allegheny County’s ‘house of cards’ property assessment system 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

The accuracy and fairness of property assessments in Allegheny County are again being challenged in court. The legal wrangling is far from new. Current cases are just the latest iteration of property owners seeking judicial intervention because the county lacks any schedule to routinely reassess property values for tax purposes. 

Today the county’s use of decade-old assessments to tax much of its property makes it an outlier. But there was a time when the county was almost in the vanguard of property tax sophistication — if only because judges compelled it to change.

Property assessments done by the county affect the taxes paid by owners to the county, municipalities and school districts. 

Courts have had a direct role in managing assessments in the county at least since Green Tree sued over assessment practices in 1970. The lawsuit was just one manifestation of growing anger at the time over the accuracy and administration of property assessments in the county. In 1974, while the case lingered, the county commissioners appointed a committee to study the state of property assessments. Headed by county Solicitor Alex Jaffurs, the committee produced as comprehensive an evaluation of the county’s property assessment practices as has ever been written.

At the time, the county reassessed each property every three years, unlike today’s practice of base-year values altered by appeals. The committee report, though, identified a lack of uniformity in assessment practices. Individual assessors used their own methods and relied in part upon outdated Depression-era line drawings of properties.

In 1977, Wilkinsburg filed a lawsuit, which was consolidated with the lingering case brought by Green Tree and went before Court of Common Pleas Judge Nicholas Papadakos. He directed the end of the triennial assessment system in 1978 and then took the unprecedented step of certifying a consent decree that placed him in direct control of the county assessor’s office.

At the time, computer-assisted mass appraisal [CAMA] software was just beginning to emerge nationally. The Lincoln Institute of Land Policy, a Cambridge, Massachusetts, think tank, produced one of the first software packages for real estate assessment. That eventually resulted in software called SOLIR (Small On-Line Research), which ran on a common Radio Shack TRS-80 computer to assist property assessors.

Based on the recommendations of the Jaffurs committee report, Allegheny County issued a request for proposals [RFP] to find the best computer models to set property values. The county in 1978 gave seven firms a dataset with information on the characteristics of 3,500 recently sold properties, and the actual sales prices for only 2,800 of the transactions. The firms were evaluated on how accurately they estimated the sales prices of the remaining 700 properties.

The team that outperformed all others – including many long-established real estate firms – was made up of two local researchers who had developed a new computer model to predict property values. The team included Richard Longini, a professor of electrical engineering at Carnegie Mellon University with a secondary appointment at CMU’s School of Urban Affairs. 

Longini had a Ph.D. in physics and a 28-year career in industrial electronic research before joining the faculty of Carnegie Tech — later CMU — in 1962. His previous research focused on quantum mechanics and the solid-state physics of transistors – the science that underlies all things digital in the modern world. 

Longini’s curiosity over his home’s assessed value led him to expand his research portfolio far outside his background. I had the chance to meet with him in the 1990s, and he explained that he was not upset, but more confused by the valuation his Squirrel Hill home was given by county property assessors.

Longini and former CMU graduate student Robert Carbone, along with local real estate broker Ed Ivory, formed a software firm to apply the novel software to property assessments in Allegheny County.

The software they used was developed out of Carbone’s 1975 dissertation research. Carbone had queried the county on their assessment methodology. Unsurprisingly, the county’s response was unfulfilling and likely came nowhere near the rigor he applied in his engineering research.

How did Longini and Carbone outperform competitors in predicting sales values in the county? Early computer models used to set market values, such as the Lincoln Institute’s SOLIR, relied mostly on what is called multiple regression analysis. Regression is a standard statistical technique that can be used to break down individual property values into how much total value can be attributable to individual parcel characteristics including total size, the number of rooms and overall condition.

Longini and Carbone proposed a more sophisticated statistical technique using an adaptive estimation procedure [AEP] to predict real estate prices. Also called feedback models, AEP uses an algorithm that not only looks at the most recent sales data but evaluates historic data and errors in previous estimates to determine current real estate values. The technique was developed decades earlier but became more widely used after World War II in early rocketry and orbital mechanics, where it helped to track the movement of satellites and ballistic launch vehicles. 

For Allegheny County, the software developed by Longini and Carbone proved faster and at least as accurate as the techniques used by other competitors in the 1978 RFP.

The county purchased the software Longini and Carbone had devised, but it would remain minimally used. Decades later, Longini told me that there was tremendous pushback from the staff of roughly 70 county assessors because of the threat it posed to their jobs. What need would there be for the services of so many assessors if a computer could quickly and presumably more consistently set assessment values?

New computer software was just one part of the modernization planned for the county assessment system. Though the county purchased the software implementing the feedback model, a full CAMA-based reassessment was not possible until core data was compiled for the roughly 580,000 individual property parcels, a huge task given that most data would need to be compiled from scratch. At the end of the 1970s, the county did not even maintain a common record card of information on individual parcels for use by its assessors.

Building the required database would be an enormous and costly task, and the bulk of the costs would have come due just as economic shocks were growing larger. The first of two back-to-back economic recessions began in January 1980 and had disproportionate impacts in Southwestern Pennsylvania, putting unprecedented stresses on public finances.

Due to the scale of the anticipated costs, pushback from county assessors or other reasons, the county never completed or consistently maintained a comprehensive database of real estate. Efforts at reforming assessments went into semi-permanent stasis once Judge Papadakos formally ended his oversight of the bureaucracy in 1982, before he was elected to the state Supreme Court in 1983.

Instead, Allegheny County mostly continued past assessment practices. Properties continued to be assessed by individual assessors, often with incomplete or out-of-date data. New lawsuits against the county were filed after newly elected county commissioners Larry Dunn and Bob Cranmer froze assessments and laid off all of the assessors in 1996. The cases were consolidated under Court of Common Pleas Judge Stanton Wettick. 

Wettick ordered county assessments to restart, and a contract was awarded to Sabre Systems, an Ohio-based firm, to manage the system. Ironically, Sabre Systems was one of the firms evaluated by the county in the 1970s, only to lose the work to Longini and Carbone’s novel software. In 1998, Wettick went further and ordered the county to prepare to conduct its first comprehensive mass reassessment since the triennial system was in place decades earlier.

The county awarded a $24 million contract to Sabre Systems to complete the CAMA-based reassessment. Sabre managed the process of collecting data and building a database needed for CAMA models. It subcontracted the actual modeling of property values to EDA Feedback Inc., the firm that Richard Longini, Robert Carbone and Ed Ivory originally formed to implement CAMA modeling for Allegheny County in the 1970s. In effect, the county was paying for software it already owned.

When completed, new assessment values made public in 2000 were a shock to many property owners and were immediately challenged in court by new plaintiffs. Wettick directed that CONSAD, a local consulting firm based in East Liberty, evaluate the results of the reassessment and oversee a new mass reassessment to be completed for the following year. CONSAD’s report said the feedback model worked correctly but that Sabre Systems made several errors in applying the model.

One problem: The county had been divided up into too few subregions to properly calibrate the computer models. 

CONSAD noted almost in passing what may have been a far more impactful decision by Sabre Systems. In calibrating its computer models, Sabre Systems did not use data on any property sales in which the transaction value was recorded as $10,000 or less. 

Why was that decision fateful? One challenge in CAMA-based property assessment is determining what real estate transactions truly represent market values. In most markets, extremely low-valued real estate transfers are often not “arms-length” transactions, instead representing transfers between family members or other interested parties. But many local communities across Southwestern Pennsylvania had not experienced significant real estate appreciation in decades. As a result, many $10,000-or-under transactions in Allegheny County did indeed represent market values.

The blanket elimination of all sales values under $10,000 had a predictable result. Low-valued properties were systematically overassessed while high-valued properties were underassessed. Sabre Systems would not be retained for a follow-on reassessment that was completed by its competitor, CLT Systems.

The follow-on assessment of 2002 was completed for use with 2003 tax bills, but plans for a new reassessment every three years were later abandoned. More litigation emerged later in the decade, and the cases would again be consolidated before Wettick. His 2009 order forced the county to conduct a new mass reassessment. When finally completed in 2012, the county announced it would retain the 2012 values as its “base year” for assessments indefinitely into the future.  

Which brings Allegheny County back to a familiar place. A full decade has passed since the most recent mass reassessment of property values and again, lawsuits are emerging challenging the accuracy and fairness of tax bills and the ongoing appeals process. What also remains the same is that the prospect of new property assessments remains a third rail of local politics, something to be avoided at all costs. 

In a county with some history of regular re-evaluation of property tax values, which even spurred the development of industry-leading technology, there seems little prospect of systematic countywide assessment, something that is a common practice outside of Pennsylvania.

 Christopher Briem is a regional economist with the Urban & Regional Analysis program at the University of Pittsburgh’s University Center for Social and Urban Research (UCSUR). He can be reached at cbriem@pitt.edu. This essay is an abridged version of a longer history of property assessment in Allegheny County available at briem.medium.com.

The post Maybe it is rocket science: Before Allegheny County stopped reassessing property, it was almost a pioneer 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

Flavia Laun visited at least 50 houses before she found one that fit both her lifestyle and her budget — or so she thought. Until the letter came.

In the spacious sunroom behind the rhododendron on a May afternoon, she brought out the piece of Woodland Hills School District letterhead she received the month before. “Dear taxpayer,” it began, before telling her that the property tax assessment on her house is being appealed. 

It was followed closely by a stream of letters from attorneys eager to represent her. She called a few, but didn’t hire any.

“I’m going to lose no matter what,” said Laun, 61. That could mean a hike in her total property tax bill of more than $2,500. “Shall I lose an extra $1,000 paying an attorney?”

Instead, she was trying to gather the information needed to represent herself – though the effort seemed to be affecting her fragile health. “Physically, I’m exhausted. And mentally, too, of course,” she said, blaming “this whole process of the assessment taxes, the way they’re calculated, and the faulty math and lack of logic.”

She knew from experience that it doesn’t have to be this way.

This year, assessment appeals — filed mostly by school districts, but also by some municipalities — are complicating the lives of around 10,000 residential property owners in Allegheny County. School leaders say those appeals are a way to raise much-needed revenue in a county in which assessments otherwise remain flat. Allegheny County Executive Rich Fitzgerald has opted since 2013 not to attempt to reassess all properties regularly, but instead to use values from 2012 indefinitely, except where they are altered by appeals.

Fitzgerald in an interview called the district appeals “totally unfair.”

The county’s property tax regime would be illegal in 38 states, which require regular reassessments of all property. It is also notably different from the policy in Philadelphia, which is the state’s most populous county and city. There, a new computer-assisted assessment system and enhanced homeowner protections are setting the stage for annual adjustment of tax bills.

While property assessment isn’t an exact science, tax bills can and should come reasonably close to reflecting market realities, said Randall Walsh, a University of Pittsburgh economics professor who has researched on housing markets. “You just need to get away from what is, to be frank, an antiquated approach to doing this,” he added. “It’s the refusal to update those assessments every year, or every other year, that’s the problem.”

‘Come back home’

Raised in Romania, Laun married a southwestern Pennsylvanian, spent two decades working as a programmer for the University of Pittsburgh and found a home in Edgewood. She divorced, and her son and daughter attended Woodland Hills schools before she moved to a Denver suburb.

She bought a Colorado condo in 2011, but never felt welcome. In March 2021, she talked with a former Pitt colleague who said three words – “Come back home” – that resonated. Three months later, she moved back and started house hunting.

The house market was hot, and she spent $225,000 — the proceeds from the sale of her condo, plus more — on a house in Churchill. 

“Nobody even wanted to talk about taxes,” Laun recounted. “Every time I asked questions about property taxes, the only thing I heard from my Realtors was, ‘You know you’re going to Allegheny County where the taxes are high.’”

She was led to believe that the tax bills on her Churchill home would total somewhere shy of $5,000.

Now she’s worried that they will be much higher. 

Need a brief primer on property taxes? Click here.

Equity ‘blown apart’

Colorado is among 38 states that require regular reassessment of property, according to a tally by the International Association of Assessing Officers [IAAO]. Most of those require reassessments every one, two or three years, though a few allow gaps of as long as six years or more.

Pennsylvania, by contrast, requires that counties assess property, but gives them the option of sticking with values set in a “base year” indefinitely.

In Allegheny County, decisions on reassessment have been driven by judges and local politicians. A series of court cases alleging unfair property taxes spurred repeat reassessments from 2001 through 2012. One casualty: the political career of the county’s first executive, Jim Roddey, who lost a 2003 election focused on the reassessment’s effects on property taxes.

After Roddey lost, no other politician would willingly brave a full reassessment, said state Sen. Wayne Fontana, D-Brookline, who was a county councilman at the time.

Fitzgerald ran on an anti-reassessment platform, and other than reluctantly implementing a court-ordered set of property values for 2013, he has kept his promise.

Stable assessments have “led to an awful lot of property values going up in Allegheny County,” Fitzgerald said in an interview with PublicSource. He touted the county’s homestead tax exemption under which the first $18,000 of an owner-occupied home’s assessment isn’t taxed by the county as a boon to owners with lower values.

While Fitzgerald said he favored statewide tax reform that would reduce schools’ reliance on tax reform, he believes the base-year system should continue in the absence of that. “In some counties, it’s lasted for more than half a century,” he said. 

An analysis by the Allegheny Institute think tank indicates that nine Pennsylvania counties last reassessed prior to 1973.

Fitzgerald’s decision not to reassess, though, has had consequences for taxpayers and communities. In the series Unbalanced, PublicSource has reported that:

• Tax values have been outstripped by market prices, and hungry taxing bodies have appealed the assessments of homebuyers, creating wildly different tax bills for similar houses.
• A court challenge to the data used to calculate assessments after appeals has revealed that a key factor in the formula was inflated, resulting in higher tax bills for thousands of property owners.
• With most residential assessments still frozen, 30 of the county’s 130 municipalities have seen their property tax bases erode since 2014, compelling some to raise taxes or cut services.
• Because homes in lower-income areas have appreciated less, the levy has become regressive, with Black homeowners in Pittsburgh paying property taxes at an estimated 7% to 8% higher rate, relative to the market value of their homes, than typical white homeowners.

Delay in reassessing “creates inequalities over time,” said Larry Clark, the IAAO’s director of strategic initiatives. “You may have a market that generally is increasing, but then parts of it are increasing at different rates, and so over time the equity that we’re trying to achieve through the assessment process is blown apart.”

‘Absolutely outrageous’

Laun found more problems with her home than she had anticipated. Faulty downspouts, leaks, cracks and broken appliances ate at her savings and her income from Social Security Disability.

Then the letter from the school district arrived. She began researching, reading, calculating, talking with friends. She looked at sale prices and assessments in her neighborhood.

The house next door to Laun’s is around the same age, with around 16% less living area but nearly 50% more yard.

Laun’s total tax bill, though, is around 48% ($1,300) higher than her neighbor’s — and likely to go up from there.

She has studied the formula that determines property tax appeal decisions, which are based on the sale prices modified downward to approximate 2012 values. That formula is likely to change due to a lawsuit alleging that it is based on flawed data that the county submitted to the state.

The appeal could boost Laun’s total property tax to a level more than double that of her neighbor. She called the potential tax bill of nearly $7,000 “absolutely outrageous.”

‘Everybody looks at me like I’m nuts’

Filing assessment appeals is the least bad option available to schools, said Woodland Hills Superintendent Dan Castagna.

“We have to generate revenue to support a district operation that can work outside of the typical raising taxes and reducing staff,” he said. He’d rather see the state fund schools fairly but, barring that, he said the “fairest approach” is to file appeals when sale prices far outstrip assessments.

“School districts can’t keep up” with rising costs, said Ira Weiss, solicitor for the Pittsburgh Public Schools. “The taxing bodies are forced to exercise their rights under the assessment laws and file appeals,” he said. “It’s the only tool they have.”

Fitzgerald disagreed, pointing to districts’ ability to raise the millage rates, which would change tax bills for all property owners in the given district. “And they’ve got other revenue sources they can use.” Instead, he said, districts “pick on one newcomer, moving in, an unsuspecting newcomer in some cases … and then boom, they get smacked” with an appeal.

It’s a tactic that some would like to wrest from the districts’ hands.

“I literally can’t go to a Cub Scout meeting or buy a hot dog anywhere without someone complaining to me about school district taxes and how unfair they are,” said state Sen. David Argall, R-Schuylkill. “If you have 10 identical houses on one block, and nine are paying one rate, and one is paying another rate, how can that be fair?”

Argall has proposed a bill to bar districts from appealing based on the sale prices of homes, a practice sometimes referred to as spot assessment. It’s now before the Senate Urban Affairs and Housing Committee.

Two Senate Democrats said they oppose Argall’s bill.

“I feel for any taxpayer that gets that spot assessment,” said Sen. Lindsey Williams, D-West View. “But we need a broader overhaul of our tax assessment process,” including regular reassessments, she said. In the meantime, she said, removing their right to appeal is  “untenable for their financial situation.”

“The perception out there is that if you do a reassessment, everybody’s taxes will go up. We know that’s not necessarily true,” said Fontana, who is both a legislator and Realtor. Anti-windfall laws would force taxing bodies to adjust millage rates, allowing some tax bills to rise, but pushing others down.

Still, when he suggests mandatory reassessment to his colleagues in Harrisburg, “Everybody looks at me like I’m nuts,” he said. “… Anybody that’s elected, they’re afraid they’re going to get tagged with [ads that say] you want to raise property taxes.”

Fitzgerald noted that his job will be on the ballot next year, and county term limits prevent him from running again.

“Candidates can obviously campaign on reassessing everybody’s property in Allegheny County,” he said, wryly. “I think there’ll be other issues that people can campaign on.”

Argall said he’d really prefer to get rid of property taxes.

He has unsuccessfully pushed bills that would replace school property taxes with other levies, arguing that “there has to be a better way to fund our public schools than: how big is your house, how many acres is it on, what color is your roof.”

Replacing the property tax, though, wouldn’t be simple. 

An analysis by the state’s Independent Fiscal Office, released in April, found that to replace the property taxes now collected by schools, the state would need to combine a 2-percentage-point increase in the sales tax, a boost in the personal income tax of 1.85 percentage points and a 4.92% tax on retirement income except Social Security.

Funding education with property taxes, said Weiss, “is not a perfect system, but no one’s come up with anything better.”

‘Standing still just makes things worse’

According to a tally maintained by the Allegheny Institute, 53 of Pennsylvania’s 67 counties tax property based on assessed values that are even older than those used in Allegheny. But the state’s biggest city is not among them.

Philadelphia reassessed property in 2020. Last month, the city/county administration released fresh values for all properties within its borders, along with a series of measures to cushion the blow on any homeowner whose value is rising steeply.

Philadelphia generated the new values using a Computer-Assisted Mass Appraisal [CAMA] that is different from the personnel-heavy process of the past.

“In the old days, when I began, we would go from property to property and record the characteristics,” said the IAAO’s Clark, who served as a consultant to Philadelphia’s process. “Then we would go back to the office and look up specific characteristics in some manual” and piece together a value based on the house’s features and the sale prices of similar structures.

CAMA automates all of that, said Clark.

To implement CAMA, Philadelphia — which includes virtually the same number of property parcels as Allegheny County — hired a vendor for $14.8 million, payable over eight years. Armed with the system, Philadelphia’s Office of Property Assessment found that the total market value of properties within its borders rose by around 21% since 2020.

That won’t, however, mean 21% tax hikes for most homeowners. Mayor Jim Kenney’s administration in May announced measures that it said would put much of the new revenue “back into the hands of taxpayers,” as it pledged in a press release. The administration plans to:

• Reduce the city’s wage tax
• Raise the homestead tax exemption from $45,000 to $65,000
• Increase funding to a Longtime Owner Occupants Program, which allows owners who have lived in their homes for 10 years or more to blunt assessment increases
• Increase marketing of its Senior Citizen Tax Freeze Program.

With the computers and protections in place, the city plans to reassess every year.

Fitzgerald said he has not studied Philadelphia’s process, but said the money Allegheny County could spend on a reassessment would be better used for infrastructure or workforce development initiatives.

Allegheny County can’t just copy Philadelphia’s solution, said Michael Lamb, the controller for the City of Pittsburgh and the Pittsburgh Public Schools.

While Philadelphia is a unified city, county and school district, Allegheny includes 130 municipalities and 43 school districts. Even if the county boosted its homestead exemption, that would not apply to municipal and school taxes, which are often higher.

Instead, Lamb said, the county could consider assessing homes on a different scale than other properties. Or it could limit increases in assessments on homes at “a certain percentage above their current assessment.” He added that he did not know whether those measures would run afoul of the state Constitution’s requirement of uniform taxation.

In California, when a property is sold at a market price, that price becomes its new tax assessment. Each year thereafter, the property’s assessment increases by either 2% or the rate of inflation – whichever is lower – until it is sold again. 

“That kind of model can work for us,” said Lamb. But right now, the county is abdicating its responsibility to assess fairly, he added. “Standing still just makes things worse and that’s what we’re doing right now.”

‘I am alone in this’

Laun continued to research the sale prices of comparable properties in preparation for her late June telephone hearing before the Board of Property Assessment Appeals & Review. The letters from attorneys were still coming, and Laun’s son was encouraging her to fight. But she despaired of her chances and craved clarity.

“I want to see the bill,” she said. She figured her remaining savings could cover the first year’s property tax payment, and then when she turned 62 she could pay her next bill through an early withdrawal from her retirement account.

She would likely make it through. But a year after she returned to Allegheny County in search of community – to “come back home” – she felt anything but settled.

“I am all alone in this,” she said, “although there are many people in my situation.”

Rich Lord is PublicSource’s managing editor. He can be reached at rich@publicsource.org or on Twitter @richelord.

This story was fact-checked by Terryaun Bell.

How property taxes work

Property taxes cover the biggest share of the cost of local government and are supposed to be related to the values of taxable land and buildings. In Pennsylvania, counties have the job of estimating the fair market values of taxable properties.

State law allows counties, municipalities and school districts to abate some portion of that value for homeowners, seniors, farmers and a few other categories of owners. Allegheny County, its school districts and some municipalities including Pittsburgh have various abatements for homeowners. The county, for instance, doesn’t count the first $18,000 in a homeowner’s fair market value when calculating the tax due.

The taxing bodies must then multiply the remaining values by their tax rates — referred to as millage — to get the tax bill.

(Fair market value – abatements) x the millage rate / 1,000 = property tax

In 2012, Allegheny County Executive Rich Fitzgerald decided to keep using that year’s property value assessments indefinitely, rather than continue a series of contentious mass reassessments. That effectively froze the assessments of property owners who don’t move or make major changes to their buildings.

Property owners, though, may appeal their own assessments, and school districts and municipalities can challenge the valuations of any property within their borders. Taxing bodies often file appeals when a property sells for a price that’s far higher than its assessed value, arguing that the sale proves the fair market value.

The Property Assessment Appeals and Review Board then decides whether the appeal is valid. It applies a new assessment, often based on the sale prices modified by a Common Level Ratio meant to approximate 2012 values.

The post ‘I’m going to lose no matter what.’ Allegheny County’s property tax system would be illegal in most states appeared first on PublicSource. PublicSource is a nonprofit news organization serving the Pittsburgh region. Visit www.publicsource.org to read more.