It has long been asserted by Pennsylvania property owners that school districts and municipalities file tax assessment appeals of properties not to correct inequitable and non-uniform assessments, but rather as a mechanism to generate additional revenue. Currently pending before the Pennsylvania Supreme Court is the case of Valley Forge Towers Apartments N, LP et al v. Upper Merion Area School District and Keystone Realty Advisors, LLC No. MAP 2016, which will determine whether a school district is permitted to selectively appeal properties strictly for revenue-generating purposes.
Upper Merion Area School District (UMASD) contracted with Keystone Realty Advisors, LLC (Keystone) to assist it with selecting properties appropriate for appeal. Based on Keystone’s review, UMASD appealed commercial properties, including that of the Valley Forge Tower Apartments N, LP (Taxpayers), but did not file any appeals of residential properties. Taxpayers filed a complaint asserting a violation of the Uniformity Clause, Pa.Const. art. VIII, § 1, which was dismissed by the trial court. The matter was appealed by the Taxpayers to the Commonwealth Court which affirmed the trial court.
The Commonwealth Court held that there was no violation of the Uniformity Clause and UMASD acted within reason when filing only against the selected commercial properties. The Uniformity Clause sets forth “All taxes shall be uniform upon the same class of subjects, within the territorial limits of the authority levying the tax, and shall be levied and collected under general laws.” Pa. Const. art. VIII, § 1. The Commonwealth Court first recognized that taxing bodies, including school districts, have a statutory right to file appeals of properties within their jurisdiction. Next, relying on prior Pennsylvania Supreme Court holdings, the Commonwealth Court held that UMASD’s decision to appeal based on financial considerations and an apparent cost/benefit analysis of increasing tax revenue by appealing high value properties (instead of only targeting certain commercial properties or properties where the owner cannot vote) was rational and not arbitrary, capricious or discriminatory.
The Taxpayers filed an appeal to the Pennsylvania Supreme Court which was granted based on the following limited question:
The School District deliberately chose commercial properties, such as Petitioners’, for selective assessment appeals, but did not appeal assessments for any single-family-home properties, although the latter are significantly under assessed. The Uniformity Clause of the Pennsylvania Constitution prohibits disuniformity in taxation. Is a school district’s decision to appeal property assessment insulated from review because, inter alia, the school district has a statutory right to file appeals and can identify an economic reason for its appeals?
Taxpayers have filed their brief and various commercial groups, including the Pennsylvania Apartment Association, the Pennsylvania Retailers’ Association, Brandywine Realty Trust, the Pennsylvania Chamber of Commerce, and a group of economists have filed “Friends of the Court” briefs in support of the Taxpayers and its position that UMASD violated the Uniformity Clause.
UMASD’s Brief and any supporting “Friends of the Court” are due on or before September 7, 2016.
Both taxpayers and school districts alike, especially in Allegheny County where school districts have been actively filing appeals against both commercial and residential properties since the first reassessment in 2001, should pay attention to this case. The Court’s decision is bound to have ramifications for both sides. If the Court sides with the Taxpayers, taxing bodies will likely be limited, if not prevented, from filing certain tax assessment appeals, resulting in potential revenue loss. At the very least, school districts and municipalities will be required to prove that the basis for filing an appeal was rational and not arbitrary or discriminatory. Property owners will have gained another mechanism for preventing appeals and ultimately preventing higher taxes. If the Supreme Court sides with UMASD, the decision will establish a legitimate pathway for taxing bodies to file appeals and property owners will continue to be required to defend those challenges and face increased tax bills.
Maiello Brungo & Maiello, LLP will continue to update you on this case. Contact Jennifer L. Cerce at [email protected] or 412.242.4400 with any questions or for further information.