Property reassessment uncertainty kills growth in Pennsylvania

(The Center Square) — Pennsylvania school districts and local governments depend on property taxes to keep them going, but the commonwealth has caused a headache by not requiring regular property reassessments.

It’s the only state in the country that lets counties decide — and some go decades without a reassessment.

The result, as Sen. Katie Muth, D-Royersford, said during a Democratic Policy Committee on Monday, is “a lopsided tax system” where some pay a little, some pay a lot, and few are happy.

“Today, Pennsylvania has become the poster child for how not to run a property reassessment system,” Sen. Wayne Fontana, D-Pittsburgh, said.

The issue has been heated in Allegheny County, where political careers are made and broken on promises of a reassessment. But one hasn’t happened since 2012. Instead, what happens are spot reassessments , where a taxing authority (usually a school district) challenges a valuation, which drives up property taxes on the property.

Those spot assessments can drive up taxes by more than 40% and are commonly known as a “newcomer tax.”

Commercial property owners can also challenge their valuation, which leads to refunds that come out of school budgets, losing schools millions of dollars.

The result is a system where similar — and identical — properties pay dramatically different levels of tax, as Mike Suley, a board member of the Allegheny County Board of Property Assessment Appeals, explained.

“A condominium on the same floor, everyone has 2,000 square feet. One person’s paying $12,000 a year, one person is paying $3,000, and one of them is paying $5,000,” he said. “One of them appealed and got it lowered. The school district appealed and got one raised. And the guy in the middle is stuck with the same base year bill. That’s what happens over time.”

Allegheny County isn’t alone in lagging behind on reassessments. Butler County hasn’t reassessed since 1969, and Westmoreland County since 1972. Other parts of the commonwealth have put it off for decades as well. Franklin County, which hasn't been reassessed since 1961, has gotten to the point where some municipalities have officially requested county commissioners to perform a reassessment.

“There’s no stability, there’s no consistency,” Suley said. “You can go up and down any street in any county in Pennsylvania — and there’s no rhyme or reason to how those properties were assessed.”

Property taxes aren’t uniform, but an even bigger problem might be that the uncertainty of the tax level kills economic growth.

“You don’t see what doesn't get built. You don’t see the deals that don’t get done,” said Sharon DiPaolo, a partner at the tax law firm Siegel Jennings. “I get three calls a week from investors who want to build or buy in Pennsylvania … I can’t tell you how many deals I've killed or offers that have been pulled after I explained our system.”

To fix it, DiPaolo argued Pennsylvania should copy Ohio’s approach, a triennial system where counties conduct a statistical update every three years with a full reassessment every six years. Joining other states that require countywide reassessments would bring consistency and stability, she said.

It would also be cheaper in the long run.

“In Pennsylvania, it costs $60-$65 a parcel to reassess,” DiPaolo said. “In Ohio, it costs $15-$20 every 6 years, and only $2-$3 a parcel in the statistical update year.”

That change could also bring a dramatic reduction in appeals as well.

“In Pennsylvania, in a reassessment year, it is common for 20%-25% of parcels to be appealed,” DiPaolo said. “In Ohio, in a full reappraisal year (every 6 years), it’s 1.5%, and it’s even fewer in the years in between.”

Regular reassessments would avoid the “sticker shock” and "angst" that happens when counties go decades without an update, Suley said.

“People on the edges here in Allegheny County are paying thousands more than they should be paying and they don’t even know it,” he said. “The only way to a fair assessment is to appeal it. The county already knows that the assessment is out of whack. You can't appeal your way to uniformity.”