Thursday, December 29, 2011

"and all the folks agree that this is terrible"

We have not even begun and this is already out of hand.  Please will someone stand up and explain that your assessment increase has little to do with your expected tax increase.  No, not me.... like how many read here?  I mean maybe one pol, or our good friends in the media not waiting until the 10 paragraph to kind of get around to trying to explain that the rates might change somewhere in the process.   They will change, and they will change a lot. I do believe from what I know of the distribution of real estate values in the city at least that the majority of properties will see property taxes go down as a result.  It's just the way the math works out.

Some people are now upset even thought hey clearly are in a range of having their taxes go down.  So here is a verbatim pull from a story today:
Donna Query said she, too, will appeal the new assessment, which increased the value of her home along Chess Street in Mt. Washington by nearly 30 percent, from about $37,000 to $48,000."I don't know how they come up with these numbers," she said
So that assessment went up by 30%.  By all accounts city values went up on average much more than that.  This person is looking at a big tax cut even if the city and school district merely come close to complying with the law. I would think the immediate question for her would be what she thought of the expected tax cut she should be getting. Probably why I am not a journalist.

I hate to pick on just that one article, they are all much the same expecially in omnimedia world.  Irate taxpayer makes good copy I do realize, but hopefully not at the expense of the truth.  And who in the world thinks any municipality or school district could get away with a back door tax increase out of this.  The lawsuits would kill them if nothing else and eat up any potential revenue gain.  .

OK..  still you worry, are upset or just plain confused.  A primer on how this all works, direct from the Commonwealth of Pennsylvania and their Real Estate Assessment Process in Pennsylvania document. It has a good starting point on property taxes, assesments, anti-windfall statutes and assessment appeals.
Prior to 2004, the assessment laws31 contained provisions limiting the amount of real estate tax revenues that could be levied by a political subdivision32 in the year following a countywide reassessment or a change in the predetermined ratio. These provisions are commonly referred to as the “anti-windfall” provisions.
The laws required a political subdivision33 to reduce its millage rate so that the total amount of taxes levied on the properties in the year following a reassessment increased by no more than a specified percentage from the previous year.34

In 2004 and 2005, three bills were signed into law35 which changed the implementation of the anti-windfall procedures by political subdivisions. The assessment laws now require political subdivisions to follow a “two-step” process when increasing real property taxes by a percentage allowed by law following a countywide reassessment. The first step requires a political subdivision to establish a revenue-neutral millage rate.36 The second step is optional. By a separate vote, a political subdivision may institute a final tax rate that limits the total amount of taxes levied to no more than the maximum percentage increase permitted by the assessment laws.
In 2006, the Taxpayer Relief Act (Special Session Act 1)37 was enacted. Act 1 contains a new anti-windfall provision which applies school districts. Section 327 directs that after a countywide reassessment,38 a school district which, after July 1, 2006, for the first time levies its real estate taxes on that revised assessment or valuation must reduce its millage rate so that the total amount of taxes levied on the properties subsequent to the reassessment increases “less than or equal to the index for the preceding year.” Section 327 does not require the “two-step” process that exists in the current assessment laws. 
(Emphasis added)
This is all going to be painful.

19 Comments:

Blogger JRoth said...

For what it's worth, I'm not stressed about a tax increase per se; I'm stressed that the County thinks my house has increased in value 398% in the last 10 years, and thinks that a single occupancy residence can be worth 20% more than 3-unit buildings on the same street sold within the last 24 months (and 170% more than the last single occupancy residence sold on the street, also within the last 24 months).

Their incompetence is my legal fee. Lucky me.

Thursday, December 29, 2011 2:32:00 PM  
Blogger JRoth said...

Wait, wasn't consistent up there: the new assessment is 398% the old one (which was the purchase price at the time of the 2001 assessment - 100% of IRL market value), but is 298% more.

Anyway, for reference purposes, we were expecting a doubling of assessed value, and significant, but not painful, increase in actual taxes paid. Our house has been improved, as has our neighborhood (still drug dealers next door), so a tax bump isn't outrageous.

Thursday, December 29, 2011 2:37:00 PM  
Blogger C. Briem said...

+400% is likely within the top percentile or 2 at most of all price changes.

Not knowing the circumstances.. but do you live near a much higher value neighborhood. I am guessing you are in a model area that includes some higher valued homes.

Thursday, December 29, 2011 4:34:00 PM  
Anonymous MH said...

The county thinks my house is a Grade C+. And I've been trying to keep it up nice. In my immediate neighborhood, everything that looks the same as my house is withing +/- 10%, so I'm not that upset.

Thursday, December 29, 2011 4:40:00 PM  
Anonymous BrianTH said...

I've noticed there also seems to be a lack of interviews with people whose assessment went down--did that just not happen in the City, or did they not even try to find one?

Incidentally, I think it will be fascinating when a whole bunch of people find out about their upcoming tax cut. Certainly the notion of simply calling a halt to this whole process will suddenly strike a number of people as not such a great idea after all.

Thursday, December 29, 2011 7:45:00 PM  
Anonymous Alex B. said...

Media is often at the expense of truth. There will be several days of stupid stuff and then a small inside-page article explaining the process.

That way the media can say they're serving the public interest.

I hope there won't be any absurd political sparing like the last time.

Thursday, December 29, 2011 7:48:00 PM  
Anonymous The Wiz said...

The purpose of the media is to sell papers so they can boost advertising dollars...thats it. Thats is why they distort so many articles on the dangers of fracking.

Have you ever read an article in the paper, on a subject that you had great knowledge of, that was factually accurate?

Thursday, December 29, 2011 10:51:00 PM  
Anonymous Alex B said...

I took a look at my assessment. Very interesting.

The land value increased more than 5x and the building went down some ten percent.

Don't intend to argue with either, but i wonder if that is a pattern?

Friday, December 30, 2011 2:08:00 AM  
Blogger C. Briem said...

the land/structure pattern is too long a story to get into. Google "Henry George" or "Henry George" and "Pittsburgh" to start reading the century long story.

But here is the thing. THe "Land" part of the assessment should capitalize the value of "place". The value of structures should not change all that much. Cost of construction and other factors will move it some, but lets say you live in Lawrenceville. All the value of living in a hot market all of a sudden should mostly be reflected in the land value going up.

So the variation in land values people seem to be noticing, or in lots of cases being irked by, really make a lot of sense.

Friday, December 30, 2011 9:04:00 AM  
Anonymous The Wiz said...

I believe a few years ago(probably more like fifteen) there was a reform measure passed that required assessments to put more value on land instead of buildings. The thought was that by assessing land higher, it would discourage speculators from buying up land and sitting on it for long periods of time, waiting for prices to go up. Plus, higher building taxes discouraged developers from building unless they had higher rents/resales.

Friday, December 30, 2011 9:11:00 AM  
Anonymous MH said...

Wiz, I think you've described the purpose of the land tax (if you add that it encourages density), but I think your time line is reversed.

Friday, December 30, 2011 1:13:00 PM  
Anonymous BrianTH said...

Yeah, if anything most structures should be depreciating in real terms, holding aside renovation.

And I happen to believe the value of land may well have gone up quite a lot in some places in the City.

That said, I do wonder if there is something of an underlying policy shift as well.

Friday, December 30, 2011 4:48:00 PM  
Blogger JRoth said...

Both my property and building went up 4X.

We are in East Liberty, but close to Friendship and the Whole Foods. But the bottom line is that anyone who knows Pittsburgh knows that boundary streets matter - North Point Breeze≠Point Breeze, and anyone who ignores that is guilty of professional incompetence.

The bottom line is that I could never sell my house for even 60% of the assessed value. Five doors up from me, a house sat on the market for three years, hoping to get ~80% of my assessed value (it was in better condition than mine, with a newer roof, no rotting wood, etc.), and finally sold for 33% of my assessed value. It's a bad joke, and the fact that the P-G isn't interviewing slumlords whose rotting row houses went down in assessed value doesn't change that.

Friday, December 30, 2011 9:12:00 PM  
Blogger C. Briem said...

That area in and near North Point Breeze was terribly problematic in the first (2001/2002) assessments for precisely the reason you point out.

It honestly may be one of the most problematic areas to address via CAMA (Computer aided mass assessment) techniques.

The challenge is defining model areas. Easy you might thing, but there is a big tradeoff. Small model areas, assuming one does know the local markets to define them, give the best match of comparable data.. but too small the area and there isnt enough sales data for the model to have enough power to work. This all is rarely a problem in big homogeneous suburbs, but is a big issue for urban areas.. and honestly a bigger problem here than most anywhere because we have this strange pattern of rich and poor areas living almost on top of each other.

So all that really means.. is you have a case to appeal and it should be successful. But also note that the issues in that area are really not to be extrapolated most anywhere else. Some places yes, but really that area is the worst. Folks in Lawrenceville are going to be unhappy, but thaat is mostly quite accurate appreciation. Same for much of the East End in general. I will have to see whenever this data gets released if there are issues at the South Side Slopes/Flats interface if similar model issues arise.

Friday, December 30, 2011 9:38:00 PM  
Anonymous MH said...

Whoever hears the appeal will probably know how to tell which side of Penn a house is on. I hope so, anyway. Speaking of, that sounds like a very unpleasant job. If I want to hear old people complain about how much stuff costs, I'd take an uncle to Starbucks.

Friday, December 30, 2011 11:06:00 PM  
Anonymous Alex B. said...

I wouldn't be too sure. We have micro-climates in our real estate values that only locals ( people in a 4-block radius) know about.

Does anyone know if the land emphasis is a policy construct in the current assessment model; And how is it defined. It wasn't emphasized the last go-round.

Saturday, December 31, 2011 1:03:00 AM  
Anonymous BrianTH said...

I strongly suspect that many of the properties that will see their assessments go down are owner-occupied.

Saturday, December 31, 2011 1:03:00 AM  
Blogger C. Briem said...

JRoth may want to check out this decade old article

"Welcome to the county reassessment system's Bermuda Triangle "

http://www.post-gazette.com/regionstate/20020206assesssidereg4p4.asp

Saturday, December 31, 2011 1:32:00 PM  
Blogger JRoth said...

Perhaps we should get together as a micro neighborhood and complain - I only know of one other assessment in my little 3 block area, but it's equally absurd. If we can show that it's a systematic misassessment, that could save some headaches.

Monday, January 02, 2012 10:15:00 AM  

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