Wednesday, January 19, 2011

Special Delivery

The assessment train is getting closer and seems to be on a collision course with the political process. Cue Captain Renault.

There is not much time to derail any of this.  You can read the official schedule of the assessment process via the court docket which I do believe says new values will start to be mailed out on Independence Day, literally July 4, 2011. 

Is there mail on Independence Day?  I'd call that special delivery. It will certainly feel like a special delivery for many.

It is not quite clear that new state legislation would have any impact on the court-mandated process we are reaching the terminal start on here in Allegheny County.  Some small state constitutional issues in thinking a standing court order could be voided by legislative action, but I suppose it could gum up the legal situation enough to delay the whole assessment.  Can you imagine?  County complains for years it can't afford to do all of this. Then that it can't be done in the timeline anyone wants (they wanted to stretch this out in stages over next few years which Judge Wettick went along with per their request) only to pretty much give in and say the only practical way to do it is to do the whole thing by 2012.  Then at the last minute it all gets thrown out or delayed to the point where they have to start over again in a few years. Hard to imagine, but stranger things have happened (in re: pension).

It's not cheap to keep redoing this from scratch.   The whole plan a decade ago was to update assessment values every year. Only regular updating can really prevent the big cost we just had to repeat and keep inequities from building in the system.  That proved too much for the political process to handle at the time and thus we are where we are.

The question remains, however, what happens when the reassessment is completed (assuming it does get implemented)?  Do we then ignore this all and wait for more litigation down the road before updating values again?  Or do we put in place a system to regularly update assessment values and keep them accurate and fair?

A rhetorical question I do realize.

Speaking of real estate valuations. The prices are going up. Best to get those assessments in sooner if you really are worried about your tax bill, though you may want your neighbor's assessment value to go up to keep yours down. 


Anonymous BrianTH said...

Lots of strange back and forth in the public debate that seems to be missing the point--a reassessment doesn't have much to do with the overall tax burden in a jurisdiction, but it may trigger a fairer distribution of that burden. Given that, it is odd to argue that a reassessment puts a county at a disadvantage relative to other counties nearby still working with outdated assessments--if anything, the opposite would be true.

It is hard for me not to be cynical about this . . . it really looks like well-connected property owners who are benefiting from an unfair distribution of the tax burden are just trying to keep that going as long as possible.

Wednesday, January 19, 2011 8:30:00 AM  
Anonymous MH said...

Next up, a report on where bears poop.

The whole public sector of this area only functions because of a variety of cheats* that keep the full cost from falling on the sorts of people who are most likely to vote.

Wednesday, January 19, 2011 8:59:00 AM  
Anonymous Anonymous said...

BrianTH, I'm assuming by "overall tax burden" you mean total property tax base? I agree that in theory, real market value assessments are more fair, but the way that intersects with Allegheny County's byzantine jurisdictional mosaic can potentially do some serious damage. I live in Wilkinsburg for instance (not far from you, I believe). Most of Wilkinsburg's property has declined below their assessed value, as Judge Wettick believes. But corners of the borough (e.g. Regents Square) have increased a great deal in the same period. If Wilksbg School District maintains its budget but the borough's tax base declines say 20%, an already-skyhigh millage will have to rise while a smaller number of property owners pay a larger share of the total revenue collected. For a nearly basket-case borough just recently beginning to take steps to escape it's tax-base death spiral, this is going to be a bullet in the head, and the consequences will be soon felt by every resident. In other words, one definition of fair might be to require property owners to pay taxes on the real-market value of their property. But another would be to give struggling municipalities the chance to recover and become attractive to newcomers. If my assessment doubles while most of my fellow townspeople's halves, I'm going to have to sell and get out because I won't be able to afford the taxes. But at least I'll be able to get out, even if I take a loss - what about fairness for those who must stay and endure the sequel?

Wednesday, January 19, 2011 11:59:00 AM  
Anonymous MH said...

I think the tax rate in Wilkinsburg is over 6%, which would mean that given a prime-rate mortgage of recent vintage and a property valuation at market value, you'd be paying more in taxes than for principal and interest (excepting a big downpayment). Given that the value of a house depends on the cost of ownership, you've reached the point where the property taxes are the prime factor in cost of ownership and thus changing the property tax valuation up lowers the resale value of the house by enough that the valuation would have to be lowered which would raise the value of the house and so on. Do property assessors know calc?

Wednesday, January 19, 2011 1:34:00 PM  
Anonymous Anonymous said...

MH, not sure if they know calc, but part of the problem in PA is that prop assessment is done by the counties generally without input from the municipalities until after the fact (via appeal). So Allegheny Co. assessors might and probably will ignore the consequences of their results for municipalities like Wilksbg.

Theoretically I agree with you that higher assessments will eventually be corrected by market forces, since prices will be forced down by the extremely high tax bills attached to desirable property in Wilksbg. But in practice, that correction will take several years, when otherwise Wilksbg's tax base might have been steadily improving.

One solution would be some kind of temporary exemption or abatement designed to encourage property purchases, especially if it was directed specifically at owner-occupied property. Wilkinsbg borough is already trying something similar with a arrears forgiveness program. If something like this were in place, even if the Regents Square bit of Wilksbg saw its assessments double or triple (as seems likely), a five or ten year abatement of those new assessments might avert a collapse in values in Rgnt Sq long enough for values and tax base to increase and even out across more of the borough. Whether the borough council or (more to the point) the school board has the will or imagination to try that trick is doubtful, alas.

But my main point is that as long as prop tax rates are set locally by very small jurisdictions, with a consequent high variation in owner costs across or even within neighborhoods, county-wide FMV reassessment is going to have consequences possibly more harmful to entire communities than the harm caused to individuals by the status quo.

Wednesday, January 19, 2011 2:36:00 PM  
Blogger C. Briem said...

Barring the equity issues and other assessment confusions.... How would one explain that there really was no observed change in economic trends for the county following 2001 reassessment. That was a big deal being the first re-assessment in decades. One could argue the first mass reassessment ever in a sense. Yet nothing really changed. So we already have a natural experiment on this. No matter what, the change in assessments that can result this time pale in comparison to the 'sticker shock' many must have felt with the 2001 numbers.

But somehow the result will be different this time around?

You know what this reminds me of? All the talk many voiced pretty loudly at the time that the RAD tax of an extra 1% sales tax would push retail businesses out of the county. Yet since that tax was implemented we've seen massive new retain in Robinson, Homestead, SS Works, Pittsburgh Mills and resurgence at places like Ross Park Mall. In fact, before that time, we used to say the county was under-retailed; you don't hear many folks making that arguement these days.

It belies comprehension that a fair tax system is bad for growth.

Wednesday, January 19, 2011 6:18:00 PM  
Blogger C. Briem said...

How about this. I will compile data on economic growth over the last decade by county in Pennsylvania and correlate that with how long it has been since they last did a reassessment. Would the correlation be positive or negative?

No, I would not dare infer causality whatever the result.. but the results would be a better basis for discussion than a completely hypothetical idea that a fair assessment will somehow hurt growth in the future.

Wednesday, January 19, 2011 6:22:00 PM  
Anonymous MH said...

I don't think it will hurt growth in the aggregate, at least not any more than the overall level of taxation. But, I don't expect that matters to why the county officials are fighting it. There's no way they won't get blamed for it.

Even if it is run perfectly, it will be increasing the taxes of the kind of well-off people who are most inclined to vote and least inclined to use public services. The people who get lower taxes often will be saving too little to be grateful and aren't as inclined to vote and will continue to remember the over-taxing years.

And, it won't be run very well because the mess created from all of the appeals. These will toss the best of plans out the window (assuming, generously, the plan starts out well). All of the mucking around of the past few years may as well have been a class entitled "How to search the county website for poorly maintained houses near your own that have sold in the past couple of years, take those papers down to Grant Street, and save far more money than any investment you've made in your life."

Wednesday, January 19, 2011 8:11:00 PM  
Anonymous Anonymous said...

"economic growth over the last decade by county"

Would be interesting, certainly, but not really speak to the point I have tried to make, which have to do with a very particular and local set of circumstances.

"But somehow the result will be different this time around?"

You're thinking solely in terms of the county - and granted, the effect on the county as a whole might well be minimal. But given the county's municipal balkanization, the results might be negligible over all but very dramatic in a single small borough which has experienced significant and divergent changes in property values (or so says Wettick, who otherwise would not have agreed with the plantiffs who started this ball rolling).

Given a "county" perspective, one might well ask why we should bother with a single small borough. That's an argument I probably shouldn't make lest I be accused of arguing from self-interest, since I live in Wilkinsburg.

"It belies comprehension that a fair tax system is bad for growth."

In general, as an "auslander" who finds PA's ways mysteriously old-fashioned and more than a little scented with Old Corruption, I agree emphatically. What I want to suggest is that FMV reassessment may have specific, very local deleterious consequences, which in my view extend from the fact that property value decisions are made at one level of government while rate decisions are made at another. I am not proposing universally applicable conclusions, but I do want to point out the operation here of the law of unintended consequences. FMV reassessment may well push Wilkinsburg back into the abyss.

Wednesday, January 19, 2011 8:32:00 PM  
Anonymous MH said...

FMV reassessment may well push Wilkinsburg back into the abyss.

And if you dropped the Venus de Milo, the arms might fall off.

Wednesday, January 19, 2011 8:49:00 PM  
Anonymous BrianTH said...

We own a house in the Regent Square part of Wilkinsburg, so I understand the concern.

Factually, I think more parts of Wilkinsburg may have seen appreciation since 2002 than some suspect, and the other parts were typically at a very low valuation in 2002 anyway, so I am actually not sure how the reassessment will impact the overall tax base and thus the overall millage in Wilkinsburg.

More generally, I would suggest the issue of tax abatements--when, how much, and for how long--shouldn't be dealt with through manipulating the assessment process.

Thursday, January 20, 2011 5:48:00 AM  
Anonymous BrianTH said...

So you can use the American Factfinder website to get basic information about cities like Wilkinsburg for both the 2000 Census and the 2005-09 ACS, and they have the median value of owner-occupied housing units in Wilkinsburg going from $53,600 in 2000 to $65,100 in 2005-09. If you look at the NYT map which provides this same comparison down to the Census tract level, this makes sense: the Census tracts with relatively medium-to-high home value in 2000 seem to have seen at least a little appreciation as of 2005-09.

Of course to really assess the property tax base in Wilkinsburg in 2011 versus 2002, you would need--well, an assessment. But for Wilkinsburg specifically, this data is looking promising: if it could actually lower its millage rates and get the same revenues, that might be a useful promotional change, even if a few people in Regent Square are paying more on net (the Census tract that contains the Regent Square and Whitney Park parts of Wilkinsburg does in fact show the highest appreciation rate of all the Wilkinsburg Census tracts).

Thursday, January 20, 2011 1:58:00 PM  
Anonymous MH said...

Of course, Wilkinsburg has the same county millage rate as the rest of the county and the same school millage rate as the rest of Woodland Hills. The stuff Anon was worried about mostly concerned only the city portion of the property tax, but the county and school district portion would be different, and probably better for the whole of Wilkinsburg.

Thursday, January 20, 2011 2:42:00 PM  
Anonymous BrianTH said...

Wilkinsburg isn't in Woodland Hills--it has its own school district. The school district millage is 35 in Wilkinsburg, 25.75 in Woodland Hills, and 13.92 in Pittsburgh. And if you think Woodland Hills has a bad reputation, the Wilkinsburg school district tends to be regarded as right at the bottom of the state.

Which I think raises the obvious point that perhaps the single best thing that could happen to Wilkinsburg is a merger of its school district into a neighbor's, preferably Pittsburgh's.

Friday, January 21, 2011 8:43:00 AM  
Anonymous MH said...

Wilkinsburg has it own school district? Yikes.

Friday, January 21, 2011 8:52:00 AM  

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