CLEARFIELD – On Tuesday, Solicitor Kim Kesner directed the attention of the Clearfield County Commissioners to a more than 200-page report, which examined reassessment in Pennsylvania and was issued by the Legislative Budget and Finance Committee in September.
Last year, Kesner said, the state’s Supreme Court ruled that Allegheny County’s property reassessment system was unconstitutional and unfair to property owners. He said the court faulted the use of a base-year assessment system, which was believed to have violated the uniformity clause in the state’s constitution.
House Resolution 334 of 2009 ordered the state LBFC to examine the real property valuation and assessment system, including protections for the taxpayers, currently in place in Pennsylvania as well as in other states, he said.
According to the report, he said unlike many states, Pennsylvania doesn’t receive any revenue from property taxes. In 2007, he said that property taxes generated $14.85 billion in local government revenue. He pointed out that it was a 45 percent increase from 2000 and also more than state personal income or sales tax.
Kesner said the LBFC report recognized that counties differ in their property markets and assessment systems. As a result, the committee found that house prices appreciate differently state-wide, and several counties have few market-based sales, which poses problems when using statistics to estimate property value.
In addition, he called particular attention to a committee finding, which indicated that a comprehensive county-wide reassessment does not assure statistical standards for assessments are met. In the report, he said that only about 25 percent (14 of 54) of reassessments from 1988 through 2008 achieved national standards for uniformity and equity one year later. Further, he said the report indicated most of those that made the standard the first year did not by the third.
According to the report, he said the State Tax Equalization Board (STEB) calculates certain statistical measures. The board’s measures are not designed to evaluate county systems or to determine if a county should be required to reassess.
Kesner said the LBFC report found that state courts have had a major role in Pennsylvania’s property valuation and assessment system and have also ordered counties to reassess. He said since 1909, Pennsylvania courts have held that, under the state constitution’s uniformity clause, all real estate is one class and all taxes must be uniform upon the same class. He said it sets the state apart from many others, such as California and Maryland.
In the report, he said it indicated that Pennsylvania courts have ordered counties to reassess after finding evidence of significant property market changes; inconsistent application of property valuation methods following reassessment; and “partial” or “selective” reassessment. He said that the LBFC found that the state courts have permitted counties to value property in prior year (base-year) rather than current market dollars as long as values and reassessments meet the constitution’s uniformity requirements.
However, Kesner said that states currently differ in their real property valuation and assessment system. In the report, the LBFC identified that Maryland, Ohio and West Virginia, for example, require property to be valued based on current market values; prescribe timeframes for reassessment; and limit individual homeowner tax increases afterward. In Pennsylvania, counties are given the option whether to assess based on current market or base-year values and when to reassess. But counties constitutionally cannot limit tax increases for individual homeowners.
Kesner said that the LBFC introduced dialogue for recommended changes to the current valuation and reassessment system. According to the report, those changes were to enhance the current system by:
- consolidating state general assessment laws;
- creating a state revolving loan program to assist counties to reassess.
- developing uniform standards for reassessment contracts;
- improving STEB’s performance measures; and
- providing for disclosure of key information about how the county revalues property and a self-evaluation tool to help counties determine reassessment need.
While indicating they were not endorsing any major change, the committee included an outline of options in their report. The following is a list, which highlights those, including:
- the authorization of a state agency to supervise county property valuation and assessment activities;
- the provision for state and other local government financing of reassessments;
- the amendment of the state constitution to provide caps on individual property tax increases following reassessment;
- the permission of residential and commercial property to be treated as separate classes; and
- the permission of partial or selective reassessments of certain geographical areas or property types while also allowing property to be valued based on its sales price.
“It’s up to the House. You would hope for some legislation to be proposed by someone,” he said. But he believed the county could rely on the report in its own property tax reassessment lawsuit.
“There is no guarantee that reassessment will make it better. It will not get any better without standards.”
Kesner said the first step was for the LBFC to evaluate the current system and provide input on the same to the legislature. Sobel said they should make a push for standards to be set.
In any reform scenario, Commissioner Mark McCracken said he wants counties to be presented with options. If presented with options, he said they’re better able to make decisions.
“It could be the start of something good and a change to the assessment law. It would give the county something to hold to,” he said.