How property tax assessments create winners and losers
An agreement reached in court on Wednesday may open the door for thousands of Allegheny County property owners to appeal their property tax assessments and potentially trim their 2022 and future bills, according to the plaintiffs.
The county has signed a consent order with attorneys representing nine property owners, which is likely to have the effect of forcing downward the assessments that result from current and future appeals. Assessments resulting from appeals are often at odds with those of neighboring properties, PublicSource found in reporting the ongoing series Unbalanced: How property tax assessments create winners and losers.
John Silvestri, attorney for the plaintiffs, said the order has the obvious effect of allowing property owners with high assessments to trim their tax bills, but could also allow homeowners in struggling areas to shed some of the burden they now bear.
“What this does is it really gives the opportunity for these economically distressed areas to adjust their values downward,” he said.
A statement issued by the county did not directly address the order’s effect on properties subject to appeals in prior years, and follow-up questions submitted by PublicSource were not immediately answered.
For a decade, assessments for properties that have not been sold or substantially altered have been largely frozen as a result of County Executive Rich Fitzgerald’s decision to declare 2012 the “base year” for property taxation.
School districts, municipalities and property owners, though, have the right to appeal assessments if they can present evidence that they no longer reflect market values. School districts often appeal the values of properties after they are sold for prices far above their assessments, arguing that the sales prove the market value.
State law requires that new assessments stemming from appeals be modified using a figure called the Common Level Ratio [CLR], meant to convert current market values to something resembling those in place during the base year. The CLR is determined by the State Tax Equalization Board [STEB] based on sales data submitted by the county. It is calculated so that if market values go up, the CLR should go down.
For example if the CLR is 81.1% – which was STEB’s original calculation based on 2020 sales data – a house whose market value is determined, at an appeal, to be $100,000 would be taxed based on an assessment of $81,100. But if the CLR is adjusted to around 63.5% – as the plaintiffs have urged – the assessment would be $63,500.
The plaintiffs argued that since 2016, the county has provided STEB with an unrepresentative sample of sales, skewed in a way that artificially inflates the CLR, and therefore boosts the assessments stemming from appeals.
About Unbalanced: This year, PublicSource is exploring the effects of property taxes on people and communities a decade after Allegheny County’s last reassessment.
“Beginning in 2016, the acceleration of sales prices, the inflation of sales prices, really began in earnest, and has especially ramped up the last several years,” Silvestri said. But the CLR remained around 87%, until it dropped to 81.1%. “And everybody knew that the real estate market was booming and the common level ratio should have seriously gone down.”
The county partly confirmed that critique in a court filing Friday, saying that “assumptions” it used in deciding which sales to provide to STEB “became outdated.” Since the June filing of the lawsuit, the county’s lawyers wrote, it had disabled some computer functions and provided STEB with updated data on 2021 sales, which will be used to determine the CLR used in next year’s appeals.
In court Wednesday, the county and the plaintiffs went further. They reached a consent order that compels the county — with input from the plaintiffs’ team — to send STEB new data on 2020 sales. It’s possible that hundreds of the 5,357 sales submitted to STEB by the county could be removed from the calculation, while thousands more could be added, according to Silvestri.
In a statement, the county confirmed that the CLR will likely drop as its Office of Property Assessment works with STEB to calculate “as accurate a figure as possible.”
Silvestri said he is preparing a court filing that would seek to ensure that STEB uses the newly submitted values to revise the current CLR. That would unquestionably apply in this year’s 12,659 assessment appeals, most filed by school boards hungry for more revenue from homeowners.
But could property owners who are not subject to current appeals benefit? Silvestri said they could, assuming the county’s Board of Property Assessment Appeals and Review [BPAAR] extends the deadline for filing appeals, which expired on March 31. He said he left court with the understanding that the board would reopen the process and accept more appeals.
“The only decision BPAAR has reached is to wait and see how the process works out that the court has ordered,” said David Montgomery, the board’s solicitor. He said he expects the CLR to change, and did not rule out the possibility of a new appeal period.
“I would certainly recommend keeping an eye on this litigation if you feel you can benefit from an appeal with a more favorable CLR,” he said.
If a new appeal deadline is set, it could:
- Allow tens of thousands of homeowners whose assessments rose due to appeals in recent years to file new appeals, seeking to push their tax bills down to levels dictated by the new, lower CLR
- Invite commercial property owners to appeal their assessments, potentially biting into governmental revenue in business-heavy municipalities and school districts
- Prompt appeals from homeowners in areas where property values have declined over the last decade.
Silvestri noted that many homeowners in places like the Mon Valley, where some neighborhoods have seen declining real estate markets, are paying taxes based on 2012 values. If they can convince BPAAR that values around them have declined, their assessments should drop, and the new CLR could result in significant savings on current and future tax bills.
Montgomery said there was no way to predict the number of appeals that could follow an extension of the deadline. “It will obviously require significant additional resources depending on the volume of appeals.”
Silvestri said the lawsuit continues, as the plaintiffs participate in the process of submitting new data to STEB. The plaintiffs have also demanded that the county hire a new chief assessment officer to guide the process going forward. The process is now led by an acting chief assessor. The county has posted the job, which carries a maximum salary of $110,000.
Rich Lord is PublicSource’s economic development reporter. He can be reached at firstname.lastname@example.org. or on Twitter @richelord.
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