Distressed real estate, countywide property tax reassessments may
spur appeals
September 11, 2009
By Raymond R. Pepe and David R. Cohen
Falling real estate values and the economic distress caused by the recession may lead more property owners
to consider filing assessment appeals this year. Before proceeding, however, business owners should evaluate
factors that will influence whether the costs of filing an appeal would justify the possible benefits.
Taking long-term perspective
In theory, appeals of assessments to reflect changes in property values should not be necessary because
periodic countywide reassessments should take these trends into consideration. Unfortunately, because of the
expense and politics involved with countywide reassessments, many counties may not conduct routine
reassessments. For example, in Adams County the most recent countywide reassessment was in 1991; in
Berks, in 1994; in Centre, in 1995; in Lackawanna, in 1973; Lehigh, 1991; Luzerne, 1965; Montgomery,
1998; Perry, 2001; and in Schuylkill, 1997.
Where routine countywide reassessments do not occur, property owners who fail to file appeals may be
saddled not only with unreasonably high assessments, but also with higher millage rates that result when other
property owners file appeals and achieve tax relief, and millage rates may increase to offset the impact of
lower assessed values caused by such appeals.
In evaluating whether to file an appeal this year, the impact on future year's taxes should also be considered.
Assessments reduced through the appeal process often stay at the reduced level and generate further tax
savings, at least until the next countywide reassessment, even if real estate values increase.
Considering factors unique to particular properties
In determining whether to file an appeal, it is also important to consider whether a property is over-assessed in
comparison to other similar properties and whether current assessments have been properly calculated.
In Pennsylvania, not all types of property, or improvements made to properties, are subject to assessment. For
example, machinery and equipment used in industrial establishments, signs, oil and gas interests, and a
variety of other types of interests in and improvements made to property may not be subject to assessment
and taxation. Furthermore, in determining a property's value, it is generally inappropriate to take into
consideration the value of business activities conducted on a site or the income generated by business
activities independent of the property interest itself.
Where assessments appear to have been improperly calculated, the combined impact of the recession, plus
the benefits of correcting assessment errors, may make appeals particularly worthwhile.
Considering the impact of "common level ratios"
Another factor to consider is the extent to which standard assessment ratios used by counties differ from the
reported ratios of assessed value to market values for recent property transactions.
The assessed value of property is the property's fair market value multiplied by a "pre-determined ratio," which
may vary by county. Where recent countywide reassessments have not occurred, however, the actual ratio of
assessed values to market values may differ from pre-determined ratios.
The State Tax Equalization Board annually publishes statistics, known as "common level ratios," (CLR) that
compare recent sales prices of properties in each county to the assessments of those properties. When CLRs
vary by more than 15 percent from pre-determined ratios, state law provides that assessed values following
appeals may be determined by multiplying the fair market value by the CLR. Recent decisions by the state
Supreme Court may also entitle property owners in other circumstances to have assessed values determined
using common level ratios.
In many Central Pennsylvania counties, there is a significant difference between the CLRs and predetermined
ratios. For example, in Cumberland, Dauphin, Lancaster and York counties, although the predetermined ratio is
100 percent, the common level ratios are, respectively, 79.1 percent, 70.5 percent, 73.9 percent and 78.5
percent. Because of these disparities, following appeals, assessed values will reflect a significant discount over
current market values, including market values that have been depressed because of the recession.
Filing assessment appeals
Property owners have the right to file assessment appeals annually, or within 40 days of receiving notice of a
reassessment. Annual filing deadlines differ from county to county, but with the exception of Allegheny,
Philadelphia, and Wyoming counties, most deadlines fall on either Aug. 1 or Sept. 1. Any appeals filed before
the requisite deadline will generally affect the valuation of the property for local government fiscal years
beginning on or after Jan. 1 of the following year.
Assessment appeal hearings are conducted informally before local boards appointed to hear appeals (or in
some small counties before the county commissioners) and generally are disposed of promptly. Decisions of
local assessment appeal boards may be appealed to county courts, and are further subject to an appeal to the
Pennsylvania Commonwealth Court.
Further information about assessment appeals may be obtained from attorneys experienced in handling
assessment appeals and from county tax assessment offices.
Raymond Pepe, a partner in the Harrisburg office of K&L Gates LLP, focuses his practice on administrative
law, state and local taxation, health care issues, governmental affairs representation, and
commercial/general corporate transactions and litigation. David Cohen, a partner in the Pittsburgh office of
K&L Gates LLP, is co-chairman of the firm's e-Discovery Analysis & Technology (e-DAT) group and also a
member of the firm's real estate investment, development and finance group.
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