Wednesday, April 29, 2009

A TIME TO GLOAT: PA Supreme Court Confirms* Unconstitutionality of "Base Year" Property Taxes

On August 25th of last year, I wrote:

"Freezing" tax assessments at a given year in the past (instead of periodically going through the drag of reassessing property) has a beneficial effect for those who own land in booming communities, and for those who have improved or developed their land since the last assessment. Meanwhile, those living in depressed or stagnant communities, and/or those who have not added any garages or two-story water features lately, are disadvantaged under the current system. (Burgh Report, SUX2BU)

Today, Chief Justice Ronald D. Castille writes:

"[T]he Allegheny County scheme, which permits a single base year assessment to be used indefinitely, has resulted in significant disparities in the ratio of assessed value to current actual value in Allegheny County. The disparity is most often to the disadvantage of owners of properties in lower-value neighborhoods where property values often appreciate at a lower rate than in higher-value neighborhoods, if they appreciate at all." (P-G, Daniel Malloy)

If a schmoe with a blog called this a year ago, one should wonder why our political leaders and their cohorts of economists and lawyers did not see this coming -- unless they are not particularly exercised by economic injustice and unconstitutionality.

I happened to learn of today's news from Fred Honsberger, who was bemoaning the "recurring nightmare" of again having to suffer through periodic property reassessments. I trust that elsewhere on the dial and in the news there will be exultant celebration that our oppressive and inequitable taxation regime is falling in favor of one that is more fair and honest.

Oh, happy day! Kalu kalay!

In all seriousness: it has been seven years since our last reassessment, and will probably be at least one more by the time the next one is completed. People will be startled at just how much the landscape will be seen to have transformed by then -- and when the millage is reduced to compensate for generalized appreciation, many City of Pittsburgh property owners will be very pleasantly surprised by the results.

As to what this means in terms of every other county in the Commonwealth -- that's not yet clear, but should be soon.

In the final analysis: despite the time, energy, expense and political capital poured into defending the "Base Year" system, it was indeed a valiant effort to keep a campaign promise and shield affluent voters from routine and necessary requirements of the social contract. Too bad reality had to intrude eventually.

*- UPDATE: Mr. Onorato said he was pleased the court upheld the constitutionality of a base-year system. But he conceded there is a problem... (ibid)

Right. What? No! Lol. Just because the court has not mandated that reassessments be conducted every year does not mean our county's explicit policy of never doing them at all is somehow "constitutional, except with one tiny caveat". Facts are stubborn things.


  1. I think I agree with everything you say here except "when the millage is reduced". Does that ever really happen?

  2. I shouldn't be surprised the Court was more timid that Judge Wettick, but I am also little surprised they dropped the matter back in his hands to decide, rather than to the legislature. Maybe they realized the legislature would never act, or maybe they wanted to spare their fellow elected officials the anguish of having to face the issue. Still, now every single county in Pennsylvania will have to reassess now at some point. I still wonder how much that has hurt Onorato's chances for the Governorship (or has that already gone by the wayside?). No matter how long he waits in Allegheny County, the rest of Pennsylvania will be affected by this ruling. The county's will delay and hem and haw, and maybe appeal Wettick's plan. But our recess is over, and now eventually county governments will have to face the wrath of their property owners.

    Of course I am both curious and afraid of how reassessment will affect my own little modest abode (also alarmed).

    Will we see some of Chris Briem's negatively valued homes in poor neighborhoods? Will the County give money back to those homeowners?


  3. "when the millage is reduced".

    That happens when you buy a Prius.

    As someone who lives in an area with mildly rising property values (at least through 2008), I'm not unhappy with a complete revaluation. What got to me was that people who just bought houses got the value appealed by the city (or the school district according to Briem). People who'd been in identical houses for 20 years were assessed at 2/3rds of the price of someone who bought in 2002 or later. Starting over is clearly a better idea, but it will irk many, many people.

  4. "schmoe with a blog" is much more honest in her/his opinions than schmoe looking to get re-elected.

  5. Bram,

    Quoting from the court ruling (emphasis added):

    "...we *disagree* with the trial court’s holding that the statutes are unconstitutional on their face. Nevertheless, for many of the same reasons cited by the trial court, we hold that the base year method of property valuation, *as applied in Allegheny County*, violates the Uniformity Clause. We therefore agree that a countywide reassessment is required and we remand this matter to the trial court for implementation of that mandate consistent with this Opinion."

  6. I hope my home isn't negatively valued.

    seriously though.. state law has anti-windfall provisions that prevent a local government or school district from increasing property tax revenues via a reassessment. So millage rates have to be adjusted following a reassessment. Those laws have actually been tightened in recent years.

  7. The anti-windfall provisions are not nearly as important as 'assessment buffering' to the individual citizen/taxpayer. We need assessment buffering.

    I understand it is done in MD.

  8. Hmm, so from what Bob Mayo said (and I am sure he is correct) this is a really narrow ruling, that probably does not apply around the rest of the State. Poor homeowners, to the extent that they care, would have to sue their counties in each county, I guess, if their county has not reassessed recently and/or is not on a regular assessment schedule.

    Good about those anti-windfall laws.

    I guess we might see more lawsuits if counties try to ignore the anti-windfall law (presumably most would adhere to it) or are so tied up between the bureaucracy and the local county legislature or governing structure that they are unable to lower their millage. At some point we may take Dick the Butcher’s (as penned by Shakespeare) suggestion seriously “The first thing we do, we kill all the lawyers”.


  9. Ed.. I think the ruling is pretty strong. The ruling has verbiage all but saying other counties will face a similar result in the courts if there is similar litigation for their counties. That seems remarkable to me. Most counties in the state currently fail the equity tests that the court has validated in this ruling. IMHO, only the most mild form of buffering would pass judicial muster based on this ruling.

    The conclusion they have that a base year system could be feasible leaves only a bit of wiggle room and makes a lot of sense for a number of reasons. What if you had a county where property values were very stable, does the court want to be forcing reassessments annually. What if a county has biennial reassessments? That could conceivably be described as a base year system during the off year. They probably didnt want to get into making that illegal. Most courts, especially appeal courts, are not going to get into the weeds of how to implement a ruling and send the issue back to the local court for implementation. Likewise I don't think there was ever an option of the court per se sending this to the legislature directly. If they said base year systems were just never to be used again, they would still have just send this back to the county to use some other system. The idea that the legislature could become involved is a political outcome that may be the case as it stands now if folks across the state dont like the idea of reassessments.. Yet this ruling is based on the uniformity clause in the state constitution I believe... so I don't understand how the legislature could legislate away the consequences of the ruling... barring a change in the constitution that is or some more fundamental move away from forcing local governments and SD's to rely on the property tax so much. That is where the political debates will be.

    lastly.... the anti windfall laws are most important in how municipalities and school districts reset their tax rates. People forget that here in Allegheny County the county itself is the lowest part of your tax bill. It's how they set your property value that impacts how much property tax you pay to your muni and SD. It's a pretty clear cut thing so ignoring them per se is hard. But outside of the assessment process, there is no reason local governments can't just pass seperate legislation to raise taxes. but they can do that any time.

    for Mark... I think any form of buffering is made pretty difficult if not impossible by this ruling. It being based on the uniformity clause in the state consitution, any Maryland precedent is pretty irrelevant. You could argue for a change to the uniformity clause I suppose, but that would be an issue an order of magnitude more impactful than even this ruling is with an awful lot of unintended consequences. Remember a form of buffering is what the country tried (remember the plan to limit annual changes in assessments to 1-2-3-4%... i forget the details of the plan put together by my friends at consad)... and Wettick pretty much ruled agains that pretty quickly as being illegal for similar equity reasons. It's a fine line, or no line, between buffering and a base line system.

  10. First the conflict: It was stated in part: "IMHO, only the most mild form of buffering would pass judicial muster based on this ruling." Then it was stated: "I think any form of buffering is made pretty difficult if not impossible by this ruling."

    Bingo. The perfect buffering method would work -- citizen appeal, political will and power, court blessing and constitution adjustments.

    With assessment buffering, no property owners are ever left in the past -- as is always the case with a base year method.

    I understand that the fight to gain the assessment buffering option for counties is big / "difficult" -- but it is much more simple and productive than the boondogle Onrato (mainly, recently) has planted for everyone for years.

    The assessment buffering solution has one objection of the 'It can't be done' flavor / done deal / shoot the messenger flavor.

    The 1, 2, 3, 4% solution is far different. When a property is 200-percent or 300-percent off the mark, it would take a lifetime to get to what is fair, even with 4% increases.

    With assessment buffering done well, and much different than that other hokie keep the rich richer hoodwink attempt, all properties are spot in in 3 years. Math = 1/3 of difference each year for 3 years.

  11. Mark.. sorry to confuse you. the first sentence you reference I tacked on to the end of the wrong paragraph there. It should follow the 2nd sentence you mention. I do believe that most buffering that would be noticed by the taxpayer is pretty much off the board per this ruling, but I left the bit of wiggle room if someone really wanted to get creative which I am sure they will. Beyond that I don't quite understand your math/logic, but this is just not worth getting into the weeds on at this point. Too many bigger picture things need to shake out from this before any of that is an issue.

  12. Okay. But, there is no bigger issue than that of the view of the taxpayer. The perspective of a fix, if done from that of an individual rate payer, rather than the bean counter in city hall, needs to happen.

    The law to avoid a windfall of gross taxes means NOTHING to the person with a new tax bill that went up 40-percent, if not 400%.


    In a matter of weeks and months, consumers seek steep changes in property taxes. That's the root of the ill that needs to be solved.

    Or, another way to shift perspective: Onorato's base year has us looking to the past, 2003 (whatever). The elegant solution is for us to look into the future, as to what your tax bill for your property is going to become in 3-4 years time (after the full buffering occurs).

    That's the key, IMNSHO.

    That is the bigger picture thing.

  13. Someone whose taxes go up 400% should, but almost certainly won't, think of it as having been lucky for the previous years.

    I'm wondering what this means for the schools. If many people's taxes go up in the city, more people are bound to start pointing out that the school district's budget is not dropping my anything approaching the rate of the drop in the student population.

  14. So what does it mean that "anti-windfall provisions that prevent a local government or school district from increasing property tax revenues via a reassessment"? Probably means taxes are not going up any 400%. They will likely go up some, but not nearly that much. What constitutes a windfall?

  15. When a mass reassessment is done, if previous millage rates were kept the same then most taxing authorities would reap a big gain in revenues since typically property values go up. Anti-windfall laws prevent that to different degrees and force govenments to reset millage rates after a mass reassessment limiting. Used to be a cap on how much the new revenue would be compared to the previous.. but (and this is from memory), the anti-windfall laws in PA were strenghened in 2006 I think pretty much preventing any windfall gains from an assessment. Millage rates must be reset to equalize pre and post assessment revenues. All that says nothing about individual tax assessments, its about the aggregate.

    There is a sad aside to all of this. The original act 47 plan for the city was mostly balanced because it presumed to take advantage of theweaker anti-windfall laws in effect at the time. Remeber there was a period Roddey had said he wasnt going to do annual assessments, but every 3 years. If you go read the Act 47 budget plan, it assumed the city would increase property tax revenues by the maximum allowable every time that reassessment happened. It was the single biggest budget balancer in the whole deal and had been made obsolute by the Onorato plans to not do a triennial assessment almost before the Act 47 plan hit the street... but did anyone notice or care? Budget looked balanced on the paper and everyone was happy, but it was all a sham (wow).

    but as I said... it would be irrelvant now anyway since I dont think the city could take advantage of an assessment that way in the future.