### A people numerous and angry

If you are coming here after reading Brian O's column today, the analysis there referenced comes from my post last week: Anger, Angst, Assessment

But there is an update that is probably a bit more inconceivable to most. That first cut was looking at the pattern of value changes in

By the way, not ever mentioned anywhere.. but over the decade there has been a tad bit of

Turns out that commercial properties came in with a 71% increase in value. That is over 10 years, so we are really talking about works out to a tad over 5% increase per annum... a rate which a lot of people in the world would still be angry with if it was that low. Itself not all that much above the rate of inflation for that matter. Stranger still it is so low when you begin to look at all the positive media coverage of local commercial real estate has had of late. Hold that thought for now.

So if you work it out, the overall value of assessments in the city of Pittsburgh work out to a 58% increase give or take. So assuming the required resetting of tax rates to levels that keep city revenues the same as before the assessment... 58% is the benchmark to look at when determining whether or not your actual tax bill will be going up.

So for the city of Pittsburgh the distribution of changes in assessed values look like the graph below. I have annotated the aggregate changes in residential, commerical properties and the overall average. It works out quite remarkably that it is

Here is something to ponder... the scale of changes resulting this assessment are likely an order of magnitude

But there is an update that is probably a bit more inconceivable to most. That first cut was looking at the pattern of value changes in

*residential*properties between the 2002 base year numbers in use in Allegheny County and the 2012 numbers that are currently in some legal twilight zone. The city-wide average for residential properties was somewhere close to a 46% increase in the two sets of values.By the way, not ever mentioned anywhere.. but over the decade there has been a tad bit of

*inflation*that is impacting the nominal values of everything. If the nominal value of your home actually*didn't*appreciate over that time, it means its real value dropped by a third give or take. In inflation adjusted dollars everyone's property taxes have been dropping over the last decade because of the lack of reassessments and generally fixed millage rates (exceptions where millages have gone up, but most have not in the county).Turns out that commercial properties came in with a 71% increase in value. That is over 10 years, so we are really talking about works out to a tad over 5% increase per annum... a rate which a lot of people in the world would still be angry with if it was that low. Itself not all that much above the rate of inflation for that matter. Stranger still it is so low when you begin to look at all the positive media coverage of local commercial real estate has had of late. Hold that thought for now.

So if you work it out, the overall value of assessments in the city of Pittsburgh work out to a 58% increase give or take. So assuming the required resetting of tax rates to levels that keep city revenues the same as before the assessment... 58% is the benchmark to look at when determining whether or not your actual tax bill will be going up.

So for the city of Pittsburgh the distribution of changes in assessed values look like the graph below. I have annotated the aggregate changes in residential, commerical properties and the overall average. It works out quite remarkably that it is

*not*60% that will see their taxes go down if the millage is properly reset,**but 65%**. So for everyone who will see their property tax bill go up, almost 2 homeowners will see their property tax bill go down. To overparse a bit, but it is about 3/4 of all owners who are looking at a property tax bill going down, or by increases of 10% increase or less.Here is something to ponder... the scale of changes resulting this assessment are likely an order of magnitude

**LESS**than the changes that resulted from the 2001 reassessment. I can't prove that because I don't have the data, but anyone want to argue the point? Why are we dealing with it this time an order of magnitude worse is a real question worth asking?and points for anyone who gets the reference used for the blog post title.

## 10 Comments:

I appreciate the perspective and data you always bring to these subjects.

Can you clarify the last paragraph and the included graph? Maybe I'm just dense, but it left me puzzled. What is the x-axis? Standard deviations? And which is 2001 data vs. 2011?

Upon further review, I noticed that little word in the graph title, "Ratio". Ah. Sorry.

any ability to isolate vacant lots, which values have increased by factors much higher than developed property?

Given some time I could do that at least partially, but not without a lot more work.. the city or county could do it in a heartbeat of course if someone wanted.

I'm working on some more basic diagnostics for now.

Mr. Briem, I appreciate your analysis. It seems to me, however, that the median statistic is a more appropriate measure of who is and who is not benefited by the change. Turning back to the residential analysis from last week, the distribution looks to be more log normal than not, with a median closer to 1.15. The mean of 1.46 is badly skewed by the large numbers of outliers on the upper side of the distribution. The median statistic 1.15 implies that half of property owners (those with increases over 15%, not 46%) will see increases in taxes paid. The increase should be proportional to the amount of the increase above the median. Of course the other half should see decreases in the same proportion. I fully accept your points of today that seen in totality (residential + business) the impact on residential owners may be lower or non existent. However, I think the mean statistic of 1.46 (residential) sets too high a threshold leading to a too small estimate for predicting the number of property owners whose ox will be gored.

David Charlton

Anti windfall is based on revenues so there isnt a question of median vs. mean in that sense at all. I am pointing out the disconnnect between that and the individual homeowners. Is it resulting from the skew, for sure.. But I don't quite understand the point I have to admit.. in the end more folks are looking at tax decreases..

Many of the highest increases represent new construction which the county was well behind in at getting property reassessed before this process. Also the outliers in the high end sure appear to reflect tha actual changes in market values which is the real and only legal question here. I will show that more explicitly soon. But you are right, the lowered taxes for the large majority would result from the skew which is coming from some real estate showing real appreciation in town and a lot of folks paying taxes on values that reflect an older Pittsburgh.

The main point is that most of the people really angry are because they have been lead to believe their taxes are going up when in all cases I have spoken to people personally about. they are looking at significant tax decreases.

The appreciation rate of the total--which is indeed what sets the Briemdoza line as per the anti-windfall laws--is mathematically equivalent to a value-weighted average appreciation rate (not a median or in fact a simple non-weighted average of the appreciation rates).

In fact that's why the relatively small pool of commercial properties can increase the Briemdoza line so much--they may be few in number relative to the number of residential properties, but they tend to be higher value (sometimes WAY higher value), and thus their appreciation rate has a big influence on the total appreciation rate, and accordingly the Briemdoza line.

Just a reminder: as we discussed a bit before, in many cases land value SHOULD be appreciating faster than structure value (in fact in real terms, structures are typically a depreciating asset). So parcels which are vacant or have a low-value structure often should appreciate faster on average than parcels with equivalent land but higher-value structures.

The saddest fact of all is that most people don't comprehend that that the assessments are an attempt to establish relative values across all properties in the county.

It would be possible to set a value of 1 cent for the worst property and $1000 for the best property (or some meaningful range) and make the assessments across that range.

The howls would be 1. "my property is worth more that that"; and 2. "how can they raise the taxes so much".

On the other hand, perhaps we underestimate the ability of Fitzgerald to play chess. His true strategy might be different. If the tax rates and hence revenues are going to go down due the the present assessment numbers- He and the council would be forced to raise taxes even more. A political nightmare.

At least there would be some logic to his acting childishly.

I thought this post would be about Steeler fans.

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