Northeast Real Estate Business

NOV-DEC 2015

Northeast Real Estate Business magazine covers the multifamily, retail, office, healthcare, industrial and hospitality sectors in the Northeast United States.

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44 • November/December 2015 • Northeast Real Estate Business www.REBusinessOnline.com A FAIR SHARE OF TAXES Frequent reassessments beneft Pittsburgh-area property owners. By Sharon DiPaolo, Esq. P ittsburgh-area properties are be- ing reassessed more frequently than in the past — and that is good news for property owners. Peri- odic reassessment helps to keep prop- erty assessments current with actual values and ensure that everyone pays their fair share. Unfortunately, frequent reassess- ments are not the norm throughout Pennsylvania. Pittsburgh and sur- rounding counties are the exception, with Allegheny County (in which Pittsburgh is located) having four re- assessments in the last 15 years. Near- by Indiana County is undergoing a reassessment now for tax year 2016, its frst since 1968, and neighboring Washington County is undergoing a reassessment for tax year 2017. Pennsylvania lacks a mandatory revaluation cycle. A revaluation or re- assessment is a thorough analysis of every property in the entire county, with the objective of bringing each property's assessment into line with its current market value. Revaluations are often conducted by outside frms, usually with the assistance of the local assessment offce. Occasionally, in- house assessment offces conduct re- assessments. Without a man- date to reassess, some counties go decades without a reassessment. Ru- ral Franklin Coun- ty, for example, last reassessed in 1961. Assessors there attempt to keep properties equalized by placing new- ly constructed assets on the tax rolls for what they believe the properties would have been worth in 1961. The more time that passes, how- ever, the more tenuous this method- ology becomes. Further, assessors are prohibited from "spot assessing," or changing assessments on existing properties without a countywide re- assessment. Thus, as different parts of the county appreciate at different rates, the equality of assessment be- comes more and more skewed. Blair County, west of Pittsburgh, decided to undertake a reassessment for tax year 2017 after commissioning a study from the attorneys at Weiss Burkardt Kramer. Comparing actual sales in the county to assessments, the study concluded that Blair County's more than 50-year-old assessments do not meet the constitutional uniformity requirement. Says attorney M. Janet Burkardt, a partner at Weiss Burkardt Kramer: "If assessment systems are not periodi- cally adjusted, they become regressive so that properties appreciating at a higher rate are taxed at less than their fair share, and properties appreciat- ing at a lesser rate or those who have depreciated in value, pay more than their fair share in taxes." Because properties that beneft from unfairly low assessments rarely ap- peal those values, inequities become locked in over time. For instance, in one county where revaluation had not occurred in decades, major offce buildings were, on the whole, dramat- ically under-assessed. Some under-assessed buildings paid such low taxes that they enjoyed a competitive advantage in attracting tenants. A neighboring offce build- ing, despite paying dramatically high- er taxes than its competition, had no recourse to appeal because it was also under-assessed and could not meet the test that its market value was too high. The solution? A county-wide re- assessment. The longer a county goes between reassessments, the harder the next reassessment becomes. First, big in- creases in assessments spark taxpayer outrage, tempting county leaders to push the problem off to another day. Infrequent reassessments are also more time-consuming and expen- sive; reassessments in Pennsylvania usually stem from litigation, which is expensive and ineffcient. Less fre- quently, county leaders prompt the reassessment, as Indiana County did when it had reached the statutory cap on its tax rate. In marked contrast, Erie County, to Pittsburgh's north, was the frst coun- ty to impose a reassessment cycle on itself. "Our goal in reassessing is to gain uniformity and accuracy," said Scott Maas, Erie County's chief as- sessor. "We meet with property own- ers informally and we welcome the opportunity to update our data and make corrections. We want to get it right." Maas initiated the county's periodic reassessment cycle and over- saw the 2003 and 2013 reassessments. Pittsburgh's record four reassess- ments in 15 years followed years-long litigation in two different cases that went all the way to the Pennsylva- nia Supreme Court. Ultimately, the Supreme Court ordered the reassess- ment. Pittsburgh's reassessment in 2013 sparked 100,000 appeals; for 2015, only a few thousand taxpayers appealed, demonstrating that most properties' assessments have been re- solved to the property owners' satis- faction. If Pittsburgh were to continue to reassess in the next three to fve years, building on this fresh data and satisfactory values, the likelihood is that there would be minimal appeals year-to-year. Frequent reassessments beneft property owners. When the appeals process corrects errors, the data under- lying the assessments improves and yields more accurate values in the next reassessment. Pennsylvania law re- quires that reassessments be revenue- neutral, meaning that rather than lo- cal governments enjoying a windfall when assessed values increase, gov- ernments must reduce tax rates, so many property owners see a reduc- tion in taxes when reassessments oc- cur. Most importantly, reassessment yields more uniform assessments. Uniformity of assessment is required by Pennsylvania's constitution. When assessments are uniform, everyone pays their fair share. Pennsylvania's Supreme Court spoke to this in 1909: "While every tax is a burden, it is more cheerfully borne when the citi- zen feels that he is only required to bear his proportionate share…" Sharon F. DiPaolo is a partner in the law frm of Siegel Jennings Co., L.P.A., the Ohio and Western Pennsylvania member of American Property Tax Counsel, the national affliation of property tax attorneys. MEMBER FDIC EQUAL HOUSING LENDER 860-638-2958 liberty-bank.com $11,450,000 permanent mortgages on two retail buildings in Philadelphia, PA $2,320,000 permanent mortgage on an apartment $450,000 permanent mortgage on an offce building in Middletown, CT Make a Statement. SM Sharon DiPaolo Siegel Jennings The longer a county goes between reassessments, the harder the next reassessment becomes. Big increases in assessments spark taxpayer outrage, tempting county leaders to push the problem off to another day. Infrequent reassessments are also more time-consuming and expensive.

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