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.


Anonymous Alex B. said...

Let us know if any media types review this with you. I'm guessing not. It's just good for ratings to sow confusion; rather than being helpful.

Monday, January 16, 2012 5:58:00 PM  
Anonymous BrianTH said...

This is more a legal point and therefore a bit outside of Chris's normal scope, but I think it is worth noting that once it became clear that Wettick was actually monitoring compliance with the anti-windfall laws, the odds of widespread flouting of those laws went from very low to virtually zero.

Tuesday, January 17, 2012 9:16:00 AM  
Anonymous MH said...

Once it became known that person complaining the loudest about the schools dodging the anti-windfall laws was they guy who managed to avoid publicly supporting a tax increase until sixteen minutes after his election, I stopped caring.

Tuesday, January 17, 2012 9:38:00 AM  
Anonymous BrianTH said...

That too. Note the year delay has secured that tax increase (otherwise it at least potentially would be subject to the anti-windfall laws).

Tuesday, January 17, 2012 11:41:00 AM  
Anonymous Reassessment of Property Taxes said...

It's a reassessment, a revaluation at each property's current market values (which is lower than the 2009 values). It's not "another assessment" which implies an additional (higher) value on each property. It should result in fewer appeals if the new values are in line with 2012 true market levels.

Tuesday, April 17, 2012 9:09:00 AM  
Anonymous Reassessment of Property Taxes said...

That’s a awesome article you posted. I found the post very useful as well as interesting.

Thursday, May 03, 2012 3:43:00 AM  

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