Paul Lalley, Esq., Campbell, Durrant, Beatty, Palombo & Miller, P.C., explains some little known provisions of the law in this blog.
There certainly has been much publicity surrounding Allegheny County’s court-ordered property reassessments and, with that, controversy generated by public fears that property reassessments automatically equate to higher tax bills for everyone. One popular sentiment that has been expressed in various mediums is that local elected officials will be able to automatically increase taxes based on the new assessment figures.
Well, it’s time to put that myth to rest.
Municipalities in Allegheny County are governed by 2005 amendments to the Second Class County Code that set forth a very specific process that municipalities must follow when setting the millage in the first year post-assessment (for those interested, it is 16 P.S. Section 4980.2). Essentially, the law is written to specifically prohibit “hidden” tax increases by a municipality immediately following a reassessment.
Here’s how it works:
First, the municipality must set the millage based on the reassessed property values at a rate that yields the same tax revenue as the municipality received in the year prior to the reassessment. This is commonly referred to as “equalizing” the millage. In setting the equalized millage, however, the municipality is allowed to exclude the assessed value of newly constructed buildings and the increased valuations based on new improvements made to existing structures. The municipality is also allowed to factor in the experience of prior years’ assessment appeals (typically, reductions in assessments due to appeals) over a five-year average when setting the equalized millage.
So, for example, if this five-year averaging shows a 5% decrease in assessed values due to appeals, the municipality may set the equalized millage by assuming that there will be a 5% drop in values as a result of appeals from the certified reassessed values that the municipality receives from the County.
However…
Once the municipality has set the equalized millage using this formula, the municipality is permitted to increase that equalized millage by up to 5%. In order to do so, however, it must have a “separate and specific vote” to increase that equalized millage up to 5% to get the final millage.
Citizens should keep in mind that The Sunshine Act, as well as other laws pertaining to public meetings and records, still apply in this case – meaning that meetings or discussions about this topic are as open as the meetings and discussions your community had in preparing its 2012 budget.
If the municipality has “good cause” why it needs to increase the equalized millage by more than 5%, it may file a petition to obtain court approval to do so. But again, this would happen only through a publicly-filed petition and proceedings in open court, with a judge deciding whether the municipality, in fact, has “good case” to set a final millage that is more than 5% higher than the equalized millage. This is an open and public process.
For municipalities in counties other than Allegheny (or Philadelphia), the Consolidated County Assessment Law (53 Pa.C.S. section 8823) contains a similar procedure. The main difference with the Consolidated County Assessment Law procedure is that after equalizing the millage, the municipality is allowed to have a “separate and specific vote” to increase the equalized millage up to 10% (not the 5% limit for Allegheny County) to get a final post-reassessment millage. Also, the municipality is not permitted to use a five-year averaging experience of assessment appeals when determining the equalized millage.
The rules for school districts – regardless of whether they are in Allegheny or another county – are different. School districts are subject to the anti-windfall provision of Act 1 (Again for those interested, 53 P.S. section 6926.327). School districts must also equalize millage for the first year post-reassessment, but they are not allowed to factor in any prior experience of assessment appeals. They then are permitted to increase the equalized millage up to the limit of their prior year’s Act 1 percentage “index” (which is an inflation-based number that is calculated for each school district each year by the Pennsylvania Department of Education).
One major difference between school districts and municipalities is that there is no requirement that this increase be by a “separate and specific” vote of the school board. In other words, a school board can do all of this in one resolution. If a school board intends to seek any increase of the equalized millage above the Act 1 index, then it must follow Act 1’s procedures to do so, which means seeking either Department of Education approval or voter approval at a referendum.
There has been much public confusion (at least in Allegheny County) about the reassessment process, but one point should be clear to all: there is no “windfall” to municipalities or hidden tax increases in a reassessment year. Any tax increase in a reassessment year must be through the same open, public process that applies to municipal budget adoption and tax levies in a non-reassessment year.
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Thursday, February 16, 2012
11 AM - 1 PM
CCAC Adminitration Building
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Submitted by:
Paul Lalley, Esq.
Campbell, Durrant, Beatty, Palombo & Miller, P.C.
