pa property tax reassessment reform task force reports
DESCRIPTION
Final Reports of the House Resolution 343 and 344 Task Force on Property Valuation and Reassessment ReformTRANSCRIPT
Final Report of the House Resolution 343 Task Force on
Property Valuation and Reassessment
Date: April 10, 2012
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Table of Contents
Acknowledgments ...................................................................................................................................................... 3
Introduction ................................................................................................................................................................. 3
Background.................................................................................................................................................................. 5
Topics of Study ........................................................................................................................................................... 7
Develop a Set of Uniform Standards for County Reassessment Contracting ................................................ 7
Recommendations.............................................................................................................................................. 9
Develop Standards for Disclosing the County's System of Property Valuation and Assessment .............. 9
Recommendation ............................................................................................................................................... 9
Develop a Self-evaluation Tool for Counties to Determine when a Reassessment is Warranted ............... 9
Recommendation ............................................................................................................................................. 10
Recommend a Standard to be Used for a Statewide Mandatory Reassessment Time Frame ................... 10
Recommendation ............................................................................................................................................. 11
Present any other Recommendations to Improve the System of Property Tax Reassessment in this
Commonwealth .................................................................................................................................................... 11
Recommendation ............................................................................................................................................. 12
Conclusion ................................................................................................................................................................. 12
Appendices ................................................................................................................................................................ 13
A. House Resolution 343 .................................................................................................................................... 14
B. Relevant Legislation ....................................................................................................................................... 20
House Bill 1463 ................................................................................................................................................. 21
House Bill 1465 ................................................................................................................................................. 24
House Bill 1696 ................................................................................................................................................. 27
House Bill 1712 ................................................................................................................................................. 30
House Bill 84 ..................................................................................................................................................... 32
House Bill 2137 ................................................................................................................................................. 34
Senate Bill 1439 ................................................................................................................................................. 37
C. Comments ......................................................................................................................................................... 45
State Representative Jesse White ................................................................................................................... 46
Pennsylvania School Boards Association ..................................................................................................... 47
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Acknowledgments The members of Task Force would like to thank the following agencies and individuals for their assistance in this endeavor: The staff of the Local Government Commission with special thanks to Danette Hobbs Magee for their expertise and effort in helping us to reach our goal. The staff of the Legislative Budget and Finance Committee with special thanks to Maryann Nardone for their expertise and efforts in helping us to reach our goal.
Introduction The Pennsylvania House of Representatives adopted House Resolution 343 on June 27, 2011, by a vote of 199-0. This Resolution created a Task Force to study Pennsylvania’s current property valuation and reassessment process and to address the following issues:
Develop a set of uniform standards for county reassessment contracting;
Develop standards for disclosing the county's system of property valuation and assessment;
Develop a self-evaluation tool for counties to determine when a reassessment is warranted;
Recommend a standard to be used for a Statewide mandatory reassessment time frame; and
Present any other recommendations to improve the system of property tax reassessment in this Commonwealth.
The Resolution established the membership of the Task Force and was comprised of the following members:
State Representative Chris Ross, as a member of the Local Government Commission.
State Representative Steve Santarsiero, as a member of the Local Government Commission.
State Representative Jesse White.
State Representative Rick Saccone.
Charles “JR” Hardester, CPE, Chief Assessor, Lawrence County, representing the Assessors’ Association of Pennsylvania.
Randy Waggoner, CPE, Chief Assessor, Perry County, representing the Assessors’ Association of Pennsylvania.
James A. Hercik, CPE, Chief Assessor, Fayette County, representing the County Commissioners Association of Pennsylvania.
Joan Righter Price, Esq., Solicitor, Montgomery County Board of Assessment Appeals, representing the County Commissioners Association of Pennsylvania.
Alan Shuckrow, School Director, North Allegheny School District, representing the Pennsylvania School Boards Association.
Robert Junker, representing the Pennsylvania School Boards Association.
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Also present at Task Force meetings were Renee Reynolds, Executive Director of the State Tax Equalization Board (STEB) and Greg Skotnicki, Assistant Director, Pennsylvania Department of Revenue, Bureau of Corporation Taxes. The staff to the Task Force began its work of compiling relevant materials and visiting counties in order to better understand how county assessment offices operate. The staff reviewed existing standards in other states as well as the standards published by the International Association of Assessing Officers (IAAO). The staff also relied heavily upon the work that was already underway by the Assessors’ Association of Pennsylvania’s Assessment Law Committee. This committee is working on a list of desired reforms relating to property valuation and reassessment, as well as issues pertinent to data collected and generated by the STEB. The committee is represented by members of Assessors’ Association of Pennsylvania, County Commissioners Association of Pennsylvania, and staff of the Local Government Commission and the Legislative Budget and Finance Committee. The Task Force organized and selected Representative Jerry Knowles as the Chair of the HR 343 and HR 344 Task Forces and immediately began to address the issues stated within the Resolutions. Several meetings were convened to gather input from the various groups involved in the assessment process. The Task Force exchanged many ideas, suggestions and recommendations on issues regarding the real estate assessment process in Pennsylvania. This Task Force worked in conjunction with the House Resolution 344 Task Force which was tasked to study certain aspects of the STEB. As the combined Task Force discussed the issues and possible solutions they were charged with by the Resolutions, concerns and questions surrounding the current data that the STEB generates continually surfaced. These concerns and issues will be discussed in more detail in the HR 344 Task Force report. However, they deserve a mention in this report since many of the issues and solutions addressed here rely upon accurate and reliable data collection and computation. Many members of the Task Force believe that the STEB data is inadequate and inaccurate and should not be used as a statistical tool to determine if a county needs to conduct a reassessment. The STEB data has come under much scrutiny and evaluation and many problems have been identified. For instance, the Auditor General of Pennsylvania released the Special Performance Audit of the Pennsylvania State Tax Equalization Board: Certification of Market Values, in February 2011. This report raises many questions as to the practices and operations of the STEB. Furthermore, the Legislative Budget and Finance Committee’s report, Pennsylvania’s System for Property Valuation and Reassessment (issued pursuant to HR 334 of 2009) raised statistical and analytical concerns with the STEB data, as well uncovering other problems relating to the agency’s computer system. Renee Reynolds, Executive Director, for STEB and Mr. Guydish pointed out that many of the statistical shortcomings and other concerns that have been raised are a result of a lack of resources and staff due to budget cuts. Until these issues of concern are corrected the data produced by STEB should not be utilized to determine any calculations regarding reassessments in this Commonwealth.
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Background The property tax is the only tax that can be levied by all local governments. School districts, counties, cities, townships, boroughs and incorporated towns all have the ability to impose this tax. Historically, the property tax has been the main source of revenue for school districts and counties in Pennsylvania. Municipalities also receive a significant portion of their revenue from the property tax. In 2010, the General Assembly passed the Consolidated County Assessment Law,1 Act 93 of 2010. The Assessors’ Association of Pennsylvania – an affiliate of the County Commissioners Association of Pennsylvania – formed an Assessment Reform Committee in 2001. The Assessors’ Association of Pennsylvania charged the committee with creating a legislative proposal that would consolidate the current assessment laws, pertaining to counties of the second class A through the eighth class, into one new uniform assessment law. The 12-member committee was made up of a wide array of real estate assessment personnel (assessors and administrators) from various counties throughout the Commonwealth. Two staff persons from the Local Government Commission were appointed as the legislative staff to serve on the committee. Due to the technical nature of the work involved with consolidating the various assessment laws, a small subcommittee, including Commission staff, took on the tasks of preparing the initial draft of the consolidated assessment law and a section-by-section commentary of the legislation. Staff also prepared the disposition and derivation tables. CCAP requested that the members of the Local Government Commission sponsor the final legislative proposal, which was eventually signed into law as Act 93 of 2010.2 Counties have the statutory responsibility to maintain the property tax assessment rolls within each county. Each county assessment office is responsible for valuing property and annually revising the property tax roll. With the exception of Philadelphia County, each county has an appointed Chief Assessor who must be certified by the State Board of Real Estate Appraisers as a Certified Pennsylvania Evaluator. The Chief Assessor is responsible for certifying the values on all real property within the county. A county is required to use the same approach to value real property. That is, in Pennsylvania, counties can choose whether to use a “base year”3 value or a “current market” value to arrive at an assessed value. Section 8842(a), (b) of the Consolidated County Assessment Law states:
. . . In arriving at actual value, the county may utilize the current market value or it may adopt a base-year market value. . . . (i) In arriving at actual value, the price at which any property may actually have been sold, either in the base year or in the current taxable year, shall be considered but shall not be controlling. (ii) The selling price shall be subject to revision by increase or decrease to accomplish equalization with other similar property within the county . . . .
1 Title 53 of the Pennsylvania Consolidated Statutes (Municipalities Generally) at Section 8801 et seq. 2 Local Government Commission, “The Consolidated County Assessment Law.”
<(http://www.lgc.state.pa.us/ccal.shtml)> December 27, 2011. 3 “The year upon which real property market values are based for the most recent countywide revision of assessment
of real property or other prior year upon which the market value of all real property of the county is based for assessment purposes. Real property market values shall be equalized within the county and any changes by the board shall be expressed in terms of base-year values.” 53 Pa.C.S. §8802.
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Three approaches to value must be considered in conjunction with one another: cost (reproduction or replacement, as applicable, less depreciation and all forms of obsolescence), comparable sales, and income. Pennsylvania has a constitutional requirement for uniformity of taxation.4 A uniform assessment rate means that all properties in the county, whether residential, commercial, or industrial, should be assessed at a common level of assessment. The main tool at the disposal of a county to correct overall property market changes is a countywide reassessment. The process of conducting a countywide reassessment is a daunting task, especially for those counties that have not recently conducted a reassessment. There is a huge disparity in the length of time a county goes between reassessments. Some counties have gone through a reassessment on a regular basis and have just recently finalized this process. However, there are counties that have not undertaken a reassessment in the past 20 years. The reasons for not undertaking a reassessment are varied; however, a major concern of many counties is the cost associated with such an endeavor. As such, counties have relied on using a “base year”, which is essentially the year of their last reassessment, to set the value of their properties. When property is no longer uniformly valued and assessed, a county risks violating the Uniformity Clause of the Pennsylvania Constitution. This can been seen in the 2009 Pennsylvania Supreme Court decision in Clifton v Allegheny County,5 where the court determined that the use of an “outdated” base year assessment to establish the tax liability for a property violates the Uniformity Clause of the Pennsylvania Constitution. The court did point out that a base year assessment is not a direct violation of the Pennsylvania Constitution’s Uniformity Clause and a county could utilize a base year method for a period of time without being in violation of the Pennsylvania Constitution. However, as market values change over time counties run the risk of violating the Uniformity Clause if their base year values are not adjusted for market changes. The Supreme Court concluded the Clifton opinion by recognizing that it was not the court’s charge to determine what may be the best system of property assessment or to fix a point in time that triggered the need for a reassessment. Instead, the Court noted that that “the General Assembly is the appropriate place in the first instance to fashion a more comprehensive and soundly constitutional scheme.” The Court observed that Pennsylvania is the only state where legislation allows the use of a base year indefinitely, and the General Assembly has the experience of all other states as well as the IAAO standards to establish a uniform assessment system. The Court resisted suggestions that it act in the place of the General Assembly, but did make clear that “there may very well come a time when this Court will be obligated to fill a legislative void in this area,” and that “it is today’s decision that provides notice to the General Assembly to make any necessary amendments to the Commonwealth’s property assessment laws so as to ensure their constitutionality when applied in various counties.” In order to address this issue, as well as others that counties face regarding reassessments, the Pennsylvania House of Representatives passed House Resolution 343 and formed a task force to address various topics mentioned earlier in this report.
4 “All taxes shall be uniform, upon the same class of subjects, within the territorial limits of the authority levying the
tax, and shall be levied and collected under general laws.” Pa. Const. Art. VIII, § 1. 5 Clifton v Allegheny County, 600 Pa. 662, 969 A.2d 1197 (2009).
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Topics of Study The Resolution delineated the areas in which the Task Force was to study and provide recommendations. They include, develop a set of uniform standards for county reassessment contracting; develop standards for disclosing the county’s system of property valuation and assessment; develop a self-evaluation tool for counties to determine when a reassessment is warranted; recommend a standard to be used for a Statewide mandatory reassessment time frame; and present any other recommendations to improve the system of property tax reassessment in this Commonwealth. This section will now address each individual topic by summarizing major issues and points raised by the Task Force members and provide recommendations for each issue.
Develop a Set of Uniform Standards for County Reassessment Contracting It has been recommended by several studies since the 1970s that counties could be better prepared to develop contracts with appraisal firms for countywide reassessments.6 The HR 343 Resolution asked the Task Force to develop a set of uniform standards for county reassessment contracting. The Task Force reviewed other state laws as well as the IAAO Standards on Contracting. The Task Force discussed this issue in much detail. The consensus opinion reached by the Task Force included the need for a “model” contract that would help counties when drafting their contracts. It was suggested that several items should also be included in the contract, in addition to other provisions that would protect the counties and the taxpayers. The Task Force also discussed the Legislative Budget and Finance Committee’s work on this issue. The Legislative Budget and Finance Committee recommended that the Local Government Commission and the Assessors’ Association of Pennsylvania, form a group to review specific standards in other states, develop and recommend a uniform set of standards to counties to use when contracting with private appraisal firms for reassessments.”7 This process had begun before the Task Force was formed and during discussions it was apparent that this process should continue in order to form a thorough and all-inclusive list of standards. The Legislative Budget and Finance Committee recommended that these standards include the following:
Conflict of interest prohibitions.
Bidding requirements, including the unbundling of hardware and software contracting from other reassessment components.
To find “actual value” of a property must consider using all three methods (cost, comparable sales and income approaches) in conjunction with one another to arrive at the value for an individual property.
Require those familiar with local property markets to designate neighborhoods for mass appraisal models.
6 Pennsylvania’s System for Property Valuation and Reassessment, Legislative Budget and Finance Committee, July
2010, Page S-23. 7 Pennsylvania’s System for Property Valuation and Reassessment, Page S-23.
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Public disclosure of the cost tables and methods used to value property by property type.
Require use of valid and sufficient data to arrive at changes in value.
Require ratio studies pre and post-implementation of new assessed values to test the level of assessment, uniformity and equity results of a mass appraisal.
Provide for the transferability of databases for subsequent use by the county.
Payment withholding provisions related to independent review of performance measures.
Through discussions of Task Force members, several of the above points were highlighted as necessary for inclusion in a model contract. The issue of unbundling hardware and software contracting was pointed to as being important to ensure that counties can retain the rights to the collected data, then used for future purposes and transferred into other databases. Such requirements are important for counties and property holders. When, for example, contracts do not “unbundle” computer hardware and software, counties may find themselves in the position of having to continue a contract with a vendor that has not performed to the county’s satisfaction. Alternatively, the county may be faced with having to expend scarce tax dollars to contract with a new vendor for new hardware and software for a new mass appraisal system. In order for counties and the public to be aware of how these calculations are reached, disclosure of cost tables and methods used to value property by the contractors is important and must remain open to public scrutiny. Without requirements for public disclosure of the methods used to arrive at values, property holders, and public officials, are unable to determine how a property’s value was derived by the contractor, and public confidence in the reassessment is undermined. To ensure that accurate data is being provided to the State, counties must be able to know how an end result is reached. They must also ensure that raw data collected within the county is being compiled and manipulated in the same manner within each property type. The Task Force discussed how the requirement to conduct pre- and post-implementation ratio studies in order to test the level of assessment, uniformity and equity, is important in proving that the reassessment performed reached a certain statistical goal. This third-party ratio study would provide counties with a mechanism to judge the effectiveness of the revaluation and determine whether the contractor met the required goals spelled out in the contract. The IAAO develops Standards on Contracting for Assessment Services which are very comprehensive. The IAAO standards contain items that should be included in the contract, such as a detailed description of the work to be performed; the time frame, delivery date and other requirements of the project; performance standards; testing standards and procedures; and payment provisions.8 It was also discussed that there is a need for criteria, qualifications and training that is necessary for data collectors and to include these best practices or guidelines in the contract. It was felt that by requiring this of the initial data collectors the data being collected would become more consistent and comparable to other counties. This would go a long way in helping to make this data more reliable and equitable for the Commonwealth and the political subdivision’s purposes.
8 Standard on Contracting for Assessment Services, International Association of Assessing Officers, Approved
February 2002 and revised December 2008, Page 7.
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Recommendations The Task Force recommends that its members continue to work with the Local Government Committee and Finance Committee of the House of Representatives as a work group to further refine the necessary components for contracting standards in order to develop a model contract or suggested RFP standards that counties can utilize. This includes developing criteria, qualifications and training necessary for data collectors. This working group should consider recommendations contained in the Legislative Budget and Finance Committee Report,9 provisions contained in the IAAO’s Standards on Contracting for Assessment Services and procedures, and policies of other states.
Develop Standards for Disclosing the County's System of Property
Valuation and Assessment As is the case with many issues the Task Force was asked to study, this issue overlaps other areas of study. Public disclosure of the cost tables and methods used to value property by the contractors was discussed in the previous section of this report. However, it should be further pointed out, as the Legislative Budget and Finance Committee did in their report10 that it is also important for counties to disclose how they arrive at fair market value by specifying whether they are using a “current market value” or “base year value.” In order for a county to be able to do this, it must know how the contractor conducting the reassessment arrived at the values; therefore, it is important that this information be disclosed by the contractor to the county.
Recommendation The Task Force recommends that members of the Task Force continue to work with the Local Government Committee and Finance Committee of the House of Representatives as a work group to further develop a standard for disclosing the county’s system of property value and assessment.
Develop a Self-evaluation Tool for Counties to Determine when a
Reassessment is Warranted
One of the biggest issues facing counties is how to determine when they should undergo a countywide reassessment. This differs from county to county based on many factors and is why it is important to provide counties with a method for evaluating current assessment levels and to determine whether a reassessment is warranted. As discussed earlier in this report, the STEB data has come under much scrutiny and evaluation and many problems have been identified. The Task Force members then looked to other means by which counties could evaluate the need for a reassessment.
9 Pennsylvania’s System for Property Valuation and Reassessment, Page S-23. 10 Pennsylvania’s System for Property Valuation and Reassessment, Page S-24.
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Several options were discussed and one issue that seemed to garner support by the members of the Task Force was that counties should use ratio studies to determine the present status of a county’s current assessment rolls. The use of a stratified ratio seemed to garner the most support among the Task Force members. It was pointed out by members of the Assessors’ Association of Pennsylvania that the Pennsylvania Supreme Court has ruled in Keebler Co. v The Board of Revision of Taxes of Philadelphia,11 that a stratified ratio could be used by counties. Further discussion revolved around refining the use of a stratified ratio as a trigger to signal a need for a reassessment. It was suggested that simply relying on one statistical number to trigger a reassessment may not give an adequate view of where a county stands in relation to the need for a reassessment. Members pointed out that since counties have different property inventories and makeup, it may make sense to take a closer look at stratified ratios and the ratios of each property type within the county. It was also discussed that by utilizing a stratified ratio by property type each strata could be examined. When one of the ratios within a certain property type widens beyond a statistically accepted number then a county could simply conduct a reassessment of that particular property type. However, since the courts have historically ruled that all property must be considered as one class, this may be a violation of the Uniformity Clause in the Pennsylvania Constitution. The Task Force raised several viable options, but did not reach a final conclusion on which standard should be met to signal a need for a county to reassess.
Recommendation The Task Force recommends that its members continue to work with the Local Government Committee and Finance Committee of the House of Representatives as a work group to further develop a standard to signal a need for a county to reassess.
Recommend a Standard to be Used for a Statewide Mandatory
Reassessment Time Frame
The Task Force was asked to recommend a standard to be used for a statewide mandatory reassessment time frame. This issue is very closely related with the issue of a self-evaluation tool for counties. As discussions progressed, it was clear that a solution to this, as well as the issue of developing a self-evaluation tool for counties, should be considered together since they are so closely related.
As was mentioned in the previous section, many different factors affect when a county would need to enter into a countywide reassessment. Each factor considered affects each county in different ways. Utilizing a mandatory time frame as a statewide standard is problematic due to each county’s differing property inventories, geography and economic conditions.
11 Keebler Company v The Board of Revision of Taxes of Philadelphia, 496 Pa. 140, 436 A.2d 583 (1981).
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The Task Force discussed which statistical trigger should be utilized to determine the need for a reassessment. As was the case in the previous section, the use of a stratified ratio came to the forefront of discussion. It was suggested that counties could conduct ratio studies stratified by each property type within the county to get a complete picture of market values within that county. This would provide a much more complete view of where a county stands in relation to assessed values and actual value of property located within the county. Task Force members stressed that the use of any statistical trigger, including the results of a stratified ratio study, should not be utilized until data becomes more consistent and reliable.
Recommendation The Task Force recommends that its members continue to work with the Local Government Committee and Finance Committee of the House of Representatives as a work group to further develop a standard to be used for a statewide mandatory reassessment time frame.
Present any other Recommendations to Improve the System of Property
Tax Reassessment in this Commonwealth During the course of discussions and reviewing other studies conducted on this issue, the Task Force proposed additional recommendations. Representative Chris Ross pointed out that the current system by which different methods of calculating assessed values between the initial assessment and the appeal proceedings, cause an inherent inequity and should be addressed. When the issue of reassessments is discussed, the matter of costs associated with such an endeavor should always be a concern of policymakers. The Legislative Budget and Finance Committee Report stated that in order to provide ongoing financial support for local property valuation and assessment duties of the counties other local government units and school districts should bear some responsibility and provide some funding.12 Further, the LBFC report also stated that the Legislature should consider designating a percentage of the realty transfer taxes for this purpose.13 The County Commissioners Association of Pennsylvania also supports using a portion of the Realty Transfer Tax for this purpose. Representative Jesse White suggested that as the General Assembly deals with these issues, any solutions adopted should ensure that school districts do not exceed the statutory limitations on revenue windfall from property taxation.14 Recognizing the inconsistent or incomplete data that currently exists partially due to variations in the county property record cards, the Task Force discussed the need for a uniform property record card to be used by all counties of the Commonwealth. A uniform property record card with standard definitions and codes will help to create greater consistency for counties during
12 Pennsylvania’s System for Property Valuation and Reassessment, Pages S-27 and S-28. 13 Pennsylvania’s System for Property Valuation and Reassessment, Page S-28. 14 Section 327 of Act 1, Special Session 1, of 2006 sets forth anti-windfall provisions for school districts following a
countywide reassessment.
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the assessment process. The availability of more reliable data will provide a better and more accurate comparison of property values throughout the Commonwealth.
Recommendation The Task Force recommends that the General Assembly keep the issue and suggestion included in this section, in mind when considering solutions to the problems associated with the Commonwealths property tax reassessment structure. The Task Force further recommends that the House of Representatives develop legislation amending the various assessment laws to provide for a uniform property record card which would include standard definitions and codes.
Conclusion It became clear that the issues the Task Force was working on were complex and intertwined. Often, the solution to one issue was affected by how one or more of the other issues were being handled. Although the Task Force was not able to offer many specific recommendations, it was able to narrow the issues to a point that will help guide future actions on these issues. The six-month time frame did not allow a more in depth study of these very complicated issues; thus, was a driving factor in moving the Task Force toward their recommendation to continue to work as a working group with the House Local Government and Finance Committees. Task Force members encourage these legislative committees to continue to work on these issues, and further refine the solutions and recommendations discussed in this report. Members of the Task Force have expressed to both Chairs of the House Local Government and Finance Committee their willingness to continue on in this working group capacity. It is the hope of Task Force members that this work group, in association with the committees, can produce several viable options in the months remaining in the current legislative session. Chairmen Tom Creighton and Robert Freeman have expressed their support for utilizing the House Local Government Committee to advance any legislative solutions and will continue to work with members of the Task Force and the House Finance Committee, in hopes of reaching a solution on many of these matters.
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Appendices
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A. House Resolution 343
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PRINTER'S NO. 2145
THE GENERAL ASSEMBLY OF PENNSYLVANIA
HOUSE RESOLUTION
No. 343 Session of 2011
INTRODUCED BY WHITE, SACCONE AND NEUMAN, JUNE 21, 2011
REFERRED TO COMMITTEE ON LOCAL GOVERNMENT, JUNE 21, 2011
A RESOLUTION Establishing a task force to develop a set of uniform standards
for county reassessment contracting, develop standards for disclosing the county's system of property valuation and assessment, develop a self-evaluation tool for counties to determine when a reassessment is warranted and recommend a standard to be used for a Statewide mandatory reassessment time frame.
WHEREAS, At the direction of the House of Representatives,
through House Resolution No. 334 of 2009, the Legislative Budget
and Finance Committee (LBFC) prepared a report on Pennsylvania's
System for Property Valuation and Reassessment and issued it in
2010; and
WHEREAS, The report includes a number of recommendations to
enhance the current system, including the development of uniform
standards for reassessment contracts, standards for disclosing a
county's system of property valuation and assessment and a self-
evaluation tool to help counties determine the need for
reassessment; and
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WHEREAS, According to the LBFC report, concerns have been
raised about the quality of reassessments since the 1970s, when
the former Department of Justice and researchers from Carnegie
Mellon University concluded that counties were ill-prepared to
develop contracts with mass appraisal firms for countywide
reassessments; and
WHEREAS, According to the LBFC report, transparent systems
for property valuation and assessment are necessary in this
Commonwealth; and
WHEREAS, Each county in this Commonwealth can choose the type
of property valuation and assessment system to be implemented in
the county, and a county can decide to assess on a "current
market" basis or a "base year" basis, select the percent of fair
market value to be assessed for tax purposes and select the
criteria to be used to decide when to revalue all properties, in
other words, to reassess; and
WHEREAS, In the 1980s, the General Assembly required counties
to specify their predetermined ratios of market value to be
assessed for tax purposes; and
WHEREAS, A county, however, is not required to inform
taxpayers if it arrives at fair market values on a current
market basis or a base year basis, or to routinely make
available to the public the methods used to arrive at fair
market values when the county reassesses or values property
after the reassessment; and
WHEREAS, According to the LBFC report, with Pennsylvania's
current system for property valuation and assessment, uniformity
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does not require that assessments be in current market dollars,
however, the system requires that uniform methods be used to
derive market values for similar properties and that the same
portion of fair market value in base year dollars be the basis
of the assessment; and
WHEREAS, When most property in a county appreciates or
depreciates at relatively the same rate and the county's
property inventory does not undergo significant changes that
alter the relative distribution of the tax burden, reassessment
does not provide greater uniformity, rather, it simply results
in the expression of market values and assessed values in
current market dollars rather than the value of a dollar in the
prior base year; therefore be it
RESOLVED, That the House of Representatives appoint a task
force to develop a set of uniform standards for county
reassessment contracting, develop standards for disclosing the
county's system of property valuation and assessment, develop a
self-evaluation tool for counties to determine when a
reassessment is warranted and recommend a standard to be used
for a Statewide mandatory reassessment time frame; and be it
further
RESOLVED, That the membership of the task force be made up
of:
(1) two representatives from the Pennsylvania Local
Government Commission appointed by the Speaker of the House
of Representatives from a list comprised of members of the
House of Representatives appointed to the commission, one
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each representing the majority and minority representation on
the commission;
(2) two members of the House of Representatives or their
designees, one appointed by the Majority Leader and one
appointed by the Minority Leader; and
(3) two appointees from each of the memberships listed
in this paragraph from a list submitted by each membership,
one appointed by the Majority Leader and one appointed by the
Minority Leader:
(i) the Assessors' Association of Pennsylvania;
(ii) the County Commissioners Association of
Pennsylvania; and
(iii) the Pennsylvania School Boards Association;
and be it further
RESOLVED, That the task force utilize the staff of the Local
Government Committee and the Finance Committee in consultation
with and assistance from the Local Government Commission and the
Legislative Budget and Finance Committee; and be it further
RESOLVED, That the task force be charged with the following:
(1) develop a set of uniform standards for county
reassessment contracting;
(2) develop standards for disclosing the county's system
of property valuation and assessment;
(3) develop a self-evaluation tool for counties to
determine when a reassessment is warranted;
(4) recommend a standard to be used for a Statewide
mandatory reassessment time frame; and
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(5) present any other recommendations to improve the
system of property tax reassessment in this Commonwealth;
and be it further
RESOLVED, That the task force report its results and present
its findings to the Chief Clerk of the House of Representatives
no later than six months after the adoption of this resolution.
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B. Relevant Legislation
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House Bill 1463: Creates a training program for Assessors.
PRINTER'S NO. 2017
THE GENERAL ASSEMBLY OF PENNSYLVANIA
HOUSE BILL
No. 1463 Session of 2011
INTRODUCED BY NEUMAN, JUNE 6, 2011
REFERRED TO COMMITTEE ON PROFESSIONAL LICENSURE, JUNE 6, 2011
AN ACT Amending the act of April 16, 1992 (P.L.155, No.28), entitled
"An act providing for the certification and recertification of assessors; establishing eligibility and training requirements; defining the powers and duties of the State Board of Certified Real Estate Appraisers relating to training, certification and recertification of assessors; and authorizing the board to establish fees," further providing for duties of board and for qualifications.
The General Assembly of the Commonwealth of Pennsylvania
hereby enacts as follows:
Section 1. Section 4 of the act of April 16, 1992 (P.L.155,
No.28), known as the Assessors Certification Act, is amended by
adding a subsection to read:
Section 4. Duties of board.
* * *
(c.1) Training program.--The board shall establish and
administer a training program for persons who apply to be
assessors, which program shall include instruction on the
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following topics:
(1) Historical and current Pennsylvania judicial
decisions affecting property valuation, assessment and
reassessment.
(2) The implications of Pennsylvania judicial decisions
for permissible valuation and assessment practices in this
Commonwealth.
(3) The manner in which an assessor's duties have been
and are currently impacted or may be impacted in the future
by Pennsylvania judicial decisions.
* * *
Section 2. Section 5(b) of the act is amended to read:
Section 5. Qualifications.
* * *
(b) Requirements.--An applicant shall meet the following
requirements:
(1) The applicant shall have a high school diploma, or
its equivalent, or two years of assessing experience.
(2) The applicant shall be at least 18 years of age.
(3) The applicant shall be a resident of this
Commonwealth for at least six months.
(4) The applicant shall have successfully completed a
minimum of 90 hours of the basic courses of study approved by
the board covering the appraisal assessing profession or any
other professional courses acceptable to the board. At the
discretion of the county commissioners, the county may
reimburse county assessors for the costs of completing the
23
courses of study required by this subsection.
(5) The applicant shall have successfully completed the
training program established by the board under section
4(c.1).
Section 3. This act shall take effect in 60 days.
24
House Bill 1465: Creates a revolving loan fund to assist counties with the cost of conducting a reassessment.
PRINTER'S NO. 2019
THE GENERAL ASSEMBLY OF PENNSYLVANIA
HOUSE BILL
No. 1465 Session of 2011
INTRODUCED BY NEUMAN, JUNE 6, 2011
REFERRED TO COMMITTEE ON APPROPRIATIONS, JUNE 6, 2011
AN ACT Providing for a State revolving loan program to counties for the
purpose of conducting countywide reassessments; imposing powers and duties on the Center for Local Government Services; and making an appropriation.
The General Assembly of the Commonwealth of Pennsylvania
hereby enacts as follows:
Section 1. Short title.
This act shall be known and may be cited as the County
Reassessment Revolving Loan Program Act.
Section 2. Definitions.
The following words and phrases when used in this act shall
have the meanings given to them in this section unless the
context clearly indicates otherwise:
"Center." The Center for Local Government Services within
the Department of Community and Economic Development of the
25
Commonwealth.
"Program." The County Reassessment Revolving Loan Program
established under section 3.
Section 3. County Reassessment Revolving Loan Program.
(a) Establishment.--The County Reassessment Revolving Loan
Program is established and shall be administered by the center.
(b) Purpose of loans.--The center shall provide loans to
counties in order for counties to adequately perform countywide
reassessments. Program funds may be used for reassessment
purposes as determined by the center.
(c) Application.--The center shall develop and distribute a
uniform application for applicants to submit for loans under the
program.
(d) Review.--The center shall review applications submitted
for loans under the program and shall approve them if they are
complete and the applicant agrees to the terms and conditions
for the loan as determined by the center.
(e) Loan repayment.--The center shall determine applicable
methods regarding loan repayment procedures.
(f) Funding distribution.--If there are insufficient State
funds appropriated for loans under this act in any year, the
center shall distribute the funds as determined by the center.
Section 4. Rules and regulations.
The center shall adopt rules and regulations necessary to
implement and administer the provisions of this act.
Section 5. Appropriation.
The sum of $5,000,000 is hereby appropriated to the Center
26
for Local Government Services within the Department of Community
and Economic Development for the purpose of providing loans
under this act.
Section 6. Effective date.
This act shall take effect in 60 days.
27
House Bill 1696: Impose a moratorium on property reassessments in certain Fourth Class Counties. Vetoed by the Governor on July 8, 2011. (Similar Legislation – House Bill 166)
SENATE AMENDED
PRIOR PRINTER'S NO. 2141 PRINTER'S NO. 2260
THE GENERAL ASSEMBLY OF PENNSYLVANIA
HOUSE BILL
No. 1696 Session of 2011
INTRODUCED BY SACCONE, WHITE, NEUMAN, TURZAI, EVANKOVICH,
MUSTIO, EMRICK, MURT, DUNBAR, GERGELY, D. COSTA, REESE,
ELLIS, GABLER, MATZIE, HORNAMAN, SIMMONS, TOOHIL, BLOOM,
MALONEY, CUTLER, CHRISTIANA, GOODMAN, SWANGER, KORTZ, MOUL
AND TALLMAN, JUNE 20, 2011
SENATOR CORMAN, APPROPRIATIONS, IN SENATE, RE-REPORTED AS
AMENDED, JUNE 29, 2011
AN ACT Providing for a temporary moratorium of court-ordered countywide
reassessments and for reforms based upon study.
The General Assembly of the Commonwealth of Pennsylvania
hereby enacts as follows:
Section 1. Short title.
This act shall be known and may be cited as the Property Tax
Reassessment Moratorium Act.
Section 2. Findings and purpose.
The General Assembly finds and declares as follows:
(1) The method of property tax assessment in this
Commonwealth is fragmented and in need of reform.
28
(2) The current method provides for little uniformity
between counties resulting in vast inequities of property
assessments across this Commonwealth.
(3) Further, the tax assessment system provides little
protection for homeowners who experience sudden and dramatic
increases in their property assessments as a result of a
countywide assessment.
(4) Failure to address the problem has led to the
potential for devastating tax increases that would be harmful
to the citizens and economic well-being of this Commonwealth.
(5) A study was conducted of the Commonwealth's property
assessment system.
(6) The study addressed the proper policies and
procedures necessary to ensure uniformity among counties and
a comparative analysis of the property assessment systems in
other states.
(7) The study concluded that changes are needed and the
General Assembly should enact legislation to address issues
raised by the study.
Section 3. Definitions.
The following words and phrases when used in this act shall
have the meanings given to them in this section unless the
context clearly indicates otherwise:
"Local taxing authority." Any political subdivision
authorized to impose real property taxes.
Section 4. Moratorium.
(a) Prohibition.--No local taxing authority may undertake,
29
on or after the effective date of this section, the process of a
court-ordered countywide reassessment of real property for
purposes of levying property taxes; however, counties currently
conducting a court-ordered countywide reassessment as of the
effective date of this section may, at the discretion of the
county, continue the process.
(b) End of prohibition.--The prohibition under subsection
(a) shall remain in effect until the General Assembly has
enacted legislation to address the declarations contained in
section 2(1), (2), (3) and (4) or until November 30, 2012,
whichever comes first.
NO COUNTY OF THE FOURTH CLASS HAVING A POPULATION, ACCORDING
TO THE 2010 UNITED STATES CENSUS, GREATER THAN 185,000 BUT LESS
THAN 210,000 MAY IMPLEMENT, EFFECTUATE OR UNDERTAKE THE PROCESS
OF A COURT-ORDERED COUNTYWIDE REASSESSMENT OF REAL PROPERTY FOR
PURPOSES OF LEVYING PROPERTY TAXES UNTIL THE LATER OF:
(1) THE GENERAL ASSEMBLY ADOPTS PROCEDURES NECESSARY TO
ENSURE UNIFORMITY AMONG COUNTIES IN THEIR PROPERTY ASSESSMENT
SYSTEMS; OR
(2) NOVEMBER 30, 2012.
Section 5. Effective date.
This act shall take effect immediately.
30
House Bill 1712: Pertaining to the composition of the State Board of Certified Real Estate Appraisers.
PRINTER'S NO. 2175
THE GENERAL ASSEMBLY OF PENNSYLVANIA
HOUSE BILL
No. 1712 Session of 2011
INTRODUCED BY NEUMAN, JUNE 22, 2011
REFERRED TO COMMITTEE ON PROFESSIONAL LICENSURE, JUNE 22, 2011
AN ACT Amending the act of July 10, 1990 (P.L.404, No.98), entitled "An
act providing for the certification of real estate appraisers; specifying requirements for certification; providing for sanctions and penalties; and making an appropriation," further providing for State Board of Certified Real Estate Appraisers.
The General Assembly of the Commonwealth of Pennsylvania
hereby enacts as follows:
Section 1. Section 4(a) of the act of July 10, 1990
(P.L.404, No.98), known as the Real Estate Appraisers
Certification Act, amended July 8, 2008 (P.L.833, No.59), is
amended to read:
Section 4. State Board of Certified Real Estate Appraisers.
(a) Creation.--There is hereby created the State Board of
Certified Real Estate Appraisers as a departmental
administrative board in the Department of State. The board shall
31
consist of the following members:
(1) The Secretary of the Commonwealth or a designee.
(2) The Attorney General or a designee.
(3) The Secretary of Banking or a designee.
(4) Eight members who are citizens of the United States
and who have been residents of this Commonwealth for a two-
year period immediately prior to appointment, two of whom
shall be public members [and], six of whom shall be persons
who are State-certified real estate appraisers and two of
whom shall be persons who are certified Pennsylvania
evaluators as defined in section 2 of the act of April 16,
1992 (P.L.155, No.28), known as the Assessors Certification
Act.
* * *
Section 2. This act shall take effect in 60 days.
32
House Bill 84: Would include Philadelphia County under the Assessors Certification Act. (Similar Legislation -- Senate Bill 1314)
PRIOR PRINTER'S NO. 42 PRINTER'S NO. 1539
THE GENERAL ASSEMBLY OF PENNSYLVANIA
HOUSE BILL
No. 84 Session of 2011
INTRODUCED BY THOMAS, BISHOP, CALTAGIRONE, M. O'BRIEN AND
YOUNGBLOOD, JANUARY 19, 2011
AS REPORTED FROM COMMITTEE ON URBAN AFFAIRS, HOUSE OF
REPRESENTATIVES, AS AMENDED, APRIL 13, 2011
AN ACT Amending the act of April 16, 1992 (P.L.155, No.28), entitled
"An act providing for the certification and recertification of assessors; establishing eligibility and training requirements; defining the powers and duties of the State Board of Certified Real Estate Appraisers relating to training, certification and recertification of assessors; and authorizing the board to establish fees," further providing for nonapplicability.
The General Assembly of the Commonwealth of Pennsylvania
hereby enacts as follows:
Section 1. Section 11 of the act of April 16, 1992 (P.L.155,
No.28), known as the Assessors Certification Act, amended
November 19, 2004 (P.L.834, No.100), is repealed:
[Section 11. Nonapplicability.
This act shall not apply to counties of the first class.]
Section 2. An assessor who is employed by a county of the
33
first class on the effective date of this section shall have
three FOUR years from the effective date of this section to
become certified under the act.
Section 3. This act shall take effect in 60 days.
34
House Bill 2137: Impose a temporary moratorium on court-ordered property reassessments.
PRINTER'S NO. 2989
THE GENERAL ASSEMBLY OF PENNSYLVANIA
HOUSE BILL
No. 2137 Session of 2012
INTRODUCED BY SACCONE, WHITE, NEUMAN, EVANKOVICH, BLOOM,
D. COSTA, P. COSTA, CUTLER, KORTZ, ROCK, SIMMONS AND SWANGER,
JANUARY 23, 2012
REFERRED TO COMMITTEE ON URBAN AFFAIRS, JANUARY 23, 2012
AN ACT Providing for a temporary moratorium of court-ordered countywide
reassessments and for reforms based upon study.
The General Assembly of the Commonwealth of Pennsylvania
hereby enacts as follows:
Section 1. Short title.
This act shall be known and may be cited as the Property Tax
Reassessment Moratorium Act.
Section 2. Findings and purpose.
The General Assembly finds and declares as follows:
(1) The method of property tax assessment in this
Commonwealth is fragmented and in need of reform.
(2) The current method provides for little uniformity
between counties resulting in vast inequities of property
assessments across this Commonwealth.
35
(3) Further, the tax assessment system provides little
protection for homeowners who experience sudden and dramatic
increases in their property assessments as a result of a
countywide assessment.
(4) Failure to address the problem has led to the
potential for devastating tax increases that would be harmful
to the citizens and economic well-being of this Commonwealth.
(5) A study was conducted of the Commonwealth's property
assessment system.
(6) The study addressed the proper policies and
procedures necessary to ensure uniformity among counties and
a comparative analysis of the property assessment systems in
other states.
(7) The study concluded that changes are needed and the
General Assembly should enact legislation to address issues
raised by the study.
Section 3. Definitions.
The following words and phrases when used in this act shall
have the meanings given to them in this section unless the
context clearly indicates otherwise:
"Local taxing authority." Any political subdivision
authorized to impose real property taxes.
Section 4. Moratorium.
(a) Prohibition.--No local taxing authority may undertake,
on or after the effective date of this section, the process of a
court-ordered countywide reassessment of real property for
purposes of levying property taxes; however, counties currently
36
conducting a court-ordered countywide reassessment as of the
effective date of this section may, at the discretion of the
county, continue the process.
(b) End of prohibition.--The prohibition under subsection
(a) shall remain in effect until the General Assembly has
enacted legislation to address the declarations contained in
section 2(1), (2), (3) and (4) or until December 31, 2013,
whichever comes first.
Section 5. Effective date.
This act shall take effect immediately.
37
Senate Bill 1439: Auditor General shall conduct a procedural and performance audit of a
county reassessment.
PRINTER'S NO. 2018
THE GENERAL ASSEMBLY OF PENNSYLVANIA
SENATE BILL
No. 1439 Session of 2012
INTRODUCED BY PIPPY, MARCH 16, 2012
REFERRED TO FINANCE, MARCH 16, 2012
AN ACT Providing for property reassessment audits.
The General Assembly of the Commonwealth of Pennsylvania
hereby enacts as follows:
Section 1. Short title.
This act shall be known and may be cited as the Property
Reassessment Audit Act.
Section 2. Legislative findings and declaration of policy.
The General Assembly finds and declares that:
(1) Countywide reassessments, including court-ordered
reassessments, have been justified and initiated on the basis
of data derived from the State Tax Equalization Board. Both a
special performance audit conducted by the Auditor General in
February of 2011 and a report issued by the Legislative
38
Budget and Finance Committee in July of 2010 questioned the
veracity of data generated by the State Tax Equalization
Board.
(2) Reassessment valuation models that rely on the State
Tax Equalization Board sales data may exclude sales
considered valid by the International Association of
Assessing Officers guidelines, contributing to inaccurate
valuation during a reassessment.
(3) Inaccurate sales data, inappropriate modeling and
inaccurate property inventory data in reassessments affect
the uniformity of taxation mandated by section 1 of Article
VIII of the Constitution of Pennsylvania by yielding
unnecessarily inaccurate valuations and disproportionate tax
burdens.
Section 3. Definitions.
The following words and phrases when used in this act shall
have the meanings given to them in this section unless the
context clearly indicates otherwise:
"Board." The State Tax Equalization Board.
"Completion." The establishment of values for all properties
in the county and released on an informal basis to the public.
"Contractor." A mass appraisal company or other contractors,
subcontractors or vendors involved in constructing the property
inventory database or other activities related to establishing
property values.
"County." A county of the second class, second class A,
third class, fourth class, fifth class, sixth class, seventh
39
class or eighth class.
Section 4. Powers and duties of Auditor General.
(a) Countywide reassessments.--The Auditor General shall
conduct a procedural and performance audit of a county or
contractor conducting a reassessment initiated after the
effective date of this section. The Auditor General shall
conduct an investigation, conduct the audits, issue remedial
recommendations and take any additional action as provided in
this act.
(b) Other reassessments.--The Auditor General may, or upon
the request of the Governor or a member of the General Assembly
shall, investigate any countywide reassessment being conducted
on the effective date of this section in accordance with section
5, except that no investigation may be initiated if more than
six months have elapsed since the certification of any
valuations by the county.
(c) Prohibition.--No countywide reassessment may be
certified by a county until the certificate under section 7(e)
has been issued.
Section 5. Investigations.
(a) General.--The Auditor General shall investigate any
countywide reassessment in accordance with this section.
(b) Procedure.--
(1) The Auditor General shall provide written notice to
the governing body of the county and the county chief
executive, if any, that an investigation has been initiated.
County officials and employees shall cooperate with the
40
Auditor General or his designees and shall provide requested
records within 30 days of a request.
(2) The Auditor General, or his designee, may issue
subpoenas to compel the attendance of county officials,
employees or contractors involved in the maintenance of the
property inventory database and the production of any data or
records in the possession of county officials, employees or
contractors. If any person fails to comply with any subpoena
under this paragraph or refuses to be sworn or testify as a
witness, or if any person refuses to permit the Auditor
General to inspect records, the Auditor General may, in
addition to other remedies provided by law, petition the
court of common pleas to order compliance. The court shall
order compliance if it deems the testimony relevant to
determining the accuracy of the valuations used in the
reassessment. Nothing under this section shall authorize the
disclosure of any information deemed proprietary by law or
contract.
(c) Contracts.--Notwithstanding any provision of law, a
contract for reassessment services executed after the effective
date of this section shall include provisions providing for the
mutual agreement of the parties to the contract that their
officers, employees and agents shall cooperate with any
investigation as provided in this section.
(d) Report.--For investigations initiated under section
4(b), the Auditor General shall, within 60 days of the written
notice provided under subsection (b), issue a report to the
41
governing body and chief executive of the county setting forth
the results of the investigation and whether there are
sufficient grounds to warrant judicial action as provided under
section 6.
Section 6. Judicial action.
(a) Petition.--If, after an investigation under section 5,
the Auditor General determines that sufficient evidence of
inaccurate valuations exists to warrant procedural and
performance audits under section 7, the Auditor General shall
petition the Commonwealth Court to stay further use of the new
assessed values until the time as the Auditor General has
conducted the audits and issued remedial recommendations. Notice
of the petition shall be provided to the governing body and
chief executive of the county and its contractors.
(b) Hearing.--Within 15 days of the petition under
subsection (a), the Commonwealth Court shall hold a hearing and
obtain evidence as may be necessary to issue an order.
(c) Order.--If the Commonwealth Court determines that
sufficient evidence of inaccurate valuation of property exists,
it shall issue an order staying further implementation of the
reassessment, including, if necessary, staying any
determinations of formal appeals, pending the issuance of the
report provided under section 7. The order may contain
additional direction to the county to ensure the continuity of
operations of all taxing districts pending the issuance of the
report.
(d) Extensions.--The Auditor General may petition the
42
Commonwealth Court for an extension of any deadlines provided
for under this act if necessary to complete an audit or the
implementation of recommendations.
Section 7. Audits.
(a) General.--If required by this act, the Auditor General
shall conduct the following:
(1) A performance audit of the county and the contractor
to determine whether the quantity or quality of work
performed yields valuations of property of sufficient
accuracy and fairness. Ratio studies between assessed values
and market values, as determined through sales or appraisals,
may be used.
(2) A procedural audit to examine whether the county and
the contractor are following established or recommended
procedures as set forth by the county or in accordance with
law.
(b) Personnel.--The Auditor General shall have the same
powers of investigation provided under section 5 and may employ
accountants, assessors or statisticians who shall receive
compensation as fixed by the Auditor General.
(c) Reports.--The Auditor General shall issue a written
report setting forth the results of the audits and any remedial
recommendations as provided under subsection (d), as follows:
(1) For audits required under section 4(a), the Auditor
General shall issue the report to the governing body and
chief executive of the county, not later than 90 days after
the completion of the reassessment. The recommendations of
43
the Auditor General shall be implemented by the county within
90 days of the receipt of the report.
(2) For audits required under section 6(c), the Auditor
General shall issue the report to the legislative body and
chief executive of the county, if any, and the Commonwealth
Court not later than 90 days after the date of the order. The
recommendations of the Auditor General shall be implemented
by the county within 90 days of the receipt of the report.
(d) Recommendations.--The report shall contain
recommendations that the Auditor General believes may be
necessary to better ensure the accuracy and fairness of the
reassessment. The chief assessor of the county shall notify the
Auditor General in writing when the recommendations have been
fully implemented.
(e) Certificate.--The Auditor General or Commonwealth Court
shall issue a written certificate to the county setting forth
that either recommendations were not included in the audit or
that all recommendations have been fully implemented by the
county.
(f) Appointed liaison.--If the Auditor General deems it
necessary to assist a county in the implementation of
recommendations, the Auditor General may appoint a liaison to
assist the county and report on the progress of the
implementation. The liaison shall be an individual with at least
five years' experience in reassessment practices and procedures,
and shall receive compensation as determined by the Auditor
General.
44
Section 8. Reassessment appeals.
Nothing in this act shall affect the progress of informal
appeals or conferences conducted by a county to resolve disputes
over valuation. Notwithstanding any other provision of law, for
audits conducted as required under section 4(a), formal appeals
shall not be conducted until after the certification of the
reassessment by the county.
Section 9. Expiration.
This act shall expire December 31, 2015.
Section 20. Effective date.
This act shall take effect in 60 days.
45
C. Comments
46
State Representative Jesse White I want to thank the members of the Task Forces for their hard work and commitment to these
issues. By bringing all the stakeholders together and engaging in focused, non-partisan analysis,
we have finally developed a blueprint for real property tax reassessment reform.
These reports strengthen my belief that until we correct the fundamental flaws in the
reassessment process, a moratorium on court-ordered reassessments is essential to prevent the
system from being abused to exploit loopholes in the anti-windfall provisions to increase tax
revenue outside the scope of Act 1 of 2006.
Any tool can become a weapon if placed in the wrong hands, and in my opinion, the
reassessment process has been turned into a weapon to raise revenue instead of a tool for
statistical measure to ensure equal and uniform taxation of properties. We must dramatically
reduce this potential for abuse and restore the reassessment process to its rightful intent as an
instrument to help taxpayers, not punish them.
The need for both technical and policy-based solutions are evident, and I hope these reports will
help guide my colleagues as we begin the work of crafting, debating and ultimately
implementing these solutions in the weeks and months ahead. The input of the task force
members came from a uniquely qualified group of stakeholders who possessed a combination of
the knowledge of the strengths and weaknesses of the current reassessment system, a
comprehensive knowledge of the legal restrictions placed upon us by the Pennsylvania
Constitution, and a firm commitment to change a status quo we all recognize to be fundamentally
flawed in various ways.
I view these task force reports as the beginning of the conversation, not the end, and I look
forward to working together to finally end decades of futility to reform the property tax
reassessment process to protect and benefit the people of Pennsylvania.
___________________
Jesse White
46th
Legislative District
Washington/Allegheny/Beaver Counties
47
Pennsylvania School Boards Association
The Pennsylvania School Boards Association joins the other Task Force members in the recognition that
the Commonwealth’s assessment laws are systemically flawed and in need of reform. PSBA encourages
the General Assembly to move forward with the Task Force’s recommendations as soon as possible to
develop and implement legislation to ensure that Pennsylvania’s property assessment system is fair to all
taxpayers.
The inequity perpetuated by the current patchwork of reassessment schedules and methods used across
the state results in nothing but continual controversy among local governments, school districts, and
taxpayers. There are currently numerous proposals in the General Assembly that attempt to address a
small or specific symptom of our broken assessment laws; however, none of the proposals provides the
required comprehensive solution to the underlying problem. Only comprehensive assessment legislation
that adds predictability to the system by setting standards for when and how a reassessment is to be
conducted will accomplish the goals of the Task Force and meet the constitutionally-mandated uniformity
of taxation.
One legislative proposal attempts to protect undervalued properties by prohibiting school districts and
other taxing authorities from appealing the assessment of a property based on the sale of the property,
undermining the goal of uniformity by increasing the discrepancy among taxable property and shifting the
burden carrying undervalued properties to those taxpayers who are accurately assessed. Additionally,
another proposal prohibits local taxing authorities from undertaking a court-ordered countywide
reassessment of real property, which, again, does nothing to remedy the existing inequities in property
assessments and denies certain property owners equal protection under the law. Other proposals
attempt to impose additional anti-windfall provisions on school districts and taxing authorities following a
reassessment, while some attempt to implement property tax reform with the goal of reducing or
eliminating the burden of the property tax on local taxpayers altogether.
At the heart of all of these proposals is Pennsylvania’s broken property assessment laws, which give rise
to unconstitutional inequities that inevitably result from the prolonged use of old and outdated assessment
values in areas where property values have changed at divergent rates. Implementing these current
proposals would serve only as a temporary bandage, potentially mitigating a perceived issue in the short
term, but ignoring the root of the problem and the need for a comprehensive solution. Without careful
examination of the underlying problem with our assessment laws, these proposals will do nothing to reset
the system and ensure that property owners who are fairly assessed and are paying their proportionate
share of taxes are not burdened with carrying the weight of owners of under-assessed properties.
The development and implementation of the recommendations set forth by this Task Force have the ability to transform and modernize Pennsylvania’s property assessment system and render the current proposals that address only a single symptom of this problem entirely moot. To ensure that property assessments are completed in a uniform and consistent manner, PSBA encourages the continued examination of our current assessment system and the adoption of solutions to ensure uniformity and fairness for all property owners. Only uniform assessment and appeal practices, accurate and timely property valuation, and increased transparency for the disclosure of how properties are valued and assessed will succeed in curing the problems with our current property assessment law.
Final Report of the House Resolution 344 Task Force on
Property Valuation and Reassessment and the Pennsylvania State Tax Equalization Board
Date: April 10, 2012
2
Table of Contents
Acknowledgments ...................................................................................................................................................... 3
Introduction ................................................................................................................................................................. 3
Background.................................................................................................................................................................. 4
Topics of Study ........................................................................................................................................................... 7
Develop Criteria and Procedures for Data Submission by the County to the State Tax Equalization
Board ........................................................................................................................................................................ 7
Recommendations.............................................................................................................................................. 8
Address Insufficient Sample Data and to Assure and Disclose that the Sample Data Relied on to
Develop a County's Performance Measures During a Reassessment is Representative of the Bulk of the
County's Property Inventory ................................................................................................................................ 8
Recommendations.............................................................................................................................................. 9
Develop Criteria and Procedures for Data Collection ....................................................................................... 9
Recommendations............................................................................................................................................ 10
Determine the Viability of Creating a Uniform Training Program for Individuals and Organizations
Collecting the Data ............................................................................................................................................... 10
Recommendations............................................................................................................................................ 10
Conclusion ................................................................................................................................................................. 10
Appendices ................................................................................................................................................................ 12
A. House Resolution 344 .................................................................................................................................... 13
B. Relevant Legislation ....................................................................................................................................... 19
Senate Bill 704 ................................................................................................................................................... 20
House Bill 84 ..................................................................................................................................................... 24
House Bill 1463 ................................................................................................................................................. 26
House Bill 2137 ................................................................................................................................................. 29
Senate Bill 1439 ................................................................................................................................................. 32
C. Comments ......................................................................................................................................................... 40
State Representative Jesse White ................................................................................................................... 41
Pennsylvania School Boards Association ..................................................................................................... 42
D. Additional Information .................................................................................................................................. 43
Assessors’ Association of Pennsylvania Rejection Code List..................................................................... 44
3
Acknowledgments The members of the Task Force would like to thank the following groups and individuals for their assistance in this endeavor: The staff of the Local Government Commission with special thanks to Danette Hobbs Magee for their expertise and efforts in helping us to reach our goal. The staff of the Legislative Budget and Finance Committee with special thanks to Maryann Nardone for their expertise and efforts in helping us to reach our goal.
Introduction The Pennsylvania House of Representatives adopted House Resolution 344 on June 27, 2011, by a vote of 199-0. This Resolution created a Task Force to study Pennsylvania’s current property tax assessment process and to address the following issues:
Develop criteria and procedures for data submission by the county to the State Tax Equalization Board (STEB) and verification by STEB;
Address insufficient sample data and to assure and disclose that the sample data relied on to develop a county's performance measures during a reassessment is representative of the bulk of the county's property inventory;
Develop criteria and procedures for data collection by those individuals or organizations conducting the collection of the data; and
Determine the viability of creating a uniform training program for individuals and organizations collecting the data that is provided to the county assessor.
The Resolution established the membership of the Task Force and was comprised of the following members:
State Representative Thomas Creighton, Majority Chair of the House Local Government Committee;
State Representative Robert L. Freeman, Minority Chair of the House Local Government Committee;
State Representative Kerry A. Benninghoff, Majority Chair of the House Finance Committee;
State Representative Phyllis Mundy, Minority Chair of the House Finance Committee;
State Representative Jerry Knowles;
State Representative Brandon Neuman;
James Zurick, Chairman, representing the Pennsylvania State Tax Equalization Board;
Daniel Guydish, Vice Chair, representing the Pennsylvania State Tax Equalization Board;
Jenny Stratton, Policy Director, representing the Pennsylvania Department of Revenue;
Amy Gill, Bureau of Research, representing the Pennsylvania Department of Revenue;
Charles “JR” Hardester, CPE, Chief Assessor, Lawrence County, representing the Assessors’ Association of Pennsylvania;
4
Randy Waggoner, CPE, Chief Assessor, Perry County, representing the Assessors’ Association of Pennsylvania;
James A. Hercik, CPE, Chief Assessor, Fayette County, representing the County Commissioners Association of Pennsylvania;
Joan Righter Price, Esq., Solicitor, Montgomery County Board of Assessment, representing the County Commissioners Association of Pennsylvania.
Also present at Task Force meetings were Renee Reynolds, Executive Director of STEB and Greg Skotnicki, Assistant Director, Pennsylvania Department of Revenue, Bureau of Corporation Taxes. The staff to the Task Force began its work of compiling relevant materials and visiting counties in order to better understand how county assessment offices operate. The staff reviewed existing standards in other states as well as standards published by the International Association of Assessing Officers (IAAO). The staff also relied heavily upon the work that was already underway by the Assessors’ Association of Pennsylvania’s Assessment Law Committee. This committee is working on a list of desired reforms relating to property valuation and reassessment, as well as issues pertinent to data collected and generated by the STEB. The committee is represented by members of Assessors’ Association of Pennsylvania, County Commissioners Association of Pennsylvania, and staff of the Local Government Commission and the Legislative Budget and Finance Committee. The Task Force organized and selected Representative Jerry Knowles as the Chair of the HR 343 and HR 344 Task Forces and immediately began to address the issues stated within the Resolutions. Several meetings were convened to gather input from the various groups involved in the assessment process. The Task Force exchanged many ideas, suggestions and recommendations on issues regarding the real estate assessment process in Pennsylvania. This Task Force worked in conjunction with the House Resolution 343 Task Force which was tasked to study certain aspects of the property valuation and reassessment process.
Background The property tax is the only tax that can be levied by school districts, counties, cities, townships, boroughs and incorporated towns. Historically, in Pennsylvania the property tax has been the main source of revenue for school districts and counties. Municipalities also receive a significant portion of their revenue from the property tax. In 2010, the General Assembly passed the Consolidated County Assessment Law,1 Act 93 of 2010. The Assessors’ Association of Pennsylvania – an affiliate of the County Commissioners Association of Pennsylvania – formed an Assessment Reform Committee in 2001. The Assessors’ Association of Pennsylvania charged the committee with creating a legislative proposal that would consolidate the current assessment laws, pertaining to counties of the second class A through the eighth class, into one new uniform assessment law. The 12-member
1 Title 53 of the Pennsylvania Consolidated Statutes (Municipalities Generally) at Section 8801 et seq.
5
committee was made up of a wide array of real estate assessment personnel (assessors and administrators) from various counties throughout the Commonwealth. Two staff persons from the Local Government Commission were appointed as the legislative staff to serve on the committee. Due to the technical nature of the work involved with consolidating the various assessment laws, a small subcommittee, including Commission staff, took on the tasks of preparing the initial draft of the consolidated assessment law and a section-by-section commentary of the legislation. Staff also prepared the disposition and derivation tables. CCAP requested that the members of the Local Government Commission sponsor the final legislative proposal, which was eventually signed into law as Act 93 of 2010.2 Counties have the statutory responsibility to maintain the property tax assessment rolls within each county. With the exception of Philadelphia County, each county assessment office is responsible for valuing property and annually revising the property tax roll. Each county has an appointed Chief Assessor who must be certified by the State Board of Real Estate Appraisers as a Certified Pennsylvania Evaluator. The Chief Assessor is responsible for certifying the values on all real property within the county. A county is required to use the same approach to value real property. That is, in Pennsylvania, counties can choose whether to use a “base year”3 value or a “current market” value to arrive at an assessed value. Section 8842(a), (b) of the Consolidated County Assessment Law states:
. . . In arriving at actual value, the county may utilize the current market value or it may adopt a base-year market value. . . . (i) In arriving at actual value, the price at which any property may actually have been sold, either in the base year or in the current taxable year, shall be considered but shall not be controlling. (ii) The selling price shall be subject to revision by increase or decrease to accomplish equalization with other similar property within the county . . . .
Three approaches to value must be considered in conjunction with one another: cost (reproduction or replacement, as applicable, less depreciation and all forms of obsolescence), comparable sales, and income. Pennsylvania has a constitutional requirement for uniformity of taxation.4 A uniform assessment rate means that all properties in the county, whether residential, commercial, or industrial, should be assessed at a common level of assessment. The main tool at the disposal of a county to correct overall property market changes is a countywide reassessment. The STEB was created by Act 447 of 1947 “to compensate for differences in property values for across counties and to help the Pennsylvania Department of Education (PDE) ensure that
2 Local Government Commission, “The Consolidated County Assessment Law.”
<(http://www.lgc.state.pa.us/ccal.shtml)> December 27, 2011. 3 “The year upon which real property market values are based for the most recent countywide revision of assessment
of real property or other prior year upon which the market value of all real property of the county is based for assessment purposes. Real property market values shall be equalized within the county and any changes by the board shall be expressed in terms of base-year values.” 53 Pa.C.S. §8802. 4 “All taxes shall be uniform, upon the same class of subjects, within the territorial limits of the authority levying the
tax, and shall be levied and collected under general laws.” Pa. Const. Art. VIII, § 1.
6
poorer districts with a smaller property tax base receive more state aid.”5 The Board consists of a chairman and two members who are appointed by the Governor for a term of four years. STEB’s primary function is to determine the aggregate market value of taxable real property in each municipality and school district within the Commonwealth. Market values are certified and submitted annually to the PDE and the respective school districts, on or before July 1 of each year. The PDE uses these market values as a factor in the legislative formula for distribution of the state subsidies to each school district. Another function of the Board is to establish a common level ratio of assessed value to market value for each county for the prior calendar year. STEB is required to make the methodology for computing ratios available to the public, and certify the ratio to the Chief Assessor of each county each year. As the Task Force discussed these issues and possible solutions that they were charged with by the Resolution, concerns and questions surrounding current data produced by STEB continually surfaced. Many members of the Task Force agreed that they do not believe the STEB data is adequate and therefore, should not be used as a tool when determining whether a county needs to reassess. Data produced by STEB has come under much scrutiny and many problems have been identified. For instance, the Auditor General of Pennsylvania released a Special Performance Audit of the Pennsylvania State Tax Equalization Board, in February 2011. That report raised many questions as to the practices and operations of STEB. These included a lack of “quality assurance controls that would help verify that source data is correct, formulas are functioning as intended and results appear reasonable.”6 Until those problems are corrected, the data produced by STEB should not be utilized to determine any calculations regarding assessments in this Commonwealth. Renee Reynolds, Executive Director, of STEB and Mr. Guydish pointed out that many of the statistical shortcomings and other concerns that have been raised are a result of a lack of resources and staff due to budget cuts. Since the formation of this Task Force, Governor Tom Corbett, in his February 7, 2012 budget proposal, transferred STEB’s line item and administration to the Department of Community and Economic Development. In order to address this issue, as well as others faced by counties regarding data collection and inaccurate STEB data, the Pennsylvania House of Representatives passed House Resolution 344, forming a task force to address the various topics mentioned earlier in this report.
5 Pennsylvania’s System for Property Valuation and Reassessment, Legislative Budget and Finance Committee, July
2010, Page 75. 6 A Special Performance Audit of the Pennsylvania State Tax Equalization Board: Certification of Market Values,
February 2011, Pennsylvania Department of the Auditor General, Bureau of Departmental Audits, page 2.
7
Topics of Study House Resolution 344 charged the Task Force to study and provide recommendations on delineated topics. They include: develop criteria and procedures for data submission by the county to the STEB and verification by the STEB, address insufficient sample data and to assure and disclose that the sample data relied on to develop a county's performance measures during a reassessment is representative of the bulk of the county's property inventory, develop criteria and procedures for data collection by those individuals or organizations conducting the collection of the data, determine the viability of creating a uniform training program for individuals and organizations collecting the data that is provided to the county assessor, and report its results and present its findings to the House of Representatives. Based on information received from testimony and research, the Task Force provided several recommendations regarding the topics mentioned above. They are as follows:
Develop Criteria and Procedures for Data Submission by the County to the
State Tax Equalization Board In order for the process to work efficiently and equitably, the data that STEB receives from the counties must be consistent and accurate. It is important that STEB receives information from each county that can be easily adapted and utilized in drawing comparisons between counties and maintaining the Constitutional requirement of uniformity. It was clear during discussions that many members of the Task Force did not think the data provided by STEB was an accurate reflection of the actual market values of property in the Commonwealth. This was discussed on numerous occasions with several members pointing to the Auditor General’s report findings that there was a lack of due diligence and absence of controls in STEB’s certification and publication of inaccurate 2008 market values.7 When discussing these points, concerns were raised regarding a lack of uniform definitions and criteria to identify valid and invalid sales. It was stressed that a sale should not be rejected or determined invalid without a specific identifiable reason. County employees and STEB employees are often left to speculate what is considered a valid or invalid sale. The Assessors’ Association of Pennsylvania (AAP) shared with the Task Force a suggested table of rejection codes which they compiled. A copy of this table has been included in Appendix D of this report. Uniform definitions and criteria would go a long way toward keeping the data consistent from county to county. By providing a uniform definition to the counties, the data could clear the first major hurdle of reliability. An additional point regarding this issue is that a county must have some sort of a mechanism to assist them in determining the validity of a sale. It was suggested that perhaps a standardized verification of sale form could be required to be included with each recorded deed. This form would provide further detail as to the type of sale that was completed and provide a valuable tool to the county assessor.
7 A Special Performance Audit of the Pennsylvania State Tax Equalization Board: Certification of Market Values,
Pages 18-21.
8
However, there are other institutional and procedural matters that need to be addressed before this data can be even considered reliable. They include a need for standard procedures of when STEB reviews sales submitted by counties. Currently, if a county submits its data electronically STEB accepts the data without any review. However, STEB does review data submitted manually and conducts trimming methods on that data. STEB stated that due to their understaffing they could not review all data received. The Task Force members discussed and agreed that once the uniform definitions and criteria were developed, all counties should be required to submit their data in electronic formats. This would most likely be accomplished by the counties entering the data directly into a standardized database accessed via the internet. It was further suggested that STEB should have a full-time statistician on staff to oversee all of the technical formulas and computations. STEB reminded the Task Force that due to recent budget cuts they simply do not have the resources to create this position.
Recommendations
STEB or another Commonwealth agency should be required to adopt an operations manual that sets forth standard procedures, including validation of sales and the statistical methods to be used by each county. This manual should include a uniform list of definitions to be used by counties and the Commonwealth to validate or invalidate sales. The Task Force recommends that its members continue to work with the Local Government Committee and Finance Committee of the House of Representatives as a working group, to further study the need for a verification form attached to every deed filed in the Recorder of Deeds Office. Mr. Hardester noted that the Assessors’ Association of Pennsylvania created a draft verification of sale form and will continue to work with the working group to further develop this form as well as any appropriate legislation. The Task Force also concluded that counties should be reporting their data to the state via a standardized electronic format. It was suggested that the Department of Revenue would be the likely agency to maintain this database. Further, STEB or another Commonwealth agency overseeing this data should have a full-time statistician on staff to maintain the technical formulas and computations involved in this process.
Address Insufficient Sample Data and to Assure and Disclose that the
Sample Data Relied on to Develop a County's Performance Measures
During a Reassessment is Representative of the Bulk of the County's
Property Inventory
In order for STEB calculations to be accurate, the sales data received from the counties must correctly reflect the types of property in the county. As noted in the Legislative Budget and Finance Committee’s report:
9
The distribution of the types of property sold may not necessarily be representative of the property in the county…. Since the counties do not provide STEB with information on the overall composition of the county’s property inventory by property parcels and type, STEB has no way of determining if the sales data it uses to develop the [common level ratio] is representative of all of the property types in a county.8
If the information STEB receives is incomplete or inaccurate, then the resulting calculations will not be correct and could produce inequities when implemented. The Task Force briefly discussed this issue directly. However, it was at the core of all of our discussions relating to data collection by the counties. This issue would be addressed by an operations manual that spelled out the procedures and criteria that counties must following when collecting or compiling their data.
Recommendations
STEB or another Commonwealth agency should be required to adopt an operations manual that sets forth standard procedures, including, validation of sales and the statistical methods to be used by each county. This manual should include a uniform list of definitions to be used by counties and the Commonwealth to validate or invalidate sales.
Develop Criteria and Procedures for Data Collection This is an important requirement as well. The initial collection of data by the counties must be accurate and give all entities that rely on this data the ability to compare among comparable properties within the county and similar properties located in other parts of the Commonwealth. It is vital that each county follow specific guidelines and data formats in order to ensure the data is comparable and accurate. As the previous issue, this point was the core of all of the Task Force discussions relating to data collection by the counties. The discussions continually pointed to the same conclusion that STEB or another Commonwealth agency should develop an operations manual establishing the procedures that County Assessors and county data collectors will follow. It was also discussed that there is a need for criteria, qualifications and training that is necessary for data collectors and to include these best practices or guidelines in the contract. It was felt that by requiring this of the initial data collectors the data being collected would become more consistent and comparable to other counties. This would go a long way in helping to make this data more reliable and equitable for the Commonwealth and the political subdivision’s purposes.
8 Pennsylvania’s System for Property Valuation and Reassessment, Pages 82-83.
10
Recommendations
STEB or another Commonwealth agency should be required to develop and adopt an operations manual that sets forth standard procedures, including, validation of sales and the statistical methods to be used by each county. This manual should include a uniform list of definitions to be used by counties and the Commonwealth to validate or invalidate sales. The Assessors’ Association in consultation with the County Commissioners Association of Pennsylvania should develop criteria for what qualifications and training are necessary for data collectors and to include these best practices or guidelines in the model contract.
Determine the Viability of Creating a Uniform Training Program for
Individuals and Organizations Collecting the Data In order for the data collection to be consistent between counties of the Commonwealth the data collection methods used must be uniform. The Task Force was asked to determine the viability of creating a uniform training program for individuals and organizations collecting the data. The discussions continually pointed to the same conclusion that STEB or another Commonwealth agency should develop an operations manual establishing the procedures that County Assessors and county sales data collectors will follow. It was also discussed that there is a need for criteria, qualifications and training that is necessary for data collectors and to include these best practices or guidelines in the contract. A uniform training program would be beneficial to all involved in this process. It should give a better understanding of what is required of each data collector and give them a better understanding on the entire process so they know the importance of accurate data collection. It was felt that by requiring this of the initial data collectors the data being collected would become more consistent and comparable to other counties. This would go a long way in helping to make this data more reliable and equitable for the Commonwealth and the political subdivision’s purposes.
Recommendations
The Assessors’ Association in consultation with the County Commissioners Association of Pennsylvania should develop criteria for what qualifications and training are necessary for data collectors and to include these best practices or guidelines in the model contract.
Conclusion The Task Force heard some revealing remarks about STEB. Many agreed with the Auditor General that there are systemic problems within STEB that need to be addressed. As long as STEB fails to address these issues, it is problematic for this Task Force to endorse the use of
11
STEB data for future calculations of the common level ratio or coefficient of dispersion9 or for use in calculating other state funding formulas. STEB has been given direction to resolve many of the existing problems in the Legislative Budget and Finance Committee Report,10 by the Auditor General’s Special Audit Report11 and now by this Task Force reaffirming many of the recommendations contained in both of those reports. The Task Force recognized that Governor Corbett’s 2012 budget proposal moved STEB to the Department of Community and Economic Development. Mr. Guydish noted that the Commonwealth’s funding of STEB has been inadequate, thus restricting their ability to perform functions and duties effectively. While the Task Force members acknowledged Mr. Guydish’s concerns, they agreed that STEB’s functions and duties should be moved to another Commonwealth agency. It was suggested that the Department of Revenue would be better suited for this role because the Department currently administers the Commonwealth’s Realty Transfer Tax. The six-month time frame did not allow a more in depth study of these very complicated issues; thus, was a driving factor in moving the Task Force toward their recommendation to continue to work as a working group with the House Local Government and Finance Committees. Task Force members encourage these legislative committees to continue to study and further refine the solutions and recommendations discussed in this report. Members of the Task Force have expressed to both Chairs of the House Local Government and Finance Committee their willingness to continue on in this working group capacity. It is the hope of Task Force members that this working group, in association with the committees, can produce several viable options in the months remaining in the current legislative session. Chairmen Tom Creighton and Robert Freeman have expressed their support for utilizing the House Local Government Committee to advance any legislative solutions and will continue to work with members of the Task Force and the House Finance Committee, in hopes of reaching a solution on many of these matters.
9 STEB is not required by law to calculate a coefficient of dispersion.
10 Pennsylvania’s System for Property Valuation and Reassessment. 11 A Special Performance Audit of the Pennsylvania State Tax Equalization Board: Certification of Market Values,
February 2011.
12
Appendices
13
A. House Resolution 344
14
PRINTER'S NO. 2146
THE GENERAL ASSEMBLY OF PENNSYLVANIA
HOUSE RESOLUTION
No. 344 Session of 2011
INTRODUCED BY NEUMAN, SACCONE AND WHITE, JUNE 21, 2011
REFERRED TO COMMITTEE ON LOCAL GOVERNMENT, JUNE 21, 2011
A RESOLUTION Establishing a task force to develop criteria and procedures for
data submission, verification and collection to address insufficient sample data and to assure and disclose that the sample data relied on to develop a county's performance measures during a reassessment is representative of the bulk of the county's property inventory.
WHEREAS, At the direction of the House of Representatives
through House Resolution 334 of 2009, the Legislative Budget and
Finance Committee (LBFC) prepared a report on Pennsylvania's
System for Property Valuation and Reassessment and issued the
report in 2010; and
WHEREAS, The report includes a number of recommendations to
enhance the current system, including the development of
criteria and procedures for data submission by the county to the
State Tax Equalization Board and verification by the State Tax
Equalization Board to address insufficient sample data and to
assure and disclose that the sample data relied on to develop a
county's performance measures during a reassessment is
15
representative of the bulk of the county's property inventory;
and
WHEREAS, According to the LBFC report, the appraisal
performance measures published by the State Tax Equalization
Board are used by: taxpayers and local governments in property
assessment appeals, the Department of Revenue for certain State
realty transfer taxes and the courts when considering county
assessment uniformity; and
WHEREAS, Despite this, the State Tax Equalization Board has
not been charged or provided the necessary resources to assure
that data used to develop the measures are consistently reported
by all counties and are representative of the bulk of the
county's property inventory, both sold and unsold properties;
and
WHEREAS, County property inventories are substantially
different and the differences currently are not taken into
account in the development of a county's performance measures;
and
WHEREAS, When a county begins the process of a countywide
reassessment, the initial step is to collect data on the current
value of all property within the county. It is important that
this initial level of data be accurate in order for the rest of
the reassessment process, and any future use of this data, to be
fair and equitable; and
WHEREAS, Data collection criteria and procedures vary between
data collectors within a county and are also different from
county to county, thus making it difficult for the political
16
subdivisions and the Commonwealth to compare accurate property
values from within a county and when comparing counties;
therefore be it
RESOLVED, That the House of Representatives appoint a task
force to develop criteria and procedures for data submission by
the county to the State Tax Equalization Board and verification
by the State Tax Equalization Board to address insufficient
sample data and to assure and disclose that the sample data
relied on to develop a county's performance measures during a
reassessment is representative of the bulk of the county's
property inventory; and be it further
RESOLVED, That the membership of the task force be made up
of:
(1) two members of the House of Representatives or their
designees, one appointed by the Majority Leader and one
appointed by the Minority Leader;
(2) two members of the House of Representatives or their
designees consisting of the chair and minority chair of the
House Local Government Committee;
(3) two members of the House of Representatives or their
designees consisting of the chair and minority chair of the
House Finance Committee;
(4) two appointees from each of the memberships listed
in this paragraph from a list submitted by each membership,
one appointed by the Majority Leader and one appointed by the
Minority Leader:
(i) the State Tax Equalization Board;
17
(ii) the Department of Revenue;
(iii) the Assessors' Association of Pennsylvania;
and
(iv) the County Commissioners Association of
Pennsylvania;
and be it further
RESOLVED, That the task force utilize the staff of the
Standing Committee on Local Government and the Standing
Committee on Finance in consultation with and assistance from
the Local Government Commission and the Legislative Budget and
Finance Committee; and be it further
RESOLVED, That the task force be charged with developing
criteria and procedures for data submission by the county to the
State Tax Equalization Board and verification by the State Tax
Equalization Board to address insufficient sample data and to
assure and disclose that the sample data relied on to develop a
county's performance measure during a reassessment is
representative of the bulk of the county's property inventory;
and be it further
RESOLVED, That the task force be charged with developing
criteria and procedures for data collection by those individuals
or organizations conducting the collection of the data to
determine the current value of properties and real estate within
a county and providing that data to the county assessor,
including the viability of creating a uniform training program
for individuals and organizations collecting the data that is
provided to the county assessor; and be it further
18
RESOLVED, That the task force report its results and present
its findings to the Chief Clerk of the House of Representatives
no later than six months after the adoption of this resolution.
19
B. Relevant Legislation
20
Senate Bill 704: Changes the Composition of the State Tax Equalization Board.
PRINTER'S NO. 685
THE GENERAL ASSEMBLY OF PENNSYLVANIA
SENATE BILL
No. 704 Session of 2011
INTRODUCED BY GORDNER, YAW, PILEGGI, ARGALL, BROWNE, FERLO,
FOLMER, HUGHES, McILHINNEY, MENSCH, ORIE AND RAFFERTY,
FEBRUARY 25, 2011
REFERRED TO FINANCE, FEBRUARY 25, 2011
AN ACT Amending the act of June 27, 1947 (P.L.1046, No.447), entitled,
as amended, "An act providing for equalization of assessed valuations of real property throughout the Commonwealth for use in determining the amount and allocation of Commonwealth subsidies to school districts; providing for the establishing of a common level ratio for each county; creating a State Tax Equalization Board; and prescribing its powers and duties; imposing duties on certain local officers, agents, boards, commissions and departments; and making an appropriation," further providing for board membership, for chairman's authority and duties, and for quorum and hearings.
The General Assembly of the Commonwealth of Pennsylvania
hereby enacts as follows:
Section 1. Section 2 of the act of June 27, 1947 (P.L.1046,
No.447), referred to as the State Tax Equalization Board Law,
amended January 14, 1952 (1951 P.L.1909, No.525), is amended to
read:
Section 2. Appointment of Board; Compensation.--
(a) The board shall consist of [three] five members, three
21
of whom shall be public members, who shall be citizens of the
United States, residents of Pennsylvania and qualified electors
for a period of at least one (1) year next preceding their
appointments. Each appointee shall be familiar by training or
experience with the problems involved in the work of the board.
(b) The public members of the board shall be appointed by
the Governor for terms of four (4) years each, or until their
successors shall be duly appointed and shall have qualified. Any
vacancy occurring shall be filled by appointment of the Governor
for the unexpired term. Each member of the board shall devote
his entire time to the duties of his office. A member of the
board may, after notice and an opportunity to be heard, be
removed for cause by the Governor.
(c) The chairman of the board shall receive an annual salary
of twelve thousand dollars ($12,000), and each other public
member thereof shall receive an annual salary of eleven thousand
dollars ($11,000).
(d) In addition to the public members, the board shall
consist of the Secretary of Education or his designee and the
Secretary of Revenue or his designee.
Section 2. Sections 3 and 4 of the act are amended to read:
Section 3. Chairman; Authority and Duties.--The Governor
shall designate one of the public members as chairman. The
chairman shall be in charge of the administration of the board,
and the transaction of its routine business, and shall execute
the orders and policies of the board. In the absence of the
chairman, the member designated by him shall perform his duties
22
and, while so doing, shall have the authority of chairman.
Section 4. Quorum.--[Two (2)] Three members of the board
shall constitute a quorum. A quorum, voting unanimously, shall
be sufficient to exercise all the rights and perform all the
duties of the board.
Section 3. Section 16.1 of the act, added December 13, 1982
(P.L.1158, No.267), is amended to read:
Section 16.1. Establishment of a Common Level Ratio.--(a)
The State Tax Equalization Board shall, annually, prior to July
1, establish for each county a common level ratio for the prior
calendar year.
(b) In arriving at such ratio, the board shall use
statistically acceptable techniques, including sales ratio
studies. The board's method in arriving at the ratio shall be
made available to the public. The ratio shall be certified to
the chief assessor of each county and it shall be admissible as
evidence in any appeal involving real property tax assessments.
(c) Any political subdivision, school district or taxpayer
aggrieved by any finding, conclusion or any method or technique
of the board made pursuant to this section may, in writing,
state objections thereto and may appeal de novo such ratio
determination to the Commonwealth Court. After receiving any
objections, the board [may] shall grant a hearing and may modify
or adjust its findings and computations as it shall appear
proper.
(d) If the common level ratio increases or decreases by ten
percent or more, the board shall immediately review its findings
23
prior to certification of the ratio.
Section 4. This act shall take effect in 60 days.
24
House Bill 84: Would include Philadelphia County under the Assessors Certification Act. (Similar Legislation -- Senate Bill 1314)
PRIOR PRINTER'S NO. 42 PRINTER'S NO. 1539
THE GENERAL ASSEMBLY OF PENNSYLVANIA
HOUSE BILL
No. 84 Session of 2011
INTRODUCED BY THOMAS, BISHOP, CALTAGIRONE, M. O'BRIEN AND
YOUNGBLOOD, JANUARY 19, 2011
AS REPORTED FROM COMMITTEE ON URBAN AFFAIRS, HOUSE OF
REPRESENTATIVES, AS AMENDED, APRIL 13, 2011
AN ACT Amending the act of April 16, 1992 (P.L.155, No.28), entitled
"An act providing for the certification and recertification of assessors; establishing eligibility and training requirements; defining the powers and duties of the State Board of Certified Real Estate Appraisers relating to training, certification and recertification of assessors; and authorizing the board to establish fees," further providing for nonapplicability.
The General Assembly of the Commonwealth of Pennsylvania
hereby enacts as follows:
Section 1. Section 11 of the act of April 16, 1992 (P.L.155,
No.28), known as the Assessors Certification Act, amended
November 19, 2004 (P.L.834, No.100), is repealed:
[Section 11. Nonapplicability.
This act shall not apply to counties of the first class.]
Section 2. An assessor who is employed by a county of the
25
first class on the effective date of this section shall have
three FOUR years from the effective date of this section to
become certified under the act.
Section 3. This act shall take effect in 60 days.
26
House Bill 1463: Creates a training program for Assessors
PRINTER'S NO. 2017
THE GENERAL ASSEMBLY OF PENNSYLVANIA
HOUSE BILL
No. 1463 Session of 2011
INTRODUCED BY NEUMAN, JUNE 6, 2011
REFERRED TO COMMITTEE ON PROFESSIONAL LICENSURE, JUNE 6, 2011
AN ACT Amending the act of April 16, 1992 (P.L.155, No.28), entitled
"An act providing for the certification and recertification of assessors; establishing eligibility and training requirements; defining the powers and duties of the State Board of Certified Real Estate Appraisers relating to training, certification and recertification of assessors; and authorizing the board to establish fees," further providing for duties of board and for qualifications.
The General Assembly of the Commonwealth of Pennsylvania
hereby enacts as follows:
Section 1. Section 4 of the act of April 16, 1992 (P.L.155,
No.28), known as the Assessors Certification Act, is amended by
adding a subsection to read:
Section 4. Duties of board.
* * *
(c.1) Training program.--The board shall establish and
administer a training program for persons who apply to be
assessors, which program shall include instruction on the
27
following topics:
(1) Historical and current Pennsylvania judicial
decisions affecting property valuation, assessment and
reassessment.
(2) The implications of Pennsylvania judicial decisions
for permissible valuation and assessment practices in this
Commonwealth.
(3) The manner in which an assessor's duties have been
and are currently impacted or may be impacted in the future
by Pennsylvania judicial decisions.
* * *
Section 2. Section 5(b) of the act is amended to read:
Section 5. Qualifications.
* * *
(b) Requirements.--An applicant shall meet the following
requirements:
(1) The applicant shall have a high school diploma, or
its equivalent, or two years of assessing experience.
(2) The applicant shall be at least 18 years of age.
(3) The applicant shall be a resident of this
Commonwealth for at least six months.
(4) The applicant shall have successfully completed a
minimum of 90 hours of the basic courses of study approved by
the board covering the appraisal assessing profession or any
other professional courses acceptable to the board. At the
discretion of the county commissioners, the county may
reimburse county assessors for the costs of completing the
28
courses of study required by this subsection.
(5) The applicant shall have successfully completed the
training program established by the board under section
4(c.1).
Section 3. This act shall take effect in 60 days.
29
House Bill 2137: Impose a temporary moratorium on court-ordered property reassessments.
PRINTER'S NO. 2989
THE GENERAL ASSEMBLY OF PENNSYLVANIA
HOUSE BILL
No. 2137 Session of 2012
INTRODUCED BY SACCONE, WHITE, NEUMAN, EVANKOVICH, BLOOM,
D. COSTA, P. COSTA, CUTLER, KORTZ, ROCK, SIMMONS AND SWANGER,
JANUARY 23, 2012
REFERRED TO COMMITTEE ON URBAN AFFAIRS, JANUARY 23, 2012
AN ACT Providing for a temporary moratorium of court-ordered countywide
reassessments and for reforms based upon study.
The General Assembly of the Commonwealth of Pennsylvania
hereby enacts as follows:
Section 1. Short title.
This act shall be known and may be cited as the Property Tax
Reassessment Moratorium Act.
Section 2. Findings and purpose.
The General Assembly finds and declares as follows:
(1) The method of property tax assessment in this
Commonwealth is fragmented and in need of reform.
(2) The current method provides for little uniformity
between counties resulting in vast inequities of property
assessments across this Commonwealth.
30
(3) Further, the tax assessment system provides little
protection for homeowners who experience sudden and dramatic
increases in their property assessments as a result of a
countywide assessment.
(4) Failure to address the problem has led to the
potential for devastating tax increases that would be harmful
to the citizens and economic well-being of this Commonwealth.
(5) A study was conducted of the Commonwealth's property
assessment system.
(6) The study addressed the proper policies and
procedures necessary to ensure uniformity among counties and
a comparative analysis of the property assessment systems in
other states.
(7) The study concluded that changes are needed and the
General Assembly should enact legislation to address issues
raised by the study.
Section 3. Definitions.
The following words and phrases when used in this act shall
have the meanings given to them in this section unless the
context clearly indicates otherwise:
"Local taxing authority." Any political subdivision
authorized to impose real property taxes.
Section 4. Moratorium.
(a) Prohibition.--No local taxing authority may undertake,
on or after the effective date of this section, the process of a
court-ordered countywide reassessment of real property for
purposes of levying property taxes; however, counties currently
31
conducting a court-ordered countywide reassessment as of the
effective date of this section may, at the discretion of the
county, continue the process.
(b) End of prohibition.--The prohibition under subsection
(a) shall remain in effect until the General Assembly has
enacted legislation to address the declarations contained in
section 2(1), (2), (3) and (4) or until December 31, 2013,
whichever comes first.
Section 5. Effective date.
This act shall take effect immediately.
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Senate Bill 1439: Auditor General shall conduct a procedural and performance audit of a
county reassessment.
PRINTER'S NO. 2018
THE GENERAL ASSEMBLY OF PENNSYLVANIA
SENATE BILL
No. 1439 Session of 2012
INTRODUCED BY PIPPY, MARCH 16, 2012
REFERRED TO FINANCE, MARCH 16, 2012
AN ACT Providing for property reassessment audits.
The General Assembly of the Commonwealth of Pennsylvania
hereby enacts as follows:
Section 1. Short title.
This act shall be known and may be cited as the Property
Reassessment Audit Act.
Section 2. Legislative findings and declaration of policy.
The General Assembly finds and declares that:
(1) Countywide reassessments, including court-ordered
reassessments, have been justified and initiated on the basis
of data derived from the State Tax Equalization Board. Both a
special performance audit conducted by the Auditor General in
February of 2011 and a report issued by the Legislative
33
Budget and Finance Committee in July of 2010 questioned the
veracity of data generated by the State Tax Equalization
Board.
(2) Reassessment valuation models that rely on the State
Tax Equalization Board sales data may exclude sales
considered valid by the International Association of
Assessing Officers guidelines, contributing to inaccurate
valuation during a reassessment.
(3) Inaccurate sales data, inappropriate modeling and
inaccurate property inventory data in reassessments affect
the uniformity of taxation mandated by section 1 of Article
VIII of the Constitution of Pennsylvania by yielding
unnecessarily inaccurate valuations and disproportionate tax
burdens.
Section 3. Definitions.
The following words and phrases when used in this act shall
have the meanings given to them in this section unless the
context clearly indicates otherwise:
"Board." The State Tax Equalization Board.
"Completion." The establishment of values for all properties
in the county and released on an informal basis to the public.
"Contractor." A mass appraisal company or other contractors,
subcontractors or vendors involved in constructing the property
inventory database or other activities related to establishing
property values.
"County." A county of the second class, second class A,
third class, fourth class, fifth class, sixth class, seventh
34
class or eighth class.
Section 4. Powers and duties of Auditor General.
(a) Countywide reassessments.--The Auditor General shall
conduct a procedural and performance audit of a county or
contractor conducting a reassessment initiated after the
effective date of this section. The Auditor General shall
conduct an investigation, conduct the audits, issue remedial
recommendations and take any additional action as provided in
this act.
(b) Other reassessments.--The Auditor General may, or upon
the request of the Governor or a member of the General Assembly
shall, investigate any countywide reassessment being conducted
on the effective date of this section in accordance with section
5, except that no investigation may be initiated if more than
six months have elapsed since the certification of any
valuations by the county.
(c) Prohibition.--No countywide reassessment may be
certified by a county until the certificate under section 7(e)
has been issued.
Section 5. Investigations.
(a) General.--The Auditor General shall investigate any
countywide reassessment in accordance with this section.
(b) Procedure.--
(1) The Auditor General shall provide written notice to
the governing body of the county and the county chief
executive, if any, that an investigation has been initiated.
County officials and employees shall cooperate with the
35
Auditor General or his designees and shall provide requested
records within 30 days of a request.
(2) The Auditor General, or his designee, may issue
subpoenas to compel the attendance of county officials,
employees or contractors involved in the maintenance of the
property inventory database and the production of any data or
records in the possession of county officials, employees or
contractors. If any person fails to comply with any subpoena
under this paragraph or refuses to be sworn or testify as a
witness, or if any person refuses to permit the Auditor
General to inspect records, the Auditor General may, in
addition to other remedies provided by law, petition the
court of common pleas to order compliance. The court shall
order compliance if it deems the testimony relevant to
determining the accuracy of the valuations used in the
reassessment. Nothing under this section shall authorize the
disclosure of any information deemed proprietary by law or
contract.
(c) Contracts.--Notwithstanding any provision of law, a
contract for reassessment services executed after the effective
date of this section shall include provisions providing for the
mutual agreement of the parties to the contract that their
officers, employees and agents shall cooperate with any
investigation as provided in this section.
(d) Report.--For investigations initiated under section
4(b), the Auditor General shall, within 60 days of the written
notice provided under subsection (b), issue a report to the
36
governing body and chief executive of the county setting forth
the results of the investigation and whether there are
sufficient grounds to warrant judicial action as provided under
section 6.
Section 6. Judicial action.
(a) Petition.--If, after an investigation under section 5,
the Auditor General determines that sufficient evidence of
inaccurate valuations exists to warrant procedural and
performance audits under section 7, the Auditor General shall
petition the Commonwealth Court to stay further use of the new
assessed values until the time as the Auditor General has
conducted the audits and issued remedial recommendations. Notice
of the petition shall be provided to the governing body and
chief executive of the county and its contractors.
(b) Hearing.--Within 15 days of the petition under
subsection (a), the Commonwealth Court shall hold a hearing and
obtain evidence as may be necessary to issue an order.
(c) Order.--If the Commonwealth Court determines that
sufficient evidence of inaccurate valuation of property exists,
it shall issue an order staying further implementation of the
reassessment, including, if necessary, staying any
determinations of formal appeals, pending the issuance of the
report provided under section 7. The order may contain
additional direction to the county to ensure the continuity of
operations of all taxing districts pending the issuance of the
report.
(d) Extensions.--The Auditor General may petition the
37
Commonwealth Court for an extension of any deadlines provided
for under this act if necessary to complete an audit or the
implementation of recommendations.
Section 7. Audits.
(a) General.--If required by this act, the Auditor General
shall conduct the following:
(1) A performance audit of the county and the contractor
to determine whether the quantity or quality of work
performed yields valuations of property of sufficient
accuracy and fairness. Ratio studies between assessed values
and market values, as determined through sales or appraisals,
may be used.
(2) A procedural audit to examine whether the county and
the contractor are following established or recommended
procedures as set forth by the county or in accordance with
law.
(b) Personnel.--The Auditor General shall have the same
powers of investigation provided under section 5 and may employ
accountants, assessors or statisticians who shall receive
compensation as fixed by the Auditor General.
(c) Reports.--The Auditor General shall issue a written
report setting forth the results of the audits and any remedial
recommendations as provided under subsection (d), as follows:
(1) For audits required under section 4(a), the Auditor
General shall issue the report to the governing body and
chief executive of the county, not later than 90 days after
the completion of the reassessment. The recommendations of
38
the Auditor General shall be implemented by the county within
90 days of the receipt of the report.
(2) For audits required under section 6(c), the Auditor
General shall issue the report to the legislative body and
chief executive of the county, if any, and the Commonwealth
Court not later than 90 days after the date of the order. The
recommendations of the Auditor General shall be implemented
by the county within 90 days of the receipt of the report.
(d) Recommendations.--The report shall contain
recommendations that the Auditor General believes may be
necessary to better ensure the accuracy and fairness of the
reassessment. The chief assessor of the county shall notify the
Auditor General in writing when the recommendations have been
fully implemented.
(e) Certificate.--The Auditor General or Commonwealth Court
shall issue a written certificate to the county setting forth
that either recommendations were not included in the audit or
that all recommendations have been fully implemented by the
county.
(f) Appointed liaison.--If the Auditor General deems it
necessary to assist a county in the implementation of
recommendations, the Auditor General may appoint a liaison to
assist the county and report on the progress of the
implementation. The liaison shall be an individual with at least
five years' experience in reassessment practices and procedures,
and shall receive compensation as determined by the Auditor
General.
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Section 8. Reassessment appeals.
Nothing in this act shall affect the progress of informal
appeals or conferences conducted by a county to resolve disputes
over valuation. Notwithstanding any other provision of law, for
audits conducted as required under section 4(a), formal appeals
shall not be conducted until after the certification of the
reassessment by the county.
Section 9. Expiration.
This act shall expire December 31, 2015.
Section 20. Effective date.
This act shall take effect in 60 days.
40
C. Comments
41
State Representative Jesse White I want to thank the members of the Task Forces for their hard work and commitment to these
issues. By bringing all the stakeholders together and engaging in focused, non-partisan analysis,
we have finally developed a blueprint for real property tax reassessment reform.
These reports strengthen my belief that until we correct the fundamental flaws in the
reassessment process, a moratorium on court-ordered reassessments is essential to prevent the
system from being abused to exploit loopholes in the anti-windfall provisions to increase tax
revenue outside the scope of Act 1 of 2006.
Any tool can become a weapon if placed in the wrong hands, and in my opinion, the
reassessment process has been turned into a weapon to raise revenue instead of a tool for
statistical measure to ensure equal and uniform taxation of properties. We must dramatically
reduce this potential for abuse and restore the reassessment process to its rightful intent as an
instrument to help taxpayers, not punish them.
The need for both technical and policy-based solutions are evident, and I hope these reports will
help guide my colleagues as we begin the work of crafting, debating and ultimately
implementing these solutions in the weeks and months ahead. The input of the task force
members came from a uniquely qualified group of stakeholders who possessed a combination of
the knowledge of the strengths and weaknesses of the current reassessment system, a
comprehensive knowledge of the legal restrictions placed upon us by the Pennsylvania
Constitution, and a firm commitment to change a status quo we all recognize to be fundamentally
flawed in various ways.
I view these task force reports as the beginning of the conversation, not the end, and I look
forward to working together to finally end decades of futility to reform the property tax
reassessment process to protect and benefit the people of Pennsylvania.
___________________
Jesse White
46th
Legislative District
Washington/Allegheny/Beaver Counties
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Pennsylvania School Boards Association
The Pennsylvania School Boards Association joins the other Task Force members in the recognition that
the Commonwealth’s assessment laws are systemically flawed and in need of reform. PSBA encourages
the General Assembly to move forward with the Task Force’s recommendations as soon as possible to
develop and implement legislation to ensure that Pennsylvania’s property assessment system is fair to all
taxpayers.
The inequity perpetuated by the current patchwork of reassessment schedules and methods used across
the state results in nothing but continual controversy among local governments, school districts, and
taxpayers. There are currently numerous proposals in the General Assembly that attempt to address a
small or specific symptom of our broken assessment laws; however, none of the proposals provides the
required comprehensive solution to the underlying problem. Only comprehensive assessment legislation
that adds predictability to the system by setting standards for when and how a reassessment is to be
conducted will accomplish the goals of the Task Force and meet the constitutionally-mandated uniformity
of taxation.
One legislative proposal attempts to protect undervalued properties by prohibiting school districts and
other taxing authorities from appealing the assessment of a property based on the sale of the property,
undermining the goal of uniformity by increasing the discrepancy among taxable property and shifting the
burden carrying undervalued properties to those taxpayers who are accurately assessed. Additionally,
another proposal prohibits local taxing authorities from undertaking a court-ordered countywide
reassessment of real property, which, again, does nothing to remedy the existing inequities in property
assessments and denies certain property owners equal protection under the law. Other proposals
attempt to impose additional anti-windfall provisions on school districts and taxing authorities following a
reassessment, while some attempt to implement property tax reform with the goal of reducing or
eliminating the burden of the property tax on local taxpayers altogether.
At the heart of all of these proposals is Pennsylvania’s broken property assessment laws, which give rise
to unconstitutional inequities that inevitably result from the prolonged use of old and outdated assessment
values in areas where property values have changed at divergent rates. Implementing these current
proposals would serve only as a temporary bandage, potentially mitigating a perceived issue in the short
term, but ignoring the root of the problem and the need for a comprehensive solution. Without careful
examination of the underlying problem with our assessment laws, these proposals will do nothing to reset
the system and ensure that property owners who are fairly assessed and are paying their proportionate
share of taxes are not burdened with carrying the weight of owners of under-assessed properties.
The development and implementation of the recommendations set forth by this Task Force have the ability to transform and modernize Pennsylvania’s property assessment system and render the current proposals that address only a single symptom of this problem entirely moot. To ensure that property assessments are completed in a uniform and consistent manner, PSBA encourages the continued examination of our current assessment system and the adoption of solutions to ensure uniformity and fairness for all property owners. Only uniform assessment and appeal practices, accurate and timely property valuation, and increased transparency for the disclosure of how properties are valued and assessed will succeed in curing the problems with our current property assessment law.
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D. Additional Information
44
Assessors’ Association of Pennsylvania Rejection Code List
Rejection Codes
Code Code Name Property examples IAAO Description
00 Valid Sale
01 No Assessed Valuation Sale of Property conveying only a portion of the
assessed unit and/or have no Assessed Value at
time of Transfer, i.e. Subdivisions, Splits or Cut-
offs.
02 Family Transfer Transfer between family members where no
consideration is available. Transfer with
consideration will need further research to
determine the validity of the sale. Generally,
these sales will be invalid.
Sales between close relatives (parents, children,
aunts, uncles, nephews, nieces, grandparents)
are usually non-open-market transactions. If the
following factors apply during the follow-up
verification, the sale may be considered a valid
transaction.
• The property was exposed on the open
market.
• The asking and selling price was within the
range that any party purchasing the property
would be expected to pay.
• The sale meets all other criteria of being an
open-market, arm’s-length transaction.
03 Corporate Affiliates /
Acquisitions or Divestments
A transfer between related corporate entities. For
example, the certificate of residence is the same as
the current mailing address on record then more
than likely they are affiliates.
Sales between related entities will most likely be
invalid because they would be considered
corporate affiliates.
Sales between Corporate Affiliates are usually
non-open-market transactions involving
business considerations not related to the real
estate.. If the following factors apply during the
follow-up verification, the sale may be
considered a valid transaction.
• The property was exposed on the open
market.
• The asking and selling price was within the
range that any party purchasing the property
would be expected to pay.
• The sale meets all other criteria of being an
open-market, arm’s-length transaction.
Acquisitions or divestments by large
corporations, pension funds, or real estate
investment trust (REITs) that involve multiple
parcels typically are invalid sales for ratio
studies.
45
Rejection Codes
Code Code Name Property examples IAAO Description
04 Government/Public Utility Sales to or from any governmental agency are
usually invalid (See IAAO description)
. Each sale in this category should be thoroughly
researched prior to use in any study. These sales
include but are not limited to schools, municipal
buildings, or former utility buildings and Rights-
of-way.
Sales to government agencies can involve an
element of compulsion and often occur at prices
higher than would otherwise be expected. When
the governmental agency is the seller, values
typically fall on the low end of the value range.
The latter should not be considered in model
calibration or ratio studies unless an analysis
indicates governmental sales have affected the
market in specific market areas or
neighborhoods.
05 Charitable/Religious/
Educational institutions or
other Tax Exempt Agencies
Sale to or from any religious or other non-profit
organizations are usually invalid sales for ratio studies.
These sales can include but are not limited to
churches and hospitals. This will also include the
sale of a tax exempt property. The sale of a tax
exempt property should be removed from all ratio
studies because there could be questionable elements
of the sale.
A sale to such an organization can involve an
element of philanthropy, and a sale by such an
organization can involve a nominal
consideration or restrictive covenants. These
sales often involve partial gifts and therefore are
generally not representative of market value.
06 Financial Institutions Property transfers where the financial institution
is the Grantee (See Code 08). Property transfers
where the financial institution is the grantee
could be in lieu of foreclosure are most likely a
forced sale. The exception could be but not
limited to vacant land sales for the construction
of a new bank. The reviewer should consider
whether the sale was part of a corporate
divestment of bank assets or a restructuring of
the business of the bank. Where the financial
institution is the Grantor, the sale will need
further research to determine if the sale should be
rejected. Items to research would be:
1. Condition of home at time of sale
compared to time
of assessment.
2. Time on Market.
3. Conditions of sale.
These sales are often made in lieu of foreclosure
and are not exposed to the open market.
However, open-market sales in which a financial
institution is a willing buyer, such as the
purchase of vacant land for a branch may be
considered potentially valid transactions.
The majority of the sales in which the financial
institution is the seller are properties that were
formerly foreclosed on by the financial
institution. Also, they are easily identified
because the seller is the financial institution.
These sales typically are on the low side of the
value range because the financial institution is
highly motivated to sell and may be required by
banking regulations to remove the property
from its books. The longer the property is
carried on the books by the financial institution,
the lower the asking price is likely to be. If the
financial institution was ordered by banking
regulators to dispose of the property regardless
of the sale price, the sale should not be included
as a valid transaction. Sales in which a financial
institution is the seller typically should be
considered as potentially valid for model
calibration and ratio studies if they comprise
more than 20 percent of sales in a specific
market area.
07 Part Interest Sales A transfer of property that is less than the entire
fee simple interest in a property is not a valid sale
for ratio studies. Examples of this would be the
sale of a 1/3 interest, sale of the mineral rights or
A sale involving a conveyance of less than the
full interest in a property should be excluded as
a valid transaction. Sometimes all the partial
interest owners of a property may agree to
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Rejection Codes
Code Code Name Property examples IAAO Description
sale of an improvement subject to a ground lease.
syndication and sell their portions of the
estate to a buyer (typically on the same day).
However, the sum of all the sale prices may not
necessarily indicate the market value of the
whole property. These transfers should not be
used as valid sales without thorough testing,
analysis, and documentation.
08 Forced Sale/ Sheriff Sale These sales usually include all sales from the
Sheriff, Tax Claim Bureau and other forced sales,
including sales pursuant to judicial order.
These sales should never be considered for
model calibration or ratio studies. The seller in
these sales is usually a sheriff, receiver, or other
court officer.
A foreclosure is not a sale but the legal process
by which a lien on a property is enforced.
These sales are often made in lieu of foreclosure
and are not exposed to the open market.
09 Multiple-parcel Sale Sales which include additional side lots to a
primary residence or when multiple lots are
identified on one deed with one consideration.
These sales will generally be considered invalid
because it is often impossible to determine the
actual consideration paid for any one parcel.
A multiple-parcel sale is a transaction involving
more than one parcel of real property. These
transactions present special considerations and
should be researched and analyzed prior to
being used for valuation or ratio studies.
If the appraiser needs to include multiple-parcel
sales, it should be determined whether the
parcels are contiguous and whether the sale is a
single economic unit or multiple economic units.
Regardless of whether the parcels are
contiguous, any multiple-parcel sale that
involves multiple economic units generally
should not be used in valuation or ratio studies.
The sum of the appraised values for the parcels
involved in the transaction should be compared
to the total sale price.
10 Estate Sale When the deed states the executor or executrix is
conveying the property then a question should be
posed about the validity.
Generally, estate sales are considered invalid for
ratio studies. If property was listed for sale and
exposed to the market for a reasonable period of
time, the sale may be valid.
A conveyance by an executor or trustee under
powers granted in a will may not represent fair
market value, particularly if the sale takes place
soon after the will has been filed and admitted
to probate in order to satisfy the decedent’s
debts or the wishes of an heir.
11 Land Contract These sales are usually long term agreements to
purchase the property and often do not represent
the current fair market value of the property.
Accordingly, they are invalid sales for purposes
of ratio studies. Also known as Article of
Agreements or Installment Land Contracts., these
sales are often contingent on factors not directly
related to the real estate..
Land contracts (also known as contracts for
deeds) and other installment purchase
agreements in which title is not transferred until
the contract is fulfilled require careful analysis.
Deeds in fulfillment of a land contract often
reflect market conditions several years in the
past, and such dated information should not be
considered.
Sales data from land contracts also can reflect
the value of the financing arrangements. In such
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Rejection Codes
Code Code Name Property examples IAAO Description
instances, if the transaction is recent, the sale
price should be adjusted for financing, if
warranted, and included as a valid transaction
(see Section 7.4.4). Because the contract itself
often is not recorded, discovery of these sales is
difficult until the deed is finally recorded. The
sale then is likely to be too old to be used.
12 Auctions Absolute auction sales are invalid but if the
following criteria is met for an auction sale, then
it could be considered valid:
• Was the auction well-advertised?
• Was the auction well-attended?
• Did the seller have a minimum bid or the right
of refusal on all bids (with reserve)?
Absolute auctions do not have a low bid clause
or right of refusal and typically are advertised as
absolute auctions. The property is sold to the
highest bidder whatever that bid may be. All
absolute auctions should be considered invalid.
Before auction sales should be considered as
valid transactions, the following criteria should
be met:
• Was the auction well-advertised?
• Was the auction well-attended?
• Did the seller have a minimum bid or the right
of refusal on all bids (with reserve)?
13 Date of Transfer The date of execution of a deed is the date of sale.
As long as the document is recorded in the same
calendar year, the sale is valid. However, if the
date of execution is in a different year than it is
recorded, the sale should be considered invalid.
This is the date on which the sale was closed or
completed. Not all jurisdictions require
recordation of deeds; therefore, the deed date
should be considered the most reliable date of
sale, not the recording date. If a copy of the deed
is not available, the date on the sales verification
questionnaire should be used.
14 Time on Market The amount of time a property is actively listed
on the market. Actively usually means with a
realtor or other real estate professional.
Sales of properties that have been exposed to the
open market too long, not long enough, or not at
all may not represent market value. The
jurisdiction should monitor typical marketing
time. The typical marketing time may be longer
in a depressed market.
15 Corporate Relocation
Company
When a relocation company takes possession of a
property in order to liquidate the property. This
can be very difficult to identify because the
relocation company isn’t always mentioned in the
deed.
16 Sale of Doubtful Title A deed other than a warranty deed and does not
fall into one of the other categories. The can be
but not limited to Special Warranty Deeds,
Bargain & Sale Deed, and Quit Claim Deeds.
These sales are invalid for ratio studies.
Sales in which title is in doubt tend to be below
market value. When a sale is made on other than
a warranty deed, there is a question of whether
the title is merchantable. A quitclaim deed is an
example.
17 Lease Purchases/ Leaseback A long term arrangement between buyer and
seller where buyer will rent property for certain
amount of time with the option to purchase the
property at the fair market value at time of lease
expiration.
A leaseback is defined as the sale of a building,
land, or other property to a buyer under special
arrangements for simultaneously leasing it on a
long-term basis to the original seller, usually
with an option to renew the lease. These
transactions are also referred to as sale and
48
Rejection Codes
Code Code Name Property examples IAAO Description
leaseback and sale-leaseback. Leasebacks occur in
the commercial and industrial class of property.
Sales involving leasebacks are generally invalid
because the sale price is unlikely to represent the
market value of the property. This can be
determined only by further verification of
the sale
18 Partial Assessment Sales where the sale price includes the
improvement but the assessment office has not
yet assessed the new construction are invalid for
ratio studies.
19 Equipment/Personal
Property
Sale that includes Personal Property is invalid
unless the consideration paid for the real estate is
set forth separately.
20 Special or Preferred
Assessments (i.e. Clean and
Green, Lerta, KOZ, TIF,
PILOT, etc.)
The sale of properties which include special tax
abatement programs. These sales will generally
be considered invalid for ratio studies. They may
be considered valid if the reviewer’s research
indicates the price paid was comparable to
similar properties sold on the open market and
not influenced by the preferential assessment.
21 Duplicate sales / Deed of
Correction
Sale of a property that occurs more than once in
the same calendar year.
A transfer of property is done for the sole
purpose of correcting defects in the title. These
sales usually have no consideration.
22 Other (Needs Explanation) This code requires explanation why the appraiser
feels the sale should be invalid. A sale should not
be rejected as invalid unless a specific reason to
do so is identified.
Grouping of Reject Codes
1. Always invalid – the following codes should always be removed from ratio studies and other statistical
studies
01 No Assessed Value
03 Corporate Affiliates / Acquisitions / Divestments
04 Government / Public Utility
05 Tax Exempt Properties
07 Partial Interest Sales
08 Forced Sale / Quit Claim
11 Land Contract
13 Date of Transfer
16 Sale of Doubtful Title
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17 Lease Purchase
18 Partial Assessment
19 Equipment/Personal Property
21 Duplicate Sales
2. Require more Research – The following codes will require additional research to determine their validity
02 Family Transfer
06 Financial Institutions
09 Multi-parcel Sales (If computer system can combine the parcels into one sales record)
10 Estate Sale
12 Auction Sales
14 Time on the Market
15 Corporate relocation Company
20 Special or Preferred Assessments (C&G, LERTA, KOZ)
22 Other with a required Explanation