Pennsylvania Supreme Court Rules Allegheny County's 2002 Base Year Real Estate Tax System Unconstitutional
Yesterday, the Pennsylvania Supreme Court ruled in Clifton v. Allegheny County that Allegheny County's "base year" real estate tax system is unconstitutional and required a countywide reassessment to be performed. Based on statistical evidence, the Court concluded that the base year system, as applied in Allegheny County, produces non-uniform tax burdens for owners of similar properties, in violation of the Uniformity Clause of the Pennsylvania Constitution. Allegheny County currently imposes real estate tax using a 2002 base year system, which assesses real estate at its 2002 value. The county takes the position that a base year system eliminates the expense of periodic countywide reassessments and provides greater certainty for property owners and taxing bodies regarding the amount of tax due.
The Court reasoned that the 2002 base year system has resulted in "significant disparities in the ratio of assessed value to current actual value in Allegheny County" because the base year system does not require periodic reassessment. Assessments based on 2002 values have become stale because they do not account for changes in property value occurring after 2002. For example, the Court noted that in the Woodland Hills School District, property values in Braddock have decreased by more than 16 percent since 2002, while property values in Edgewood have increased by more than 35 percent. Because all property is taxed based on its 2002 value, without regard to subsequent changes in value, property owners in Braddock (where property value has decreased) pay more than their fair share of taxes while property owners in Edgewood (where property value has increased) pay less than their fair share.
In determining that the base year system produces unconstitutional disparities between assessed value and fair market value, the Court relied on several statistical measures commonly used in the appraisal industry. Based on countywide averages, one statistical measure showed that out of four representative properties in Allegheny County, all with a fair market value of $100,000, one would be 30 percent overassessed — with an assessed value of $130,000 — and a second would be 30 percent underassessed — with an assessed value of $70,000. A second statistic showed that the countywide disparity between fair market value and assessed value "is most often to the disadvantage of owners of properties in lower-value neighborhoods."
The Court declined to find that the state statute permitting counties to use base year assessment systems is unconstitutional in theory. Rather, the Court limited its ruling to a determination that Allegheny County's system, in practice, has produced unconstitutional results. By upholding the constitutionality of a base year system in theory, the Court's ruling permits other Pennsylvania counties to continue using base year systems until a Court determines that the county's system produces unconstitutionally non-uniform assessments. Appeals challenging the constitutionality of the base year system "as applied" in other counties are likely to follow.
While the Court also declined to establish a statistical measure or other methodology to determine the point at which a county's base year system produces unconstitutional results necessitating a county-wide reassessment, it invited the General Assembly to do so.
Ultimately, the Pennsylvania Supreme Court described Allegheny County's base year system as "broken" and held that "reassessment is required." The Court remanded the case to the Allegheny County Court of Common Pleas to set a timeframe for the reassessment to be completed. Despite the Court's ruling, Dan Onorato, the County Executive, said yesterday, "I'm not prepared to say that there will be a property reassessment in Allegheny County." Additional litigation is sure to follow.
Please contact Buchanan Ingersoll & Rooney if you'd like to discuss how the Court's ruling may affect you or your business.
The Court reasoned that the 2002 base year system has resulted in "significant disparities in the ratio of assessed value to current actual value in Allegheny County" because the base year system does not require periodic reassessment. Assessments based on 2002 values have become stale because they do not account for changes in property value occurring after 2002. For example, the Court noted that in the Woodland Hills School District, property values in Braddock have decreased by more than 16 percent since 2002, while property values in Edgewood have increased by more than 35 percent. Because all property is taxed based on its 2002 value, without regard to subsequent changes in value, property owners in Braddock (where property value has decreased) pay more than their fair share of taxes while property owners in Edgewood (where property value has increased) pay less than their fair share.
In determining that the base year system produces unconstitutional disparities between assessed value and fair market value, the Court relied on several statistical measures commonly used in the appraisal industry. Based on countywide averages, one statistical measure showed that out of four representative properties in Allegheny County, all with a fair market value of $100,000, one would be 30 percent overassessed — with an assessed value of $130,000 — and a second would be 30 percent underassessed — with an assessed value of $70,000. A second statistic showed that the countywide disparity between fair market value and assessed value "is most often to the disadvantage of owners of properties in lower-value neighborhoods."
The Court declined to find that the state statute permitting counties to use base year assessment systems is unconstitutional in theory. Rather, the Court limited its ruling to a determination that Allegheny County's system, in practice, has produced unconstitutional results. By upholding the constitutionality of a base year system in theory, the Court's ruling permits other Pennsylvania counties to continue using base year systems until a Court determines that the county's system produces unconstitutionally non-uniform assessments. Appeals challenging the constitutionality of the base year system "as applied" in other counties are likely to follow.
While the Court also declined to establish a statistical measure or other methodology to determine the point at which a county's base year system produces unconstitutional results necessitating a county-wide reassessment, it invited the General Assembly to do so.
Ultimately, the Pennsylvania Supreme Court described Allegheny County's base year system as "broken" and held that "reassessment is required." The Court remanded the case to the Allegheny County Court of Common Pleas to set a timeframe for the reassessment to be completed. Despite the Court's ruling, Dan Onorato, the County Executive, said yesterday, "I'm not prepared to say that there will be a property reassessment in Allegheny County." Additional litigation is sure to follow.
Please contact Buchanan Ingersoll & Rooney if you'd like to discuss how the Court's ruling may affect you or your business.
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