UPDATED September 2019

Pennsylvania Appellate Court Hears Argument in a Series of Taxpayer Constitutional Challenges to School District's Schemes to Select Taxpayers for Appeals Based on Economic Thresholds

In a series of arguments heard or scheduled to be heard in the summer and fall of 2019, the Pennsylvania Commonwealth Court will repeatedly address the issue of whether school districts’ schemes for selecting which taxpayers to appeal meet constitutional uniformity. 

The cases follow the Pennsylvania Supreme Court’s decision in July 2017 in Valley Forge Towers Apts. LP v. Upper Merion Area School District, 163 A.3d 962 (Pa. 2017).  In Valley Forge, taxpayers alleged that the school district filed increase appeals only against commercial property owners and not against residential owners. The Pennsylvania Supreme Court held in Valley Forge that all real estate is one class, that taxing districts cannot divide property into sub-classes, and that all real estate must be taxed uniformly which is a requirement of Pennsylvania’s Constitution.  Taxpayers read Valley Forge broadly based on its language, reasoning and policy.  Taxing districts read Valley Forge extremely narrowly, essentially limiting its reach to the facts of that case and taking the position that so long as the school district establishes a facially neutral policy in which it “considers” appealing residential properties even if it did not, in fact, appeal any residential properties, its policy is constitutional.

Following the Supreme Court’s decision in Valley Forge there have been a series of taxpayer challenges to school selection schemes for increase assessment appeals where the schools’ schemes are based on some form of economic threshold.  In Pennsylvania, there is an appeal as of right to the Pennsylvania Commonwealth Court; there have been at least five (5) post-Valley Forge cases filed to the Commonwealth Court challenging school’s selection schemes including:

  • The School District of Philadelphia v. Philadelphia Board of Revision of Taxes, 1493 CD 17 (Pa. Commw. Ct, August 22, 2019). Here, the City of Philadelphia School District used consultant New Jersey-based Keystone Realty Consultants to create scheme whereby the School purported to select properties for appeal where the additional taxes that could be created were at least $7,500. The trial court dismissed approximately 140 school-initiated appeals because the trial court found this policy to be unconstitutional. The Commonwealth Court heard argument on the school district’s appeal; on August 22, 2019 the Commonwealth Court issued its decision refusing to affirm or reverse the trial court and, instead, remanded back to the trial court to make an evidentiary record on the school’s selection scheme.
  • Martel v. Allegheny County Board of Assessment Appeals, 568 CD18 (Pa. Commw. Ct. August 14, 2019(reported, amended opinion). Here, City of Pittsburgh School District filed on sale price.  Taxpayer filed a challenge, citing the Allegheny County local rule and Valley Forge.  The trial court ruled against the taxpayer; the taxpayer appealed.  The Commonwealth Court ruled against the taxpayer in early summer 2019, then rescinded and reissued its decision August 14, 2019 in which it ruled that the taxpayer had failed to exhaust its administrative remedy.  The taxpayer has filed a petition to the Pennsylvania Supreme Court seeking to have the Court take the case on appeal.  Taxpayer awaits the decision of the Pennsylvania Supreme Court as to whether to take the appeal.
  • East Stroudsburg Area School District v. Dallan Acquisitions LLC, 529 CD 2018 (Pa. Commw. Ct.)(aka “Marshall’s Crossing”). Here, the Stroudsburg Area School District used consultant Keystone Realty Consultants as well.  The School took the position at trial that it had a policy of appealing properties where the additional taxes that could be created were at least $10,000.  However, the taxpayer adduced evidence that neither the school nor Keystone performed any calculations to ensure that the properties it selected met this threshold, and that the school did not appeal any residential properties even though taxpayer produced expert testimony that at least 12 houses met the criteria.  The trial court found the school’s methodology to be constitutional and taxpayers appealed.  This case was argued before the Commonwealth Court on September 9, 2019 and the parties await a decision.  Siegel Jennings, Co., L.P.A. is co-counsel for taxpayers on this appeal.
  • Kennett Consol School District v. Chester Co. Board of Assessment, 253 CD 2019 (Pa. Commw. Ct.)(aka “Autozone”). Here, the school district admitted in discovery that it did not have a policy of its own, but rather, delegated its authority to set a threshold to a third party appraiser functioning as its consultant; the appraiser-consultant set a threshold of properties that are under-assessed by at least $1 Million and recommended 13 appeals. Based on this advice, the school filed increase appeals on 12 properties, none of which were residential. The school then engaged the same consultant-appraiser to prepare the appraisals.  The school appraisal on the subject property concluded that the property was under-assessed by $800,000 (thus, by its own evidence, the appeal did not meet its own threshold).  Taxpayer filed a motion to quash the appeal on the basis that the school’s appeal policy was unconstitutional.  The trial court denied the taxpayer’s motion and set the assessment based on the school district’s appraisal.  Taxpayer appealed to the Commonwealth Court.  This case, being handled by Siegel Jennings, Co., L.P.A. is scheduled for argument on November 12, 2019 before the Commonwealth Court.
  • Bethlehem Area School District v. Northampton County Board of Revenue, 357 CD 2019 (Pa. Commonwealth Court)(aka “Lehigh Crossing”). Here, the school district consulted with Keystone Realty Consultants and set a policy of selecting properties that would yield at least $10,000 of additional taxes.  Minutes from school board meetings indicated that part of the reasoning for setting this threshold was to recoup tax dollars that had been lost by virtue of appeals filed by commercial property owners which the school believed shifted the tax burden to residential owners.  Since 2012, the school’s scheme yielded no appeals on residential properties.  The trial court granted the taxpayer’s motion for summary judgment, finding the school’s selection scheme to be unconstitutional, notwithstanding the fact that the policy was facially neutral. The school district appealed to the Commonwealth Court.  The case is tentatively scheduled for argument on December 9, 2019.
  • CF PA Owner LLC. v. North Allegheny School District, (632 CD 2019(Pa. Commw. Ct.)(aka “Sherbrook Apartments”). Here, the school district filed based on a recent sale price.  Taxpayer filed a separate action asking the court to declare a selection scheme based on sale price alone to be unconstitutional.  Following briefing and argument, the trial court ruled against the taxpayer in a one-sentence decision without any reasoning.  Taxpayer appealed to the Commonwealth Court where the case remains pending; argument has not yet been scheduled.  Siegel Jennings Co., L.P.A. represents the taxpayer.

To discuss the specifics of these pending appeals and how they might affect the assessment on your property, please contact Siegel Jennings at:

Sharon F. DiPaolo, Esquire
Siegel Jennings, Co., L.P.A.
American Property Tax Counsel (APTC)
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Pennsylvania Property Tax Update Archive

UPDATED JUNE 2019

PENNSYLVANIA SUPREME COURT ISSUES ANOTHER DECISION IN A SERIES OF UNIFORMITY RULINGS PROTECTING TAXPAYERS

In an April 2019 decision, the Pennsylvania Supreme Court issued yet another ruling in a series of decisions over the last decade consistently upholding the constitutional requirement of uniformity in taxation in favor of taxpayers.  In Sands Bethwork Gaming, LLC v. Pennsylvania Department of Revenue, 216 MM 2017 (Pa. Apr. 26, 2019), the Supreme Court ruled that a statute that taxed gaming revenue at different thresholds and then re-distributed the proceeds violated the Uniformity Clause.

The Pennsylvania Constitution provides “All taxes shall be uniform, upon the same class of subjects, within the territorial limits of the authority levying the tax. . . .”  In Sands, all seven Justices agreed in the result, declaring the statutory section to be unconstitutional; five Justices made up the majority and two Justices concurred.  The concurrence, authored by Justice Wecht (who was the author of the Court’s 2016 Mount Airy decision) is particularly strong.  Justice Wecht begins with a refresher that Pennsylvania’s Uniformity Clause was adopted in the late 1800’s in a “populist backlash against the preferential tax treatment that the legislature often had extended to favored industries and individuals.”  He noted that as a result of those preferential laws “[t]he burden of maintaining the state had been, in repeated instances, lifted from the shoulders of favored classes, and thrown upon the remainder of the community.”  The  Uniformity Clause was the specific remedy fashioned by the delegates to the constitutional convention to prevent “certain groups from having to shoulder the benefits of progress from which all would benefit.”

Unfortunately, in Pennsylvania, most local school districts, some local assessors and some trial courts seem to have lost sight of the requirement of constitutional uniformity in taxation.  Pennsylvania’s Supreme Court, refreshingly, has not.

The Sands decision follows the Court’s recent decisions in:

  • 2017, Nextel v. Commonwealth, 171 A.3d 682 (Pa. 2017)(declaring that a corporate income tax statute that required corporations that met an income threshold to pay an income tax, whereas corporations that did not meet the threshold wholly escaped taxation, violates the Uniformity Clause);
  • 2017, Valley Forge Towers v. Upper Merion School District, 124 A.3d 962 (Pa. 2017)(declaring that a school district policy targeting only commercial property owners for increase assessment appeals violates the Uniformity Clause);
  • 2016, Mount Airy #1 v. Pennsylvania Department of Revenue, 154 A.3d 268 (Pa. 2016)(declaring that a gaming statute setting a graduated-rate income tax violates the Uniformity Clause)
  • 2012, Tech One v. Allegheny County, 53 A.3d 685 (Pa. 2012) (acknowledging the “logic and force” of the trial court’s finding that treating some real estate as exempt from taxation solely because it is owned as a leasehold interest rather than in fee simple would violate the Uniformity Clause, but deferring a ruling on those grounds because it had already ruled that real estate cannot be classified differently for purposes of taxation based on the manner in which it is owned)
  • 2009, Clifton v. Allegheny County (Pa. 600 Pa. 662 (Pa. 2009)(ruling that “base year” system of assessment was unconstitutional as applied in Allegheny County because it did not consider real estate valuation changes; and ordering county to re-assess);
  • 2006, Downingtown Area School District v. Chester County Board of Assessment, 913 A.2d 194 (Pa. 2006)(ruling that a taxpayer may bring evidence of assessment-to-value ratio of similar shopping centers in challenging uniformity of taxpayer’s assessment);

We have called the Uniformity Clause the “fourth approach to value”.  The Uniformity Clause is the underpinning of all taxation and should inform the strategy of every assessment appeal.

To discuss the specifics of your property, please contact Siegel Jennings at:

Sharon F. DiPaolo, Esquire
Siegel Jennings, Co., L.P.A.
This email address is being protected from spambots. You need JavaScript enabled to view it.
American Property Tax Counsel (APTC)

UPDATED december 2018

PA APPELLATE COURT RULES BILLBOARD GROUND LEASES (BUT NOT STRUCTURES) TAXABLE

In one of its last decisions of 2018, the Pennsylvania Commonwealth Court overturned a trial court in a decision issued December 27, 2018 concerning the taxability of billboards for property tax purposes.  See Consolidated Appeals of Chester-Upland School District, 633 C.D. 2017 (Pa. Commw. Ct. 12-27-2018).

In 2011, Pennsylvania legislators passed a statute excluding billboard structures from the definition of “real estate” for purposes of property taxation.  The Chester-Upland School District case is the first case to reach Pennsylvania’s appellate courts regarding the interpretation of the statute.

For tax year 2015, two school districts in Delaware County collectively filed 26 real estate assessment appeals; each of the 26 appeals were of properties containing an outdoor advertising sign.  The school districts sought to value the properties based on revenue the property owners realized through ground leases or grants of easements to outdoor advertising companies.  The trial court consolidated all 26 appeals on the legal issue of “whether a taxing authority can use the presence of an outdoor advertising sign to increase the real property tax basis of the property.”  Citing the statute, the trial court ruled in favor of the taxpayers, concluding that the statutory exclusion of outdoor advertising signs from real estate taxation, “prevented the existence of an outdoor advertising sign on a property from being considered in any manner to raise that property’s real estate tax basis.” 

The school districts appealed to the Commonwealth Court.  The school districts argued that the sign-and-structure exclusion does not preclude the assessment of the land on which a billboard sits.  Taxpayers responded that “the amount of rent paid here by billboard operators to the property owners pursuant to leases or easements necessarily ‘reflect consideration’ of the billboards and that taxing the rent that is paid by the operators will operate as a ‘subtle-but no less real – assessment.” The Commonwealth Court ruled that the trial court erroneously interpreted the statute to foreclose any consideration of any potential income that a property owner may receive from the placement of a billboard on its property.  The Commonwealth Court interpreted prior decisions of the Pennsylvania Supreme Court in its Marple and Tech One decisions to support its holding that the appraiser must considered the “economic reality” of a long-term lease on a property that provides revenue to the property owner.  The Commonwealth Court limited its ruling to the effect of the outdoor advertising structure on the land value.  With respect to the advertising revenue itself, the Commonwealth Court held “We agree that an appraiser must not indirectly value an existing billboard on a property by, for example, considering the revenue generated from the number of advertisements that are placed on that billboard in a given year.”

To discuss the specifics of your property, please contact Siegel Jennings at:

This email address is being protected from spambots. You need JavaScript enabled to view it.
Siegel Jennings Co., L.P.A.
American Property Tax Counsel (APTC)

UPDATED september 2018

LATEST PENNSYLVANIA NEWS ON UNIFORMITY IN ASSESSMENT

In the summer of 2017, the Pennsylvania Supreme Court issued its landmark decision in Valley Forge Towers, restoring meaning to the constitutional requirement of uniformity in taxation.  Pennsylvania, like nearly every state, has a constitutional requirement of uniformity in taxation.  One hundred years of decisions from Pennsylvania’s Supreme Court consistently underscore the primacy of uniformity as the foundational concept in taxation.  However, decades of intermediate appellate decisions failed time and again to apply the concept correctly.

Post-Valley Forge, the decisions out of trial courts on uniformity are mixed – and the first cases are making their way to argument at the intermediate appellate court, the Pennsylvania Commonwealth Court, in October 2018.  In Philadelphia County, the trial court threw out 138 school-initiated appeals, finding that the school’s scheme for selecting taxpayers for appeals (purportedly a monetary threshold) violated constitutional uniformity.  Oral argument in the Philadelphia appeal is tentatively scheduled before the Pennsylvania Commonwealth Court for November 2018.  (Interestingly, last week the City of Philadelphia filed its notice of  non-participation in the appeal, leaving the school district to defend its scheme alone.)  Unfortunately, a uniformity case decided against taxpayers arising out of Allegheny County (Pittsburgh-area) is scheduled for argument first before the Pennsylvania Commonwealth Court on October 15, 2018.  The uniformity argument in the Allegheny County case is framed to ask for enforcement of an esoteric administrative rule as opposed to being framed as an outright challenge on the “welcome stranger” practice of Pittsburgh-area school districts to select recently-sold properties for increase appeals (which practice is not constitutional under the United States Supreme Court case in Allegheny Coal.)

It is frustrating and unfortunate that the first case that the Pennsylvania Commonwealth Court will hear on uniformity post-Valley Forge is framed on such narrow grounds.  Other appeals from trial courts around the state have been filed to the Commonwealth Court, but are not yet scheduled for argument.  In addition, several trial courts have ruled favorably on threshold issues such as allowing discovery into the school’s methodology for selecting taxpayers for appeal and in requiring that the uniformity issue be resolved before forcing the taxpayer to defend on market value.  We will continue to provide updates as the law develops.

To discuss the specifics of your property, please contact Siegel Jennings at:

Sharon F. DiPaolo
Siegel Jennings, Co., L.P.A.

American Property Tax Counsel (APTC)

UPDATED june 2018

PHILADELPHIA COUNTY, PA’S BACK-TO-BACK-BACK REASSESSMENTS MEAN INCREASES FOR COMMERCIAL TAXPAYERS

After three decades without countywide reassessments, Philadelphia County is now planning to do a reassessment on every property in the county every year.  This is a huge change in typical Pennsylvania practice where counties often go decades between county-wide reassessments.  (The counties are allowed to assess annually, but this is the first county to do so).  Starting in 2014, Philadelphia had a countywide reassessment for all properties – its first countywide reassessment in thirty years.  Then in 2016, Philadelphia reassessed residential only, in 2017 vacant land only, and in 2018 commercial properties only. 

The increases on 2019 assessments for commercial properties vary widely.  County-wide the 2018 reassessments for commercial properties increased the aggregate assessment of commercial properties by 50%, so the 2019 notices are increases on just-issued-last-year gigantic increases.

Notices with 2019 assessments are now out.  Even if you have a pending appeal from a prior tax year, we are advising property owners to file new appeals from these 2019 notices to avoid waiving any rights.  The deadline to appeal for tax year 2019 is the first Monday in October 2018.

Sharon F. DiPaolo, Esquire
Siegel Jennings, Co., L.P.A.

American Property Tax Counsel (APTC)

UPDATED march 2018

Pennsylvania Taxpayers Enjoying Favorable Rulings in Appeals by Taxing Districts

In July 2017, the Pennsylvania Supreme Court issued a landmark decision in Valley Forge Towers Apartments wherein the Court ruled that in government-initiated assessment appeals (Pennsylvania is one of a handful of jurisdictions where taxing districts have a statutory right to file increase appeals), the government’s selection scheme for choosing properties to appeal must meet constitutional uniformity.  Above all, the Pennsylvania Supreme Court’s decision mandated that all real estate is a single class and that taxpayers must be uniformly treated, whether they are residential or commercial taxpayers.  It follows that the government may not create sub-classifications of property for different tax treatment, a holding which the Court stated ten times in its decision.

In the eight short months since the Supreme Court decision, taxpayers have been putting the Supreme Court’s decision to good effect.

First, taxpayers are pushing back by taking discovery from the taxing districts as to their methodology for selecting properties for appeals.  In the four counties where the issue has been contested, the trial courts have agreed that whether or not the taxing district’s scheme meets constitutional uniformity is a threshold issue before the valuation phase of the case can proceed.  Trial court decisions as to whether or not a particular taxing district scheme is uniform so far are mixed – as to be expected in a fact-based inquiry.  Of note is a Philadelphia trial judge’s decision to jettison 130 school-initiated appeals for failure to comply with constitutional uniformity in taxation.  Appeals to the Commonwealth Court (Pennsylvania’s intermediate appellate court) have been filed on this threshold issue already in at least two counties. 

More broadly, the Supreme Court’s decision underscores the need for a standard as to how all realty is to be taxed in Pennsylvania regardless as to whether it is residential or commercial.  In current practice, residential and commercial properties are taxed on different standards, thus the need for clarifying definitions in Pennsylvania’s statutes. 

[A]ll property in a taxing district is a single class, and as a consequence, the Uniformity Clause does not permit the government, including taxing authorities, to treat different property sub-classifications in a disparate manner.  Second, this prohibition applies to any intentional or systematic enforcement of the tax laws and is not limited solely to wrongful conduct.  Valley Forge Decision at 18 (emphasis added).

Currently, in Pennsylvania assessment practice, commercial properties are valued differently than residential properties.  If a commercial property is leased, the taxing districts answer not “what would a hypothetical buyer pay for this commercial realty on the open market” but rather, “what would a hypothetical buyer pay for this commercial realty on the open market, encumbered by this lease?” The only interest that is uniform across all categories is the fee simple unencumbered value.  Functionally, residential properties are taxed on a fee simple standard and commercial properties are not.  As Valley Forge makes clear, there can only be one standard because all realty is a single class.  The only uniform standard for all realty is to be taxed on the basis of fee simple unencumbered.  The Court in the Valley Forge decision lays out the roadmap that that the key is to tax all realty uniformly. 

Valley Forge holds that systematic disparate treatment (which is exactly what we have in practice now) between residential and commercial property taxpayers is unconstitutional.  The only way to get one uniform standard in Pennsylvania all realty is to include a definition in the statute that the standard is the same for all realty – fee simple unencumbered.

Sharon F. DiPaolo, Esquire
Siegel Jennings, Co., L.P.A.

American Property Tax Counsel (APTC)

UPDATED December 2017

Pennsylvania Voters Pass Constitutional Amendment Allowing Legislature to Exempt Homes from Property Taxation

On November 7, 2017, Pennsylvania voters approved a constitutional amendment which would allow the Pennsylvania legislature to entirely exempt primary residents from property taxes.  In recent years, there has been a grassroots effort in Pennsylvania to eliminate property taxes, although there has been no credible source of funding proposed to replace property taxes.  If this constitutional amendment were to move forward to legislation, it would mean a transfer of the property tax burden from homeowners (who vote) to commercial property owners (who cannot vote).  But additional steps would be needed for the tax shift to become a reality.

Voters were asked:  “Shall the Pennsylvania Constitution be amended to permit the General Assembly to enact legislation authorizing local taxing authorities to exclude from taxation up to 100 percent of the assessed value of each homestead property within a local taxing jurisdiction, rather than limit the exclusion to one-half of the median assessed value of all homestead property, which is the existing law?” 

But for a tax shift to occur, two things would need to happen:  Pennsylvania’s legislature would have to enact a statute enabling local taxing districts to exempt residential owners.  And, then, local taxing districts would have to enact ordinances or resolutions exemption residential owners from tax.  As a practical matter, the local taxing districts would have to replace the lost revenue.

Sharon F. DiPaolo
Siegel Jennings Co., L.PA.
American Property Tax Counsel (APTC)

UPDATED SEPTEMBER 2017

PA Supreme Court Issues Landmark Ruling Favoring Taxpayers

Widely considered the most important property tax decision in 25 years, on July 5, 2017, the Pennsylvania Supreme Court issued its much-anticipated decision in Valley Forge wherein the Court took up the issue of constitutionally guaranteed uniformity in taxation in the context of school-initiated assessment appeals.  Fittingly, the Court’s decision – which reestablished the primacy of constitutional uniformity protections to taxpayers in the strongest possible language -- issued just one day after the July Fourth holiday.

In Pennsylvania, unlike most states, taxing districts have a statutory right to file annual assessment appeals seeking to increase property owners’ assessments. Because Pennsylvania has no mandatory reassessment cycle – some counties have gone more than fifty (50) years without a reassessment – many schools turn to increase appeals as a way to generate more revenue. When they do, schools frequently target just certain commercial property owners for appeals. The result is that schools’ selective or “spot” appeals disrupt constitutionally-required uniformity in assessment. This violates fundamental fairness and puts targeted commercial owners at a competitive disadvantage with owners of properties whose assessments are not increased. It also shifts more of the tax burden from residential to commercial property owners, since most schools are loathe to sue residential property owners (who vote) to increase their assessments.

In Valley Forge Towers Apts., LP v. Upper Merion Area School District, 135 A.3d 1017, (Pa. Commw. Ct. 2015), the Upper Merion Area School District (“School”) filed increase appeals only against commercial property owners and not against residential owners. The School selected properties for appeal after consultation with Keystone Realty Advisors (a New Jersey-based tax consultant which employs trained appraisers) which takes a 25% contingent fee on any increase in taxes as a result of the appeals. Four apartment building owners (“Taxpayers”) who had been targeted for these appeals challenged the School’s selection of only commercial owners for appeals as violating Pennsylvania’s Constitution which mandates uniformity in taxation. Both the trial court and the first-level appellate court denied Taxpayers’ challenge, holding that the School need only satisfy a “rational basis” test and that the School’s goal of “increasing revenue” justified the selective nature of the appeals.

Taxpayers sought review by the Pennsylvania Supreme Court. The Supreme Court agreed to take the case on the following issue:

[The School District] deliberately chose commercial properties, such as Petitioners’, for selective assessment appeals, but did not appeal assessments of any single-family-home properties, although the latter are significantly underassessed. The Uniformity Clause of the Pennsylvania Constitution prohibits disuniformity in taxation. Is a school district’s decision to appeal property assessment insulated from review because, inter alia, the school district has a statutory right to file appeals and can identify an economic reason for its appeals?

Above all, the Pennsylvania Supreme Court’s decision mandates that all taxpayers must be uniformly treated, whether they are residential or commercial taxpayers.  The Court held that there can be no assessment scheme that systematically treats residential and commercial taxpayers differently.  The Court stated no less than 13 times that all real estate is a single class. In making this point, the Court observed that this constitutional tenet had been in place since 1909, was reaffirmed by the Court on multiple occasions and – emphatically -- “this Court plainly had no intention of discarding it.”  Valley Forge Decision at 23 n. 17.  It follows that the government may not create sub-classifications of property for different tax treatment, a holding which the Court stated 10 times in its decision.

The Court’s decision makes it abundantly clear that all realty must be taxed uniformly and that this Constitutional protection is for the benefit of the taxpayer.  Residential and commercial taxpayers cannot be treated differently.   In the Court’s own words:

“First, all property in a taxing district is a single class, and as a consequence, the Uniformity Clause does not permit the government, including taxing authorities, to treat different property sub-classifications in a disparate manner.  Second, this prohibition applies to any intentional or systematic enforcement of the tax laws and is not limited solely to wrongful conduct.”  Valley Forge Decision at 18 (emphasis added).

The Court then remanded the case for discovery to determine if there was a violation of uniformity.  The discovery process will help to establish the facts either to prove or disprove that there was a systematic disparate treatment of the taxpayers in the Valley Forge case.  It will not be necessary to show that the school intended to treat the taxpayers differently from the other taxpayers.

The principal holding that we can take away from the case is that all taxes must be uniformly assessed and that no purposeful or unintentional systematic assessment that treats taxpayers in a disparate manner is constitutional.

What’s Next?: The Supreme Court’s decision underscores the need for a standard as to how all realty is to be taxed in Pennsylvania regardless as to whether it is residential or commercial.  In current practice, residential and commercial properties are taxed on different standards, thus the need for clarifying definitions in Pennsylvania’s statutes. 

Pennsylvania’s legislature has been taking up the issue of property tax reform in its current session which ends July 7, 2017.  Among other proposals under consideration was a definition to set the standard for valuation as “fee simple unencumbered.”  With Pennsylvania’s budget and financing still under consideration for the current session, it is not expected that legislature will enact property tax reform in the session that ends tomorrow, but we will be watching to for more developments when the legislature returns for the fall session.

The need for a uniform standard is best illustrated by example.

A residential property is valued as follows:  1) Pennsylvania’s case law definition of “actual value” presumes a hypothetical willing buyer and a willing seller even though the actual homeowners are still living in the house.  In other words, the presumption in an assessment appeal is that the homeowners move out and put their house on the open market. 2) The house is, of course, vacant at the time of the hypothetical sale.  It is not being leased.  It is unencumbered.  3) The question asked in the assessment appeal is “what would a hypothetical buyer pay for this house on the open market?”  The taxpayer and the taxing districts may have different opinions as to what the price would be, but both are answering the same question.  “What is the value of the real estate interest unencumbered by any lease or private restrictions?” The same standard – fee simple unencumbered is always sought in residential assessments.

Currently, in Pennsylvania assessment practice, commercial properties are valued differently than residential properties.  If a commercial property is leased, the taxing districts answer not “what would a hypothetical buyer pay for this commercial realty on the open market” but rather, “what would a hypothetical buyer pay for this commercial realty on the open market, encumbered by this lease?” Moreover, because commercial property trades quite often as part of an ongoing business or with long term leases or with deed restrictions or with non-public use restrictions, etc. it is imperative to have a single defined interest to be valued for tax purposes.  And the only interest that is uniform across all categories is the fee simple unencumbered value.  Functionally, residential properties are taxed on a fee simple standard and commercial properties are not.  As Valley Forge makes clear, there can only be one standard because all realty is a single class. 

The only uniform standard for all realty is to be taxed on the basis of fee simple unencumbered.  The Court in the Valley Forge decision lays out the roadmap that that the key is to tax all realty uniformly. 

Valley Forge holds that systematic disparate treatment (which is exactly what we have in practice now) between residential and commercial property taxpayers is unconstitutional.  The only way to get one uniform standard in Pennsylvania all realty is to include a definition in the statute that the standard is the same for all realty – fee simple unencumbered.

To read the decision in its entirety, go to http://www.pacourts.us/assets/opinions/Supreme/out/J-14-2017mo%20-%2010315970920113108.pdf?cb=1

If you have specific questions about this case or how Pennsylvania law applies to your property, please contact Siegel Jennings at:

Sharon F. DiPaolo, Esquire
Siegel Jennings, Co., L.P.A.
American Property Tax Counsel (APTC)

 

UPDATED JULY 2017

Philadelphia PA Increases Commercial Assessments by Fifty Percent

Philadelphia County, Pennsylvania posted new commercial assessments online on April 1, 2017 which – in the aggregate – increase values fifty percent (50%) over the County’s 2014 reassessment figures.

In 2014, Philadelphia conducted a countywide reassessment.  Before that, some of the County’s 580,000 parcels had not been reassessed since the 1980s because Pennsylvania does not have a mandatory reassessment cycle.  The 2014 reassessment was conducted under what Philadelphia called its “Actual Value Initiative.”  One of the tenets of the Actual Value Initiative was that the County would commit to period reassessments.

Following the appeals on the 2014 reassessment, the County’s 60,000 commercial properties had an aggregate assessment of $30.23 Billion.  Based on the preliminary values posted for commercial properties on April 1, 2017, the new aggregate assessment for commercial properties is $45.3 Billion – a fifty percent increase in assessment on commercial properties in only three years.  On these new assessments, the City of Philadelphia and Philadelphia School District will share in $118 Million additional taxes from commercial property owners.  (In contrast, when Philadelphia reassessed its residential properties last year, only 15% of residential properties had an increase in assessment.)  What’s more, unlike every other county in Pennsylvania, in Philadelphia there is no requirement that the reassessment be “revenue neutral” meaning that (absent the appeals that are sure to come) the taxing districts will pocket the $118 Million windfall from commercial property owners. 

 Anecdotally, land values are one reason for the increases.  The 2014 assessment was criticized as undervaluing land and the 2017 values are intended to address land values among other things.  The increase in land assessments disproportionately affects the County’s 15,000 parcels in abatement programs.  Philadelphia has a 10-year 100% abatement of real estate taxes on the improvement component on new construction; for properties in abatement, only land value is taxed.  The reassessment’s increase in land values affected 12,000 of the 15,000 abated parcels.

Formal notices on commercial properties were mailed on April 14, 2017, but the County only issued notices on properties where the assessments have changed.  New assessments take effect for tax year 2018.  Formal appeals are due October 2, 2017. 

Sharon F. DiPaolo, Esquire
Siegel Jennings Co., L.P.A.
American Property Tax Counsel (APTC)

 

UPDATED MARCH 2017

(WESTERN) PA Court Issues Decision Reinforcing Confidentiality of Client Information

Siegel Jennings recently scored a win for taxpayer rights in Pennsylvania in two back-to-back decisions from two separate trial judges in Lehigh County, Pennsylvania.  The judges issued nearly identical decisions requiring that the taxpayer’s confidential business information be kept confidential in real estate assessment appeals filed by local school districts.

Pennsylvania is one of a handful of states in which school districts have an annual right to file assessment appeals seeking to increase its own taxpayers’ assessments.  While it has been fairly common practice for school districts to file appeals chasing recent sale prices, increasingly – especially in eastern Pennsylvania – school districts have been targeting commercial taxpayers with perceived deep pockets and national branding for increase appeals.  Behind this trend is a realty consultant firm from which has been approaching school districts and offering to select cases for districts on a contingent fee basis.

The consulting firm moved into Lehigh County last year and coordinated with a local school district to file 35 increase appeals, then immediately filed discovery of the commercial taxpayers’ leases and other confidential financial information.  The school district refused to sign confidentiality agreements.  Siegel Jennings led the effort to coordinate all property tax counsel in defending against the attack.  Siegel Jennings successfully argued that any information disclosed ought to be held as confidentiality and – critically – ought not to be shared with the behind-the-scenes consultant which has been using such information to build a database, which it then uses to solicit other school districts and uses against the property owner in new appeals.  Essentially, the consultant has been using property owner’s own confidential information to fund its business model and to initiate new litigation against the property owner. 

The 35 cases were divided between two trial judges, who determined that they would coordinate the motions and arguments surrounding the issue of confidentiality so that there was a uniform standard in the county.  Recently, both trial judges issued decisions requiring that information produced be kept confidential and expressly prohibiting the information from being disclosed to the consultant.


Sharon F. DiPaolo, Esquire
Siegel Jennings, Co., L.P.A.
American Property Tax Counsel (APTC)

 

Updated September 2016

PA Supreme Court Accepts Case on Uniformity in Taxation

Pennsylvania’s highest court recently agreed to hear a taxpayer’s uniformity challenge to a school district’s appeal of taxpayer’s assessment. In Valley Forge Apartments N. LP v. Upper Merion Area School District, 124 A.3d 363 (Pa. Commw. Ct. 2015), the school district, working with a consultant, selected certain commercial properties for appeal, including taxpayer’s apartment building, but did not appeal any residential properties.

The taxpayer filed suit against the school district contending the school district’s actions were part of a scheme between the school district and its consultant to generate more tax revenue for the school district which, in turn, would benefit the consultant since it was paid a contingency fee of 25% of any increased revenue it generated for the school district. The taxpayer claimed that the school district’s appeals of solely commercial properties violated the Uniformity Clause. The taxpayer argued, among other things, that the school district intentionally avoided appeals of residential properties because the owners of those properties were voters.

The trial court dismissed the taxpayer’s case. On appeal, Pennsylvania’s appellate court ruled that the school has a statutory right to file appeals and need only have a “rational basis” for its selection of properties for appeals. The appeals court wrote: \"it is easy to envision a rational basis for [the school district] taking these appeals: sufficient increased revenue to justify the costs of appeals. Judicious use of resources to legally increase revenue is a legitimate governmental purpose.\"

Contingent-fee based consultant-recommended school appeals are rampant, particularly in Eastern Pennsylvania and there have been several commercial taxpayer challenges to the constitutionality of these appeals. Pennsylvania’s appellate courts have ruled against taxpayers in every instance. Thus, it is promising news that Pennsylvania’s Supreme Court agreed to hear Valley Forge case. Specifically, the issue the Pennsylvania Supreme certified in Valley Forge is: “The School District] deliberately chose commercial properties, such as Petitioners\', for selective assessment appeals, but did not appeal assessments of any single-family-home properties, although the latter are significantly underassessed. The Uniformity Clause of the Pennsylvania Constitution prohibits disuniformity in taxation. Is a school district\'s decision to appeal property assessment insulated from review because, inter alia, the school district has a statutory right to file appeals and can identify an economic reason for its appeals?”

The case is getting plenty of attention. Amicus briefs were filed in favor of the commercial taxpayers by the Pennsylvania Chamber of Business and Industry, the Pennsylvania Retailer’s Association, the Pennsylvania Manufacturer’s Association, Pennsylvania Economy League, the Pennsylvania Apartment Association and others. Oral argument has not yet been scheduled.

Sharon F. DiPaolo
Siegel Jennings Co., L.P.A.
American Property Tax Counsel (APTC)

 

Updated June 2016

Annual Pennsylvania Appeal Deadline Approaching - August 1, 2016
Watch for New Assessments for Washington County, PA

It is time to get ready for annual appeals in Pennsylvania. Sixty-five (65) of Pennsylvania’s sixty-seven (67) counties have the same appeal deadline: August 1, 2016 for the 2017 tax year. (The deadlines for Philadelphia County is October 4, 2016 and the deadline for Allegheny County is March 31, 2017).

Of special import this year is Washington County, PA which is in the midst of its first revaluation in thirty-five (35) years. Washington County is mailing final notices with new 2017 assessments on July 1, 2017 with the appeal deadline also anticipated for August 1, 2017. Our review of the preliminary 2017 assessment notices reveals that property owners are seeing huge increases in their assessments. Newer office buildings and industrial properties are particularly hard hit.

Sharon F. DiPaolo, Esq.
Siegel Jennings, Co., L.P.A.
American Property Tax Counsel (APTC)

Proposed Bill Seeks to Curb Spot Appeals of Property Assessments

In April, Representative Warren Kampf along with 14 other House members introduced legislation to limit the overwhelming number of spot appeals of property assessments. House Bill 1993 (2015-2106) arises out of the belief that taxing jurisdictions have overused their ability to appeal assessments to a point that they have begun to resemble spot assessments. Spot assessments are expressly prohibited in the state of Pennsylvania by Title 53 Section 8843. Representative Kampf stated that the practice is “unfair to many landowners, homeowners, and businesses.

The bill aims to enact change by prohibiting spot appeals based on the sale of a property. It also prevents appeals arising out of significant improvements to a property if those improvements were in furtherance of safety elements of the property (security alarms, lighting, fire suppression) or if the improvements were required by fair housing or disability laws. Under the proposed bill, spot appeals are only acceptable if filed timely during a countywide reassessment, if the land is subdivided, or if a change has occurred in the productive use of the property. The bill has been referred to the Committee on Urban Affairs and is currently pending a decision. Stay tuned.

Gregory S. Schaffer
Garippa, Lotz & Giannuario
American Property Tax Counsel (APTC)

 

Updated March 2016

Pittsburgh City Council Passes Resolution to File Appeals for Property Owners Seeking Reduction in Assessments

Politics makes strange bedfellows. Pittsburgh’s City Council recently passed legislation mandating its own Director of Finance to draft policies to protect taxpayers from appeals by the City, and even to file appeals on behalf of taxpayers.

In a strange twist, first-term City councilman Dan Gilman recently introduced legislation to limit the City’s ability to file increase appeals and, in some cases, to even direct the City to file appeals to decrease property assessments. The resolution passed and was signed by the Mayor of Pittsburgh on February 23, 2016.

The resolution starts off with two self-limiting provisions. First, the resolution directs the City to cease appealing assessments of properties that sell for at least two years after the sale date. Second, the resolution prohibits the City from using a property’s sale price as the basis for an appeal seeking an assessment increase. These provisions restrict the City from doing what it is permitted to do by Pennsylvania statute: “[A]ny county, city, . . . school district . . which may feel aggrieved by any assessment of any property . . . shall have the right to appeal” an assessment the same as the property’s owner.

The resolution further limits the City to appealing a property’s assessment to once every three years. Pennsylvania’s statute allows taxing authorities to appeal annually

Perhaps most unusual, is the resolution’s requirement directing the City to generate a list of properties whose assessment is 50% greater than their market value and to “appeal values downward on behalf of those owners.” This provision turns current practice on its head. In a taxpayer-initiated appeal seeking an assessment reduction, the City Law Department has historically defended the assessment and fought against reductions. Now, the City will be required to file appeals seeking reductions on behalf of taxpayers.

What happens next is open for debate. Even though the resolution was passed by the Council and enacted by the Mayor, one City Councilwoman on February 22, 2016 introduced new legislation to repeal the resolution. The new proposal has been referred to committee, where it remains. All appeals for properties located in the City of Pittsburgh are due March 31, 2016. Hearings will begin in May and June 2016.

Sharon F. DiPaolo, Esq. Partner
Siegel Jennings, Co., L.P.A.
American Property Tax Counsel (APTC)

 

Updated December 2015

Washington County, Pennsylvania Conducts First Countywide Reassessment in 35 Years

Washington County, Pennsylvania (about an hour south of Pittsburgh) is conducting its first reassessment since 1981; the reassessment will become effective for tax year 2017. Because Pennsylvania does not have a mandate for counties to reassess on a periodic basis, reassessments are most often triggered by litigation. That is the case in Washington County.

What should taxpayer’s expect?

If experience is any predictor, commercial office and industrial properties – especially those located in Southpointe Business Park -- will likely be hit hard. The same outside company that handled Allegheny County’s reassessment is handling Washington County’s reassessment.

There is a tendency to want to put very high values on the commercial buildings. In Pittsburgh, we saw a 71% increase in assessment for commercial buildings in the City of Pittsburgh, and that was with only a ten-year interval between reassessments. Also, there was a huge shift in the tax base in the City of Pittsburgh from more heavily residential to more heavily commercial. Based on our analysis, in the Allegheny County reassessment, the revaluation company used too high rents for their modeling on commercial office and industrial, especially.

What are key dates?

Property owners will be mailed their notices in February 2016. Informal reviews with representatives from the revaluation company will occur in March and April 2016. Next, formal appeals are due September 1, 2016. One trap for the unwary is that in some counties filing an informal appeal does not obviate the need to file a formal appeal. As a precaution, we file both.

The County will set hearings and will try to resolve the appeals before year-end 2016 with the idea that the 2017 bills will be mailed on more correct values. That might be ambitious given that the formal appeal filing date is so late. Of course, a fair percentage of the appeals, especially commercial appeals, will end up at court.

Sharon F. DiPaolo, Esquire
Siegel Jennings Co., L.P.A.
American Property Tax Counsel (APTC)

 

Updated September 2015

Disturbing Trend in PA: Courts Finding Appraisers Not Credible

There is a disturbing trend in recent Pennsylvania decisions where trial courts are finding that one party’s appraiser is not credible as a threshold issue to making a valuation determination. Even worse, Pennsylvania’s Commonwealth Court upheld these credibility determinations in the two recent decisions of Council Rock School District v. Bucks County, No. 826 C.D. 2014 (Pa. Commw. Ct. Jan. 6, 2015) and City of York v. York Wallpaper, 1198 CD 2014 (Pa. Commw. Ct. May 29, 2015). There is no requirement in law that the trial court must find one appraiser credible and one appraiser not credible, in order to select one valuation conclusion over another. But that is exactly what the courts are doing.

In the two cited decisions, both times it was the property owner’s appraiser that was named not credible. Based on the appraisal methodology described in the decisions (and based on first-hand experience with these two appraisers), it appears that not only were the two appraisers’ methodologies grounded in good appraisal practice, it also appears that theirs were the better supported appraisals. By way of illustration, in Council Rock the property at issue was the 52 -acre campus of a Lockheed Martin division located in a suburban setting. The facilities include a 69,000-square-foot office building, a 335,000-square-foot research and development building and a conference center. The property owner’s appraiser, a well-respected MAI with a national expertise in industrial valuation, did not locate comparable sales of corporate campuses in Pennsylvania and, thus, used sales comparables from out-of-state. The property owner’s appraiser concluded a value of $35 Million. The school’s appraiser used sales comparables of high-rise office buildings. Also, the school’s appraiser failed to deduct any functional or external obsolescence in the cost approach. The School’s appraiser concluded to a value of $72 Million. In finding in favor of the school’s valuation conclusion, the trial court first held that the property owner’s appraiser was not credible. Accordingly, in April 2014, the trial court set the fair market value at $72 Million.

The Lockheed Martin facility closed in early 2015. It sold in the summer of 2015. Asking price was $30 Million. The property sold to a user-occupant for $12.5 Million.

Sharon F. DiPaolo
Siegel Jennings
American Property Tax Counsel (APTC)

 

Updated June 2015

August 1 Filing Deadline In Almost All PA Counties

Sixty-five of Pennsylvania’s 67 counties have filing an annual filing deadline that is right around the corner. The deadline is August 1, 2015 for the 2016 tax year, for all Pennsylvania counties except Philadelphia County (October 5, 2015) and Allegheny County (March 31, 2016). Tentative ratios for 2016 just issued last week and ratios are predicted to drop in more than half of the counties, meaning that County fair market values are rising and there are more opportunities for successful appeals this year.

Of note, Indiana and Washington Counties are both preparing for revaluations. Indiana’s reassessment takes effect in 2016 and change notices will be mailed in early July 2015. Washington County’s reassessment is for tax year 2017; notices are expected to go out in February 2016. These counties have been sending letters to property owners requesting information. Property owners should not share financial information with the counties. While the counties’ letters seem to imply that submissions are mandatory by including deadlines, in fact, submissions are purely voluntary.

Sharon F. DiPaolo
Siegel Jennings Co., L.P.A.
American Property Tax Counsel (APTC)

 

Updated March 2015

Appeal Changing Pittsburgh Office Market

Change is on the horizon in the office market in Pittsburgh’s central business district. Pittsburgh’s office market did not suffer as much as other cities during the recession, because the occupancy rate was extraordinarily high. That’s because in 2007 health care giant University of Pittsburgh Medical Center moved from its offices from the Oakland neighborhood to downtown Pittsburgh, taking half a million square feet of the priciest Class A space in the iconic USX Tower. That one move took occupancy into the high 90s where it has stayed ever since. For the last few years sales of office buildings in Pittsburgh have been at record highs.

Now, in 2015, Pittsburgh is experiencing a boom in new construction of office space downtown. With projects already under construction and those that have been announced, Pittsburgh could see 3.5 Million square feet in new office space in the next two to three years. Among these projects are US Steel Corporation’s new 268,000 square foot headquarter building set for 2017 occupancy, Millcraft Industries’ mixed-use Gardens at Market Square which will add 128,000 square feet of office by the end of this year, and PNC’s new 33-story headquarters building scheduled to open in 2015. With new space flooding the market, occupancy and rental rates will be affected throughout the central business district.

Sharon F. DiPaolo, Partner
Siegel Jennings Co., LPA
American Property Tax Counsel (APTC)

 

Updated December 2014

Pittsburgh Property Owners Have Unique Appeal Opportunity in 2015

Pittsburgh property owners have an opportunity to appeal their assessments for a healthy reduction in 2015 due to a change in the county’s ratio. Appeals are due by March 31, 2015.

What changed? Allegheny County, where Pittsburgh is situated, had a countywide reassessment in 2013. At that time, commercial assessments in Pittsburgh’s central business district saw their assessments increase on average by a whopping 71%. Over 100,000 assessment appeals later, most of those assessments appeals have been completed and the properties’ assessments corrected to market value for 2013 and 2014. The applicable ratio for 2013 and 2014 was 100%. For 2015, the applicable ratio is 90.8%, meaning that many property owners will be able to appeal and argue for a 10% reduction in their assessment.

What should I do now? Gather information. If it is an income-producing property, gather your year-end 2014 income and expense statement and January 2015 lease(s) or rent roll. Did the property experience a major change in 2014 – for example, the loss or addition of a major tenant? If it is an owner-occupied property, were there any physical changes in 2014 – additions, demolitions, purchases or sales or excess land? If so, gather the costs for these items. Did you add any properties to your portfolio in 2014? If so, you’ll need to gather copies of the sale documents and any costs associated with getting the property into shape for your needs.

What if I bought in 2014 and paid more than the current assessment? Expect an appeal from the school district in 2015. Under Pennsylvania statutory law, taxing districts have the same right as property owners to file annual challenges to assessments. (Unlike many states, Pennsylvania County assessors cannot automatically raise an assessment to the sale price). Pennsylvania schools aggressively chase sale prices via assessment appeals. You should budget for the increase, but defend vigorously to keep the assessment as low as possible.

Sharon F. DiPaolo
Siegel Jennings
American Property Tax Counsel (APTC)

 

Updated September 2014

Appeals by Taxing Districts on the Rise in Pennsylvania

Pennsylvania property owners (especially those perceived to have deep pockets) are experiencing an unwelcome surprise – appeals by taxing districts to raise their assessments and their taxes.

Under Pennsylvania statutory law, taxing districts have the same right as property owners to file annual challenges to assessments. Usually, it is the school districts that file because they receive the largest piece of the tax pie. And, usually, school-initiated appeals are filed in order to chase a sale price on the property from the prior year. (Unlike many states, Pennsylvania County assessors cannot automatically raise an assessment to the sale price). Those post-sale appeals by districts are still being filed, but in recent years, schools have started filing appeals even without sales.

Faced with cutbacks in state spending on schools, schools are desperate for new sources of revenue without raising taxes. In the last three years, schools have hired on with real estate consultants who select cases for the schools in exchange for a contingent fee on any resulting increase in taxes. The schools and consultants are passing over residential owners and targeting commercial owners for appeals – particularly the largest taxpayers in the County. They do typically do not put on any evidence at the administrative hearing, then file the case to court where they are permitted to take discovery.

The trend started with school districts in eastern Pennsylvania counties surrounding Philadelphia, and, each year, we are seeing more districts sign on moving westward. Property owners are well-advised to vigorously defend, because property owners who are consenting to increases quickly are essentially inviting future appeals from other school districts.

Sharon F. DiPaolo
Siegel Jennings
American Property Tax Counsel (APTC)

 

Updated June 2014

PA Legislature Contemplates Property Tax Reform

In what most are referring to as election-year politicking, the Pennsylvania legislature is once again considering a bill to reform property tax. Entitled the "Property Tax Independence Act," Senate Bill 76 would allow individual school districts to vote to eliminate school property tax and replace it with other forms of taxes. County and borough property taxes would remain unchanged.

For schools that vote to eliminate the property tax, the legislation would allow levying a greatly expanded sales tax and also increasing the earned income tax to unspecified levels. The sales tax would be expanded both in scope and amount. The sales tax would apply to categories of purchases which are now exempt, for example, purchases of necessities such as food and clothing. Currently, the sales tax is 1% and the proposal would raise the sales tax to 7%.

Reading the bill closely, the earned income tax would include "net profits." While most taxpayers equate "earned income tax" with "wage tax", it is clear that the drafters intend to bring business profits within the tax as well. One candidate for the Pennsylvania house says he favors increasing retail and income taxes to fund education.

Missing from the commentary about the proposed legislation are any details as to whether swapping property tax for the other taxes would be financially feasible. At a public hearing in May 2014 – the fourth hearing on the legislation – some participants pointed out that this proposal comes at a time when the state is already dealing with a significant revenue shortfall, in part because income and sales taxes have come in below estimates. Sources close to the legislation say that no financial feasibility analysis has been provided and they give the legislation little chance of success. Reportedly, the Senate may consider the legislation in the current June session, but to date that has not occurred.

Sharon F. DiPaolo
Siegel Jennings
American Property Tax Counsel (APTC)

 

Updated March 2014

Pennsylvania County with Oldest Assessments Values Announces Revaluation

Blair County in Pennsylvania announced in early March 2014 that it will undertake a county-wide revaluation of its assessments to take effect in 2017, at an estimated cost of $3 to $4 Million. Blair County last reassessed in 1958 and had been – until this announcement -- the county in Pennsylvania with the oldest assessed values. Any new structures constructed in Blair County after 1958 had their assessments set in 1958 dollars.

Pennsylvania has no mandated periodic revaluation cycle and no centralized funding for revaluations. When revaluations do occur, they are paid for by the individual counties and taxpayers are often outraged. Accordingly, Pennsylvania’s 67 counties have little incentive to conduct revaluations. Other Pennsylvania counties with imminent revaluations are Indiana County, (2016) and Washington (2017). With Blair County’s announcement, Franklin County will now enjoy the dubious distinction of the county having the oldest assessments. Franklin County last conducted a revaluation in 1961.

Sharon F. DiPaolo
Siegel Jennings
American Property Tax Counsel (APTC)

 

Updated December 2013

New Pittsburgh Property Owners Should Be Alert for 2014 School Appeals

Property owners who bought real estate in Pittsburgh in 2013 should watch their mailboxes in January for appeals filed by the Pittsburgh School District seeking to increase their assessments. Pittsburgh is located in Allegheny County, PA which, for 2013, had a countywide reassessment. Commercial property values – especially in Pittsburgh's Central Business District – were set at egregiously high values during the reassessment project, but most were corrected during the assessment appeal process. The School District underestimated the success rate of commercial appeals and now faces a budget shortfall for next year of more than $10 Million. To make up for the shortfall, the School has vowed to track and appeal all properties in the City with sale prices that exceed their current assessment. Both property owners and taxing districts have the right to file a 2014 assessment challenge. The deadline to do so is March 31, 2014.

Sharon F. DiPaolo
Siegel Jennings
American Property Tax Counsel (APTC)

 

Updated September 2013

Pennsylvania – Legislative Proposals to Revamp Assessment System

It's déjà vu in Pennsylvania as state legislators propose various measures to reform property tax assessment. The state does not have a mandatory reassessment cycle, nor does it provide state-based funding when a court orders a reassessment. The result is a very uneven reassessment pattern with some counties (e.g., Blair County) not reassessing since 1958 and other counties (e.g., Allegheny) having 4 court-ordered reassessments in 12 years.

When reassessments do occur they are so expensive (Allegheny's cost $12 Million; Washington County's next reassessment is estimated at $8 Million) and the increases are so dramatic there is across-the-board outrage from voters and government officials alike. What usually follows is a bevy of tax reform proposals in the legislature which invariably suggesting to 1) eliminate property tax altogether, or 2) shift more of the tax burden to commercial owners
There are two other reasons for the proposals: First, three years ago the legislature passed a law that caps the amount by which school districts can raise taxes each year. Second, the current administration de-funded a lot of the state support for local school districts. So, school districts are looking for new sources of revenue, but do not want to alienate the voters (i.e., the residential property owners).

One pending proposal is the inaccurately named "Property Tax Elimination Act", which would allow the local school districts – without requiring voter approval – to set new taxes which would shift the tax burden primarily to commercial owners. Districts would be able to levy new taxes on either gross profits or sales which, of course, would be borne only by commercial owners. Plus, the act would not necessarily eliminate the current property tax in place because it provides the option for the local school district to just add the new taxes, without eliminating the property tax.

If history is any predictor, these will proposals will get little traction because the likely result would be to drive businesses from the state.

 

Updated June 2013

PA Appeal Deadline Approaching in 65 Counties

The deadline to file 2014 tax appeals in 65 Pennsylvania counties is August 1, 2013. Historically, some counties had a deadline of August 1, while others had a deadline of September 1. A couple of years ago, Pennsylvania changed the law to allow counties to move their deadline up to August 1 with very little notice to the public. Afterwards, several counties have passed under-the-radar deadline changes. Accordingly, we advise property owners to file their appeals by August 1, 2013 to be safe.

That deadline does not apply to Philadelphia and Allegheny Counties, which have their own deadlines. The deadline for 2014 appeals in Philadelphia is October 7, 2013. The deadline for 2014 appeals in Allegheny County will be March 31, 2014.

 

Updated March 2013

Revaluations Are On Their Way

Pennsylvania's two largest counties – Allegheny (where Pittsburgh is located) and Philadelphia are both in the midst of revaluations. Allegheny County completed a revaluation for 2013; the deadline to file appeals is March 31, 2013. Over 100,000 appeals were already filed in Allegheny County for 2013.

Philadelphia County just issued notices with preliminary values for 2014; the deadline to request an informal review meeting to discuss the preliminary values is also March 31, 2013. There will be another opportunity to appeal after final values are certified.
Because Pennsylvania does not mandate periodic revaluation, counties only undertake revaluation when a taxpayer files suit or, more rarely, on the county's own initiative. Washington County, just south of Allegheny, is in on-again off-again litigation to force a reassessment. While Washington County officials have been fighting against a reassessment, the school attorneys who brought the lawsuit were in court last week, suggesting that the Judge could hold the County in contempt for thwarting her Court Order requiring a reassessment. The Washington County Judge has set a conference for June 2013 at which time we anticipate the reassessment date for Washington County will be set.
Across the state, Erie, Lehigh and Lebanon Counties completed reassessments for 2013 without nearly the political upheaval and media attention seen in Pennsylvania's larger counties.

 

Updated December 2012

Revaluations Are On Their Way

Pennsylvania's two largest cities are both in the midst of revaluations – Allegheny County (where Pittsburgh is located) is just completing a revaluation and Philadelphia is just starting one. Because Pennsylvania does not mandate periodic revaluation, counties only undertake revaluation when a taxpayer files suit or, more rarely, on the county's own initiative.

Allegheny County's revaluation takes effect for 2013. 2013 values were set prospectively and 116,000 appeals were filed. Approximately 65% of the appeals have been heard, with the balance expected to be heard through the first quarter of 2013. Taxing districts were granted an extension to January 31, 2013 to set 2013 tax rates. Consequently, with appeals unresolved and tax rates up in the air, many property owners are having difficulty budgeting for 2013 real estate taxes.

Across the state in Philadelphia, officials are gearing up for a revaluation which is scheduled to take effect in 2014. Philadelphia expects to mail preliminary notices in February 2013.

 

Updated March 2012

First Quarter 2012 Revaluation Update in Pennsylvania

Four Pennsylvania Counties are reassessing for tax year 2013:

  • Allegheny County's (Pittsburgh area): Final notices all mailed. Deadline to file appeals is April 2, 2012. Commercial owners are seeing huge spikes in their assessments (71% on average in the central business district) and we have seen increases as high as 300% to 400%.
  • Erie County: Effective for tax year 2013, preliminary notices are being mailed now, with final notices being mailed July 1, 2012. The County's assessment base increased, in the aggregate, by 25%.
  • Lehigh County: Effective for tax year 2013, preliminary notices mailed out, with final notices being mailed July 1, 2012. Deadline to request an informal review extended to March 23, 2012.
  • Lebanon County: Effective for tax year 2013, preliminary notices not yet out. Final notices should be mailed July 1, 2012.

In the pipeline for future reassessments are:

  • Washington County: Originally slated to reassess for 2014, now tied up in appellate litigation.
  • Bedford County: In January 2012 signed contract with revaluation company to conduct reassessment.

Lancaster County: Originally slated to reassess for 2013, now on hold until at least 2017.

 

UPDATED February 2011

Allegheny County Deadlines
February 6, 2012 – Given the ever-changing deadlines to file appeals of new 2013 reassessments in Allegheny County, here is a roundup of where things stand:

Formal v. Informal Appeals
There has been a lot of confusion surrounding these two types of appeals. Very recently, the Judge overseeing the reassessment took the position that the County is not mandated to have informal hearings. The Judge's hands-off approach means the County can handle informal appeals however it wants without supervision.

Timing. Commercial owners should not delay filing their formal appeal, even if the owner is planning to file an informal appeal. It is extremely unlikely that owners will receive outcomes from their informal hearings before it is time to file a formal appeal. Moreover, a commercial owner is unlikely to receive the full outcome it desires at an informal hearing and, even if it does, the taxing district can challenge the reduction by a formal appeal. Finally, many commercial properties will need an appraisal for their formal hearing and the best appraisers are getting booked. For these reasons, we are advising commercial owners to file formal appeals now.

Evidence. Not only are the deadlines different for formal and informal appeals, evidence that will be accepted each is different. Of even greater concern for commercial owners, is that any evidence submitted in an informal hearing will be scanned into the County system and will become a public record. Owners are well-advised to consult with counsel to strategize as to what evidence can and should be submitted.

Deadlines to Appeal New Assessments
Deadlines are different for taxpayers in different parts of the County. The County sent, or will send, notices with new assessments in four separate mailings by municipality. The City and Eastern suburbs will share the same deadlines. The Southern and Northern Suburbs will have a different deadline. You can look up your municipality in the chart here.

 

Updated January 2011

Commercial Owners in Allegheny County Dodge Bullet

Commercial Owners Have a Right to a Board of Assessment Hearing. On Wednesday of this week (January 25) we learned that a draft court order was under consideration in Allegheny County's reassessment case, which would have deprived commercial owners of their right to a hearing before the Board of Assessment Appeals (what the County calls the "formal appeal"). Put simply, if a commercial owner filed an appeal to the Board of Assessment, this order would have allowed taxing districts to unilaterally move the case immediately to the next level (Board of Viewers) without having a hearing at the Board of Assessment. No commercial property owner is a party to the lawsuit.

One of our commercial clients agreed to step forward with us to fight for commercial property owners. By Wednesday evening, we prepared court papers seeking to intervene in the lawsuit. First thing Thursday morning (January 26) we filed a Petition to Intervene and took it before Judge Wettick; it will be heard on February 2. In the meantime, immediately following yesterday's court conference, the lawyers in the case met with Judge Wettick behind closed doors in a working meeting. When the Judge issued an Order late yesterday afternoon, the troubling problem for commercial owners was removed – rather, under the Order, commercial owners (but not taxing districts) will have an option to move their case to the next level if they wish. The language which would have allowed taxing districts to eliminate Board of Assessment hearings for commercial properties was eliminated, we think as a direct result of our raising the issue.

Dearth of Data for Commercial Owners. Commercial owners who have taken a look at their new values – commercial property in the City saw an average increase of 70% -- might be wondering what data the County used to set these new values. Keep wondering. The County says they used sales from 2008 through 2010 and general financial information. But, unlike residential properties, there is no data available to commercial owners as to the specific data the County relied on. Residential property owners can view the County's comparable sales for their properties online; commercial owners can't. Residential owners can go online to view square footage and other building characteristics that the Country tracks for their properties; commercial owners can't. And, while the County does maintain Property Record Cards on commercial properties (available only by going to the County Office Building in person and asking for them), our check of some Property Record Cards this week revealed that information for commercial properties is outdated and ties to the old assessment values. In other words, there is absolutely no data available to commercial owners as to how the County arrived at their new assessment, which places a huge – some might say impossible – burden on the commercial owner to figure out why it is wrong. Part of our request to intervene in the lawsuit is to force the County to provide the same data for commercial owners as it does for residential owners.

Fighting the Good Fight. We still think commercial property owners need a seat at the table to avoid any other "solutions" that deprive commercial owners of their right. We will ask the Judge next Thursday February 2 to allow us to take part in the case.

 

Updated December 2011

First Wave of Allegheny County, PA Revaluation Notices Due By Year-End

Allegheny County (Pittsburgh is the County seat) will start mailing 2012 notices on December 27 (City residential properties) and December 31, 2011 (City commercial properties), with the rest of the County’s 600,000 properties to follow in late spring 2012. Changes to the deadlines occur daily, so even these dates could slip.

After the County repeatedly missed deadlines, the local trial judge took close control of the project. The County has announced at least ten target dates for the mailings, all of which have come and gone. Last Monday, the County said it would start mailing notices on December 19; by Thursday, the County said the 27th.

The outgoing County Executive and the new County Executive – who takes office in January 2012 – continue to actively fight the revaluation order, by filing last week a fourth request to the PA Supreme Court to stop the reassessment. The Supreme Court denied the request. To manage last-minute details of the reassessment, the trial judge issued a schedule of conferences for December 23, 28, 30 and December 31 (a Saturday).

 

Updated September 2011

Revaluation Update in Pennsylvania

Right now, five of Pennsylvania's 67 Counties are undergoing reassessment. Allegheny County is under order from the Supreme Court to revalue every property in the county. Erie and Lebanon Counties are reassessing for 2013. Washington County is in on-again, off-again litigation and currently preparing a 2014 reassessment. Lancaster County just pulled its reassessment for 2013 and will not reassess until 2017, even though millions were spent getting ready and all the preparatory work will have to be redone. Philadelphia County just announced it will reassess for 2013, after an unexpected change in ratio drove up 2012 implied market values more than 50%.

Allegheny County is significantly behind on the revaluation project. The Judge overseeing the reassessment ruled law week: 1) the reassessment will absolutely take effect for 2012 (despite conflicts with deadlines for taxing districts to set tax rates, set budgets and send tax bills), 2) the notices will issue in two phases (first, the City of Pittsburgh, and second, properties outside the City) and, 3) the Judge will hold weekly conferences to manage the pace of the reassessment project.

 

Updated June 2011

Revaluation 2012

For the last decade, most reassessment law in PA has arisen from cases coming out of Allegheny County (Pittsburgh is the county seat). Now is no different. Pennsylvania has no mandated reassessment cycle; reassessments occur only when a taxing authority files a lawsuit forcing the issue. While Allegheny County is undergoing its 4th reassessment in the last ten years, many PA counties have not reassessed in 30 years or more.

Right now, Allegheny County is preparing for the 2012 revaluation. At a conference with the local judge last week, the County reported that it is well underway on preparations, although work on residential properties is outpacing work on commercial properties. Notices with preliminary values will issue on a rolling basis between July and October 2011. The County’s plan also calls for an informal hearing process prior to the values taking effect in January 2012.

Recently, local politicians have been advocating for legislation seeking a moratorium on reassessments until the state legislature mandates that all of Pennsylvania’s 67 Counties reassess. Over the past five years, numerous attempts have been made try to stop the reassessments. Just this month, Allegheny County Council authorized its solicitor to file a request to the PA Supreme Court. A similar motion filed two years ago to the PA Supreme Court was denied. The expectation is that the Allegheny County revaluation will occur on pace.

 

Updated September 2010

Reappraisal Efforts in Allegheny County to Meet Pennsylvania Supreme Court Order

Allegheny County is continuing its efforts to complete the county wide reappraisal scheduled to take effect in 2012. The county is under an order by the Pennsylvania Supreme Court to reappraise the county. The county has thus far completed its sales ratio study and continues to add to their database of sales as the new sales occur.

It is estimated that preliminary values for residential and commercial properties will be complete by April 2011 and that notices will be sent starting as early as July 2011 with a goal of completion by October 2011. After notices are received the county will hold informal hearings between July and November.

What can taxpayers do in preparation for the reassessment? Taxpayers should be ready with evidence to submit at the local hearings and be prepared on larger properties with appraisal evidence. Where the county has established a particularly low value taxpayers should also prepare to defend against unwanted appeals coming from the school district.

 

Updated June 2009

Fee Simple and Leased Fee

The Commonwealth Court of Pennsylvania has recently decided Tech one Associates v. Bd of Property Assmnt and Rev. of Allegheny Cnty..No. 103 C.D. 2008 (June 1, 2009). In Tech One, the court stated that "fee simple, a fee simple determinable, a leasehold interest, or month to month lease are irrelevant." The Court went to state that the Pennsylvania Supreme Court did not recognize "that leased property and non-leased property could be treated differently for real estate tax purposes" Further interpreting the Supreme Court in Maple Springfield, regarding uniformity stating that "a tax must be applied upon similar kinds of property with substantial equality of the tax burden on all members of the class."

What does all of this mean? According to the dissenting opinion the court is requiring both the lease fee and the leasehold to be valued. Because the fee simple interest is the combination of both leased fee and the leasehold interests in the property; the state of Pennsylvania may require a fee simple approach to valuation. Although not startling to many taxpayers outside of Pennsylvania, this is a departure from nearly 17 years of leased fee decisions. Finally, it should be noted that the decision indicates that Marple Springfield is still good law. The case may not be final as the tax payer may have taken an appeal to the Supreme Court.

 

Updated September 2008

Pennsylvania Courts Review Reappraisal System

Pittsburgh, Pa played host to the Pennsylvania Supreme Court this September. The issue brought to the Court by Clifton et al, and Pierce v. Allegheny County was whether the state law that permits a county to establish a base tax year is unconstitutional. Currently state law permits the County to establish a base tax year. In 2005 Allegheny County decided to ignore the reassessment and use 2002, the date of the last reassessment as a base year. A great number of the counties in Pennsylvania use base years. The result of the base year is that counties do not have regular reassessments; and they rely on a sales ratio study to create perceived uniformity.

A ruling against the use of base years will likely create some short term drastic changes to the tax system in Pennsylvania and a flood of reassessments.

Also of interest is the Tech One case which is pending in the Commonwealth Court. The Tech One case challenges yet another ruling that is peculiar to Pennsylvania. The case seeks to overturn a 15 year old practice of utilizing long-term contract rents to establish market value. As that case develops APTC will keep you posted.

 

Updated September 2007

Contract v. Market Rent Will Pa continue to have two versions of Market Value

At present a case in Allegheny County is challenging the long held Pennsylvania standard of using contract rather than market rents to value property. The current system creates an unintended uniformity problem. Currently two theoretical properties can be assessed at drastically different values. The first property is occupied by a net lease tenant enjoying a long-term below market lease. Under present law that tenant should be taxed based on the value attributed to the lease payments.

The second property is owned by a competitor however the competing company owns the property rather than leasing. The current law provides that the owner of real estate be assessed based fair market value. And therefore market rents and market sales of like property would be used to establish value.

This system would have then two competing companies taxed at different amounts interestingly enough the company that enjoys the below market rents would also be taxed at a lower amount. As developments in this matter progresses APTC member firms can help you to plan or fight excessive taxation.