How property tax assessments create winners and losers
Raising taxes is “never an easy decision,” notes Brian Kamauf. As manager of a borough whose tax base used to be anchored by a now-dead mall, it’s a decision he has learned to defend.
Since Kamauf was hired to manage West Mifflin in 2010, he has seen the borough’s Century III Mall close. The mall’s main parcel was valued by the county at $58 million a decade ago, but following an appeal and a court case, is now assessed at $2 million. Assessments on scores of other commercial properties have followed the mall’s in a downward swoop. Overall, the borough’s property tax base has dropped by 20% since 2014.
With the cost of everything creeping up, the borough council raised property taxes by 0.6 mills this year, to 9.98 mills. That resulted in some challenging interactions with homeowners.
Kamauf recounted his response to a complaint about a $900-a-year borough property tax bill. “I said, ‘What’s your Comcast bill for internet?’” The answer: $200 a month. “I said, ‘So you’re paying $200 a month to watch Judge Judy. I’m giving you 24-hour EMS, police, fire.’”
It’s an argument he might not have to make if Allegheny County’s property tax system were not largely disconnected from actual property values.
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Since 2014, home sale prices in West Mifflin have risen more than 35%, in inflation-adjusted dollars, according to data provided by the Western Pennsylvania Regional Data Center. Taxes on homes that haven’t been sold, though, are largely frozen at values set in 2012 due to County Executive Rich Fitzgerald’s decision to use a base year for taxation.
All property owners have the right to appeal their assessments, and commercial properties like malls have the incentive and wherewithal to litigate and push their tax bills downward.
Fitzgerald, through his spokesperson, declined to be interviewed on assessments.
Because property taxes make up half of West Mifflin’s budget, the borough faces unpalatable choices.
Residents want improvements, like improved parks, said Kamauf. His budget doesn’t give him much to work with. “There’s very little in there for the capital projects,” he said. “Are we going to pave five streets this year or just three streets?”
PublicSource used 2014 as a baseline to study the effects of the base-year assessments on communities because tax values in the years immediately prior to that were volatile due to a mass reassessment and the appeals that followed.
About Unbalanced: This year, PublicSource is exploring the effects of property taxes on people and communities a decade after Allegheny County’s last reassessment.
Since 2014, 30 of the county’s 130 municipalities have seen their property tax bases erode by 1% or more, with another seven essentially flat. The reasons and ramifications vary.
- In McKeesport, southeast of Pittsburgh, broad drops in property assessments have contributed to decisions to raise property taxes substantially.
- Frazer, a township northeast of the city, has seen a mall’s woes slash its taxable value in half since 2014, forcing it to raise taxes and seek state grants to cover normal expenses like road maintenance.
- In East Pittsburgh, which has lost ¼ of its taxable value since 2014, the manager wishes he could reward staff with raises or pave even one more block of street.
- Other communities that have seen their property tax bases decline by 5% or more are Trafford, Turtle Creek, East Deer, Wilmerding, Dravosburg, Haysville, Braddock Hills, Rankin, West Elizabeth and West Homestead.
As a result of the property tax system, “municipalities have a difficult time keeping up with increased costs,” said Seth Abrams, manager of East Pittsburgh. He said his town would benefit from a system in which tax bills better mirrored values.
“The inconsistency of the assessments, without question, is concerning,” said McKeesport Mayor Michael Cherepko. “I do believe we’re leaving a lot of revenue on the table.”
McKeesport: ‘No rhyme or reason’
McKeesport’s 5.5% dip in taxable value since 2014 can’t be pinned on any one property like West Mifflin’s losses can. The decline is widespread: Eight of the city’s 12 wards have lost assessed value. Combined with rising costs, that has compelled the Mon Valley city to raise property taxes.
In 2014, the Mon Valley city charged 16.5 mills on each property’s land value and 4.26 mills on building value. Now those figures are 20.5 mills on land and 8.26 mills on buildings.
“It was not an easy decision for us to do, but the right choice is not the popular choice,” said Cherepko. “The people that were hit the hardest for the most part were people who were not on fixed incomes,” he added, but rather “the ones in the higher-assessed homes.”
He’s most troubled by the swings in assessments among similar houses.
“The inconsistencies, it’s just amazing,” Cherepko said. “This house is just as nice as this house, and this one is assessed at $130,000, the next one is at $210,000. … It just seems like there’s no rhyme or reason.”
East Pittsburgh: What $24,000 could do
In East Pittsburgh, also in the Mon Valley, demolitions of dilapidated buildings have cut into the taxable property rolls. Because the borough consists mostly of older homes on small lots, there is little new development to replace lost revenue.
When homes sell, the prices are usually under $40,000. Abrams said it isn’t often cost-effective to pay an attorney to file an appeal to boost the modest assessments.
If there was a comprehensive reassessment of all properties, municipalities would be subject to the state anti-windfall law. That means that if assessments rose dramatically, millage rates would have to be reduced to prevent a revenue surge. “Most of our homeowners would see a slight increase” in tax bill, said Abrams.
His budget, meanwhile, would probably initially grow by around $24,000. In a small borough, that would mean something.
“People deserve pay raises. We don’t pay really well to begin with,” he said. “We could fix an extra block of roadway every year. … Who wants to buy a house on a road you can’t get to without losing a front tire?”
Another option would be to offer partial exemptions from property taxes for homeowners or seniors, or both, he said. “Right now, we can’t afford to do that. We rely on every nickel and dime.”
Frazer: Another mall, another fall
The coming years were supposed to be windfall time for Frazer. Instead, this may be gut-check time.
“We’re going to have to decide where we have to go from here. We may need to cut expenses significantly,” said Lori Ziencik, secretary/treasurer of the Allegheny River Valley township and one of its elected supervisors.
Development of the township’s marquee property, the Galleria at Pittsburgh Mills, was backed by tax-increment financing. TIF is a tool in which government borrows money to back new construction, and then pays it back using the bulk of the property taxes that would otherwise flow to the school district, municipality and county, for as long as 20 years.
In the case of Pittsburgh Mills, the borrowing happened in 2004, and the debt was supposed to be paid off in 2023. After that, all of the property taxes from the mall would flow to the township, school district and county.
The parcel including the main mall, valued by the county at $125 million in 2011, is now assessed at just $14 million. The township’s total taxable assessed value plunged from $314 million in 2014 to $155 million this year.
The board of supervisors had to raise the property tax last year from 1.42 mills to 2.5 mills. “It did not fill the gap,” said Ziencik. The township has tapped state grants to tar and chip roads.
“Helping them get funding for other projects that they can’t afford to do, like the road construction projects, sewer and water, that’s what I’m here to piecemeal together,” said state Sen. Lindsey Williams, D-West View, whose district includes Frazer and who has been involved with the township’s grant hunt.
Asked whether the county should reassess all properties, Williams said, “I think that would be good, because then it’s fair.”
Rich Lord is PublicSource’s managing editor. He can be reached at firstname.lastname@example.org or on Twitter @richelord.
This story was fact-checked by Sophia Levin.
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 sales price modified by a Common Level Ratio meant to approximate 2012 values.
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