Defending School District Tax Appeals
"When the school hits you ...,
we hit back harder."
- Defending School District Appeals
- Defending Municipality Appeals
- Defending County Appeals
- Representation at the Court of Common Pleas (Board of Viewers)
FREE CONSULTATION | 412.802.6666
Here They Go Again: (New Appeals in 2010):
There are 45 school districts in Allegheny County. Every year, any taxing entity (County, School, or Municipality) and all property owners have the right to file new Allegheny County property tax appeals. The deadline for 2010, is March 31, 2010.
Normally, the taxing entities (County, School and Local) file tax appeals against property owners if they believe an assessment is too low on a property, and of course property owners most often file
property tax appeals if they believe their assessment is too high.
Over 90% of the taxing entity appeals are filed by the school district only. There are 3 reasons why:
1. The school district files the most appeals because they typically have the highest millage rate and therefore the most financial incentive.
2. The municipalities typically do not file appeals because they often have lower millage rates and "piggy back" off of the school districts, Most municipalities realize that they can receive additional taxes without paying any legal fees. (There are some municipalities that do aggressively get involved).
3. The county's position is supposed to support the 2002 'base year' system, and what the County certified. Unfortunately, the county sometimes supports the school districts. Very rarely if ever, have we witnessed the county strongly oppose a school district. Basically, their friends.
Why is the School District Appealing me?
Since 2004, School Districts have been aggressively filing property appeals against property owners. There target has primarily been recent home buyers. Their rational is that if you bought a house for $500,000.00, and you are only assessed at $300,000.00 then your property taxes should be raised closer to your sales price.
On first glance, this seems rationale.
However, it's flawed for several reasons.
First, if two neighbors are identical, and the county certifies the value of both properties at $300,000.00, then both pay taxes on an assessed value of $300,000.00. However, let's assume, one of the houses then sells for $500,000.00. The school district will file a property tax appeal against the one property only based upon the recent sale price.
In essence, the school districts want to establish that two identical should be assessed differently because one of them sold. We believe it is unconstitutional to assess identical properties differently.
Second, a sale price is not always indicative of the true market value. Property owners often pay higher or lower than the true price of a property for many reasons. We have had clients move to Pittsburgh from New York, Virginia, and California, all areas where market values were substantially higher. These owners all substantially overpaid for properties based upon their prior locations and the real estate markets in those locations.
Can We Defend These School District Appeals?
A: Yes.
First, the school districts are not always prepared. When they file an appeal against a property owner, the school district has the burden of proof.
Legally, to change an assessment, a valuation method must be used. There are 3 valuation methods: (Sales Comparison) (Income/Expense) (Cost Approach).
The school districts most often simply try to present the deed for the sale of the subject property as a basis to raise the property taxes. A sale of a subject can be persuasive, but is not authoritative. A valuation method must be used.
In addition, under the 2002 'base year' system, the test is still what the property was worth on January 1, 2002?
What the property sold for in 2008 or 2009, should matter as much as what the property sold for in 1995 or 1996, (both are 6 and 7 years removed from the base year respectively).
Does that mean we are analyzing 12 - 14 years of sales (1995-2009) for Allegheny County assessment appeals? Of course not.
The reality is that the school districts hope that the property owners do not appear or appear by themselves. Property owners are at a severe disadvantage when they try to represent themselves.
First, they do not the system, the rules of law, or the forum involved. The school district attorneys are friends with the county lawyers, the municipal lawyers and the hearing officers. They work with each other every day, for months and years at a time. It is natural that friendships evolve.
Second property owners do not have the advantage of negotiating and litigating cases against the taxing entities previously. We know for fact that the school districts and hearing officers do not treat all property owners the same.
If anything should anger Allegheny residents, it is the fact, that personality and relationships is still factoring into assessments. The assessment is not blind, and in our humble opinion, can be very unfair for certain property owners. We have seen basically identical houses on a street be settled by school districts with large discrepancies between the settlements.
Third and most importantly, the lawyer for the school can cross-examine the property owner to actually make their case against the property owner. this might be the strongest argument not to represent yourself.
Often, at the hearing, the school district is only prepared with a copy of the Deed showing the new price. Some school districts are obviously more prepared than others and will bring comparable sales.
But as stated a copy of the Deed SHOULD NOT meet the school's burden of proof. If the homeowner appears, the school district may cross-examine the homeowner, and use their testimony as evidence to increase the owner's assessment. For Example:
School District Lawyer:
Q: Do you have a mortgage on your property? (How much?)
Q: Was there an appraisal performed?
Q: Have there been improvements to the property?
Depending on the property's owners responses, the school can actually have a better case with the property owner present than if they would have simply stayed at home.
We are NOT advising anyone to stay at home or miss their hearing. However, understanding 'burden of proof' and understanding what the best evidence to submit is, does make a difference. Very rarely will I advise a property owner to attend the hearing, unless I believe it is necessary or beneficial based upon the circumstances.
Each case is certainly unique. However, defending school district appeals is really about being more prepared than the school with solid evidence, legal arguments, and the ability to negotiate the best settlement.
For a free consultation, call our offices at 412.802.6666, or simply email us your address and we will review your case for free.
What is the 'Base Year'?
The 'base year' means that all properties should be assessed at what they were valued as of January 1, 2002.
This could change if there has been permits, appeals, corrections, or catastrophic loss. In short, similar homes should be assessed the same. However, everyone knows the assessment system is not perfect. Often, a recent home buyer is punished over those property owners who have not changed ownership for many years.
Even more complex, is what if the property is or has depreciated in value? If you bought your home in 2002, can you argue that the value has gone down? That's exactly what the school districts do when somebody pays more than the assessment. The assessment system in Allegheny County is far from perfect, and in fact, it's often grossly unfair. The answer is to abolish or significantly reduce overall property taxes; until then allow us to fight your appeals for you.
What is the process for Allegheny County Property tax appeals?
All new
Allegheny County property tax appeals first are heard at BPAR (Board of Property Assessment and Review). The first hearing in the process is an administrative hearing, before a County Hearing Officer.
This takes place on the 3rd floor of the Allegheny County Office Building, and are usually in small rooms, with a Hearing Officer, and potentially lawyers from the school, county and/or municipality.
Sometimes an assessor from Allegheny County will also be present. The hearings are recorded by audiotape and the hearing officers are usually individuals with real estate experience (Appraisers/Real Estate Agents etc.)
Whoever filed the appeal has the burden of proving that the current assessment is incorrect. The Hearing Officer listens, allows the parties to cross-examine each other, and may ask questions on their own. At the end of the hearing, no decision is rendered and the Hearing Officer makes a written recommendation to the actual Allegheny County Board of Property Assessment. The Board of property assessment can then agree or disagree with the decision before mailing the Notice of Decision to the property owner. I have seen cases where the Hearing Officer makes a recommendation for either a decrease or increase, and the Board will overturn the decision, even though they weren't present at the hearing and no new evidence was submitted. In fact, I have seen it go both ways in favor of the schools and in favor of the property owners.
The decision is then mailed to all interested parties, normally about 6-10 weeks after the hearing (sometimes longer). At that point, all interested parties (the property owner and the taxing entities) have 30 days to appeal to the BOV (BOARD OF VIEWERS) which is actually the County level and is located on the 8th floor of the City County Building. At this stage the litigation is given a BV case number and becomes public record with the docket available on-line. Often once an appeal is filed to the County level (BOV) - it may take anywhere between 10 months and 24 months (sometimes longer) to get called for a second hearing.
ALMOST ALL OF THE RECENT SCHOOL APPEALS are being appealed to the BOV. The reason being if the taxes are raised, the property owner appeals, and if the school loses, the school appeals. At this second stage of litigation, it is called a 'De Novo' appeal (meaning fresh or new) and whatever happened at the first level (BPAR) is no longer relevant. It is once again crucial that the property owner understands how the process works on appeal.
We fully expect every single case to be appealed to the BOV. Often there will be multiple years at issue and the savings to our clients can be substantial. Also, the hearing at the BOV is a real court hearing, whereby it is essential to have proper representation. The rules of evidence and objections apply and a property owner is at a severe disadvantage if they attempt attending without representation.
This is simply a sketch of the process and by no means an exhaustive explanation.
How is Property Valued in Allegheny County?
Pennsylvania assessment laws require that real estate be valued according to its “actual value” and at a bona fide rate and price for which the property would separately sell.
The courts have interpreted actual value to mean market value. Market value has been defined by the Pennsylvania State Supreme Court as “the price in a competitive market a purchaser, willing but not obligated to buy, would pay an owner, willing but not obligated to sell, taking into consideration all the legal uses to which the property can be adapted and might reasonably be applied.”
To establish the “actual” value of property, the county may use current year market values or it may adopt a base year for market values. For the most part, properties are assessed at a set percentage of base year values. Property is only assessed at current market value when a county wide reassessment has been conducted and implemented. Unless a county reassesses all properties every year, the property assessments will be predicated upon base year values (the last year in which the county reassessed). The same methodology must be used to value property throughout the county; that is, when a county adopts a base year for market value, then all property in the county must be valued as of the same base year.
The assessment laws state that “the price at which any property may actually have been sold in the base year or the current tax year is to be considered but is not controlling. Such selling prices can be increased or decreased as part of the valuation process to accomplish equalization with other similar property within the taxing district.” Recent sales of comparable properties, that is, properties of a similar nature, are persuasive but not conclusive in helping to establish the market value. The properties selected need not be identical. The sales prices, however, are useful in showing relative values by bringing out characteristic qualities, whether similar or divergent. Comparison based on sales may be made according to location, age, income, expense, use, size, type of construction and in numerous other ways.
When valuing property, three approaches must be considered in conjunction with one another; they are cost (reproduction or replacement, as applicable, less depreciation and all forms of obsolescence), comparable sales, and income approaches. Although all three approaches must be considered, they do not all have to be used in arriving at the final valuation of the property.
The approach used may differ depending upon the type of property involved (e.g., commercial, residential, income-producing). Many factors are considered in arriving at the fair market value of property. One very important consideration is the highest and best use of the property in question. It is not only the present use of a property that affects its value, but all of the uses including the highest and most profitable use to which Real Estate Assessment Process in Pennsylvania .
An Overview the land is adaptable and available. The possible demand for such use affects the market value. Highest and best use, then, “is that use of a property that will generate the highest net return to the property over a reasonable period of time.” Highest and best use of property must be supported by the following criteria; the use must be: Legally permissible; Physically possible; Financially feasible; and Maximally productive.
The courts have recognized that “economic reality” factors also influence real property values. As mentioned previously, the valuation placed on a property should reflect what a willing buyer would pay in the open market for all the property rights that the present owner will transfer to him. A buyer would likely discount the price of a property due to “restrictions” or “regulatory requirements” or “encumbrances” that are tied to the property. For example, if income restrictions based on applicable federal regulations or income restrictions based upon bona fide contractual obligations are attached to a commercial property, the fair market value of the property would be “deflated” because a buyer cannot anticipate income at a current market value. Thus, the present market value should logically reflect the economic dynamics impacting the property as it presently exists. (Source: PA Legislator's Municipal Deskbook) -