Allegheny County Real Estate Tax Revaluation Program

April 24, 2002

A 1997 court ruling required that every property in Allegheny County be revalued to correct perceived inequities in the assessed values of properties for real estate tax purposes. Allegheny County hired Sabre Systems, a real estate appraisal firm, to perform the revaluation of the approximately 580,000 properties in the county. The three-year program will be completed by January 2001. Real estate tax bills for 2001 will be based upon the market value determined through the revaluation program.

Sabre Systems began mailing Preliminary Notices of the new market value to residential property owners in August. The mailing of all Notices is scheduled to be completed by November 2000.

Currently, Sabre Systems is conducting informal reviews with property owners who disagree with the new market valuation of their property. The informal review period will conclude by December 31, 2000. Instructions for scheduling an informal review are included with the Preliminary Notice. A request for a review can be made on-line at www.revaluation2000.net, by completing a voucher included with the Preliminary Notice or by calling Sabre Systems. Information about your property and other comparable properties used in establishing the new market value are available on-line and from Sabre Systems.

In January 2001, all property owners will receive an official Allegheny County Change of Assessment Notice reflecting the new assessed market value for their property. This notice will reflect any change resulting from an informal review with Sabre Systems.

Beginning with real estate tax bills that will be mailed and payable in 2001, the assessed value of property will equal 100% of the market value. Previously, the assessed value of property in Allegheny County was, in theory, 25% of the market value. With assessed value equal to market value, every taxing jurisdiction in Allegheny County must reduce the 2001 tax millage rates to comply with state law which prohibits taxing jurisdictions in Allegheny County from receiving more than 105% of the real estate tax revenue received in 2000. This does not amount to a 5% cap on increases in your real estate taxes; rather, it is a limit on the overall levy by taxing jurisdictions. Whether your tax bill increases or decreases depends on the change in your assessed value relative to other property owners in your jurisdiction.

Any property owner who does not agree with the new assessed market value may file an appeal with the Allegheny County Board of Property Assessment, Appeals and Review (the “Board”) or such other board as may be ordered by the court. The appeal must be filed no later than February 28, 2001. Given the expected number of appeals, it is likely that the Board will be hearing appeals throughout 2001. Either the taxing bodies or the taxpayer may appeal the Board’s decision to the Court of Common Pleas.

The critical issue in a tax assessment appeal is a determination of market value. The Pennsylvania courts have defined market value as the price a purchaser, who is willing but not obligated to buy, would pay an owner, who is willing but not obligated to sell, taking into consideration all uses to which the property is adapted and might in reason be applied. The County Assessment Law provides that a determination of market value requires that consideration be given to the property value resulting from application of three different valuation methods (the cost method, the comparable sales method and the income method), all considered in conjunction with one another. The case law in Pennsylvania has consistently held that all three methods are relevant and must be considered. The court may, however, give the appropriate weight to any method it feels credible, accepting all three methods, two or only one. The market value determination for industrial property must exclude the value of all machinery and equipment.

The cost method considers the value of the land as if it were vacant and available for its “highest and best use” and estimates the replacement or reproduction cost of any facility, less depreciation and all forms of obsolescence. The income method requires a determination of the future benefit arising from ownership of a property. The net income of a property, taking into account projected rent, operating expenses and capital expenditures, is capitalized at an appropriate rate to determine market value. The comparable sales method utilizes recent sales of comparable properties as the basis for establishing market value showing relative value of characteristic qualities such as location, age, income, expense, use, size, type of construction, and numerous other criteria.

Appeal of a property tax assessment, whether to the Board or the court, is a fact-intensive process. Although not necessary for an informal review, for an appeal to the Board or the court for commercial and industrial properties, a property appraisal performed by a qualified appraiser utilizing all three valuation methods is essential. Pennsylvania courts have held that the market value of a property, while not easily ascertained, is fixed by the opinions of competent witnesses as to what the property is worth on the market at a fair sale.

The procedures on appeal of a tax assessment at a hearing before the Board or at trial before the court require the taxpayer to meet its burden of proof to rebut the prima facie validity of the assessment through admissible, sufficient, competent, credible and relevant evidence. The Rules of Procedure before both the Board and at trial before the court provide for discovery by the parties through a tax assessment appeal discovery request, written interrogatories and request for production of documents.

The Allegheny County Real Estate Tax Revaluation Program impacts every property owner in Allegheny County. Newspaper reports indicate substantial increases in the assessed value of properties in selected areas. Every property owner should carefully review both the Preliminary Notice of market value received from Sabre Systems and the Change of Assessment Notice from Allegheny County. Consideration should be given to the impact the new assessment will have on not only your real estate taxes for the year 2001 and subsequent years but also the price you could obtain from a sale of your property.

The procedures for appeal to the Board require that prompt action be taken. If you desire further information regarding your Preliminary Notice or have questions concerning an informal review or an appeal to the Board, please contact Raymond J. Hoehler, Esquire, William R. Taxay, Esquire or your Cohen & Grigsby attorney.