Tuesday, January 31, 2012

Grapeshot

For those who have been asking... the county's own calculations of the changes in taxable assessment values in total by municipality are as follows:

Clairton +42.1%   (I believe this just the part assessed thus far)
Duquesne +31.9%  (I believe this just the part assessed thus far)
McKeesport +27.8%
Dravosburg +85.9%
Versailles +43.1%
White Oak +23.5%
South Versailles +69.3%
East McKeesport +26.8%
Wall +23.0%
Wilmerding +15.4%
North Versailles +22.2%
Eliz Boro +12.8%
Eliz Township +29.3%
Forward +54.3%
Pitcairn -5.2%
Monroeville +26.1%
Penn Hills +12.1%
Plum +23.7%
Oakmont +34.8%
Verona +14.1%
Glassport +13.0%
Liberty +19.8%
Port Vue +19.3%
Lincoln +63.7%
Wilkinsburg +25.6% (ha.. I predicted +24.67%)
Braddock +34.4%
Chalfant +12.3%
Churchill +39.4%
East Pittsburgh +27.7%
Edgewood+51.4%
Forrest Hills +36.5%
North Braddock +15.0%
Rankin +75.3%
Swissvale +42.9%
Turtle Creek +8.1%
Braddock Hills +51.9%
Wilkins +29.8%

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Rocks and shoals

It's January and 55 degrees outside in Pittsburgh; the unemployment rate is down and...  I guess it isn't true that there are no assessment headlines, but the ones I see are calm, sensible and rational stories*. Makes you wonder why could not have started out that way. Still a banner day all around.

So no poking the bear I say.  That and you should never be fooled by the calm weather; the big rocks are always right under the surface and we are still far to close to shore to think this is all over with.

Plenty of other topics.  For all the new bemused readers, and the poor PR folks now being assigned to check in every day, I will update my unemployment graphic and add a new twist. The unemployment story is kind of curious in that in ink I only see a story from the PG.  The monthly labor force dump is de rigueur all around, yet no story in Trib or PBT or elsewhere as yet. Kind of curious.  PG did also note the factoid we pointed out last week that the total employment count for the region is highest since April of 2001. I would say the highest other than just for April of 2001, but I parse.  So with the December data just out this is what I get for the history of how regional unemployment looks to me. 



What are the red numbers I added this time? I have generally failed in my quest to create a neologism that sticks;  I am nowhere near smart enough to ever discover an equation, we will leave that to the physicists; but it is a far lower bar to create a metric.  We obsess a bit to much on the monthly level of unemployment.  Its the trend and the long term that really matters.  So what I have done is create a measure of how many percenage points the region has been above or below the national unemployment rate cumulatively for distinct periods.   So for the prolonged periods where the regional and national rates diverge, there is a cumulative number of "unemployment percentage points-months" that can be added up.  I have noted what I have gotten for each of the significant periods for Pittsburgh on the chart.   A name?  It could be the Briem Unemployment Metric?  Umm...... maybe not.

* and for those who read between the lines.. Note that the PG story makes a step toward clarity by pointing out that the lower percentage  expecting their property tax to go down  applies to a universe much bigger than just residential properties.  Note where in that it references "residential and commerical owners" which is a point that was just skipped in the previous reporting.  Still not quite right in that a lot of the virtually zero valued parcels I excluded in my higher number are parcels that have no owners really.  Some are owned by the city itself, or just don't have owners period.  Dead parcels with long gone owners that exist in a legal netherworld or otherwise are not relevant to the question at hand.  I am quite sure that if you are talking a universe of Pittsburgh residential owners.. which would be the universe most analagous to those showing up at these meetings or lets say voters in the city.. you are talking a percentage a lot closer to my 65% number previously.  If that is all too much minutia or too complicated in summary: a parcel is not a parcel.   There are some folks out there with toolsheds separately deeded.  or  Probably should not treat them the same as a person.  Citizens United not withstanding.  Counting something valued at $1000, and which has a total annual tax of well under $100 as equivalent to most homes is confusing the issue. 

Yeah,    12 step program is failing.

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Monday, January 30, 2012

Bonds in being

So I know that there are not a half dozen people outside the fifth floor who care... but for the muni finance wonks this is is actually curious reading the breaking news that Pittsburgh has (finally) agreed to a bond issuance that will be approved tomorrow.   It looks like most, but not all of the paper found buyers by the end of the day today.

Beyond it being $125 million or so which is not a small number, why is it of interest?  According the the Preliminary Official Statement on this offering, part of it is to refinance some old bonds. Specifically these 2002 Series A bonds.  Thing is that these bonds are callable on March 1, 2012, with a minimum of a 30 day notice to the registered holders of those bonds.   30 days left of March 1st is...  tomorrow? You are talking seriously down to the wire in all of this. 

Curious discrepancy in numbers.   Dow Jones says this was for $114 million.  POS said $125 million.  Trib breaking news says it is 80+57 which I add up to be $137 million.   I'm quite sure the number for the debt is a hard number at the end of the day, just curious reporting to see the different numbers floating around.

Like I said..  not quite the stuff for a general audience, but beyond any headines on this, there must be a very serious inside game of poker going on between the city, ICA and everyone else involved in the timing of this.  Given how much ink we spill over some incredibly minutia things, you think this all would get a little more coverage or public debate. 

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a thud-less Monday morning?

So roughly a quarter of Allegheny County had new assessment numbers that arrived in the mail Friday and Saturday.  I am personally hoping that the lack of headlines and/or other rhetoric constitutes..... I dunno....  progress?  Could it be?

One big important point based on questions I am getting.   Realize that virtually every number that has been talked about thus far, by me, in the media, and all others, have been about the assessment data out there for ONLY the City of Pittsburgh and the borough otherwise known as Mount Oliver

So everything you have read about the notional tax issues and revenue neutrality all pertain only to those two municipalities.   Every municipality will have different aggregate tax changes requiring a unique resetting of tax rates, as will every school district.  So for all other municipalities even to begin figuring out what the change to your tax bill is you will need to compare your assessment change to the changes in both taxing bodies.  Whatever the number was for Pittsburgh, and/or Mount Oliver, will have nothing to do with your situation if you are not a resident of those two places.  I sense a lot of folks thing the numbers being reported for Pittsburgh apply more generally.

I got into this a bit more a year ago in this post: So you want to calculate your new property tax bill?

and as far as I can tell, there is nothing in the public record yet as to what any of those aggregate changes are.  I did calculate it to be a roughly +25% value for Wilkinsburg, but that again just applies for residents there.

More to follow.  

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Sunday, January 29, 2012

Redistricting evermore

Yes, the big news is all about the confusion over what is happening with state level redistricting of late.. lest we forget and for the political cartophiles out there the PG has an Next Page feature on some redistricting ideas..  I would have started putting up my own proposed redistricting maps up by now if I hadn't become preoccupied of late. 

I go back to my post from October, and if there is any tech person out there who wants to implement to open source redistricting software it referenced (from publicmapping.org)  on a server, I will offer my services to do whatever is needed to populate the data in the system for local projects.  Nobody took me up on that offer.

The result would be a way the public could create their own maps that could be used to provide inputs into the ongoing redistricting processes.. which as per the PG piece includes at least Allegheny County Council, Pittsburgh city council, the Pittsburgh School District and of course lots of smaller municipalities and school districts.  There really is no reason we don't have the capacity to do something like this in Pittsburgh is there? Tech savvy, data, and certainly interest in local politics all in abundance.  Makes you wonder why nobody is doing this here?

Even in October I thought it too late for anything to happen with the state redistricting, but who knows now? If they miss the cycle, who knows when they will get back in gear.  But the local council and school district redistrincting processes are all pretty far away from conclusion, so there is time for most of those I think.

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Saturday, January 28, 2012

No, this is not a post about assessments

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When a challenge isn't

Well, this is curious semantics.  A news article just out says: Many city homeowners may find property tax payments reduced.  In it one of the first lines is:
"This estimate was released today by RealSTATS, which challenged University of Pittsburgh economist Chrisotpher Briem who earlier this month the new assessments would reduce property taxes for two out of three homeowners."
The article has data saying 54% of homeowners will likely see tax bills go down as a result of new assessment numbers.  I had said here that it is likely 65%.    Strange semantics to say there is any 'challenge' going on. Seems to me they are agreeing with me more than anything else.  I don't get it.  But like I said, nobody asked me on this.

Anyway, just to avoid any confusion.  I have put the full distribution of values I scraped from the county assessment web site online and explained in that previous post. I put my full dataset online as well exactly where the distribution comes from for those who want to look at it.  Feel free to go and use it to do your own calculations. Remember, the old article being references was done at a time when the county was not releasing the assessment data even to the media even though it was central to the entire public debate at the time.  The real issue here is that it is about open data, transparency and what the public should not be guessing about.  There need not be any confusion or debating numbers here.  In itself, figuring if your taxes go up or down need not be proverbial rocket science.

Note I used data directly from the assessment which is the basis for tax bills.  I think the Realstats data is great, but I dont think they have access to the actual assessment data yet do they? (see update below)  If they do I really want to know how they got it since to my knowledge the county has not released it yet. I also can not tell from the article if the realstats estimate of the tax rate change is being based entirely on residental values, or if it includes the reported commercial value increases as well.  The higher increase in commerical values would create a bigger drop in the revenue neutral rate and thus a bigger percentage of homeowners that will face tax bills. 

But I don't quite see the 'challenge' part anywhere. This news item says there is an estimate that 54% of homeowners will see a price drop. I came up with 65%.   We can argue over the 10% there, but the point is that there is not additional analysis saying that a majority of homeowners will see a price drop in the new assessment. Something that I suspect a majority of people still find suprising given the political rhetoric.  I kind of see it as the opposite of any 'challenge'.  I don't get it??  

In fact, they really agree with the big point I made earlier.  Per the article summarizing the realstats data "The areas in which taxes are going up are Lawrenceville, Stanton Heights, Morningside, South Side, Bloomfield, Highland Park and East Liberty".   I think that comes awfully close to what I said and was quoted in the PG:
The neighborhoods where assessment increases are most concentrated include the South Side Flats, Lawrenceville, the Mexican War streets and portions of Highland Park and East Liberty. Many city and county officials have pointed to those neighborhoods as redevelopment success stories where new residents are moving in and real estate prices are rising, Mr. Briem wrote.
What am I missing?  I wish everyone who 'challenged' me would so agree with me?  I can only speculate a bit on where the difference is from 55%, but as I said.. I based my ratio on the actual assessment data and not on an analysis of recent sales data which I suspect is what Relastats has since that is what they distribute regularly. Also as I explained, I took out parcels that were likely not habitable parcels which are a big chunk of all the parcels coded as 'residential' in the assessment data for the county.

You know what would be fun?  The county distributes an actual dataset that the PG could then use to come up with a number themselves and then not get caught up in this.  Why argue over a number that clearly can be calculated without too much speculation needed. Of course, it is unknown to me if the PG has yet to be able to acquire the actual data which I know they have been trying to get since December to little avail.

Update:  So I've seen the Realstats report though it still isn't on their web site yet.  From what I can tell he has somehow acquired the actual property assessment data, which is a big mystery since everyone I know including public officials who needed it did not have it. Though they may have it now.  I think, and this is speculation a bit that Realstats is talking about a different set of issues. I was looking at City of Pittsburgh residents which at the time was clearly the only thing any of us could have been talking about since the county had only released the residential values.   I think the count of residential properties in the city of Pittsburgh and Mount Oliver is close 119,100.  There are another 30K or so commercial, or government parcels as well.  So in the Realstats report I see he references 128 thousand parcels which I am pretty sure is talking about a lot more pacels than matters if you are talking about Pittsburgh residents and residential owners. I bet it is including commercial properties or a lot of properties that are clearly vacant in some form.  So the numbers they are compiling are just not comparable to what I did and thus there are some difference between them. 

Again, my data, explanation of how it was acquired, distribution of results, presumptions and explantion are all ONLINE HERE.  Everyone can go poke a it and make their own conclusions. It might be good if Realstats put their complete dataset online as I have done for comparison.

If there is any difference in the final results it is because the county was not putting any of this data out at the time.. Right when everyone was getting their assessments and jumping to a lot of conclusions without much clarification from anyone out there.  So it would have been nice if Realstats had put out this analysis of the actual assessment data when it really mattered, but it's great they are in large agreement now that folks have started to calm down.  I would hope that with the actual assessment data we might reach a more definitive answer.  It just isn't comparable to say "my numbers" are different from what comes out later.  It isn't quite how this all works.

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Best and Highest Value Use

So this is interesting and no, this isn’t really about assessments. I mean, it is about assessments, but there are so many bigger issues rolled into this new legal development.

In the new litigant a week merry-go-round in Judge Wettick’s courtroom (it really must be getting crowded), the latest is the (collective) property owner of one R.J. Casey Industrial Park who has a slew of issues.

One of many points is a contention that it is against Pennsylvania’s uniformity clause to assess commercial property differently than residential property which is indeed how it is done here and most everywhere else. Problem with that is that commercial properties across the state have been assessed different than residential properties for decades. So I will let the attorneys fight over that one, it is just one of the issues.

Then they seem to point out the dearth of information on the assessment. Here are points 16 and 17 in their filing:
16. Regarding commercial properties, the Property Record Cards available for purchase on the Third Floor of the County Office Building, do not contain any information on the New Assessments. 
17. Accordingly, unlike residential property owners, commercial property owners evaluating their New Assessments have no access to any information that the County used to determine the New Assessments.
Lots of capitals in that, but to be sure I feel their pain. Though I do get a chuckle of someone really digging up (and dusting off) a property record card and expecting to find much relating to the latest machinations written down in ink. Are those things still written in cursive? For the record, the online information is just a small part of what what went into determining new residential values.  I see no reduced form from any of the many regressions that were used.  'Comps' are at most part of the equation and many overinterpret their role in the assessment I am pretty sure.  There is a funny story back from when the original 2001 Sabre numbers came out which didn't really used comps the same way CLT did.  The county web site did not list any 'comps' for a property, but people so expected to see them that eventually the web site was altered to show a few comparable properties that were picked ex post... though the properties listed really had no specific input into setting a particular property value becuase of the way the Sabre Systems algorithms worked. (that is a very short version of a very very long story.. but I digress). 

To be fair I should go back to point 15 in the filing which is clearer and shows they did start out digitial:
15. Regarding Commercial Properties, the county provides no information online regarding the comparable sales used to determine New Assessments or even the gross square footage of an improvement on a commercial property. The County does provide this information online for residential properties.
Well, some information at least. Otherwise ditto. 

Nonetheless, the motivation in the end must be to get a lower assessment and a lower tax bill.  First off realize that for commercial property across the nation the standard for property assessment is not market valuation that it commonly is for residential values but “Highest and Best Use of the real property”. For a lot of properties that distinction may not be such a big deal, but for some in certain unique locations it could be a big deal.

So here the property owner is upset having seen their assessment for 6 properties jump from $2.7 million to $11.3 million. A scary 340% increase in nominal value. Even with our notional revenue neutrality it works out to a potential tax increase of 280%, so more than enough to be upset. So.. is the increased assessment some gross error on the part of the assessors, or is something else going on?  Could it be the highest and best use for the property has changed?

Again, like the Mt. Washington parking space, we may have found the most exceptional case out there. Is there anything unique about this property?


So where is this property?  All of the properties at issue in the filing are located in the otherwise depopulated Chateau neighborhood (why we still call it a neighborhood is another issue since literally no more than 10 people live there.. likely a lot less.. unless you count folks sleeping under the slots machines I guess). The properties in question are all along the riverfront a half mile or so from the edge of a property recently redeveloped and otherwise known as 777 Casino Dr. Nice new bike trail cuts through the properties in question and there are some nice marinas there it looks like. 

So lets ponder the 'old' assessment values which everyone likes to refer to as 2011 values which they really are not. They are, again, base year assessments based on what circumtance were in 2002, if not prior.  Yes, the 2002 base year assessment really means that the ‘old’ values were based on what the market would bear for a property in 2002. Back then the idea of a casino was not yet really formed, and even if it was there was no thought the casino would be placed over on the North Shore there where the Rivers Casino wound up. Remember Don Barden really came in with a somewhat unexpected bid and was clearly not expected to beat out the Penguins backed project slated for the Lower Hill District, nor the Station Square locations that everyone was focusing on. The location on the North Shore and the big empty plot of land on the North Shore there was fallow and without anyone really expecting much to be made of it anytime soon. I am pretty sure that was a big drag on all nearby real estate. Even the North Shore Connector was so far from completion, and opposition so loud, that it would not have been reasonable for it to have had any impact on real estate values at the time. Now it is on the verge of opening. Could it not have some positive impact on land values anywhere near it.
 
So now, 10 years later.. it is not to say there is any vast demand for land over there and I am unclear was nearby development the casino has wrought… but would it really be reasonable to think there has not been any impact on nearby property. In this case the 5 properties in question are add up to either 5 or 10 acres (I am confused because the itemized parcel 22-J-67 is listed as being owned by the URA?? even though there is no mention of the URA in the filing??)  of land all effectively riverfront parcels though I am not sure if they own all the way to the river itself.

Someday when we ever really see data out of all this I will work up a map of the value per acre along all of Pittsburgh’s rivers before and after the reassessment.  It might be interesting to see how the price gradient moving away from the river has changed over time. It would be an interesting factoid at least to see if any of the vast efforts to redevelop our riverfronts have had any meaningful impact capitalized into real estate values of real estate close to the riverfront. Just imagine the counterfactual if they did not and what that would mean?

So there is a bit of Henry Georgism in the highest and best use construct. It is certainly true that the parcels might not currently be ‘worth’ the new higher assessments placed on them.. but if assessments stay low, and taxes stay low, there will that much less incentive to ever fully develop those properties to the “highest value” use.  There is only so much riverfront property near the Casino (and the stadia and the science center) to be had. I think that is the core reason commercial properties are assessed differently to begin with. 

I'm thinking there is a future casino-annex hotel latent in the geography there. Best and highest value use?

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Friday, January 27, 2012

North Side Story II

Just noting the news today about some new commercial developments on the North Side. Last week I poked at the serious counterfactural North Side (Development) Story that is now mostly forgotten except by those focused on preservation history. 

Just a gratuitous extra aerial view of the North Side circa 1954, also from the North Side Study of 1954.

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Green Lantern Lands in Lawrenceville

So here is an advertisement I noticed when reading something on PopCityMedia. It causes all sorts of short circuits in my real estate obsessed mind these days.


So 5309 Duncan St. in Lawrenceville. Way up in Upper Lawrenceville.  Asking price a smidge under $245K.   Let's go look up the assessment valuations for the property.  Old assessment = $38K.  Great gobs of gentrification Batman!  Ok, lots changing in Lawrenceville and the ad implies a lot of investment in this property so no surprise the 'old' assessment is not quite matching.  But the 'new' assessment value?  All of $64K?  So I know asking price is always optimistic, but we will have to track what this property actually sells for and how it compares to assessment values.  Don't get me wrong, I don't get the price myself. That energy efficiency the ad talks about better include a Green Lantern power lantern since I doubt there is space to drop a geothermal pipe in the backyard... if indeed there is a back yard.

Stranger still when you look at the recent owner history.  Fannie Mae REO disposal for $1,658 late 2010, and resold for $26K in early 2011.

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Thursday, January 26, 2012

To Flight Pittsburgh, To Flight

So news yesterday includes a mention that Alcoa will expand production destined for the aerospace industry.  

Is it a new gig for Pittsburgh?  Not even close.  Pittsburgh and specifically the Steel Building was for a long time the headquarters of the Rockwell Corporation.  Rockwell was a major player in aerospace having built the Apollo command module and parts of the Saturn V rocket before that.  It would move out as its Southern California operations eclipsed all that it was doing here, but still it was a Pittsburgh firm for a long time.  Some may recall the mockup of the Space Shuttle, also built by Rockwell, that was in the Steel building's lobby until they left town.  What is odd is I can find no image on the Internet of the Steel building's lobby with the shuttle mockup in it. 

More than that of course.  Just before the US would enter World War II, the Defense Plant Corporation would contract with the Curtiss Wright Corporation to build from scratch and operate a plant in Beaver County fo the production of state of the art propellers.  The plant would employ nearly 4,000 workers at its peak, only to shut down completely as the war ended. Think about those job numbers a bit when you read almost any business news today about job creation or destruction here or there. 4,000 manufacturing jobs would be nearly 5% of the total manufacuting job count in the entire region today and that was just one, relatively small by Pittsburgh standards, plant now mostly forgotten in the long Pittsburgh story. 

February is coming up and with it Black History Month.  I always find some new nugget in this old article Early Black Flyers of Western Pennsylvania, Western Pennsylvania History. Vol. 69, No. 2. April 1986.  Among other stories it covers is the story of one Charles Wesley Peters of the Hill District who in 1906 built a glider and flew it himself off of Herron Hill.  Can you imagine?

and I learn something new every day about Pittsburgh.  Checking a fact for some of the above I came across a recent newsletter for the Pittsburgh Space Command. Cool.

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Wednesday, January 25, 2012

There is large, and there is large

EPR describes the imminent bond Pittsburgh is about to float for $80 million as the "largest bond floated in city history".

Either memories are really really short, or I think someone misunderstood what large is. alternatively large, or getting smaller, or maybe even this not so small bond. I mean, even this.

Just semantics I am sure.

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on those nomination petitions

Attention politicos major and minor, sundry election lawyers and all hangers on!  It appears the Pennsylvania Supreme Court has rejected the redistricting plan that had been approved.   I don't see the final opinion which will spell out what their issue is that will have to be addressed by the Pennsylvania Legislarive Redistricting Commission.

but what is even more practical to the political apparachiki is that their order today appears to shift some of the dates crucial to the spring election cycle. (so attention Mitch Daniels!..  Isn't it strange that people are talking about Mitch Daniels parachuting into the Pennsylvania primary which by the time it comes around could be an All-Pennsylvania affair with Gingrich, Santorum and Paul... politics is strange)

update: I guess the biggest question is whether there is time for both the PLRC to revise the maps and then if it is necessary for this to all be litigated back to the Supreme Court. The ruling says the current (old) maps are in effect until there is a new plan.  As per the schedule below, petition season is upon us and it will make a huge difference if the old maps are used one last cycle.  What happens say with the now vacant District 22 which Wagner just resigned from and which is being moved across the state in redistricting?  Will people be running for that seat here or in Allentown?  Law gets complicated as to whether a special election needs to be scheduled for that seat now in its extant location. The only reason there was not going to be a special election was because the district was being moved.  I think as of the moment there will literally have to be a special election scheduled here in Allegheny County for that seat, but I will defer to any attorneys to have other thoughts.   Then just when will new maps come?   You can make maps fast, but agreeing to maps is another thing.  A complicating factor is the Supreme Court released its ruling on this, but I don't think they have yet followed up with an opinion detailing what specifically they found objectionable in the current plan, thus it would be hard to begin redrawing any maps until the opinion is posted.  Convoluting things more.. PoliticsPA reports that three of the justices are off to Puerto Rico on a pre-sceduled event which may impact the timing of getting an opinion posted. 

But the revised dates per the court:






Thursday, January 26 (was Jan 24th) First day to circulate nomination petitions

Thursday, February 16 (was Feb 14th) Last day to file nomination petitions

Thursday, February 23 (was Feb 21) Last day to file objections to set aside nomination petitions

Monday, February 27 (was Feb 24) Last day that court may fix for hearings on objections to nomination petitions

Friday, March 2 (was Feb 29th) Last day for court to finally determine objections to nomination petitions

Friday, March 2 (was Feb 29th) Last day for withdrawal by candidates who filed nomination

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At least pick a prime number

So a news item out of Harrisburg included a bill passed in the state house that would lead toward the Pennsylvania General Assembly shrinking from 203 members to 153 members. It's a long way to go before it gets enacted, but it might be a starting point.

but 153?  Is there some aversion to round numbers in base 10 math?  Master triangle math the motivation?  Why 153?

It might be interesting for reform of the Pennylvania legislature to go just a bit further than just reducing the number by 50 or so.  Would it be too much to try and impose a little more order on the whole system? Don't answer that.  Our neighbors to the west in Ohio actually have a much more rational legislative structure.   99 members make up their house of representaives while there are 33 senators.  The big difference is that the 3 to 1 ratio in Ohio is how the districts are spatially defined.  Each senate district is made up of exactly the 3 general assembly districts which are coterminus in perfect tessellation. Just saying that if the proposed number of general assembly districts for Pennsylvania was150 and not 153 then it could work out the same with the 50 Pennsylvania senate districts. A tweak in the proposed law on how the general assembly districts are drawn could create a structure much like Ohio's.  Think how much clearer that would be? Who would want that?

Not to say all that goes on in Ohio makes sense to me.  This current proposal to transfer Ohio's control of the wholesale liquor market to a nonprofit with a monetized bond payment is all too convoluted to figure out. Which is why I am waiting for someone to come up with a corollary to try in Pennsylvania.

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Tuesday, January 24, 2012

Slim Pickens redux

For those perusing here while watching the State of the Union address, it is always a cottage industry for the media pundits to comment on the missing cabinet secretary in the audience.   A topic far afield from the normal fare here, but as a baby wonk I started as a defense analyst many years ago.  Thus the fodder for what was one of the most non-sequitur posts here a few years ago that may be worth posting again:

Slim Pickens Revenge (or What I would blog about if I were Tom Clancy)

Seriously, people worried about this stuff a lot. I didn't make a word of that up myself. 

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Nabobs alert

OK... listen up.  Nabobs especially.   Latest job counts are out and for December we again have a peak in terms of the highest December job count for the Pittsburgh region ever. 

Only May and June of 2001  showed a higher job count than the 1,164,000 raw number just out. So the middle of construction season then when I think there were a few big construction projects pushing up the numbers (and before USAirways employment imploded of course).  Seasonally adjusted the first part of 2001 had some slightly higher numbers. 


So we will call it the post-USAirways peak.

and yes.. just a side story to that number may be the warm weather permitting more construction than is typical to continue through the season.

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Homework

It's like the county is giving me programming homework. 

OK.  All 'new' assessment values for City of Pittsburgh commerical parcels are in a comma delimited file online here. Just two fields, Block and lot number (one field) and the 2012 assessment.  Scraped with this program if you are interested.

So the top 10 new commercial valuations in the city that I come up with are....

500 Grant St. $242 million
Rivers Casino $242 million
1 PPG Place $238 million
600 Grant St. (aka Steel Tower) $233 Million
301 Grant St. $167 million
1001 Liberty $149 million
500 Ross St. $102 million
210 6th St. $98 million
401 Liberty $93 million
625 Liberty $92 million


So yes, I am sure they will all appeal and some may be overassessed.  But it begs some questions on others.  Look at the Steel Building (or Steel Tower or 600 Grant St. or whatever its moniker is these days).  $233 million dollar assessment, but it is reported to have sold for $250 million last year all while it paid no real estate transfer tax on the deal.  In past years the City of School District might have appealed against the assessment, but I suspect the political climate precludes that happening this year.   This is speculation, but that steel building sale may be setting the market in the valuations.

Likewise the casino valuation will be appealed (again?), but realize that since it's base year assessment value set all sort of things have happened.  The law changed allowing them to engage in the much more profitable table games was enacted and in a sense that would impact what the property is worth.  For an establishment reportedly set up with $800 million in investment, you think it might be worth a third of that in the assessment valuation?

I have an idea..  they would need to change some laws for this to happen, but for anyone really balking at their assessment valuation then the fallback could be to use replacement cost.

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Monday, January 23, 2012

City: $125 million bond POS hits street

So the city has made nice with the ICA??  For the local public finance wonks out there:  the City of Pittsburgh has hit the street with a preliminary official statement for a $125 million bond offering that they need to get out there by Thursday I think it is if they want to call the bonds part of his new bond is intended to defease.

Note on page A-10, a plague of some sort hit the city in 2009. 

and only a bit non-sequitur... actually quite apropos..  but if you noticed the story today about how hillside problems are hitting the city's budget and likely the expenditures from this new bond offering. Is the City of Pittsburgh's Hillside Committee still functioning?  I refer you to a report from not all that long ago from my friend Steve Farber:

An Ecological and Physical Investigation of Pittsburgh Hillsides - ECONOMICS REPORT to the City of Pittsburgh Hillsides Committee

Economics of Hillside Slope Development
Final Report

November 30, 2004

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Flaring Contango

My inner energy futures trader is mesmerized by what is happening in the natural gas markets of late.  If you do not wake up at night wondering if natural gas will flip from contango to backwardation then I will make it simple..  the price of natural gas is plummeting faster than anyone predicted. 

A little over 3 years ago, right around when a lot of folks were signing a lot of their Marcellus Shale leases, the benchmark price for natural gas peaked at over $14 per million British thermal units. The benchmark is for the gas at the Henry Hub pricing point.   As of Friday that price had dropped to around $2.34. So for now a decline of 80+% from it's recent peak, but nobody seems to know where the trend ends. Some describe it as a 10 year low in natural gas prices, but that is in nominal prices.  Adjusted for inflation I wonder what prices would be described as?  I only know what I read, and it seems to me that industry folks, or at least the traders, are beginning to contemplate a near term future where there isn't enough storage capacity to hold the gas being produced.  Then what?

Remember the glow of steel mills along the rivers?  There may be a new glow forming across the Pennsylvania countryside.

But it means more than the potential artificial twilight that may be on the horizon.  Most landowners signed leases with upfront hand money as a bonus to entice signing development rights to one of the drillers out there, but also with guarantees of royalities against future production usually around 12.5% as per state law setting the minimum royalty payments, though many may have negotiated higher shares.

But not all minimums are a minimum.  Some may remember that the drillers won a court case against landowners that the royalty payment  was only due on the price NET of a cost to get gas to market.  How much that isI do not know, but if there are any folks out there in receipt of royalities it would be of interest (at least to me).  The only number in the record I see is from this old blog post which says Range Resources is deducting 72 cents or 80 cents, mer MMBtu, for dry and wet gas respectively.

So just for sake of argument, assume the selling price for gas is the benchmark price.  Yes, some may be getting more, but hold the thought and lets assume a dry gas example for moment.  If you net out 80 cents from the peak and current prices it works out to $13.28 back in 2008 and $1.62 on Friday, it then works out to a royalty decline of over 88%. 
Seems to me there are some latent stories out there of individual landowners seeing their royalty checks dropping precipitously?  Though I have no idea what the time lag is between production and check which may have a lot to do with it. The biggest drops in gas prices have been very recent, and certainly to recent to have been reflected in checks yet.

The bigger question is just where the stability returns to the market.  Are current price levels enough.  Some industry folks say clearly yes and tht profit can be made even as low as $2.50, likely because of the other 'wet' products in the gas here.  But we are not even at that level right now.

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Sunday, January 22, 2012

Player Piano Redux

Let's see if we can crowdsource a post.   h/t to several who caught it out there, but does anyone have the video for a Cisco commercial that ran during of of the games today with a tagline of "factories that fix themselves"?  Just the sort of thing that might grate in a region once full of factories; factories full of workers.  If the video is out there, I'll embed here if possible. 

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Friday, January 20, 2012

North Side Story

So I probably could post something on reassessments daily, but why go through the torture? So I will at least pace myself.  This is related to real estate and I guess really is about reassessments in the end.  Just playing with a new wand scanner and some images from the North Side Study of 1954.

Today what I think will become a bigger story is the rising property value in at least some neighborhoods.  Not the least of which will be the Mexican War Streets and environs.  In the big picture it has not been that long since much of that real estate was written off and slated for vast reconstruction which much of the North Side could not escape.

How much reconstruction?  Basically from the ground up.  In the 1950's the plan was to take the neighborhood of  the Mexican War Streets and environs from something that looked like this (click on images for better resolution versions)



and make it into something that looked like this:


You just have to wonder if those towers some sure wanted to build would have themselves been demolished over the last decade like so many of the other big housing projects built around then.  A counterfactual history we were spared.

I really need to digitize the rest of my office some day.

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Thursday, January 19, 2012

Words Numbers Matter

So which should be the opening line of this article: Appeals of largest-percentage reassessments to be heard first
Version 1: "About 8,000 Pittsburgh and Mount Oliver property owners have appealed their new assessments."

Version 2: "About 6.7%  of Pittsburgh and Mount Oliver property owners have appealed their new assessments."
and which version was used?   Actually the 6.7% is the percentage if the 8,000 appeals were just the residential appeals of which the city of Pittsburgh has 120 thousand or so parcels..  If it is 8,000 appeals of the the 150 thousand or so residential or commerical properties you are talking 5%.

Actually I am wondering.. is that scale of appeals higher or lower than what happened back in 2000 - 2001?

So go back to to the angst, anger, fear and loathing reported all around.  All of  5-7% filed an appeal. Likely a chunk of them will not show up if past patterns follow and again looking at past practice I bet you would find plenty of folks see no, or minimal, adjustments in the appeal process. 

So for everyone telling me the appeals will change all the numbers...   how exactly?  and by how much.  Realize that if someone gets a lowered valuation, it will push down the revenue neutral point an iota, but at the same time will push another parcel into a lower valuation.   So the impact on the distribution is unclear.  Some point out the likely self-selction in that higher valued homes will be appealing more than lower valued homes.  Granted, but see the numbers above on what total impact is possible and also I really got the impression from the news accounts that everyone was trying to appeal, not only those with nominal value increases above the revenue neutral point, but those below as well. .. So it may balance out more than one might presume.

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Zen and the art of riding the 54C

Since I can't avoid the topic I will just repost an old transit map I have below.  A longer transit post isn't in me honestly.  Since the Port Authority cut so many suburban routes a few years ago, they lost any hope of maintaining even passive support by the median voter and thus lost the battle for political support for any other path than the one we are clearly on.
Still, it is all just sad.  As a disclaimer in one of the first posts here I pointed out that my 2nd spoken word was in fact 'bus'.. likely trying to hail a 54C.  Now where are we? In the fall campaign I did try to introduce a simple question that still needs to be answered.  Will there be public transit in Allegheny County eight years from now?  Still needs to be answered.. strike that, it still needs to be asked. 

So the map.  Part of the news on the announced route cuts is that they include virtually all 'express' routes.  So the map below isn't from all that long ago.  Note the Port Authority used to have more 'express' routes than they will routes in total once this round of cuts is over with.



And if you have read this far then you probably want to go check out one of the more amazing side streets of the long tail intertubes: http://www.pittsburghtransit.info/

First image above from hopetunnel.org and found via pittburghtransit.info...  or the other way around.

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Wednesday, January 18, 2012

Waterblogged

So does someone have a 12 step program for blogging about property assessments. Probably a really niche market. But I don’t have a problem. Still, there is time to look at our rosetta stone, otherwise known as the Pittsburgh Water and Sewer Authority.

And the readership drains away………

Seriously, our rosetta stone. Take the news today that the city and county are merging accounting systems. It was not too long ago that the city was fighting that with an argument that the city should merge its accounting system with… yes, the PWSA. The other news is that the PWSA, after 13 months is kind of, sort of, possibly, considering whether it will plan to look for a new leader. Makes you wonder who would have been running the city’s accounting system if it had followed the PWSA plan. It is not like the PWSA was very clear what software it was going to use itself.  There could have been all sorts of fun news stories I bet.

More of course. Other news today is a report looking at the impact of “Swaptions” on the finances of a broard range of public entities in Philadelphia. Plenty of those issues here as well, but none worse than… yes, the PWSA’s.  I'm not convinced that situation is settled completely even yet.

Assessments (who said that) are in the news of late in Judge Wettick’s courtroom. Not long ago though it was the same Judge Wettick who ruled that the PWSA’s line insurance program was illegal. Prompting it’s service provider, one Utility Line Security, LLC, to declare bankruptcy and hint at seeking $3 million in compensation from.. the PWSA again. What is up with that bankruptcy eh? Nobody noticing any longer, but lots this week actually. In summary, more liquid(ation).  If I understand the filings looks like the PWSA is paying the rump ULS not $3mil, but $350K which may just go toward paying contractors awaiting fees. (I still bet that $$ came from cash generated via the Bond to Nowhere) I am guessing that is all needed to clear those contractor's liens that were beginning to gum up the system.  Well... that was fun. 

Why does ULS own this vacant parcel in Garfield anyway? Curious. I'm tempted to go try to buy one of those Dell computers to get the hard drives.  Too much hassle.

And our water is purple…Cool!   Dare I say, it’s not some Ravens aficionados in our midsts.. Look no father than the PWSA. That was a fun prank in high school I have to admit, but points for doing it at scale. 

and I just can't connect it to water at all, but note the story about the city being forced to put money away toward its unfunded health insurance liability. I am sure it is all because it was mentioned here over 5 years ago.

Hey, I'm improving.  Only one mention of Judge Wettick.  I've been put on a quota.

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Tuesday, January 17, 2012

The unbearable assessment of the Pittsburgh Hipster

Some think I don't get the assessment angst.  I do and it can all be explained by the Pittsburgh hipster. 

Really.

So last month the Washington Post named Pittsburgh the new 'in' place and in some official list maintained I guess by those powerful AP word czars we must have displaced tragically hip Portland.  Now some of us noticed this last month when it came out, but the media catches up and the PG had a fun story on Sunday on this neo-hipsterism that is somehow making Pittsburgh 'cool' in a way it may never have been (ever?).  So if you didn't go read  Watch Out Portland, Pittsburgh's looking hip and in particular read this remarkable quote:
As for Pittsburgh being attractive to young people, "well, why wouldn't it?" said Mr. Sussman, the ukulele instructor.

"It is cheap to live here. It's the only city I know of where you can have a part-time job at a coffee shop, still afford a mortgage payment and be able to go out once a week. ... How would that not be appealing to any young person who isn't ready to settle down?"

There you go,  it really is an amazing quote and the whole assessment angst follows from it directly.  Our new hipster denizens are observing as new what generations or more have lived here.  Real estate here just does not appreciate. In Pittsburgh real estate is hipster-priced. Period. End of story. Forget what happens everywhere else on the planet, real estate can be had in Pittsburgh cheap. Like really cheap, cheaper than anywhere else.  Forget what the tax might be set at, it just can't be correct that our homes have inched up in value.  Not too long ago it was observed that the total real estate value in the city of Pittsburgh (a city with at least 300,000 residents) was lower than the valuation in Lower Merion, a borough in Eastern Pennsylvania with less than a quarter the population. 

So here is a story.  Absolutely true and I'll protect the innocent, but a friend was absolutely livid at his new assessment. Angrier than anything I've seen.  I asked by how much of course and it as near exactly 50%.  The argument about tax rates being reset was not the point it was explained to me. It was just how could they be so WRONG.  It wasn't about what the tax bill would be, it was about getting it right.  Hard to argue against the point.

So a week later emotions abated and we talked again.  Turns out he dug up some paperwork.  Just last year a 2nd mortgage was taken on the house and there had been an appraisal done. He had not looked at the details because the loan was approved so it was never an issue.  Now by univeral agreement, almost all commercial appraisals these days are coming in at extremely conservative levels for legal reasons related to the foreclosure crisis most likely. It is a particular problem here in Pittsburgh where lots of folks are willing to pay prices for local property, but often cant get a loan at the amounts they want and can pay because the appraisals are coming in so low.  Still, it turns out that the property in question here the appraisal last year was HIGHER than what the new assessment figure came in at this year. Go figure.  "Maybe they got it right" was the new thought.  I have wondered for some time how many long-time Pittsburghers would be surprised by what value say Zestimate gives for their property.

So yes, there are things going on in SOME neighborhoods and communities.  Places that were once priced for armageddon are actually being invested in. Not all, but some. Arguably more than a few.  Might seem like big percentage changes, but more a reversion to the mean.  Seriously take Lawrenceville.  There is a French gourmet bakery thriving in Lawrenceville.  Think about that.  The Financial Times came in and decreed the neighborhood a "Diamond in the Rust". These are remarkable things that would have seemed inconceivable even a decade ago, ridiculous two decades ago and delusional three decades ago.  Certainly these of not signs of prices going down are they?

For some of us, memories persist way to long, for others maybe not long enough.  Lawrenceville was from upper to lower a depressed place until not too long ago.  Some just can't believe there are even 6 figure prices being paid for a lot of those properties.   I can say that having been born in Lawrenceville that there is more than a little cognitive dissonance about it all.. and it all plays out in the assessment numbers.  Not as much cognitive dissonance as my born-Yunzerness feels when watching snippets of that Portlandia movie, but close.

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Monday, January 16, 2012

But they NEVER ever reset tax rates following a reassessment

So one of the most common beliefs out there is that no tax rates will get set based on the new assessment values... that somehow all governments ignore the state's anti-windfall laws and just get more money in the end.  Can we do a poll to see how universal that belief is?  I think it would come close to what most consider a universal truth? Certainly is common wisdom. I mean everyone says it... when everyone says it the news accounts report that everyone is saying it and it gets said again. Fact by repetition is an oxymoron.  Rarely has common wisdom been so much more common that wise.

So let's go back to the traumatic assessments Allegheny County implemented for the 2001 and 2002 tax years. Remember, there were TWO reassessments.  First in 2001 and then in 2002 because we were going to do this annually.  At the time the anti-windfall laws were looser than they were now.  School districts were able to collect up to 105% their previous property tax revenue in an assessment year, while I believe municipalities were able to collect 110% more.  So did they?

School districts first.  Don't have to do any work because then County Controller, a fellow some may have heard of named Dan Onorato, did the work already.  His report is right there for everyone to read:

 Review of Allegheny County School Districts' Compliance with the Act 146 Real Estate Tax Revenue Limitation 105% Windfall Provision For the Fiscal Year ended June 30, 2002. Dated July 1, 2003.  Produced by the Office of the Allegheny County Controller.

No need for an introduction if that is your title.  I will say it is pretty clear and straightforward and certainly thorough; I would argue definitive on the subject. The conclusion.  Of the county's 43 school districts: 9 collected LESS in property taxes following the reassessment, 23 collected between 100 and 105% of their pre-reassessment property tax revenues, so within the law at the time.  4 collected between 105 and 110% of the previous year, though 2 of those explicitly voted for a tax increase at the time.  The real scofflaws, 7 of the 43 school districts collected between 110 and 125% of the previous year's property tax revenues.  5 of those 7 voted for a tax increase, but two didn't.  The conclusion spelled out in that report is that 75% of all school districts complied with the anti-windfall laws.  25% did not, but note they clearly were not the largest districts in the county, so it is something less than 25% of the county's population impacted by that.  Note that school districts are changing tax rates all the time and one might argue most of those tax increases would have happened independent of the assessment

OK.  So how about municipalities?  I bet Dan has a report out there equally definitive on the subject, but I am not seeing quickly.  I still would like to check the numbers myself. 

So I found an old web site that I think the state has forgotten about that has all local tax collection data in it for Pennsylvania municipalities. Seriously, the site may be forgotten about. It only partially works and note the disclaimer: "These pages require Microsoft IE or Netscape versions 4.0 or greater. Best if viewed at a screen resolution of 800x600 or higher" there at the bottom. I really think they mean IE 1.0 actually.

(yes, I will put the municipality by municipality data I collected here. Hold that thought)
What do I get from that data, which includes a value for the total assessed value of property by municipality.  For 130 municipalities in Allegheny County I get a change in total property valuation jumping from $9.8 billion in 2000 and then it jumps to $55.8 billion in 2001.  So a 465 percent increase.  Did taxes go up by 465 percent? 

I also pulled actual real estate tax collections for every municipality in Allegheny County for all of the years between 1998 and 2005, so that ought to cover the whole trend well before, during and after the 2001 and 2002 reassessments.  The key question is did the trend in property tax collections jump up as a result?  Did every, or any, municipality sneak in a back door tax increase?  Remember the anti-windfall laws were different at the time and municipalities were only limited to not collecting any more than 10% above the prior years property tax collections.  Even that is not allowed any longer, but did they even take the tax windfall they could have without legal challenge?

Let's just say I don't think I need a Granger causality test for this......

Below is what I get adding up that data the total property tax collections by 130 municipalities in Allegheny County by year.  You can decide if there was a 10% windfall taken in either or both, and they could have taken it 2 years in a row, in 2001 and then in 2002.  Is there any observed deviation at all from the longer term trend which looks to me to barely be capturing new construction.

You know just eyeballing that time series you have a hard time making the case that the assessment caused an unprecedented jump in how much in property taxes local municipalities collected. 
To be specific, there was a total property tax increase of 4.4 percent between 2000 and 2001.  A small bit higher than the average 3.4% increase across all of the years in that range. That range includes year prior to 2001 when the county assessment system was basically kaput, and the years after 2002 when it was effectively operating on the base year system set at 2002 levels.  The average jump, even in the fixed base year assessment years likely is mostly coming from new construction which does exist and produce a minimal amount of new property tax revenue each year.

But look closely at the 1999 and 2000 years.  No change at all. Not even what little you might expect from new construction which certainly happened.  Maybe the county was behind in routine assessments because the whole mass assessment was going on.  Maybe it just caught up with the full mass reassessment. If you assume the 2000 number was just a bit higher than it was, then the trend looks even flatter between 2000 and 2001, the first reassessment year.  Did the assessment create any bump up in property taxes collected?

So no. Just to be clear this is not a 'study'.  This is not a 'report'.  I think this is just looking up a few numbers to see if they match the common wisdom that keeps being repeated and universally believed.  Call it fact checking if you will. That or trying to keep the news from being an echo chamber.

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Sunday, January 15, 2012

Statisticum Collegium

For those who keep asking for the data with new assessment numbers here you go. I will be honest and had hoped that this data would be made public from its source.  To have it come from me risks a bit of confusion of multiple sources if and/or when this is distributed. I would expect it would have to become available at some point, but even that isn't absolutely assured.  I don't think many folks have ever seen a data set for the county's 2005/2006 reassessment that was completed, but never implemented.   So one purpose of this exercise was to capture the results of county's multi-million dollar reassessment for the pseudo-record just in case the data wound up being 'lost' along the way.

For this new data, my understanding is the media folks have been asking since December for this and as yet have been unable to obtain it even though it is central to all the assessment debates of late.   I guess we live in a 2nd best world and this data has become too central to the public debate to leave it in data-limbo.  So for all that have been asking, below you will find a link to the data I have on new property assessments for residential parcels in the City of Pittsburgh and Mount Oliver as first released last month and subsequently retracted.  So this is not meant to be the definitive reference. I suspect I lost a few records along the way, but I believe it represents 99% of what it should be. 

This is the data I have and is what I used to generate the distribution of assessment changes and the 65% factoid that has been repeated surprisingly often in the media.   I will repost what that distribution looks like below as well.

The file is comma delimited text.  The file has only 3 data fields: 1) An index for each parcel comprised of its block and lot number, a standard reference for properties, 2) the 2002 base year assessment for each parcel and 3) the 'new' 2012 assessment for the parcel.  There is one record per parcel and this should all only reflect residential parcels in the City of Pittsburgh.  

OK.  That comma delimited file is accessible via this link. For further reference on the data itself you should refer back to this earlier post here



I will add to the earlier explanations that when coming up with the 65% I took out properties that were valued at under $3,000 per the previous (2002 base year) assessments. An arbitrary dollar amount to a degree, but is the value below which appeared to me conservatively represented mostly vacant land, new construction yet to be assessed at its new market value, auxilliary parcels such as the occassionally separately deeded parking space, or parcels otherwise unused and not relevant to the question at hand of how much residents can expect to see their tax bills change as a result of this reassessment. That took out roughly 10% of the records in the data; each record representing a parcel located within the City of Pittsburgh. Honestly I suspect if you could identify and take out more of the vacant land and similar parcels, the % below the notional revenue neutral point would be even higher, but that will remain for future crunching by someone.

and I'll address some of the math associated with the homestead exemption in a later post.

So to be clear.  It is a 2nd best world at this point and ideally those generating this data would have made it a bit easier to access and would have provided similar and better diagnostics than this.  Realize that property assessment data is public record in Pennsylvania.  Any comments, errors or other quibbles... please feel free to comment.

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Saturday, January 14, 2012

(Far far) Back to the Future

There are just under 89 thousand local governments in the United States. Remember, I even have a picture for Pennsylvania* of just how convoluted local government can be.  I worked it out and 66 thousand of those local governments collect at least some property taxes for at least part of their revenues. All of that property tax collected is based on assessment values set on individual properties just like here.   If even the smallest fraction of all those other local governments had anywhere near the angst, anger and outright fear that we do in managing assessments then there would be no time for any other subject to ever be covered in the media anywhere. Somehow most of the municipalities, counties and school districts that assess property taxes muddle their way through this process with less pain.

But it is not that way here.  One thing I hear that that comes up repeatedly in the discussions of assessments is a straightforward argument.  Lots of folks are looking at an increased assessment value that they feel, likely correctly, that the increased value is the result of their investment and improvements.  Why, they wonder, should they be penalized for choosing to invest in their properties, makng them better and along the way improving our communities?  That is what their core issue is with an increased assessment value, almost regardless of whether it will cause their tax bill to go up or go down.  Their point boils down to an argument that they should not be taxed on the incremental real estate value they create. You might argue you really want to encourage investment in real estate because it is the type of invesment that results positive benefits for a lot more than just the individual property.

You know.. I agree. (with a !)  Not only that, but there was a fellow named Henry George who argued that very point.  His argument was that if tax was inevitable it should only be placed on the value of the land and that there should be no tax on the structures we build on the land.  The argument was that such a tax encouraged investment, density. discouraged speculators, and kept land from being unused. George's Land Tax concept inspired a movement.  It was the least objectionable way to tax, he argued, if indeed some tax was inevitable.

Of course history is strange.  Most everyone in town** has already forgotten, but it turns out that the City of Pittsburgh actually implemented a George inspired land tax and was for the better part of a century the largest government in the United States that did so. Technically it was a tiered tax with not all, but most taxes placed on the value of land. Some, but a much smaller fraction of tax, was place on the value of built structures. The history of split tax rates locally is really why you see local assessment data broken out into the value of land vs. the value of buildings.  In the assessment/appraisal models the breakout is always there, but in lots of jurisdictions they don't bother to even show you the two numbers, just what the total value is of a property.  What was the impact of the split tax over the period from 1916 when it was put in place here, to 2002 when it went away, is a perpetual debate.  At the core of that depate is whether the land tax had something to do with say the density of our Downtown and its ability to retain a concentration of large buildings that in a lot of other similar cities have diminished.  

So I am not jumping on board all of a sudden.  There really is little political will, or understanding to really go back to a complete land tax.  Yet, there are some intermediate policies that are gaining traction.  In Philadelphia there are folks who argue that a city abatement on residential investment has been responsible for population gain in the city for the first time in decades. One of those things that is virtually impossible to prove definitively given all that goes on in a city.  Still, that abatement works out to be very similar to a land tax at the end of the day.  While there is a limited abatement on similar investment in place for some City of Pittsburgh neighborhoods, it just isn't anywhere near the same thing. I have argued that we should follow Philly's example a bit more closely and implement a city-wide abatement on virtually all new residential invesment.  It would make news. It would put the City on the map and might even be worth its own cost in sheer publicity value that could encourage investment.  There just have to be a few investors out there who would be excited to pay taxes valued for a vacant lot on new apartment building, condo or home they invest in. 

The strongest counterargument for doing something like that is that the city needs revenues and cutting out so much revenue will hurt the city's ability to function.  Thing is, for the City of Pittsburgh there is no cutting out of revenues.  Pittsburgh revenues from the property tax have been extremely flat going back many years.  There are not a lot of reasons to expect property taxes to jump anytime soon.  An abatement does not cut taxes, but abates future investment that has yet to happen.  It is giving away future tax revenue that may never be coming, yet the payoff could be a spike in investment and a population reversion that is really what plague the City of Pittsburgh.  Lots of good stories around the region, and in the city, but population trends are still down and you really need to encourage families to stay.. families who are the ones likely to be investing in real estate for the longer term.   Given the minimal amount of new residential investment compared to what there should have, Pittsburgh may be a poster child for a place that has the most to gain, but the least to lose from a comprehensive residential tax abatement.

History is even stranger.  If you think there is something at all to my abatement argument or go farther and really think the land tax is some antidote to the assessment miama that we currently endure... then it gets really strange actually.  The demise of the land tax in Pittsburgh is really tied to the political anger that erupted upon learning the original Sabre Systems assessment numbers in 2001.  The higher rate on land, and the adjusted land valuations meant that the sticker shock that is bad this cycle was far far worse for a lot of properties in the city back in 2001.  It was easiest, and certainly politically expediant, to quickly end the split tax in the city of Pittsburgh.  A century earlier it had been implemented after a public debate and analysis over years. It would go away in virtually hours without any analysis or debate.  Folks had forgotten why it was there and the political costs of keeping it was far too much.

Still.. if you want more stability in your assessment values, want to incentivize investment and maybe at the end of the day get people to move into the City...  could our problem be our solution. 

and if that does not strike you as the way forward, there are other ideas.  One local Georgist has a bit more creative solution to our assessment mess
__________________________________________

* I do have a US version of that graphic, but it is too big a file to do all that much with. 

** Apologies to ADB

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Friday, January 13, 2012

Known, but undisclosed, knowns

So it's been an interesting couple of days. Sincere thanks for all the notes of support and sympatico along the way. At the other extreme I don't think I could summarize the comments I've had, but they range the gamut from folks telling me I don't have a clue, literally made it all up, or otherwise am delusional. We will dig into it all more of course as we watch the neverending machinations. The first blog post here addressing assessments was over five years ago (and I forgot this oped is now over a decade old as of next week) so I figure they can't end now.  Back then I figure I bored even the regular readers here bringing up such a boring topic as assessments. No longer I guess. 

The arguments certainly are not any more completed than is the legal process.  It looks like Judge Wettick has ordered an update on the assessment for next week already, so it all continues.  It really could be a year of assessment posts. On that point, for those who think much actually changed it may not be as it appears.  The news is that the county will not attempt to oppose the progress of the reassessment. So nobody is going to jail.  The timing of key milestones have been pushed out by 7 days in most cases is all.  Per a new filing last week the current schedule of new assessment numbers to arrive for municipalities other than Allegheny is as follows. The numbers in the header are for subregions of the county.  If it isn't clear, it means a lot more numbers are coming in the mail real real soon. Probably will be a shock for those who may read just the headlines and be thinking this process all ended. I'll lay odds most will receive the new letters and think they are "null and void" per previous.



For sure we can and will be arguing accuracy in individual or collective assessment values forever.   Can we all at least agree on the issue being data transparency, openness and why we don't even know what is known. So the very first question is will the new assessment numbers reappear on the county web site anytime soon? Has anyone asked that question? Not there as I write this is all I know.  Will they release a full data set or will we all have to become a county of hackers to scrape it over and over again?  Best practices there.

So I just thought it might be fun to point out a news story from almost a YEAR ago.  See the Trib: After reassessment, many in county could see lower taxes, by Tim Puko, February 11, 2011.  And in that is a quote NOT from me (I'm going to make you follow the link to read it) that goes:
The fastest-rising values are in Pittsburgh neighborhoods, meaning people in 87 of 130 suburbs deserve to pay a lower share of county taxes,

Go figure that and tell me how it matches the public sentiment as reported.  Also tell me why anything I said was 'news' in any real sense.  It was all well known before it all began and there really isn't any real debate that for the majority taxes will go down with the new assessment numbers.  Seriously, read the full story please.  Ponder it.  Think about whether any of it makes sense given the last week. I know, there are all sorts of issues with getting 'accurate' assessment values. What amazes me is that in this whole debate the folks who are clearly going to be winners thought they were losing and those clearly losing thought they were winners.  Makes for some odd politics.

Since nobody seems to have asked this on the record.  But does anyone know how much cost to mail out the mass mailing to everyone in the City of Pittsburgh telling them to ignore the 2012 assessment numbers.  Everyone got one, so you are talking over 100 thousand pieces of mail sent out really quickly, so there must have been some rush premia on that.  Someone paid that bill?  Speaking of money, one of Judge Wettick's ruling yesterday was that the county could not fire the assessor, and I presume the firm that has been working on this for the county since 2002. Think he was in a good position to negotiate a decent contract?  I still think this last week might have been a bit more entertaining if Ed was still on the county payroll.

Speaking of money. Has anyone added up how much money the county spent on the the 2005 assessment it threw out completely.  Does anyone have the 2005 assessment numbers just to look at?  Did the county get anything for whatever that $ amount works out to be.


Maybe it would be good for a little perspective.  Great collection of some seriously glum looks in this photo from the November 30, 1930 Pittsburgh Press.  Can you see the one almost-happy looking guy there looking up:

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Thursday, January 12, 2012

Sound Collision

So again, if you are a new reader here and are only looking for information on the accuracy, tax implications of just the sheer Zeitgeist of the new property assessment figures in Allegheny County, you may want to skip below and look at 3 previous posts here on the subject.  Click here: (1),  (2), or (3). 

As much as I would really love to look at something other than property assessments today, it just wouldn't seem right.  There are several new angles on this today.  Both Trib and PG explain that Downtown property owners are a bit miffed at the new assessment values and that they might hurt their rental business.  Remember, I've pointed out in the past the incredible story that Downtown Pittsburgh is not only far from dead, but about as about as identically packed with jobs as it was 10, 20 and 50 years ago.  About as densely packed with jobs as 4/10ths of a square mile can likely support here given challenging transportation, parking and transit issues Downtown Pittsburgh has (all of which clearly have costs that seem not to have deterred investment Downtown of late).  There was an announcement last week of an entirely new PNC skyscraper, on top of the bigger one that was just built.  Also, the North Shore Connector is about to open and can only help push down parking prices which will benefit Downtown occupancy.  And if you really want to get into it... there are a lot of Downtown investment properties that had their values drop incredibly in the new assessment numbers which, according to the logic cited in the news articles from the Downtown landlords, can only increase the probability of more investment and occupancy in the future.  The Granite Building in particular dropped in value by a rather incredible 80% in the new numbers and some of the high end condos that were priced rather incredibly for Pittsburgh were brought down to, still high, but less astronomical numbers. That should increase their marketability now and in the future should it not?    So yes, I get it that Downtown property owners who may indeed be looking at some marginal tax increases (again you have to look beyond the nominal assessment increase to figure by how much) want any tax increase not to happen, but given all the other costs and issues Downtown, you are really incredibly hard pressed to make the case that the new assessment numbers will somehow flip everything on its head.  Just isn't going to happen, of if it does it will not be because of the assessment.  I'll skip the rational expectations argument that Downtown landlords might have read the news over the last 5 years and seen that a property reassessment was coming, yet that seems to be a particularly good period for the city in these things.  Though maybe the uber rational Yinzer-owner really thought assessments would never ever happen ever again.

And by the way I would love to show some data on what is happening with Downtown assessment values to see if what is being reported is true for all the properties owners down there.  That is impossible of course because Allegheny County took all the new assessment data off of its website and has otherwise made it all unavailable... even to all the media organizations who have tried to get it I am told. So we really do not know if the stories being reported are more than anecdotal stories from the self-selected owners that are upset with their own property assessments.. and just can't make any broader statements for Downtown and the City's commercial properties in total . They might all be correct, but we just don't know.  Policy by anecdote is not considered a best practice anywhere on the planet. 


Then the news of the day is that there is a meeting this afternoon that may, just may, lead to a few headlines.  How big a deal is the question at hand? We can calculate a $$ value. 

So taking just the city of Pittsburgh and Pittsburgh School System property tax millages (10.8 and 13.92 respectively) you can get a $$ for how much the total distribution is at stake in the decision this afternoon.   What I come up with via the analysis of the posts this week is that if the new assessment goes through, there is a total of $20 million in increased payments for one set of home owners in the city.  Also at stake is $33 million in lowered payments for another set of residential owners.  So it is a $53 million dollar question in a sense. 

County-wide it will add up to more than that of course.  Those numbers are just for the City of Pittsburgh and there will be some similar calculations in the suburbs. It is also a shift in taxes that recurs annually.  So if we are fighting over the permanent fixture of a past-year base year then one might want to calculate the NPV of that tax shift for winners and losers each and every year into the future.   You can see why some are fighting this to its scorched earth conclusion.

We could do a thought experiment and calculate how much the lack of a reassessment since 2002 has cost the citizens of Allegheny County.   As an assumption that is clearly false, but lets say the values of properties changed consistently in a straight line from old values to new values over a a decade.   That $53 million in 2012 adds up to $265 million dollars in counter-factual tax shift that didn't happen because there was no reassessment implemented over all those years.  And if whatever happens today leads to another 10 year delay in getting a new assessment completed what then?  Let's say that $53 shift grows to $100 million over the next decade.  Added up it is another $750 million on a very fictional table.  Real money at the end of the day though.

It is not over of course, no matter what happens in court today.  Given the uncharted territory we are all in it is a bit silly to speculate to far on the potentialities until decisions are made.  Keep in mind that these tax impact calculations will get far more complicated for most suburban residents compared to what is going on within the City of Pittsburgh.  Most suburban residents have, in addition to the county itself, typically pay property taxes to a municipality and a school district and those geographies are not coterminus.  So there is another whole dimension to this question of how the tax bill is changing for a specific parcel.  You will need to figure out the tax neutrality for two distinct taxing bodies and then add.  Given the confusion in the city thus far, the unknown tax calculation could be ever more painful if there continues to be no data to help coming from the assessors on how tax rates should change.

At some point we will get to the next question which unfortunately is far too rhetorical: what do we do if and when this reassessment is completed.  Will it be another decade before we do it again?  Remember that with the implementation of the 2001 reassessment it was all to be updated continuously with new values issues annually.  That is why there was a 2002 reassessment and there would have been a 2003 reassessment as well until Jim Roddey decided for the political expediency of pushing it off 3 years into the future.  The myth was that it would become a triennial reassessment, but of course that was fiction and once turned off no politician would ever be able to survive restarting assessments.  It was a brief moment Allegheny County could have moved into the 21st century, but was not to be, and likely will not be again.

For me, the saddest part of this is how we so confuse ourselves.  There are innumerable people in town who work toward a goal of improving the economic development of the city and region.  Real estate prices really capitalize almost all the good and bad of what happens in a place.  So we can argue over the accuracy of individual property values in this assessment, but there is much less error in the cumulative value the reassessment is placing on local properties.  So buried in all the noise is a nugget of a bigger truth that property values in a lot of parts of the city are going up.  We think Lawrenceville is hot, certainly the Financial Times does, but it really was not that long ago when Lawrencevile was as written off as a lot of other neighborhoods remain today.  South Side Flats appreciating far beyond what anyone can conceive.  I can tell you personally what the South Side Flats was like 30 years ago and it was not pretty and yes you could buy blocks of row houses for less than what subcompact cars cost today.  Far less actually at one point not that long ago; yet those $200K and larger transaction prices for those same homes are very real.  Most of the world actually likes and wants their property to appreciate. We have taken a fundamentally positive things and turned it on its head.  We do that a lot.

So there is something uniquely Pittsburgh in all of this: A persistence of memory that keeps us from seeing the changes all around us.  Time to stop being afraid of the future.

2pm. Might make the OK Coral look tame.  Though the only weapons will be pen and pencil.

Maybe next week we will find something else to talk about? Or not.

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