washington county reassessment amicus curiae brief filed by state rep. jesse white

8/4/2019 Washington County Reassessment Amicus Curiae Brief filed by State Rep. Jesse White

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INTHECOURTOFCOMMONPLEASOFWASHINGTONCOUNTY,PENNSYLVANIA

:WASHINGTONSCHOOL : CIVILDIVISIONDISTRICTandMcGUFFEY :SCHOOLDISTRICT, : NO.: 2008-607

:Plaintiffs, : TYPEOFPLEADING:

:vs. : BRIEFOFAMICUSCURIAE

:WASHINGTONCOUNTYand :LAWRENCEO.MAGGI, :J.BRACKENBURNS,SR.,and :DIANAL.IREY,Washington :CountyCommissioners,and :ROBERTNEIL,ChiefAssessor :

:Defendants.:

:::::: Filedby:: JesseJ.White,Esq.: StateRepresentative,46thLegislative: DistrictofPennsylvania:: PAI.D.#91152:::::::: P.O.Box384: Cecil,PA15321: 724-743-4444


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TABLEOFCONTENTSPreliminaryStatement. Page1InterestoftheAmicus. Page2Argument Page5

BASEDONTHELEGISLATIONBOTHPASSEDANDPENDINGINTHEPENNSYLVANIALEGISLATURE,WASHINGTONCOUNTYWOULDBEBESTSERVEDINEVERYLEGITIMATEWAYBYPOSTPONINGAREASSESSMENTUNTILNOLATERTHANDECEMBER1,2012.ALLOWINGAFORCEDREASSESSMENTUNDERTHECURRENTFUNDAMENTALLYFLAWEDSYSTEMWOULDSERVENOPURPOSE,WOULDHAVEACRIPPLINGECONOMICEFFECTONWASHINGTONCOUNTYANDPOSEAFARGREATER

RISK

OF

VIOLATING

THE

UNIFORMITY

CLAUSE

OF

THE

PENNSYLVANIACONSTITUTION.

PendingandPassedLegislation.Page12HR334of2009ABlueprintforReassessmentReform.Page26Conclusion. Page40AdditionalAttachments/SourceDocuments:

HR343(2011) HR344(2011) HB1462(2011) HB1463(2011) HB1465(2011) HB1467(2011) HB1468(2011) HB1696(2011) PennsylvaniasSystemforPropertyValuationandReassessment,

preparedbythePennsylvaniaLegislativeBudgetandFinanceCommitteepursuanttoHR334of2009


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PRELIMINARYSTATEMENT

Jesse J. White, duly-elected State Representative for the 46 th Legislative District of

Pennsylvania, respectfully submits this brief as amicus curiae to urge the Court to

order a stay in the underlying action in regards to a reassessment of real estate in

Washington County, Pennsylvania. This minimal and reasonable stay would allow the

Pennsylvania Legislature adequate time to continue and complete its work on this

issue and provide more comprehensive and cohesive guidelines for such a

reassessment.

The result would be a comprehensive reassessment that ensures compliance with the

Uniformity Clause of the Pennsylvania Constitution while protecting the interests of the

taxpayers of Washington County. Failure to grant the stay and allow the forced

reassessment under the current, fundamentally flawed system would cause irreparable

financial harm to taxpayers while simultaneously crippling business growth and

economic development with no recognizable benefit to the public or the interests of

justice.


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INTERESTOFTHEAMICUS

Jesse White was sworn in as State Representative for the 46th Legislative District of

Pennsylvania in January 2007, and has held his position continuously since that time.

As per the 2010 Census, the 46th Legislative District contains 51,595 residents of

Washington County residing in the Townships of Buffalo, Canton, Cecil, Chartiers,

Cross Creek, Hanover, Hopewell, Independence, Jefferson, Mount Pleasant, Robinson,

Smith and South Franklin and the Boroughs of Burgettstown, Green Hills, McDonald,

Midway and West Middletown. The 46th Legislative District also contains smaller

portions of Beaver County and Allegheny County, where the difficulties related to

reassessment are well documented and serve as a cautionary tale in this case.

The taxpayers of Washington County will be permanently and significantly impacted by

the result of the above-captioned action. Representative White has written numerous

pieces of legislation dealing with the issue of reassessment reform and has co-

sponsored numerous others. Representative Brandon Neuman and Representative

Rick Saccone, both of whom also represent portions of Washington County in the

General Assembly, have also written bills dealing with reassessment reform. These

specific pieces of legislation will be described in greater detail later in this Brief.

There can be no question that the statutes relating to reassessment fall under the

direct purview of the State Legislature. Since the start of the 2011-12 legislative

session, both the House of Representatives and the Senate have acted on the issue of


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reassessment. The current legislative session will end on November 30, 2012, at which

point any bills not passed and signed into law will need to be re-introduced in the

following legislative session. Until that date, any or all of the pending bills can be

passed and signed into law.

In their brief, Plaintiffs claim that even if some or all of these pieces of legislation were

adopted, they would not have a substantial impact on Washington County. As a State

Representative, Jesse White has been intimately involved in the crafting and

development of legislation dealing with real estate assessment practices and school

tax reform in Pennsylvania. Representative White has appeared before this Honorable

Court as a sworn witness in a status conference on this matter on April 14, 2011 and

presented testimony about pending legislation designed to have a substantial impact

on real estate assessment practices and school tax reform in Pennsylvania.

Despite the claims of the Plaintiffs, Representative White is uniquely qualified to

provide accurate information to the Court dealing with legislative intent and directly

respond to claims made by Plaintiffs. Not only is he a member of the legislative body

with clear authority to make legislative changes in the area of reassessment, he is also

the direct author or co-author of the very pieces of legislation in question. The

Defendants lack the first-hand knowledge and/or authority under the law to make

definitive statements as to legislative intent.

As a result, Representative White has resolved to express his opinion on the issues


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raised herein, in the hope that the his direct experience with such matters will be of

assistance to the Court.


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ARGUMENT

BASEDONTHELEGISLATIONBOTHPASSEDANDPENDINGINTHEPENNSYLVANIALEGISLATURE,WASHINGTONCOUNTYWOULDBEBESTSERVEDINEVERYLEGITIMATEWAYBYPOSTPONINGAREASSESSMENTUNTILNOLATERTHANDECEMBER1,2012.ALLOWINGAFORCEDREASSESSMENTUNDERTHECURRENTFUNDAMENTALLYFLAWEDSYSTEMWOULDSERVENOPURPOSE,WOULDHAVEACRIPPLINGECONOMICEFFECTONWASHINGTONCOUNTYANDPOSEAFARGREATERRISKOFVIOLATINGTHEUNIFORMITYCLAUSEOFTHEPENNSYLVANIACONSTITUTION.

Reassessment is the process by which the value of all the properties in a county are

evaluated and set for the purposes of determining how much you pay in school and

municipal taxes. All of the value of all of the properties is added up and run through an

equation, and you get a dollar value for a mill, when multiplied by the millage rate

set by the school district or municipality, you get the amount of taxes you owe.

Washington County has not reassessed its property since 1981, which means that the

dollar value of a mill is low, especially when you compare it to neighboring areas like

Allegheny County. One of the main reasons why Washington County tax rates are so

much lower that Allegheny County is that Allegheny has been going through a messy


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reassessment process for years now, and Washington has been one of the direct

beneficiaries of the disproportionately higher rates.

There are many technical and policy problems with the reassessment process, mainly

stemming from the overriding theme that the entire process is extremely messy.

Determining a propertys value is a very inexact science, especially when the property

owner wants to pay as little in taxes as possible. The result is a lengthy, expensive and

very unpopular process that almost always results in higher property taxes for

homeowners and businesses.

In Washington County, two school districts (McGuffey and Washington) filed a lawsuit

in 2008 to force the County to conduct a reassessment. Many people wondered why

the school districts took the unusual step of filing the lawsuit, and rightfully so. Under

state law, a school district is only allowed to receive a five percent windfall, or tax

increase, as the result of a reassessment. So by definition, a reassessment will almost

always bring an across-the-board property tax increase.

The real problem is the immense loophole school districts could exploit to raise taxes

much higher. This is the really important part of the whole dynamic, which should help

bring the debate into sharp focus. When the dollar value of a mill changes as a result of

a reassessment, the school district is supposed to adjust the millage rate down to

make sure there is no windfall. For example, if the dollar value of a mill goes from $10

to $40 as the result of a reassessment, and the millage rate is 20.0, the school district


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should adjust the rate down to 5.0. This ensures that you are still paying $200 in taxes

after the reassessment.

The problem arises because although the law mandates school districts to adjust the

millage rate down, there is no real enforcement and no punishment if they fail to do so.

Using the numbers in the example above, if the school district multiplied the new mill

value through the old millage rate (because they chose not to adjust it), you would be

paying $800 in taxes instead of $200, and because they didnt technically adjust the

rate, the school board could claim that they didnt raise your taxes. It is an accounting

trick with no real penalty in the law.

The only potential remedy would be for a resident to sue a school district after their

taxes went up, but by then you have already spiraled out of control because the only

way the school district could repay you for overtaxing you would be to raise taxes. The

only option is to fix the system before everything goes bad, which is exactly what the

State Legislature has been working to do.

This tax-increase loophole shoots down the argument made by proponents of

reassessment under the current system, which is the taxes of one third of properties

will go up, one-third will go down and one-third will stay the same. According to

testimony given by former Allegheny County Council President Rich Fitzgerald at a

Democratic Policy Committee Hearing in early 2011, a whopping 90% of all property

taxes increased after the last reassessment. And why would school districts spend so


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much money on lawsuits if they really though they werent going to see a windfall in tax

revenue?

For a process designed to be basically revenue neutral, the existence of this loophole

coupled with the undeniably aggressive and zealous pursuit of a reassessment through

litigation should give both the Court and the public great cause for concern.

The Legislative Budget and Finance Committee report stated very clearly that the

current reassessment system is flawed and gave numerous recommendations for

improvements, ranging from small pieces of legislation to large-scale changes to the

State Constitution. Although defining the necessity of some additional work by

bringing stakeholders to the table on specific issues, there is finally a clear blueprint for

reforming the reassessment system.

In June 2011, the Legislature established two sweeping reform task forces established

with specific goals of how to make the reassessment process more uniform, affordable

and efficient for taxpayers. These task forces, each of which have members from the

Washington County Legislative Delegation, are currently meeting and acting on

recommendations from the comprehensive Legislative Budget and Finance Committee

study released in 2010. By law, they will be required to release their findings by the end

of 2011.


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Once those findings are released, the Legislature will still have nearly a full year in the

2011-12 Legislative Session to pass them into law. But even if they are not signed into

law in time we will have real solutions and best practices for reassessments that

Washington County can implement on their own.

By taking a reasonable amount of time to enable these measures, Washington County

would be making the most prudent move available under the circumstances. With the

very real possibility of reassessment reform looming directly ahead, Washington

County could easily have spend an estimated $8 million on a reassessment which will

be unconstitutional on its face before the process is even completed.

The process may be complicated, but the message is crystal clear. None of the

proposed legislation is designed to indefinitely postpone a reassessment, but does

reiterate a desire to make sure it is conducted the right way and for the right purpose.

Reassessment is designed to serve as a tool to make the property tax system more fair

for everyone, not allow school districts to sneak in massive property tax hikes in a clear

violation of both the letter and the spirit of the law.

The House Democratic Policy Committee held a hearing on reassessment policy in

March 2011 in Washington County, and all of the testifiers agreed the report was

accurate in identifying many problems and potential solutions. Legislation to implement

some of the reforms was introduced within weeks, including a uniform and


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constitutional moratorium bill that would apply to all counties and last no later than the

end of current legislative session on November 30, 2012.

The fear is that the school districts could use the reassessment to raise property taxes

through a loophole and keep a large piece of the windfall. There are in fact anti-

windfall laws on the books, but they unfortunately have no teeth. The only recourse

would be for a resident to sue the school district after their taxes have been raised, and

the only way the school district could possibly pay everyone back would be to raise

taxes even more. Its a black hole; once you fall in, you never get out.

Based on the real fear that we were following the same path as Allegheny County,

where 90% of homeowners saw a property tax increase after the most recent

reassessment, a temporary moratorium became a clear necessity not only to stop the

legal pressure from McGuffey and Washington, but also to close the loophole and

implement the reforms needed to protect both homeowners and business owners from

devastating property tax increases across the state.

If the true goal of the relentless legal pressure by McGuffey and Washington School

Districts is to have a fair, accurate and cost-effective reassessment in Washington

County and not to raise property taxes through a loophole in the law, the time has

come to put down their swords. Lawmakers at both the county and state level, both

Democrat and Republican, are working together to make sure we do this the right way,

and the school districts need to come to the table as partners, not adversaries. The


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only alternative is to keep fighting a battle with both sides funded by the taxpayers,

which makes no sense at all.


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PENDINGANDPASSEDLEGISLATION

One of the chief arguments made by the Plaintiffs is that the State Legislature has

failed to address the issue of reassessment reform. While blaming inaction by the State

Legislature has traditionally been a safe haven for advocacy, it simply fails to hold

water in this case. There is a plethora of pending and passed legislation dealing with

reassessment reform, plus a comprehensive, non-partisan report dealing exclusively

and extensively with reassessment reform. A thorough review is crucial to demonstrate

to the Court the commitment by the Legislature to reform the currently flawed

reassessment process.

HouseResolution343RegularSession2011-2012(Passed)Prime Sponsor: Jesse White

Last Action: Adopted, June 27, 2011 (199-0) [House]

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.

HR 343 establishes a task force to develop a set of uniform standards for county

reassessment contracting, and a county's disclosure of property valuation and


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assessment and an evaluation tool for counties to determine when a reassessment is

warranted. Task force shall also recommend a standard to be used for a Statewide

mandatory reassessment time frame.

This Resolution resolves that the House of Representatives appoint a task force to

develop the following:

uniform standards for county reassessment contracting, standards for disclosing the county's system of property valuation and

assessment, and

a self-evaluation tool for counties to determine when a reassessment iswarranted.

It also asks the task force to recommend a standard to be used for a Statewide

mandatory reassessment time frame and to present any other recommendations to

improve the system of property tax reassessment in this Commonwealth.

The ten-member task force will be made up of the following:

Two Representatives from the PA Local Government Commission appointedby the Speaker from a list of House members appointed to the Commission,

one each representing the majority and minority party.

Two members of the House of Representatives or their designees, oneappointed by the Majority Leader and one by the Minority Leader.

Two appointees from each group below appointed from a list submitted byeach group, one appointed by the Majority Leader and one by the Minority

Leader:


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the Assessors' Association of Pennsylvania; the County Commissioners Association of PA; and the PA School Boards Association.

The House task force will 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.

The task force will 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 the Resolution,

which would be December 27, 2011.

The Consolidated County Assessment Law (Act 93 of 2010) consolidated several real

property assessment statutes into one combined law, removed outdated language,

and codified some case law. It applies to counties of the Second Class A and Third

through Eighth Class counties.

HouseResolution344RegularSession2011-2012(Passed)Prime Sponsor: Brandon Neuman

Last Action: Adopted, June 27, 2011 (199-0) [House]

A Resolution establishing a task force to develop criteria and procedures for data

submission, verification and collection to address insufficient sample data and/or to


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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.

HR 344 establishes a House 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 county's property inventory.

This Resolution resolves that the House of Representatives appoints a task force to do

the following:

Develop criteria and procedures for the data submission by the county to theState Tax Equalization Board (STEB) and verification by STEB in order to

address insufficient data and to assure an disclose that the sample data

relied on to develop a county's performance measures during reassessment

is representative of the county's property inventory.

Develop criteria and procedures for data collection by those individuals ororganizations 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.

Determine the viability of creating a uniform training program for individualsand organizations collecting the data that is provided to the County

Assessor.


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The 14-member task force is made up of the following:

Two members of the House of Representatives or their designees, oneappointed by the Majority Leader and one by the Minority Leader.

Two members of the House of Representatives or their designees consistingof the Chair and Minority Chair of the Local Government Committee.

Two members of the House of Representatives or their designees consistingof the Chair and Minority Chair of the Finance Committee.

Two appointees from each group below appointed from a list submitted byeach group, one appointed by the Majority Leader and one by the Minority

Leader:

o the Assessors' Association of Pennsylvania;o the County Commissioners Association of PA;o the State Tax Equalization Board; ando

the Department of Revenue.

The House task force will 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.

The task force will 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 the Resolution,

which would be December 27, 2011.


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The Consolidated County Assessment Law (Act 93 of 2010) consolidated several real

property assessment statutes into one combined law, removed outdated language,

and codified some case law. It applies to counties of the Second Class A and Third

through Eighth Class counties. Section 8811(b)(5) and 8842(b)(2) also apply to counties

of the First and Second Class. The General County Assessment Law (Act 155 of 1933)

applies to counties of the First and Second classes.

HouseBill1462RegularSession2011-2012(Pending)Prime Sponsor: Brandon Neuman

Last Action: Referred to PROFESSIONAL LICENSURE, June 6, 2011 [House]

An Act amending the act of July 10, 1990 (P.L.404, No.98), known as the Real Estate

Appraisers Certification Act, further providing for definitions and for State Board of

Certified Real Estate Appraisers.

House Bill 1462 would amend the Real Estate Appraisers Certification Act (Act 98 of

1990) to require certified assessors be included on the State Board of Certified Real

Estate Appraisers.

This bill is based upon a recommendation of the Legislative Budget and Finance

Committee report. If enacted, there could be changes to the way Certified Real Estate


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Appraisers are certified, which would have a substantial impact on the methodology

used by a county to select qualified appraisers in Washington County.


Last Action: Referred to PROFESSIONAL LICENSURE, June 6, 2011 [House]

An Act amending the act of April 16, 1992 (P.L.155, No.28), known as the Assessors

Certification Act, further providing for duties of board and for qualifications.

House Bill 1463 would amend the Assessors Certification Act (Act 28 of 1992) to

establish and require the completion of a training program covering the Pennsylvania

Supreme Court rulings, their implications for permissible valuation and assessment

practices, and how this impacts an assessors duties. If enacted, there could be

changes to the way assessors are employed, which would have a substantial impact

on the methodology used to conduct a reassessment in Washington County.


Last Action: Referred toAPPROPRIATIONS, June 6, 2011 [House]


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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.

House Bill 1465 would require the Pennsylvania Department of Community and

Economic Development to establish, implement, and administer a state revolving loan

program for counties that have identified non-uniformity in their property valuations. If

enacted, House Bill 1465 would enable Washington County to take advantage of

substantial economic resources to ease the financial burden on the County and its

residents.

HouseBill1467RegularSession2011-2012(Pending)Prime Sponsor: Jesse White

Last Action: Referred to LOCAL GOVERNMENT, June 6, 2011 [House]

An Act amending Title 53 (Municipalities Generally) of the Pennsylvania Consolidated

Statutes, in consolidated county assessment, further providing for limitation on tax

increase after countywide reassessment.

House Bill 1467 would amend Title 53 to add a specific penalty for any municipal

taxing authority or school district that violates the anti-windfall provisions of

reassessment law. More specifically, it would authorize the Commonwealth to take


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action to require these bodies to comply with the law and also reduce the amount of

state funds the taxing authority receives by twice the amount they exceeded the anti-

windfall restriction.

House Bill 1467 would have a substantial impact on Washington County in that the

provisions would provide tangible penalties for violating anti-windfall provisions of

existing reassessment law. This bill would protect taxpayers from potential bad actors

seeking to exploit loopholes in the current system.


Last Action: Referred to FINANCE, June 6, 2011 [House]

An Act amending the act of June 27, 2006 (1st Sp.Sess., P.L.1873, No.1), known as the

Taxpayer Relief Act, in taxation by school district, further providing for property tax

limits on reassessment.

House Bill 1468 would amend the Public School Code to add a specific penalty for any

municipal taxing authority or school district that violates the anti-windfall provisions of

reassessment law. More specifically, it would authorize the Commonwealth to take

action to require these bodies to comply with the law and also reduce the amount of


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state funds the taxing authority receives by twice the amount they exceeded the anti-

windfall restriction.

House Bill 1468 would have a substantial impact on Washington County in that the

provisions would provide tangible penalties for violating anti-windfall provisions of

existing reassessment law. This bill would protect taxpayers from potential bad actors

seeking to exploit loopholes in the current system.


Last Action: Referred to LOCAL GOVERNMENT, Jan. 24, 2011 [House]

An Act providing for a temporary moratorium of court-ordered countywide

reassessments and for reforms based upon study.

The proposed freestanding Property Tax Reassessment Moratorium Act provides for a

temporary moratorium of court-ordered countywide reassessments.

Under this bill, no local taxing authority may undertake the process of a court-ordered

countywide reassessment of real property for the purpose of levying property taxes.

However, counties conducting a court-ordered countywide reassessment may, at the

discretion of the county, continue the process.


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HB 166 further provides that the moratorium shall remain in effect until the General

Assembly has enacted legislation to enact assessment reforms or until November 30,

2012, whichever comes first.

Article VIII (Taxation and Finance), Section 1 (Uniformity of Taxation) of the PA

Constitution provides that 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. This section applies to real property taxes and has been

used to maintain the uniformity of real property assessments.

The newly enacted Consolidated County Assessment Law (Act 93 of 2010) provides for

the assessment of real property for taxation purposes, exemptions from taxation, the

formulation of the assessment roll, the assessment appeals process, etc.

HouseBill1696RegularSession2011-2012(Vetoed)Prime Sponsor: Rick Saccone

Last Action: Veto No. 1 An Act providing for a temporary moratorium of court-ordered countywide

reassessments and for reforms based upon study.


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House Bill 1696provides for a temporary moratorium of court-ordered countywidereassessments. There was a Senate amendment limiting the bill to a fourth class

county with a population between 185,000 and 210,000 according to the 2010 U.S.

Census. (Washington County). The amendment also removed the date certain for the

temporary moratorium. These changes raised serious questions as to the compliance

with the Uniformity Clause of the Pennsylvania Constitution, and Governor Corbett

vetoed the bill on July 8, 2011.

It should be noted that counsel for Plaintiffs wrote to the Governor, urging the veto.

The proposed freestanding Property Tax Reassessment Moratorium Act provides for a

temporary moratorium of court-ordered countywide reassessments.

Under this bill, no local taxing authority may undertake the process of a court-ordered

countywide reassessment of real property for the purpose of levying property taxes.

However, counties currently conducting a court-ordered countywide reassessment

may, at the discretion of the county, continue the process.

HB 1696 further provides that the moratorium shall remain in effect until the General

Assembly has enacted legislation to enact assessment reforms or until November 30,

2012, whichever comes later.


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Article VIII (Taxation and Finance), Section 1 (Uniformity of Taxation) of the PA

Constitution provides that 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. This section applies to real property taxes and has been

used to maintain the uniformity of real property assessments.

In 2009, the House adopted House Resolution 334 which directed the Legislative

Budget and Finance Committee to conduct a study of the Commonwealth's

fragmented system of property tax assessment... This study containing findings and

recommendations was released in September 2010. One recommendation,

consolidation of the states general assessment laws, was enacted in the form of Act

93 of 2010, which established the Consolidated County Assessment Law.

HouseBill

1661

RegularSession2009-2010(diedwithoutSenateaction)Prime Sponsor: DERMODY

Last Action: Re-referred to APPROPRIATIONS, Aug. 26, 2009 [Senate] An Act providing for a temporary moratorium of court-ordered countywide

reassessments.

Provides for a temporary moratorium of court-ordered countywide assessment

pending the outcome of a study.


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HB 1661 proposes a freestanding act, the Property Tax Reassessment Moratorium

Act. The bill establishes a moratorium on court-ordered countywide real property

assessments while the General Assembly conducts a study of the property tax

reassessment system and enacts legislation to address issues that include sudden and

dramatic increases in taxes, lack of uniformity among counties and inequities

throughout the state.

As amended on second consideration, the bill allows counties currently involved in

court-ordered reassessment to decide, at the county level, whether to continue the

process.


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HOUSERESOLUTION334of2009-ABLUEPRINTFORREASSESSMENTREFORM

HouseResolution334RegularSession2011-2012(Passed)Prime Sponsor: LEVDANSKY

Last Action: Amended and Adopted, June 24, 2009(195-0) [House]

A Resolution directing the Legislative Budget and Finance Committee, in conjunction

with the Local Government Commission and the State Tax Equalization Board, to

request the assistance of the Assessors and County Commissioners Associations of

Pennsylvania to conduct a study of the Commonwealth's fragmented system of

property tax assessment, compare it to real property tax systems of other states,

including specifically the real property tax reassessment systems of Maryland and

California, and identify measures to make the Pennsylvania system more uniform,

transparent, cost effective and acceptable to the taxpayer, as well as determining the

impact of adopting the Maryland system; and directing the Legislative Budget and

Finance Committee to request the assistance of the Assessors and County

Commissioners Associations of Pennsylvania to conduct an additional study regarding

the Pennsylvania Farmland and Forest Land Assessment Act of 1974 in order to

determine its Statewide impact.

HR 334 directs the Legislative Budget and Finance Committee (LBFC) to conduct

studies on (1) Pennsylvanias current property tax reassessment system; and (2) the


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statewide impact the PA Farmland and Forest Land Assessment Act (Clean and Green)

has had on local taxing entities.

HR 334 directs the Legislative Budget and Finance Committee (LBFC) to work in

conjunction with the Local Government Commission and the State Tax Equalization

Board in order to conduct a study regarding Pennsylvanias current property tax

reassessment system and compare it to other systems in other states.

HR 334 cites that Pennsylvania operates under a fragmented system of property tax

assessment, which necessitates this study.

Pennsylvania operates under at least five major assessment statutes, none of which

are wholly consistent with the others, and counties operate under two assessment

statutes concurrently, with other assessment provisions also being present in other

statutes.

Two home rule counties (Philadelphia and Allegheny) provide different administrative

procedures in their home charters than exist in State statute. There are no uniform

restraints for all classes of political subdivisions following the implementation of a

countywide reassessment. Also, there are little to no protections provided to taxpayers

when a countywide reassessment takes place.


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HR 334 directs the above-mentioned agencies to request assistance from the

Assessors and County Commissioners Associations of PA to complete a study that

includes an analysis of the property tax reassessment systems of Pennsylvania and

other states with similar demographics, California (which stresses uniformity during the

assessment process) and Maryland. The analysis should focus on:

The level of government that levies property taxes and the level ofgovernment that conducts the real property tax reassessment.

Every aspect of how property tax reassessments occur and how they arefinanced.

The report will also contain information regarding the protections that are inplace for the taxpayer as a result of a reassessment. (i.e. appeals and

payment options)

Clean and Green Study:

HR 334 also directs the LBFC to work in conjunction with the Assessors and County

Commissioners Associations of PA to conduct a study regarding the statewide impact

of the PA Farmland and Forest Land Assessment Act of 1974, also known as the Clean

and Green Act.

HR 334 cites that there is significant participation in Clean and Green in many counties,

which causes a tax shift to landowners not qualified or not enrolled in the program. In

order to learn more about this tax shift, HR 334 requires the study of the impact of the

Clean and Green Act to include:


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Information related to the number of properties enrolled in the program,broken down on a county-by-county basis at the end of the calendar year

2008.

The fiscal impact the Clean and Green Act has on all local municipalitiesacross the Commonwealth on a yearly basis.

The fiscal impact which the tax shift provided for in the Clean and Green Acthas had on local school taxes.

ABOUTTHELEGISLATIVEBUDGETANDFINANCECOMMITTEE

The Legislative Budget and Finance Committee (LBFC) is a bipartisan, bicameral

legislative service agency consisting of 12 members of the General Assembly. As set

forth in the LBFC's enabling legislation, Act 195 of 1959, as amended, 46 P.S. 70.1-

70.6, the Committee is to conduct studies and make recommendations aimed at

eliminating unnecessary expenditures; promoting economy in the government of the

Commonwealth; and assuring that state funds are being expended in accordance with

legislative intent and law. To carry out these mandates, the LBFC is authorized to

conduct a wide range of research activities pertaining to the operation and

performance of state-funded programs and agencies.

By law, the Committee membership is comprised of six Senators and six

Representatives, evenly divided between the majority and minority parties in each

chamber. The President Pro Tempore of the Senate, the Speaker of the House of

Representatives and Majority and Minority Leaders of each House, or their designees,


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serve as members of the Committee. The President Pro Tempore of the Senate and

the Speaker of the House of Representatives appoint three additional members of their

respective chambers, at least two of whom are to be from the minority party. The

Committee elects its own Chairman, Vice Chairman, Secretary and Treasurer.

The Committee appoints an Executive Director who is responsible for the direction of

the Committee's staff and activities. A Project Manager, who reports directly to the

Executive Director, generally manages projects. The Project Manager, in turn, leads

teams of Analyst staff. The LBFCs staff includes persons with graduate degrees in

public administration, business administration, law, and journalism. The staff's

experience covers a wide range of topics, including among others: health and welfare,

transportation, economic development and law enforcement.

LegislativeBudget

and

Finance

Committee

PennsylvaniasSystemforPropertyValuationandReassessmentReportPresentationbyMaryannNardoneatSeptember22,2010,Meeting

Good morning. House Resolution 334 of 2009 directed the Legislative Budget and

Finance Committee (LB&FC), in cooperation with the Local Government Commission,

the State Tax Equalization Board, and the Assessors Association of Pennsylvania, to

study the system of real property valuation and assessment in place in Pennsylvania

and other states, including Maryland and California. It also directed us to consider how

other states provide for taxpayer protections following a reassessment.


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Pennsylvania has relatively high property taxes when compared to the 49 other states.

In 2007, property taxes generated almost $15 billion for local governments, with about

70 percent going to school districts, 20 percent to counties, and 10 percent to

municipalities. The state ranks in the top third nationwide on the level of property taxes

relative to typical home value and household income, and 17 Pennsylvania counties

are in the top 10 percent of counties nationwide on such measures.

Unlike many states, Pennsylvania receives no state revenues from property taxes, and

counties have the primary responsibility, both under the Constitution and state law, for

administering property assessments and reassessments. Counties also serve as the

first formal level for taxpayers to appeal the countys values and assessments.

Our report describes the property valuation and assessment systems in place in our

neighboring states and California, which has a rather complex acquisition value

system.

Pennsylvanias system is more like that of neighboring New Jersey, New York, and

Delaware, where local governments can choose to value property in current or base

year dollars, select their levels of assessment, and decide when to reassess.

Pennsylvanias system differs significantly from those in Ohio, West Virginia, and

Maryland, where property must be valued in current dollars and there are prescribed

cycles for reassessment.


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Ohio, West Virginia, and Maryland also differ from Pennsylvania in that they limit an

individual propertys tax increase following reassessment, which is not permitted under

Pennsylvanias constitution. These states also conduct reassessments that do not

involve revaluing of all properties; these types of partial reassessments are also

prohibited in Pennsylvania.

While Pennsylvania statute does not prescribe when counties must reassess, state

courts have ordered counties to reassess based on multiple factors, including, for

example, findings of evidence of partial reassessment, significant demographic and

economic changes that influence the relative value of properties, use of inconsistent

methods of valuing property following reassessment, the countys acknowledged need

for reassessment, and time since the last countywide reassessment.

We found that 22 Pennsylvania counties have not completed onsite inspections of all

properties since at least the mid-1980s, including seven that have also not changed

their predetermined ratios. Many of these counties are small and struggling financially,

and the cost of a reassessment would clearly be a problem for them. We also note that

most of the 22 counties are limited by statute to a 5 percent increase in their aggregate

revenue as a result of a reassessment. For those counties, we calculated that a 5

percent revenue increase would result in increased revenues ranging from $2.50 to $20

per parcel, with a median increase of around $14 per parcel. However, $14 would only

cover about 30 percent of the cost of a countywide reassessment, which has averaged

about $50 per parcel in larger counties in recent years. And per parcel costs could well


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be greater than $50 for smaller counties that have fewer parcels over which to spread

their fixed costs.

The International Association of Assessing Officers (IAAO) has developed mass

appraisal performance standards and measures. In the report, we provide detailed

explanation of these statistical measures and how they are calculated. In a 2009 case

in Allegheny County, one Supreme Court Justice recommended the Court adopt one of

these measures, the coefficient of dispersion, or COD, and require the county to

reassess when the statistical standard for this measure is not met.

The Court as a whole, however, did not embrace this recommendation and restated its

reluctance to rely solely on statistical measures as the basis for ordering a county to

reassess. We too concluded that there are no one or two statistical measures that

could reliably determine when a county reassessment is necessary. The report outlines

some of the measures and standards we recommend counties consider when making

a decision as to whether or not to conduct a reassessment.

We also found that reassessments often fail to meet the proposed statistical

performance standards following a comprehensive reassessment. For example, only

about 25 percent (14 of 54) of the comprehensive reassessments from 1988 through

2008 meet performance measures for level of assessment, coefficients of dispersion,

and price related differentialsthe International Association of Assessing Officers

measures of uniformity and equitythe first year following the reassessment.


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Stated differently, three-quarters of the comprehensive reassessments failed to

achieve at least one of these IAAO performance standards in the year after they

reassessed. By the second year after a reassessment, almost 90 percent failed to meet

at least one of these standards. In the 1970s, Pennsylvania State University

researchers reported similar findings, and concluded reassessments were not properly

performed by county contractors.

While this may certainly be a factor, another major factor is housing price volatility.

Mass appraisal processes typically use recent sales data to estimate the value of

property in identified neighborhoods. Housing prices can be very volatile and,

particularly if the volatility is not uniform across the county, can result in sale prices

after reassessment that are very different than the values used in the reassessment

models.

They also found that the performance measures developed by the State Tax

Equalization Board (STEB)the common level ratio (CLR) and its related statistical

measure the CODas currently derived are not designed to evaluate county systems.

In the report they discuss several technical issues that would need to be addressed

before such measures could be used, even as one of several factors, to evaluate the

quality of county assessments.


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RecommendationsandOptionsforChangeThe report contains several recommendations to enhance Pennsylvanias current

system. Specifically, we recommend the General Assembly (1) consolidate state

general assessment laws to promote greater uniformity in understanding the states

valuation and assessment practices, (2) create a revolving loan program for counties

that have identified non-uniformity in their assessments and that are not financially

positioned to conduct reassessments, (3) promote the development of a set of uniform

standards for county reassessment contracting, (4) expand requirement for certification

of assessors to all counties, (5) require representation of certified assessors on the

State Board of Certified Real Estate Appraisers, and (6) require public disclosure of the

key elements of a countys chosen system for property valuation and assessment,

including how properties are valued and assessed.

We also recommend that STEB work with the appropriate executive branch agencies

and the Assessors Association of Pennsylvania to modify existing performance

measures to assure they are developed using data that is consistent, verified, and

representative of most properties in the countys property inventory. If such measures

are to be used to evaluate county assessment uniformity, the criteria and methods

used to derive such measures should be published in state regulations. We also

recommend the Assessors Association of Pennsylvania develop a self-evaluation tool

for counties to help determine when a reassessment is warranted, and we have

provided suggestions for such a tool.


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House Resolution 334 also asked us to identify options for the General Assembly to

consider based on valuation and assessment systems in other states.

While not endorsing them, the report outlines several of these approaches and outlines

some of their advantages and disadvantages. These options include: authorizing a

state agency to supervise county property valuation and assessment activity; providing

for state and other local government financing of reassessments; and amending the

state constitution to provide caps on individual property tax increases following

reassessment, to permit residential and commercial property to be treated as separate

classes, to permit partial or selective reassessment of certain geographic areas or

property types (i.e., residential, commercial, and one municipality but not others), and

to permit property to be valued based on its sale price.

ReportHighlightsoftheLegislativeBudgetandFinanceCommitteesReportonPennsylvanias

System

for

Property

Valuation

and

Reassessment

House Resolution 334 of 2009 directed the LB&FC to study the real property valuation

and assessment system, including protections for taxpayers, in place in Pennsylvania

and other states. They found:

Unlikemanystates,PAobtainsnorevenuefrompropertytaxes.In 2007,property taxes generated $14.85 billion in local government revenue a 45

percent increase from 2000, and more than state personal income or sales

taxes.

Twenty-twocountieshavenotcompletedonsiteinspectionofallpropertiessinceatleastthemid-1980s.Many of the 22 counties are small


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or struggling financially and would generate less than $20 per parcel

(annually) from a reassessment. Reassessment costs average $50 per parcel,

but due to fixed costs can be much greater for counties with smaller

inventory bases.

Countiesdifferintheirpropertymarketsandassessmentsystems.House prices appreciate differently across the state, and several counties

have few market-based sales, which is a problem when using statistics to

estimate property values.

Comprehensivecountywidereassessmentdoesnotassurethatstatisticalstandardsforassessmentsaremet.Only about 25 percent ofthe reassessments (14 of 54) from 1988 through 2008 achieved national

standards for uniformity and equity one year later. And most of those that

met the standard the first year did not by the third. Similar results occurred

for the 11 counties completing two or more countywide reassessments

during the period. Various factors, most notably housing price volatility,

contribute to this problem.

TheStateTaxEqualizationBoardcalculatescertainstatisticalmeasures(CLRandCOD).STEBs measures are not designed to evaluate countysystems or determine if a county should be required to reassess. There is no

one-size-fits all standard to determine when a county should reassess. The

report, however, outlines the key criteria that should be considered.


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StatecourtshaveamajorroleinPennsylvaniaspropertyvaluationandassessmentsystemandhaveorderedcountiestoreassess.Since 1909,PA courts have held that, under the state constitutions uniformity clause, all

real estate is one class and all taxes must be uniform upon the same class,

which sets PA apart from many states, including California and Maryland. PA

courts have ordered counties to reassess upon finding evidence of

significant property market changes, inconsistent application of property

valuation methods following reassessment, and partial or selective

reassessment, but have permitted counties to value property in prior year

(i.e., base year) rather than current market dollars as long as values and

assessments meet the constitutions uniformity requirements.

Statesdifferintheirrealpropertyvaluationandassessmentsystems.Maryland, Ohio, and West Virginia, for example, require that property be

valued based on current market values, prescribe timeframes for

reassessment, and limit individual homeowner tax increases after

reassessment. In PA, counties can choose whether to assess based on

current market or base year values and when to reassess, but

constitutionally cannot limit tax increases for individual homeowners.

RecommendationsandOptionsforMajorChangeRecommendations to enhance the current system include: consolidate state general

assessment laws,create a state revolving loan program to assist countiesto reassess,

develop uniform standards for reassessmentcontracts, improve STEBs performance


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measures, and provide for disclosure of key informationon how the county revalues

property and a self-evaluationtool to help counties determine reassessmentneed.

Options for Major Change: While not endorsing them, the report outlines some of the

advantages and disadvantages of options to change PAs current system based on

systems in other states. These options include: authorizing a state agency to supervise

county property valuation and assessment activities; providing for state and other local

government financing of reassessments; and amending the states constitution to

provide caps on individual property tax increases following reassessment, permit

residential and commercial property to be treated as separate classes, permit partial or

selective reassessments of certain geographic areas or property types (i.e., residential,

commercial), and permit property to be valued based on its sales price.


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SENATORS

JOHN R. PIPPY

Chairman

JAY COSTA, JR.

WAYNE D. FONTANA

ROBERT B. MENSCH

DOMINIC PILEGGI

JOHN N. WOZNIAK

REPRESENTATIVES

ROBERT W. GODSHALLSecretary

DAVID K. LEVDANSKYTreasurer

STEPHEN E. BARRAR

JIM CHRISTIANA

H. SCOTT CONKLIN

ANTHONY M. DELUCA

EXECUTIVE DIRECTOR

PHILIP R. DURGIN

Pennsylvanias System forProperty Valuationand Reassessment

Conducted Pursuant toHouse Resolution 2009-334

July 2010

Legislative Budget and Finance CommitteeAJOINT COMMITTEE OF THE PENNSYLVANIA GENERAL ASSEMBLY

Offices: Room 400 Finance Building, 613 North Street, HarrisburgMailing Address: P.O. Box 8737, Harrisburg, PA 17105-8737

Tel: (717) 783-1600 Fax: (717) 787-5487 Web: http://lbfc.legis.state.pa.us


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Table of Contents (Continued)

III. Pennsylvanias System for Real Property Valuationthe StateLevel .................................................................................................... 59

A. Pennsylvania, Unlike Many States, Does Not Receive State RevenueFrom Real Property Taxes, But Has Provided for Various Property TaxReforms................................................................................................... 59

B. Since 1987, Pennsylvania Has Required Certification for PennsylvaniaReal Property Evaluators ........................................................................ 71

C. Pennsylvanias State Tax Equalization Board Gathers and ProvidesData to State Agencies for Use in Formula Allocation of State Fundsand to Establish Certain State Tax Rates ............................................... 75

D. The Pennsylvania State Tax Equalization Board Develops and

Publishes a Common Level Ratio, Which Is Used In CertainReal Property Appeals ............................................................................ 79

E. Pennsylvania Courts Have Required Counties to Initiate CountywideReassessments Based on the Cumulative Effect of a Variety ofFactors .................................................................................................... 99

F. The Pennsylvania Constitutions Uniformity Clause Has BeenStrictly Interpreted by the Courts and Differs From Those in ManyOther States ............................................................................................ 108

1. Requirement for Common Level of Assessment ................................ 112

2. Assessment Limits Following Reassessment .................................... 113

IV. Real Property Valuation and Assessment Systems in OtherStates................................................................................................... 117

A. Real Property Valuation and Assessment Systems in SurroundingStates. ..................................................................................................... 117

1. Maryland ............................................................................................. 119

2. Delaware ............................................................................................. 123

3. West Virginia ....................................................................................... 126

4. Ohio .................................................................................................... 1325. New Jersey ......................................................................................... 139

6. New York ............................................................................................. 149

B. Californias Real Property Valuation and Assessment System ................ 154

V. Appendices ......................................................................................... 161

A. House Resolution 2009-334 .................................................................... 162


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Table of Contents (Continued)

V. Appendices (Continued)

B. LB&FC Survey of Pennsylvania County Chief Assessors ....................... 166

C. Common Level Ratio, by County, 1988 Through 2008 ........................... 171

D. Coefficient of Dispersion, by County, 1988 Through 2008 ...................... 174

E. Price Related Differential, by County, 1988 Through 2008 ..................... 177

F. Glossary of Terms ................................................................................... 180

G. Property Taxes on Owner-Occupied Housing for Pennsylvania andSurrounding States (2004-2007) ............................................................. 182

H. Calculation of the STEB Certified Aggregate Market Values and theSTEB Ratio ............................................................................................. 184

I. Common Level Ratio Calculation ............................................................ 186

J. STEBs Coefficient of Dispersion (COD) Calculation .............................. 187


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S-1

Summary, Conclusions, Recommendations, and Options

House Resolution 2009-334 directed the Legislative Budget and Finance

Committee (LB&FC) to study the systems of real property valuation and assess-

ment in place in Pennsylvania and other states, in particular Maryland and Cali-

fornia. It also directed the study consider state systems for protection for taxpayers

following reassessment, especially for those on fixed incomes.1

We found:

Real property taxes are an important source of revenue for counties, muni-

cipalities, and school districts (pp. 39 and 58). From 2000 to 2007, local propertytaxes increased from $10.23 billion to $14.85 billiona 45 percent increase. In

2007, about 70 percent of such revenues went to school districts, 10 percent to mu-

nicipalities other than Philadelphia, and the remainder to counties, including Phil-adelphia. Local real estate taxes generated 36 percent more revenues than the

states personal income tax and 75 percent more than the states sales and use taxes

in 2007.

Pennsylvania has relatively high property taxes, and is in the top third na-tionwide on measures that consider property taxes relative to typical home val-

ue and household income (pp. 12 to 17). The Commonwealth ranks 15th in the na-tion on median property taxes paid for owner-occupied housing, 11th for such taxes

as a percent of median home value, and 12th as a percent of household income. Se-

venteen Pennsylvania counties,2 are in the top 10 percent of counties nationwide on

one or more of such measures.

Since the 1800s, Pennsylvanias property valuation and assessment sys-tem has evolved to the one in place today where (pp. 60 to 65):

All properties are assessed based on actual value,3 and all taxing bodiesin a county must use the same property value when taxing local property,4

though they have flexibility in determining their tax rates.5

1 HR 334 also directs an additional study of the Pennsylvania Farmland and Forest Land Assessment Act of

1974 be conducted to determine its statewide impact, which is being conducted as a separate study.2

Allegheny, Armstrong, Beaver, Berks, Bucks, Chester, Delaware, Erie, Greene, Lehigh, McKean, Monroe,Montgomery, Northampton, Pike, Venango, and Warren.3 Actual value is a construct which refers to market value, though it need not be the amount or price at which

a property has recently sold. Act 1982-268 clarified that in arriving at actual value, all three methods of ap-

proach to value (i.e., cost, comparable sales, and income) must be considered in conjunction with one another to

arrive at a propertys actual value.4 In New York and Delaware all taxing bodies within a county are not required to use the same property value

when assessing a property.5 In states that cap the overall amount of property taxes for individual properties, such as Ohio, West Virginia,

and California, the state is involved in determining the distribution of property tax millage or revenues across

all state and local taxing districts.


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S-2

Counties are primarily responsible under relevant provisions of the statesconstitution and general laws for:

maintaining an inventory of all property in the county;

valuing all properties and assuring that such values are arrived at un-

iformly (i.e., equalized values);

assessing all properties and assuring all assessments are arrived atuniformly (i.e., equalized assessments);

selecting the percent of value on which property in the county is as-sessed (referred to in Pennsylvania as the county predetermined ra-

tio);6

deciding to assess property based on current market (i.e., in currentdollars) or base year values (i.e., the value of a dollar at the time of the

county reassessment);7, 8

deciding when to revalue the countys property inventory; and

serving as the first formal level for taxpayers and others to appeal thecountys property values and/or assessments.

Taxpayers and local municipalities (which until the 1930s determined lo-cal property values) or other taxing districts can appeal the countys val-

ues and assessments in state court.

In Pennsylvania, counties can choose to assess property based on a prop-ertys current market value or base year value, with the associated advantag-

es and disadvantages of each approach (pp. 88 to 98). The International Associa-tion of Assessing Officers (IAAO) has developed standards for mass appraisal9 of

real property which is appraised at market value. Market value, according to the

IAAO, refers to the most probable price a property should bring in a competitive

and open market based on sales as of a specific date. Current market value refers

to recent or present day price. The IAAO has not, however, developed standards for

systems in which assessed values differ from current market values, such as base

year systems in which property is appraised based on values or prices in an earlier

year. Base year systems allow for continued use of base year values until a county

conducts a comprehensive reassessment.

6 Surrounding states of Maryland, Ohio, and West Virginia have one statewide ratio of assessment.7 Philadelphia is on a current market system, and Allegheny County was until 2005.8 Ohio and West Virginia base assessments on current market values. Maryland has a modified system of cur-

rent market values in which current values are phased in over a three-year period. Like Pennsylvania, Dela-

ware, New Jersey, and New York provide for base year systems, and current market valuation systems.9 Mass appraisal is the process of valuing a group of properties as of a given date using common data, standar-

dized methods, and statistical testing, according to the IAAO.


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A current market value system implies annual reassessment of all property

and reappraisal of all individual properties every four to six years, according to the

IAAO. Current market value systems have the advantage of continually tracking

current property prices, and therefore avoid the sticker shock that can occur when

property values are not frequently updated. They are, however, highly labor inten-

sive and costly to maintain.

In 2009, the Pennsylvania Supreme Court rejected an Allegheny County

Common Pleas Court opinion that a base year system for assessing property is fa-

cially unconstitutional. In that case (Clifton)10, the Supreme Court ruled that the

base year system in and of itself is not unconstitutional, but as it was implemented

in Allegheny County violated the Pennsylvania constitutions uniformity clause.

(Findings III D and III E on pp. 90-94 and 103-107 provide additional information

on this case.) Commenting on the desirability of a constitutional base year system,

the Court noted that base year systems can provide stability in assessed values and

efficient use of public funding. The Supreme Court also noted, however, that coun-

ties that do not reassess at least periodically are at risk of failing to maintain a uni-

form (i.e., constitutional) system. In this report, we discuss various approaches to

determine if assessed values are failing to meet uniformity criteria (pp. 96-97 and S-

24 to S-26).

The Supreme Court in Clifton, moreover, recognized that not all counties are

the same, and that a countys need to conduct a comprehensive reassessment will

arise at different rates depending upon the stability of a countys property market,

the variety of real estate in the county, and other economic and market factors. As

discussed below, the differences across counties are substantial.

Pennsylvania counties differ (pp. 18 to 38):

In ways that have implication for their real property market. They differ in theirpopulations, household incomes, unemployment rates, home values, and the

age of their housing stock. In 2008, in about half of the counties, fewer than

2 percent of county total parcels were sold in arms-length transactions, which

can be problematic when using computer models to project property values.

Housing prices also appreciate at different rates across the state. From the

first quarter 2000 through 2007, Pittsburgh area had the lowest appreciation

with a 33 percent increase, and Philadelphia area had the highest at 87 per-

cent.

10James C. Clifton v. Allegheny County, 600 Pa. 662, 969 A.2d 1197, 2009.


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S-4

In their property inventories. Pennsylvania has over 5.9 million parcels. Al-most half of the counties, however, have fewer than 50,000 parcels, with the

vast majority having fewer than 100,000 parcels. There are, moreover,

important differences in the composition of county property inventories. Typ-

ically, about three-quarters of real property consists of residential property;

however, residential property accounts for less than 70 percent of total par-cels in about 60 percent of Pennsylvanias counties, including six counties

where it makes up less than 50 percent of the countys property inventory.

In their valuation and assessment systems. To maintain and update theirproperty inventories, counties typically rely on full-time staff, though two

counties rely almost totally on private contractors to operate their county as-

sessment offices. About half of the counties have one full-time Certified

Pennsylvania Evaluator (i.e., CPE, or state certified assessor) for every

11,000 parcelsa ratio similar to that of neighboring Maryland,11 where the

state itself is responsible for property valuation and assessment. Nine coun-

ties, however, have about twice as many parcels per CPE.

Counties use multiple approaches to update their property records, including

deed transfers and building permits (98 percent); aerial photography (42 per-

cent); zoning changes and canvassing (20 percent); and planning commission

data (15 percent). Two-thirds of the counties rely on vendor-supplied com-

puter assisted mass appraisals systems to value property. At least 14, how-

ever, report they rely in whole or in part on manual property record data in

valuing property.

In their reassessments. In county responses to an LB&FC survey, more than75 percent (51 of 66) reported their last reassessments included physical on-

site reviews of each property, which typically took more than two years to

complete. Nine percent (6 of 66) reported their reassessments were based on

property market data, which took from 8 to 48 months and 8 percent (5 of 66)

reported they changed the percent of property value that was assessed (i.e.,

the county changed its predetermined ratio), which took from three to six

months.

Ninety percent of the counties (60 of 67) have completed one or more reas-sessments since 1986. The majority of such reassessments have involved com-

prehensive countywide reassessment--not just changes in predetermined ratios(pp. 6 to 11). The map on page S-5 shows for each county the date when its lastreassessment went into effect based on our analysis of Pennsylvania Department of

Revenue data. The map shows that most counties last reassessed sometime after

2000, but seven counties have not conducted a reassessment since at least the mid-

1980s. Four of the seven counties that are shown as not completing a countywide

11 State employees value all properties in three states: Kentucky, Maryland, and Montana.


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LastCountyEffectiveReassessment

Date

DuringthePerio

dJuly1,1986,ThroughJanuar

y1,2009

_______________

NOTE:Graphicincludesco

unty-widereassessments,predetermin

edratiochanges,andbothincombina

tion.Philadelphiareassessesonano

ngoingbasisandis

notonabaseyearsystem.

Alleghenyretrospectivelyadoptedabaseyearsystemin2005.

Source:DevelopedbyLB&FC

stafffromt

hePennsylvaniaDepartmentofRevenueCommonLevelRatio

(CLR)RealEstateValuationFactors..

Chester

1998

Delaware

2000

Philadelphia

Carbo

n

2001L

acka-

w

anna

1986

Luzerne

2009

Monroe

1989

Pike

1993

Susquehann

a

1994

Wayne

2005

Wyoming

1997

Adams

1991

Cumberland

2005

Dauphin

2002

Franklin

2001

Juniata

2003

Lancaster

2005

Lebanon

2005

Perry

2001

York

2006

Allegheny

2001

Beaver

Priorto

1986

Fayette

2003

Greene

2003

Washington

Priorto

1986

W

estmoreland

Priorto1986

Bedford

2001B

lair

Priorto

1986

Cambria

2005

Centre

1995

Fulton

2002

Huntingdon

Priorto

1986

Mifflin

1999

Somerset

1998

Bradford

1999

Clinton

2009

Columbia

1992

Lycom

ing

2005

Mon-

tour

2006

Northum-

berland

2005

Potter

2002

Snyder

2007

Sullivan

2004

Tioga

2002 U

nion

2006

Armstrong

1997

Butler

2009

Cam

eron

1986

Clarion

2009

Clearfield

1989

Elk

2006

Forest

Priorto

1986 In

diana

2006

Jefferson

2005

Crawford

Priorto1986

Erie

2003

Lawrence

2003

McKean

2005

Mercer

2002

Venango

2005

Warren

1989

Berks

1994

Bucks

2005

L

ehigh

1991

Montgomery

1998

Northampton

1995

Schuylkill

1997

Priorto1986

1986-1989

1990s

2000or

Later

S-5


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S-6

House Price Index - Pennsylvania and Erie AreaPercent Change by Quarter: 1990-2009

Source: Developed by LB&FC staff from Federal Housing Finance Agency data.

Pennsylvania Median Household Income and Median Home Value1990-2008

Source: Developed by LB&FC staff from United States Census Bureau data. The U.S. Census data on value is therespondents estimate of how much the property would sell for if it were for sale, or the asking price for properties thatare for sale.

-6.00%

-4.00%

-2.00%

0.00%

2.00%

4.00%

6.00%

PercentChange

Calendar YearPennsylvania Erie Area

25,000

50,000

75,000

100,000

125,000

150,000

175,000

200,000

225,000

250,000

1990 2000 2001 2002 2003 2004 2005 2006 2007 2008

MedianHouseholdIncome MedianHomeValue


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reassessment since 1986 report they are in the process of completing one, including

two that are conducting them as a result of a court order or settlement agreement.

Fifteen12 of the counties that reassessed through changes in their predetermined

ratios have not conducted comprehensive countywide reassessments since at least

the mid-1980s.

Many of the 22 counties that have not completed a comprehensive county-

wide reassessment since the mid-1980s are small counties or are struggling finan-

cially. Eighteen of the 22 had median home values and household incomes lower

than the state median, 13 had a higher percentage of older housing stock than the

state as a whole, 9 had population declines in every U.S. Census since 1980, and 8

have populations of less than 50,000.

The cost of a reassessment is clearly a problem for most of the 22 counties

(pp. 39-43). All but three of the 22 are permitted by statute to increase their aggre-

gate revenues by 5 percent as a result of a reassessment. For those 19 counties, a 5

percent revenue increase results in increased revenue ranging from $2.50 to $20 per

parcel, with a median increase of around $14 per parcel, which is only about 30 per-

cent of the cost of a countywide reassessment (about $50 per parcel) in larger coun-

ties in recent years. Per parcel costs could be much greater for counties with small-

er property inventory bases over which to spread fixed costs.

Based on their recent county property tax revenues, only 1213 of the 67 coun-

ties could actually generate an additional $50 per parcel in the first year following a

reassessment, absent significant growth in their property inventory. Not surpri-

singly, 10 counties in response to our survey reported their last reassessment was

financed through county bond issuances. Over 80 percent of the chief assessors,moreover, reported cost, including the fiscal status of the county, as a primary rea-

son they would not advise initiating a countywide reassessment.14

Completion of a comprehensive countywide reassessment does not assure

that statistical standards for assessments are met (pp. 44 to 47). National assess-ing organizations have developed performance measures and standards to deter-

mine if mass or neighborhood appraisals in current market valuation systems have

achieved their appraisal goals for level of assessment, uniformity, and equity. In

this report, we provide detailed explanations of these statistical measures and how

they are calculated, in particular the measure known as a COD (i.e., coefficient of

dispersion) that some Pennsylvania justices have recommended be used as a triggerto require a county to reassess. Utilizing the State Tax Equalization Boards data,

12 Bedford, Bucks, Butler, Cambria, Clarion, Franklin, Indiana, Jefferson, Juniata, Lackawanna, Lebanon,

Mercer, Northumberland, Potter, and Snyder.13 Berks, Bucks, Chester, Dauphin, Delaware, Lackawanna, Lancaster, Lehigh, Montgomery, Northampton,

Philadelphia, and York.14 Pennsylvania has a total of 5.89 million parcels, according to data provided by the Assessors Association of

Pennsylvania. At $50 per parcel, comprehensive reassessment statewide would cost $294.5 million.


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we analyzed the performance measures for counties after a comprehensive county-

wide reassessment and found:

One year after, only 25 percent (14 of 54) of the reassessments from 1988through 2008 achieved standards for level of assessment (i.e., within 15

percent of the predetermined ratio), uniformity (i.e., a COD of 20 or less),and equity (i.e., a Price Related Differential, or PRD, between 0.98 and

1.03). More than half of those that met the standards in the first year did

not by the second.

One county, which met the performance measures for six years followingthe countywide reassessment, initiated a subsequent reassessment after

failing to meet one of the three performance measures, and then failed to

meet two of the three measures the first year after the subsequent reas-

sessment.

Even relatively frequent reassessments do not assure that the perfor-

mance standards are met. Eleven counties completed two or more coun-tywide reassessments from 1988 through 2008, and only 25 percent of

such reassessments met the three performance standards. One county

conducted three countywide reassessments during the 20-year period, and

none of these met all three performance standards one year after the reas-

sessment.

Penn State researchers reported similar findings to the Senate Finance

Committee in its 1976 investigation of property tax assessments and the work of

mass appraisal firms. They reported only two of the 20 counties that completed

reassessments over a six-year period met two performance measures one year aftertheir reassessments, and only two of the 20 had a COD of 20 or less. The research-

ers concluded that reassessments were not properly performed by county contrac-

tors.

Significant housing price volatility contributes to challenges for counties inachieving assessment performance standards after a reassessment (pp. 48 to 55).Typically, mass appraisal processes utilize recent sales data, in part, to derive esti-