Written by: Patrick Price

Both taxpayers and government entities are bracing for some major repercussions stemming from a lawsuit in Pittsburg’s Allegheny County Court of Common Pleas.

While some counties regularly reassess property, others (like Allegheny) have a “base year.” In this instance, the last revaluation was 2012. The county, school districts or taxpayer can contest an assessment – at which point, the property’s FMV is determined, and it is then adjusted by the Common Level Ratio (CLR). The CLR is the ratio or relationship of today’s FMV’s to the 2012 Base Year values. Thus, if a property was assessed at $200k, and recently sold for $270k, the school board could file an appeal. If proven that FMV is now $270k, that amount would then be adjusted by the CLR, to establish an appropriate assessment for the current year. So if, for example, the overall CLR from studies was 82%, the assessment would be set at $221k (an increase, as desired by the school district).

Because of this system, thousands of appeals are filed annually – for example, during this appeal window of January through March, the Board of Appeals received 12,659 appeals. And 89% of those were filed by school districts seeking increases!

However, the recent lawsuit challenged the CLR, claiming that the County had misled the State Tax Equalization Board (STEB) by under-reporting or selectively-reporting sales data. Based on the Judge’s recent orders handed down in the case (calling for the STEB to use a much large & representative sample of sales data), observers anticipate that the CLR calculated by the STEB will fall from 81.1% to 63.6%.

What does this mean?

In the aforementioned example, if the house under appeal has a FMV of $270k, and a CLR of 63.6% is applied, the new assessment set would be $171k (lower than the prior assessment). This would force the school districts to “withdraw” thousands of cases under appeal – although the taxpayer would have no mechanism of keeping the appeal active, because the window to appeal has expired.

Then everything will “flip” next year; you will have thousands of appeals filed by taxpayers, because the new lower CLR will entitle them to a lower assessment (especially for all those appealed in recent years and increased based on recent sales). For all commercial and industrial properties recently transacted and increased, this could be a huge opportunity for them to reduce their current assessments.

For more details, read the full article published by Public Source.