Policy - Property Tax Assessments
This is the fifth entry in our ongoing Policy series. Pittsburgh is in the midst of a severe housing crisis, with many neighborhoods becoming increasingly out of reach for many families. While the causes for our housing problems today are many, the goal of Pro-Housing Pittsburgh is to advocate for each and every change that can lessen the extent of the crisis. Each entry in this series describes a specific Policy that can be undertaken by the local government to help with the housing crisis in Pittsburgh.
Last month, County Councilmember Bethany Hallam proposed new legislation that would make property tax assessments in Allegheny County regular, frequent, and fair. We support this legislation (though have some minor suggestions for its text) and want it to pass.
What are Property Tax Assessments?
When a municipality (a city, borough, county) or school board collects property taxes, they first have to measure how much the properties are worth. Figuring out how much a property is worth is an assessment. After doing so, the taxing body will set a millage rate ($ of taxes owed for $1000 of assessed property value) to collect the revenue needed for the body’s budget. The amount of tax a property owner owes is the assessed value of the property, divided by one thousand, multiplied by the millage rate.
As an example, consider the above house at 906 Yetta Ave in Spring Hill. It was sold in 2022 for $150,100. Under its current assessment, Allegheny County believes its total value to be $57,100 - the house is worth $39,000 and the land it sits on is worth $18,100.
Since the house is in Pittsburgh, it pays taxes to the City of Pittsburgh, Allegheny County, and the Pittsburgh School Board. For 2024, the millage rate for the City of Pittsburgh is $8.06 per $1,000 of assessed value, for Allegheny County it is $4.73 per $1,000, and for the School Board it is $10.25 per $1,000. In addition, there are separate taxes to support the library ($0.25 per $1,000) and the parks ($0.50 per $1,000). In total, the owner of this house will face a tax rate of $23.79 per $1,000. Since the house is assessed at $57,100, the owner will pay $1,358 in taxes this year.
Now an astute reader, such as yourself, might ask several questions. We’ll try to answer them here:
Wait, if the house sold for $150,100 two years ago, and Zillow currently estimates it to be worth $190,200, why does the county think it’s worth $57,100?
Allegheny County’s property taxes assessments are way out of whack with market rate values.
It didn’t use to be this way.
From 1913 to 1942, Pittsburgh assessed all of its properties every 3 years, 1/3rd of the properties each year. From 1942 to 1979, assessment was done by Allegheny County with the same regularity: all of the properties every 3 years, 1/3rd of the properties each year. A 1979 court ruling overturned Pennsylvania’s system of regular county assessment of property taxes. Since 1982, Allegheny County has only done assessments when forced to by the courts: in 1994, 2001, and 2012.
Since 2012 was the last full assessment, all new assessments are adjusted to meet the 2012 base year. This is done by dividing the median market rate of property by the median property value in 2012. Currently, this Common Level Ratio(CLR) is determined by the state to be 1.83.
This ratio is far from perfect - if it was applied to 906 Yetta according to its 2022 sale price, its assessed value would be $82,000, not $57,700. And if it was applied to Zillow’s estimate of the current value of the house, the assessed value would be $104,000.
Why does the county list two values for my house, and one is $18,000 less than the other?
The state mandates certain exemptions to assessed value. If you own your house and you live in your house, you get the Homestead’s Exemption, which lowers your assessed value of your house by $18,000.
Why do I keep hearing about UPMC not paying taxes?
The state also exempts certain buildings from taxes, including Burial grounds, Churches, Courthouses, Educational institutions, Fire stations, Hospitals, Jails, other public property used for public purposes, public parks for public use, and some disabled veterans.
The city and county have no control over this.
Won’t reassessments just raise my taxes?
For the average person, no.
Pennsylvania has an anti-windfall provision. When a county does a property tax re-assessment, municipalities must re-adjust the millage so that the revenue remains the same.
The median selling price for a house in Pittsburgh is $270,000. If all homes are assessed at market value, and the median assessed value for a house in Pittsburgh becomes $270,000, then that median house will still pay $1,559.8. The millage rate in Pittsburgh will drop from 23.79 to 5.7 mills.
So 906 Yetta, currently assessed at $57,100 and paying $1,358 based on 23.79 mills, if assessed at its market value of $190,100 and paying a rate of 5.7 mills, will pay $1,083.57. The owners’ taxes of this house will actually go down.
How do regular, frequent, fair tax assessments help create more housing?
Infrequent and irregular tax assessments makes the tax burden fall heaviest on new construction.
If 906 Yetta had been built this year and sold for $190,100 (its Zillow estimate), its assessment, after adjusting for the CLR, would be $104,000, and its taxes would be $2,474.79 - much higher than the current $1,358.
Heavier taxes on new construction constrains the supply of housing, causing the incidence of that tax to fall primarily on renters and new arrivals. It also favors those who appeal their housing assessments, who are disproportionately wealthier, shifting the tax burden more onto the poor and exacerbating the racial wealth gap.
What does Bethany Hallam’s proposed legislation do?
The legislation would require the county to do a new assessment when the current assessments drift too far from market value (as determined by two measures frequently used by assessors: coefficient of dispersion and price related differential).
This would make assessments frequent and regular, and since they would be triggered any time the assessments were too far off market value, it would make them fairer.
What changes would you want to make?
We asked Joe Caissie, the former state assessor of Alaska, to review the legislation for us. He brought up two concerns:
The legislation says that the assessment “shall not be conducted solely through a computer-assisted mass appraisal system.” All modern assessment techniques are computer-assisted mass appraisals. It’s unclear how this text will be interpreted and enforced. This clause should either be struck or amended to clarify what it means and how it will be enforced.
The legislation all says “In the event that any Chief Assessment Officer submits data, calculations, or any other information that proves to be inaccurate to the State Tax Equalization Board for its certification, or permits any other County official or employee to submit any data, calculations, or information to the Board, such Chief Assessment Officer shall be deemed ineligible for any subsequent appointment or reappointment to the position” There doesn’t appear to be an exception for a good faith error nor is there a measure of accuracy. This clause should either be amended to clarify the measure of accuracy and include a good faith exception, or it should be struck.
Won’t regular assessments be really expensive?
We asked assessment firms how much it would cost to reassess Allegheny County.
Using modern data techniques, we were quoted a cost of $219,000 a year - most of which would be for data cleaning. If the county does assessments regularly and data collection and cleaning improves, that cost would go down. In comparison, Allegheny County spent $24 million in 1998 hiring a firm for the 2001 assessment.
Suggested Policy
Allegheny County needs to do frequent, regular, fair assessments. Allegheny County should amend Bethany Hallam’s legislation as suggested above, pass it, and either hire a firm or develop the in-house capabilities to implement these assessments.
