Final Report of the House Resolution 343 Task Force on Property Valuation and Reassessment

Date: April 10, 2012

Table of Contents

Acknowledgments ......................................................................................................................................................3 Introduction .................................................................................................................................................................3 Background..................................................................................................................................................................5 Topics of Study ...........................................................................................................................................................7 Develop a Set of Uniform Standards for County Reassessment Contracting ................................................7 Recommendations..............................................................................................................................................9 Develop Standards for Disclosing the County's System of Property Valuation and Assessment ..............9 Recommendation ...............................................................................................................................................9 Develop a Self-evaluation Tool for Counties to Determine when a Reassessment is Warranted ...............9 Recommendation ............................................................................................................................................. 10 Recommend a Standard to be Used for a Statewide Mandatory Reassessment Time Frame ................... 10 Recommendation ............................................................................................................................................. 11 Present any other Recommendations to Improve the System of Property Tax Reassessment in this Commonwealth .................................................................................................................................................... 11 Recommendation ............................................................................................................................................. 12 Conclusion ................................................................................................................................................................. 12 Appendices ................................................................................................................................................................ 13 A. House Resolution 343 .................................................................................................................................... 14 B. Relevant Legislation ....................................................................................................................................... 20 House Bill 1463 ................................................................................................................................................. 21 House Bill 1465 ................................................................................................................................................. 24 House Bill 1696 ................................................................................................................................................. 27 House Bill 1712 ................................................................................................................................................. 30 House Bill 84 ..................................................................................................................................................... 32 House Bill 2137 ................................................................................................................................................. 34 Senate Bill 1439 ................................................................................................................................................. 37 C. Comments ......................................................................................................................................................... 45 State Representative Jesse White ................................................................................................................... 46 Pennsylvania School Boards Association ..................................................................................................... 47

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Acknowledgments
The members of Task Force would like to thank the following agencies and individuals for their assistance in this endeavor: The staff of the Local Government Commission with special thanks to Danette Hobbs Magee for their expertise and effort in helping us to reach our goal. The staff of the Legislative Budget and Finance Committee with special thanks to Maryann Nardone for their expertise and efforts in helping us to reach our goal.

Introduction
The Pennsylvania House of Representatives adopted House Resolution 343 on June 27, 2011, by a vote of 199-0. This Resolution created a Task Force to study Pennsylvania’s current property valuation and reassessment process and to address the following issues:      Develop a set of uniform standards for county reassessment contracting; Develop standards for disclosing the county's system of property valuation and assessment; Develop a self-evaluation tool for counties to determine when a reassessment is warranted; Recommend a standard to be used for a Statewide mandatory reassessment time frame; and Present any other recommendations to improve the system of property tax reassessment in this Commonwealth.

The Resolution established the membership of the Task Force and was comprised of the following members:           State Representative Chris Ross, as a member of the Local Government Commission. State Representative Steve Santarsiero, as a member of the Local Government Commission. State Representative Jesse White. State Representative Rick Saccone. Charles “JR” Hardester, CPE, Chief Assessor, Lawrence County, representing the Assessors’ Association of Pennsylvania. Randy Waggoner, CPE, Chief Assessor, Perry County, representing the Assessors’ Association of Pennsylvania. James A. Hercik, CPE, Chief Assessor, Fayette County, representing the County Commissioners Association of Pennsylvania. Joan Righter Price, Esq., Solicitor, Montgomery County Board of Assessment Appeals, representing the County Commissioners Association of Pennsylvania. Alan Shuckrow, School Director, North Allegheny School District, representing the Pennsylvania School Boards Association. Robert Junker, representing the Pennsylvania School Boards Association.

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Also present at Task Force meetings were Renee Reynolds, Executive Director of the State Tax Equalization Board (STEB) and Greg Skotnicki, Assistant Director, Pennsylvania Department of Revenue, Bureau of Corporation Taxes. The staff to the Task Force began its work of compiling relevant materials and visiting counties in order to better understand how county assessment offices operate. The staff reviewed existing standards in other states as well as the standards published by the International Association of Assessing Officers (IAAO). The staff also relied heavily upon the work that was already underway by the Assessors’ Association of Pennsylvania’s Assessment Law Committee. This committee is working on a list of desired reforms relating to property valuation and reassessment, as well as issues pertinent to data collected and generated by the STEB. The committee is represented by members of Assessors’ Association of Pennsylvania, County Commissioners Association of Pennsylvania, and staff of the Local Government Commission and the Legislative Budget and Finance Committee. The Task Force organized and selected Representative Jerry Knowles as the Chair of the HR 343 and HR 344 Task Forces and immediately began to address the issues stated within the Resolutions. Several meetings were convened to gather input from the various groups involved in the assessment process. The Task Force exchanged many ideas, suggestions and recommendations on issues regarding the real estate assessment process in Pennsylvania. This Task Force worked in conjunction with the House Resolution 344 Task Force which was tasked to study certain aspects of the STEB. As the combined Task Force discussed the issues and possible solutions they were charged with by the Resolutions, concerns and questions surrounding the current data that the STEB generates continually surfaced. These concerns and issues will be discussed in more detail in the HR 344 Task Force report. However, they deserve a mention in this report since many of the issues and solutions addressed here rely upon accurate and reliable data collection and computation. Many members of the Task Force believe that the STEB data is inadequate and inaccurate and should not be used as a statistical tool to determine if a county needs to conduct a reassessment. The STEB data has come under much scrutiny and evaluation and many problems have been identified. For instance, the Auditor General of Pennsylvania released the Special Performance Audit of the Pennsylvania State Tax Equalization Board: Certification of Market Values, in February 2011. This report raises many questions as to the practices and operations of the STEB. Furthermore, the Legislative Budget and Finance Committee’s report, Pennsylvania’s System for Property Valuation and Reassessment (issued pursuant to HR 334 of 2009) raised statistical and analytical concerns with the STEB data, as well uncovering other problems relating to the agency’s computer system. Renee Reynolds, Executive Director, for STEB and Mr. Guydish pointed out that many of the statistical shortcomings and other concerns that have been raised are a result of a lack of resources and staff due to budget cuts. Until these issues of concern are corrected the data produced by STEB should not be utilized to determine any calculations regarding reassessments in this Commonwealth.

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Background
The property tax is the only tax that can be levied by all local governments. School districts, counties, cities, townships, boroughs and incorporated towns all have the ability to impose this tax. Historically, the property tax has been the main source of revenue for school districts and counties in Pennsylvania. Municipalities also receive a significant portion of their revenue from the property tax. In 2010, the General Assembly passed the Consolidated County Assessment Law,1 Act 93 of 2010. The Assessors’ Association of Pennsylvania – an affiliate of the County Commissioners Association of Pennsylvania – formed an Assessment Reform Committee in 2001. The Assessors’ Association of Pennsylvania charged the committee with creating a legislative proposal that would consolidate the current assessment laws, pertaining to counties of the second class A through the eighth class, into one new uniform assessment law. The 12-member committee was made up of a wide array of real estate assessment personnel (assessors and administrators) from various counties throughout the Commonwealth. Two staff persons from the Local Government Commission were appointed as the legislative staff to serve on the committee. Due to the technical nature of the work involved with consolidating the various assessment laws, a small subcommittee, including Commission staff, took on the tasks of preparing the initial draft of the consolidated assessment law and a sectionby-section commentary of the legislation. Staff also prepared the disposition and derivation tables. CCAP requested that the members of the Local Government Commission sponsor the final legislative proposal, which was eventually signed into law as Act 93 of 2010.2 Counties have the statutory responsibility to maintain the property tax assessment rolls within each county. Each county assessment office is responsible for valuing property and annually revising the property tax roll. With the exception of Philadelphia County, each county has an appointed Chief Assessor who must be certified by the State Board of Real Estate Appraisers as a Certified Pennsylvania Evaluator. The Chief Assessor is responsible for certifying the values on all real property within the county. A county is required to use the same approach to value real property. That is, in Pennsylvania, counties can choose whether to use a “base year”3 value or a “current market” value to arrive at an assessed value. Section 8842(a), (b) of the Consolidated County Assessment Law states: . . . In arriving at actual value, the county may utilize the current market value or it may adopt a base-year market value. . . . (i) In arriving at actual value, the price at which any property may actually have been sold, either in the base year or in the current taxable year, shall be considered but shall not be controlling. (ii) The selling price shall be subject to revision by increase or decrease to accomplish equalization with other similar property within the county . . . .

1 2

Title 53 of the Pennsylvania Consolidated Statutes (Municipalities Generally) at Section 8801 et seq. Local Government Commission, “The Consolidated County Assessment Law.” <(http://www.lgc.state.pa.us/ccal.shtml)> December 27, 2011. 3 “The year upon which real property market values are based for the most recent countywide revision of assessment of real property or other prior year upon which the market value of all real property of the county is based for assessment purposes. Real property market values shall be equalized within the county and any changes by the board shall be expressed in terms of base-year values.” 53 Pa.C.S. §8802.

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Three approaches to value must be considered in conjunction with one another: cost (reproduction or replacement, as applicable, less depreciation and all forms of obsolescence), comparable sales, and income. Pennsylvania has a constitutional requirement for uniformity of taxation.4 A uniform assessment rate means that all properties in the county, whether residential, commercial, or industrial, should be assessed at a common level of assessment. The main tool at the disposal of a county to correct overall property market changes is a countywide reassessment. The process of conducting a countywide reassessment is a daunting task, especially for those counties that have not recently conducted a reassessment. There is a huge disparity in the length of time a county goes between reassessments. Some counties have gone through a reassessment on a regular basis and have just recently finalized this process. However, there are counties that have not undertaken a reassessment in the past 20 years. The reasons for not undertaking a reassessment are varied; however, a major concern of many counties is the cost associated with such an endeavor. As such, counties have relied on using a “base year”, which is essentially the year of their last reassessment, to set the value of their properties. When property is no longer uniformly valued and assessed, a county risks violating the Uniformity Clause of the Pennsylvania Constitution. This can been seen in the 2009 Pennsylvania Supreme Court decision in Clifton v Allegheny County,5 where the court determined that the use of an “outdated” base year assessment to establish the tax liability for a property violates the Uniformity Clause of the Pennsylvania Constitution. The court did point out that a base year assessment is not a direct violation of the Pennsylvania Constitution’s Uniformity Clause and a county could utilize a base year method for a period of time without being in violation of the Pennsylvania Constitution. However, as market values change over time counties run the risk of violating the Uniformity Clause if their base year values are not adjusted for market changes. The Supreme Court concluded the Clifton opinion by recognizing that it was not the court’s charge to determine what may be the best system of property assessment or to fix a point in time that triggered the need for a reassessment. Instead, the Court noted that that “the General Assembly is the appropriate place in the first instance to fashion a more comprehensive and soundly constitutional scheme.” The Court observed that Pennsylvania is the only state where legislation allows the use of a base year indefinitely, and the General Assembly has the experience of all other states as well as the IAAO standards to establish a uniform assessment system. The Court resisted suggestions that it act in the place of the General Assembly, but did make clear that “there may very well come a time when this Court will be obligated to fill a legislative void in this area,” and that “it is today’s decision that provides notice to the General Assembly to make any necessary amendments to the Commonwealth’s property assessment laws so as to ensure their constitutionality when applied in various counties.” In order to address this issue, as well as others that counties face regarding reassessments, the Pennsylvania House of Representatives passed House Resolution 343 and formed a task force to address various topics mentioned earlier in this report.

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“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. 5 Clifton v Allegheny County, 600 Pa. 662, 969 A.2d 1197 (2009).

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Topics of Study
The Resolution delineated the areas in which the Task Force was to study and provide recommendations. They include, develop a set of uniform standards for county reassessment contracting; develop standards for disclosing the county’s system of property valuation and assessment; develop a self-evaluation tool for counties to determine when a reassessment is warranted; recommend a standard to be used for a Statewide mandatory reassessment time frame; and present any other recommendations to improve the system of property tax reassessment in this Commonwealth. This section will now address each individual topic by summarizing major issues and points raised by the Task Force members and provide recommendations for each issue.

Develop a Set of Uniform Standards for County Reassessment Contracting
It has been recommended by several studies since the 1970s that counties could be better prepared to develop contracts with appraisal firms for countywide reassessments.6 The HR 343 Resolution asked the Task Force to develop a set of uniform standards for county reassessment contracting. The Task Force reviewed other state laws as well as the IAAO Standards on Contracting. The Task Force discussed this issue in much detail. The consensus opinion reached by the Task Force included the need for a “model” contract that would help counties when drafting their contracts. It was suggested that several items should also be included in the contract, in addition to other provisions that would protect the counties and the taxpayers. The Task Force also discussed the Legislative Budget and Finance Committee’s work on this issue. The Legislative Budget and Finance Committee recommended that the Local Government Commission and the Assessors’ Association of Pennsylvania, form a group to review specific standards in other states, develop and recommend a uniform set of standards to counties to use when contracting with private appraisal firms for reassessments.”7 This process had begun before the Task Force was formed and during discussions it was apparent that this process should continue in order to form a thorough and all-inclusive list of standards. The Legislative Budget and Finance Committee recommended that these standards include the following:     Conflict of interest prohibitions. Bidding requirements, including the unbundling of hardware and software contracting from other reassessment components. To find “actual value” of a property must consider using all three methods (cost, comparable sales and income approaches) in conjunction with one another to arrive at the value for an individual property. Require those familiar with local property markets to designate neighborhoods for mass appraisal models.

Pennsylvania’s System for Property Valuation and Reassessment, Legislative Budget and Finance Committee, July 2010, Page S-23. 7 Pennsylvania’s System for Property Valuation and Reassessment, Page S-23.
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    

Public disclosure of the cost tables and methods used to value property by property type. Require use of valid and sufficient data to arrive at changes in value. Require ratio studies pre and post-implementation of new assessed values to test the level of assessment, uniformity and equity results of a mass appraisal. Provide for the transferability of databases for subsequent use by the county. Payment withholding provisions related to independent review of performance measures.

Through discussions of Task Force members, several of the above points were highlighted as necessary for inclusion in a model contract. The issue of unbundling hardware and software contracting was pointed to as being important to ensure that counties can retain the rights to the collected data, then used for future purposes and transferred into other databases. Such requirements are important for counties and property holders. When, for example, contracts do not “unbundle” computer hardware and software, counties may find themselves in the position of having to continue a contract with a vendor that has not performed to the county’s satisfaction. Alternatively, the county may be faced with having to expend scarce tax dollars to contract with a new vendor for new hardware and software for a new mass appraisal system. In order for counties and the public to be aware of how these calculations are reached, disclosure of cost tables and methods used to value property by the contractors is important and must remain open to public scrutiny. Without requirements for public disclosure of the methods used to arrive at values, property holders, and public officials, are unable to determine how a property’s value was derived by the contractor, and public confidence in the reassessment is undermined. To ensure that accurate data is being provided to the State, counties must be able to know how an end result is reached. They must also ensure that raw data collected within the county is being compiled and manipulated in the same manner within each property type. The Task Force discussed how the requirement to conduct pre- and post-implementation ratio studies in order to test the level of assessment, uniformity and equity, is important in proving that the reassessment performed reached a certain statistical goal. This third-party ratio study would provide counties with a mechanism to judge the effectiveness of the revaluation and determine whether the contractor met the required goals spelled out in the contract. The IAAO develops Standards on Contracting for Assessment Services which are very comprehensive. The IAAO standards contain items that should be included in the contract, such as a detailed description of the work to be performed; the time frame, delivery date and other requirements of the project; performance standards; testing standards and procedures; and payment provisions.8 It was also discussed that there is a need for criteria, qualifications and training that is necessary for data collectors and to include these best practices or guidelines in the contract. It was felt that by requiring this of the initial data collectors the data being collected would become more consistent and comparable to other counties. This would go a long way in helping to make this data more reliable and equitable for the Commonwealth and the political subdivision’s purposes.

8

Standard on Contracting for Assessment Services, International Association of Assessing Officers, Approved February 2002 and revised December 2008, Page 7.

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Recommendations The Task Force recommends that its members continue to work with the Local Government Committee and Finance Committee of the House of Representatives as a work group to further refine the necessary components for contracting standards in order to develop a model contract or suggested RFP standards that counties can utilize. This includes developing criteria, qualifications and training necessary for data collectors. This working group should consider recommendations contained in the Legislative Budget and Finance Committee Report,9 provisions contained in the IAAO’s Standards on Contracting for Assessment Services and procedures, and policies of other states.

Develop Standards for Disclosing the County's System of Property Valuation and Assessment
As is the case with many issues the Task Force was asked to study, this issue overlaps other areas of study. Public disclosure of the cost tables and methods used to value property by the contractors was discussed in the previous section of this report. However, it should be further pointed out, as the Legislative Budget and Finance Committee did in their report10 that it is also important for counties to disclose how they arrive at fair market value by specifying whether they are using a “current market value” or “base year value.” In order for a county to be able to do this, it must know how the contractor conducting the reassessment arrived at the values; therefore, it is important that this information be disclosed by the contractor to the county. Recommendation The Task Force recommends that members of the Task Force continue to work with the Local Government Committee and Finance Committee of the House of Representatives as a work group to further develop a standard for disclosing the county’s system of property value and assessment.

Develop a Self-evaluation Tool for Counties to Determine when a Reassessment is Warranted
One of the biggest issues facing counties is how to determine when they should undergo a countywide reassessment. This differs from county to county based on many factors and is why it is important to provide counties with a method for evaluating current assessment levels and to determine whether a reassessment is warranted. As discussed earlier in this report, the STEB data has come under much scrutiny and evaluation and many problems have been identified. The Task Force members then looked to other means by which counties could evaluate the need for a reassessment.
9

Pennsylvania’s System for Property Valuation and Reassessment, Page S-23. Pennsylvania’s System for Property Valuation and Reassessment, Page S-24.

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Several options were discussed and one issue that seemed to garner support by the members of the Task Force was that counties should use ratio studies to determine the present status of a county’s current assessment rolls. The use of a stratified ratio seemed to garner the most support among the Task Force members. It was pointed out by members of the Assessors’ Association of Pennsylvania that the Pennsylvania Supreme Court has ruled in Keebler Co. v The Board of Revision of Taxes of Philadelphia,11 that a stratified ratio could be used by counties. Further discussion revolved around refining the use of a stratified ratio as a trigger to signal a need for a reassessment. It was suggested that simply relying on one statistical number to trigger a reassessment may not give an adequate view of where a county stands in relation to the need for a reassessment. Members pointed out that since counties have different property inventories and makeup, it may make sense to take a closer look at stratified ratios and the ratios of each property type within the county. It was also discussed that by utilizing a stratified ratio by property type each strata could be examined. When one of the ratios within a certain property type widens beyond a statistically accepted number then a county could simply conduct a reassessment of that particular property type. However, since the courts have historically ruled that all property must be considered as one class, this may be a violation of the Uniformity Clause in the Pennsylvania Constitution. The Task Force raised several viable options, but did not reach a final conclusion on which standard should be met to signal a need for a county to reassess. Recommendation The Task Force recommends that its members continue to work with the Local Government Committee and Finance Committee of the House of Representatives as a work group to further develop a standard to signal a need for a county to reassess.

Recommend a Standard to be Used for a Statewide Mandatory Reassessment Time Frame
The Task Force was asked to recommend a standard to be used for a statewide mandatory reassessment time frame. This issue is very closely related with the issue of a self-evaluation tool for counties. As discussions progressed, it was clear that a solution to this, as well as the issue of developing a self-evaluation tool for counties, should be considered together since they are so closely related. As was mentioned in the previous section, many different factors affect when a county would need to enter into a countywide reassessment. Each factor considered affects each county in different ways. Utilizing a mandatory time frame as a statewide standard is problematic due to each county’s differing property inventories, geography and economic conditions.

11

Keebler Company v The Board of Revision of Taxes of Philadelphia, 496 Pa. 140, 436 A.2d 583 (1981).

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The Task Force discussed which statistical trigger should be utilized to determine the need for a reassessment. As was the case in the previous section, the use of a stratified ratio came to the forefront of discussion. It was suggested that counties could conduct ratio studies stratified by each property type within the county to get a complete picture of market values within that county. This would provide a much more complete view of where a county stands in relation to assessed values and actual value of property located within the county. Task Force members stressed that the use of any statistical trigger, including the results of a stratified ratio study, should not be utilized until data becomes more consistent and reliable. Recommendation The Task Force recommends that its members continue to work with the Local Government Committee and Finance Committee of the House of Representatives as a work group to further develop a standard to be used for a statewide mandatory reassessment time frame.

Present any other Recommendations to Improve the System of Property Tax Reassessment in this Commonwealth
During the course of discussions and reviewing other studies conducted on this issue, the Task Force proposed additional recommendations. Representative Chris Ross pointed out that the current system by which different methods of calculating assessed values between the initial assessment and the appeal proceedings, cause an inherent inequity and should be addressed. When the issue of reassessments is discussed, the matter of costs associated with such an endeavor should always be a concern of policymakers. The Legislative Budget and Finance Committee Report stated that in order to provide ongoing financial support for local property valuation and assessment duties of the counties other local government units and school districts should bear some responsibility and provide some funding.12 Further, the LBFC report also stated that the Legislature should consider designating a percentage of the realty transfer taxes for this purpose.13 The County Commissioners Association of Pennsylvania also supports using a portion of the Realty Transfer Tax for this purpose. Representative Jesse White suggested that as the General Assembly deals with these issues, any solutions adopted should ensure that school districts do not exceed the statutory limitations on revenue windfall from property taxation.14 Recognizing the inconsistent or incomplete data that currently exists partially due to variations in the county property record cards, the Task Force discussed the need for a uniform property record card to be used by all counties of the Commonwealth. A uniform property record card with standard definitions and codes will help to create greater consistency for counties during

12 13 14

Pennsylvania’s System for Property Valuation and Reassessment, Pages S-27 and S-28.

Pennsylvania’s System for Property Valuation and Reassessment, Page S-28. Section 327 of Act 1, Special Session 1, of 2006 sets forth anti-windfall provisions for school districts following a countywide reassessment.

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the assessment process. The availability of more reliable data will provide a better and more accurate comparison of property values throughout the Commonwealth. Recommendation The Task Force recommends that the General Assembly keep the issue and suggestion included in this section, in mind when considering solutions to the problems associated with the Commonwealths property tax reassessment structure. The Task Force further recommends that the House of Representatives develop legislation amending the various assessment laws to provide for a uniform property record card which would include standard definitions and codes.

Conclusion
It became clear that the issues the Task Force was working on were complex and intertwined. Often, the solution to one issue was affected by how one or more of the other issues were being handled. Although the Task Force was not able to offer many specific recommendations, it was able to narrow the issues to a point that will help guide future actions on these issues. The six-month time frame did not allow a more in depth study of these very complicated issues; thus, was a driving factor in moving the Task Force toward their recommendation to continue to work as a working group with the House Local Government and Finance Committees. Task Force members encourage these legislative committees to continue to work on these issues, and further refine the solutions and recommendations discussed in this report. Members of the Task Force have expressed to both Chairs of the House Local Government and Finance Committee their willingness to continue on in this working group capacity. It is the hope of Task Force members that this work group, in association with the committees, can produce several viable options in the months remaining in the current legislative session. Chairmen Tom Creighton and Robert Freeman have expressed their support for utilizing the House Local Government Committee to advance any legislative solutions and will continue to work with members of the Task Force and the House Finance Committee, in hopes of reaching a solution on many of these matters.

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Appendices

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A. House Resolution 343

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PRINTER'S NO. THE GENERAL ASSEMBLY OF PENNSYLVANIA

2145

HOUSE RESOLUTION No. 343
Session of 2011
INTRODUCED BY WHITE, SACCONE AND NEUMAN, JUNE 21, 2011 REFERRED TO COMMITTEE ON LOCAL GOVERNMENT, JUNE 21, 2011

A RESOLUTION Establishing a task force to develop a set of uniform standards for county reassessment contracting, develop standards for disclosing the county's system of property valuation and assessment, develop a self-evaluation tool for counties to determine when a reassessment is warranted and recommend a standard to be used for a Statewide mandatory reassessment time frame. WHEREAS, At the direction of the House of Representatives, through House Resolution No. 334 of 2009, the Legislative Budget and Finance Committee (LBFC) prepared a report on Pennsylvania's System for Property Valuation and Reassessment and issued it in 2010; and WHEREAS, The report includes a number of recommendations to enhance the current system, including the development of uniform standards for reassessment contracts, standards for disclosing a county's system of property valuation and assessment and a selfevaluation tool to help counties determine the need for reassessment; and
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WHEREAS, According to the LBFC report, concerns have been raised about the quality of reassessments since the 1970s, when the former Department of Justice and researchers from Carnegie Mellon University concluded that counties were ill-prepared to develop contracts with mass appraisal firms for countywide reassessments; and WHEREAS, According to the LBFC report, transparent systems for property valuation and assessment are necessary in this Commonwealth; and WHEREAS, Each county in this Commonwealth can choose the type of property valuation and assessment system to be implemented in the county, and a county can decide to assess on a "current market" basis or a "base year" basis, select the percent of fair market value to be assessed for tax purposes and select the criteria to be used to decide when to revalue all properties, in other words, to reassess; and WHEREAS, In the 1980s, the General Assembly required counties to specify their predetermined ratios of market value to be assessed for tax purposes; and WHEREAS, A county, however, is not required to inform taxpayers if it arrives at fair market values on a current market basis or a base year basis, or to routinely make available to the public the methods used to arrive at fair market values when the county reassesses or values property after the reassessment; and WHEREAS, According to the LBFC report, with Pennsylvania's current system for property valuation and assessment, uniformity

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does not require that assessments be in current market dollars, however, the system requires that uniform methods be used to derive market values for similar properties and that the same portion of fair market value in base year dollars be the basis of the assessment; and WHEREAS, When most property in a county appreciates or depreciates at relatively the same rate and the county's property inventory does not undergo significant changes that alter the relative distribution of the tax burden, reassessment does not provide greater uniformity, rather, it simply results in the expression of market values and assessed values in current market dollars rather than the value of a dollar in the prior base year; therefore be it RESOLVED, That the House of Representatives appoint a task force to develop a set of uniform standards for county reassessment contracting, develop standards for disclosing the county's system of property valuation and assessment, develop a self-evaluation tool for counties to determine when a reassessment is warranted and recommend a standard to be used for a Statewide mandatory reassessment time frame; and be it further RESOLVED, That the membership of the task force be made up of: (1) two representatives from the Pennsylvania Local

Government Commission appointed by the Speaker of the House of Representatives from a list comprised of members of the House of Representatives appointed to the commission, one

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each representing the majority and minority representation on the commission; (2) two members of the House of Representatives or their

designees, one appointed by the Majority Leader and one appointed by the Minority Leader; and (3) two appointees from each of the memberships listed

in this paragraph from a list submitted by each membership, one appointed by the Majority Leader and one appointed by the Minority Leader: (i) (ii) the Assessors' Association of Pennsylvania; the County Commissioners Association of

Pennsylvania; and (iii) and be it further RESOLVED, That the task force utilize the staff of the Local Government Committee and the Finance Committee in consultation with and assistance from the Local Government Commission and the Legislative Budget and Finance Committee; and be it further RESOLVED, That the task force be charged with the following: (1) develop a set of uniform standards for county the Pennsylvania School Boards Association;

reassessment contracting; (2) develop standards for disclosing the county's system

of property valuation and assessment; (3) develop a self-evaluation tool for counties to

determine when a reassessment is warranted; (4) recommend a standard to be used for a Statewide

mandatory reassessment time frame; and

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(5)

present any other recommendations to improve the

system of property tax reassessment in this Commonwealth; and be it further RESOLVED, That the task force report its results and present its findings to the Chief Clerk of the House of Representatives no later than six months after the adoption of this resolution.

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B. Relevant Legislation

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House Bill 1463: Creates a training program for Assessors.

PRINTER'S NO. THE GENERAL ASSEMBLY OF PENNSYLVANIA

2017

HOUSE BILL No. 1463
INTRODUCED BY NEUMAN, JUNE 6, 2011

Session of 2011

REFERRED TO COMMITTEE ON PROFESSIONAL LICENSURE, JUNE 6, 2011

AN ACT Amending the act of April 16, 1992 (P.L.155, No.28), entitled "An act providing for the certification and recertification of assessors; establishing eligibility and training requirements; defining the powers and duties of the State Board of Certified Real Estate Appraisers relating to training, certification and recertification of assessors; and authorizing the board to establish fees," further providing for duties of board and for qualifications. The General Assembly of the Commonwealth of Pennsylvania hereby enacts as follows: Section 1. Section 4 of the act of April 16, 1992 (P.L.155,

No.28), known as the Assessors Certification Act, is amended by adding a subsection to read: Section 4. * * * (c.1) Training program.--The board shall establish and Duties of board.

administer a training program for persons who apply to be assessors, which program shall include instruction on the
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following topics: (1) Historical and current Pennsylvania judicial

decisions affecting property valuation, assessment and reassessment. (2) The implications of Pennsylvania judicial decisions

for permissible valuation and assessment practices in this Commonwealth. (3) The manner in which an assessor's duties have been

and are currently impacted or may be impacted in the future by Pennsylvania judicial decisions. * * * Section 2. Section 5. * * * (b) Requirements.--An applicant shall meet the following Section 5(b) of the act is amended to read:

Qualifications.

requirements: (1) The applicant shall have a high school diploma, or

its equivalent, or two years of assessing experience. (2) (3) The applicant shall be at least 18 years of age. The applicant shall be a resident of this

Commonwealth for at least six months. (4) The applicant shall have successfully completed a

minimum of 90 hours of the basic courses of study approved by the board covering the appraisal assessing profession or any other professional courses acceptable to the board. At the discretion of the county commissioners, the county may reimburse county assessors for the costs of completing the

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courses of study required by this subsection. (5) The applicant shall have successfully completed the

training program established by the board under section 4(c.1). Section 3. This act shall take effect in 60 days.

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House Bill 1465: Creates a revolving loan fund to assist counties with the cost of conducting a reassessment.

PRINTER'S NO. THE GENERAL ASSEMBLY OF PENNSYLVANIA

2019

HOUSE BILL No. 1465
INTRODUCED BY NEUMAN, JUNE 6, 2011

Session of 2011

REFERRED TO COMMITTEE ON APPROPRIATIONS, JUNE 6, 2011

AN ACT Providing for a State revolving loan program to counties for the purpose of conducting countywide reassessments; imposing powers and duties on the Center for Local Government Services; and making an appropriation. The General Assembly of the Commonwealth of Pennsylvania hereby enacts as follows: Section 1. Short title.

This act shall be known and may be cited as the County Reassessment Revolving Loan Program Act. Section 2. Definitions.

The following words and phrases when used in this act shall have the meanings given to them in this section unless the context clearly indicates otherwise: "Center." The Center for Local Government Services within

the Department of Community and Economic Development of the
24

Commonwealth. "Program." The County Reassessment Revolving Loan Program

established under section 3. Section 3. (a) County Reassessment Revolving Loan Program.

Establishment.--The County Reassessment Revolving Loan

Program is established and shall be administered by the center. (b) Purpose of loans.--The center shall provide loans to

counties in order for counties to adequately perform countywide reassessments. Program funds may be used for reassessment purposes as determined by the center. (c) Application.--The center shall develop and distribute a

uniform application for applicants to submit for loans under the program. (d) Review.--The center shall review applications submitted

for loans under the program and shall approve them if they are complete and the applicant agrees to the terms and conditions for the loan as determined by the center. (e) Loan repayment.--The center shall determine applicable

methods regarding loan repayment procedures. (f) Funding distribution.--If there are insufficient State

funds appropriated for loans under this act in any year, the center shall distribute the funds as determined by the center. Section 4. Rules and regulations.

The center shall adopt rules and regulations necessary to implement and administer the provisions of this act. Section 5. Appropriation.

The sum of $5,000,000 is hereby appropriated to the Center

25

for Local Government Services within the Department of Community and Economic Development for the purpose of providing loans under this act. Section 6. Effective date.

This act shall take effect in 60 days.

26

House Bill 1696: Impose a moratorium on property reassessments in certain Fourth Class Counties. Vetoed by the Governor on July 8, 2011. (Similar Legislation – House Bill 166)

SENATE AMENDED PRIOR PRINTER'S NO. 2141 PRINTER'S NO.

2260

THE GENERAL ASSEMBLY OF PENNSYLVANIA

HOUSE BILL No. 1696

Session of 2011

INTRODUCED BY SACCONE, WHITE, NEUMAN, TURZAI, EVANKOVICH, MUSTIO, EMRICK, MURT, DUNBAR, GERGELY, D. COSTA, REESE, ELLIS, GABLER, MATZIE, HORNAMAN, SIMMONS, TOOHIL, BLOOM, MALONEY, CUTLER, CHRISTIANA, GOODMAN, SWANGER, KORTZ, MOUL AND TALLMAN, JUNE 20, 2011 SENATOR CORMAN, APPROPRIATIONS, IN SENATE, RE-REPORTED AS AMENDED, JUNE 29, 2011

AN ACT Providing for a temporary moratorium of court-ordered countywide reassessments and for reforms based upon study. The General Assembly of the Commonwealth of Pennsylvania hereby enacts as follows: Section 1. Short title.

This act shall be known and may be cited as the Property Tax Reassessment Moratorium Act. Section 2. Findings and purpose.

The General Assembly finds and declares as follows: (1) The method of property tax assessment in this

Commonwealth is fragmented and in need of reform.
27

(2)

The current method provides for little uniformity

between counties resulting in vast inequities of property assessments across this Commonwealth. (3) Further, the tax assessment system provides little

protection for homeowners who experience sudden and dramatic increases in their property assessments as a result of a countywide assessment. (4) Failure to address the problem has led to the

potential for devastating tax increases that would be harmful to the citizens and economic well-being of this Commonwealth. (5) A study was conducted of the Commonwealth's property

assessment system. (6) The study addressed the proper policies and

procedures necessary to ensure uniformity among counties and a comparative analysis of the property assessment systems in other states. (7) The study concluded that changes are needed and the

General Assembly should enact legislation to address issues raised by the study. Section 3. Definitions.

The following words and phrases when used in this act shall have the meanings given to them in this section unless the context clearly indicates otherwise: "Local taxing authority." Any political subdivision

authorized to impose real property taxes. Section 4. (a) Moratorium.

Prohibition.--No local taxing authority may undertake,

28

on or after the effective date of this section, the process of a court-ordered countywide reassessment of real property for purposes of levying property taxes; however, counties currently conducting a court-ordered countywide reassessment as of the effective date of this section may, at the discretion of the county, continue the process. (b) End of prohibition.--The prohibition under subsection

(a) shall remain in effect until the General Assembly has enacted legislation to address the declarations contained in section 2(1), (2), (3) and (4) or until November 30, 2012, whichever comes first. NO COUNTY OF THE FOURTH CLASS HAVING A POPULATION, ACCORDING TO THE 2010 UNITED STATES CENSUS, GREATER THAN 185,000 BUT LESS THAN 210,000 MAY IMPLEMENT, EFFECTUATE OR UNDERTAKE THE PROCESS OF A COURT-ORDERED COUNTYWIDE REASSESSMENT OF REAL PROPERTY FOR PURPOSES OF LEVYING PROPERTY TAXES UNTIL THE LATER OF: (1) THE GENERAL ASSEMBLY ADOPTS PROCEDURES NECESSARY TO

ENSURE UNIFORMITY AMONG COUNTIES IN THEIR PROPERTY ASSESSMENT SYSTEMS; OR (2) Section 5. NOVEMBER 30, 2012. Effective date.

This act shall take effect immediately.

29

House Bill 1712: Pertaining to the composition of the State Board of Certified Real Estate Appraisers.

PRINTER'S NO. THE GENERAL ASSEMBLY OF PENNSYLVANIA

2175

HOUSE BILL No. 1712
INTRODUCED BY NEUMAN, JUNE 22, 2011

Session of 2011

REFERRED TO COMMITTEE ON PROFESSIONAL LICENSURE, JUNE 22, 2011

AN ACT Amending the act of July 10, 1990 (P.L.404, No.98), entitled "An act providing for the certification of real estate appraisers; specifying requirements for certification; providing for sanctions and penalties; and making an appropriation," further providing for State Board of Certified Real Estate Appraisers. The General Assembly of the Commonwealth of Pennsylvania hereby enacts as follows: Section 1. Section 4(a) of the act of July 10, 1990

(P.L.404, No.98), known as the Real Estate Appraisers Certification Act, amended July 8, 2008 (P.L.833, No.59), is amended to read: Section 4. (a) State Board of Certified Real Estate Appraisers.

Creation.--There is hereby created the State Board of

Certified Real Estate Appraisers as a departmental administrative board in the Department of State. The board shall
30

consist of the following members: (1) (2) (3) (4) The Secretary of the Commonwealth or a designee. The Attorney General or a designee. The Secretary of Banking or a designee. Eight members who are citizens of the United States

and who have been residents of this Commonwealth for a twoyear period immediately prior to appointment, two of whom shall be public members [and], six of whom shall be persons who are State-certified real estate appraisers and two of whom shall be persons who are certified Pennsylvania evaluators as defined in section 2 of the act of April 16, 1992 (P.L.155, No.28), known as the Assessors Certification Act. * * * Section 2. This act shall take effect in 60 days.

31

House Bill 84: Would include Philadelphia County under the Assessors Certification Act. (Similar Legislation -- Senate Bill 1314)

PRIOR PRINTER'S NO. 42

PRINTER'S NO.

1539

THE GENERAL ASSEMBLY OF PENNSYLVANIA

HOUSE BILL No. 84

Session of 2011

INTRODUCED BY THOMAS, BISHOP, CALTAGIRONE, M. O'BRIEN AND YOUNGBLOOD, JANUARY 19, 2011 AS REPORTED FROM COMMITTEE ON URBAN AFFAIRS, HOUSE OF REPRESENTATIVES, AS AMENDED, APRIL 13, 2011

AN ACT Amending the act of April 16, 1992 (P.L.155, No.28), entitled "An act providing for the certification and recertification of assessors; establishing eligibility and training requirements; defining the powers and duties of the State Board of Certified Real Estate Appraisers relating to training, certification and recertification of assessors; and authorizing the board to establish fees," further providing for nonapplicability. The General Assembly of the Commonwealth of Pennsylvania hereby enacts as follows: Section 1. Section 11 of the act of April 16, 1992 (P.L.155,

No.28), known as the Assessors Certification Act, amended November 19, 2004 (P.L.834, No.100), is repealed: [Section 11. Nonapplicability.

This act shall not apply to counties of the first class.] Section 2. An assessor who is employed by a county of the
32

first class on the effective date of this section shall have three FOUR years from the effective date of this section to become certified under the act. Section 3. This act shall take effect in 60 days.

33

House Bill 2137: Impose a temporary moratorium on court-ordered property reassessments.

PRINTER'S NO. THE GENERAL ASSEMBLY OF PENNSYLVANIA

2989

HOUSE BILL No. 2137

Session of 2012

INTRODUCED BY SACCONE, WHITE, NEUMAN, EVANKOVICH, BLOOM, D. COSTA, P. COSTA, CUTLER, KORTZ, ROCK, SIMMONS AND SWANGER, JANUARY 23, 2012 REFERRED TO COMMITTEE ON URBAN AFFAIRS, JANUARY 23, 2012

AN ACT Providing for a temporary moratorium of court-ordered countywide reassessments and for reforms based upon study. The General Assembly of the Commonwealth of Pennsylvania hereby enacts as follows: Section 1. Short title.

This act shall be known and may be cited as the Property Tax Reassessment Moratorium Act. Section 2. Findings and purpose.

The General Assembly finds and declares as follows: (1) The method of property tax assessment in this

Commonwealth is fragmented and in need of reform. (2) The current method provides for little uniformity

between counties resulting in vast inequities of property assessments across this Commonwealth.
34

(3)

Further, the tax assessment system provides little

protection for homeowners who experience sudden and dramatic increases in their property assessments as a result of a countywide assessment. (4) Failure to address the problem has led to the

potential for devastating tax increases that would be harmful to the citizens and economic well-being of this Commonwealth. (5) A study was conducted of the Commonwealth's property

assessment system. (6) The study addressed the proper policies and

procedures necessary to ensure uniformity among counties and a comparative analysis of the property assessment systems in other states. (7) The study concluded that changes are needed and the

General Assembly should enact legislation to address issues raised by the study. Section 3. Definitions.

The following words and phrases when used in this act shall have the meanings given to them in this section unless the context clearly indicates otherwise: "Local taxing authority." Any political subdivision

authorized to impose real property taxes. Section 4. (a) Moratorium.

Prohibition.--No local taxing authority may undertake,

on or after the effective date of this section, the process of a court-ordered countywide reassessment of real property for purposes of levying property taxes; however, counties currently

35

conducting a court-ordered countywide reassessment as of the effective date of this section may, at the discretion of the county, continue the process. (b) End of prohibition.--The prohibition under subsection

(a) shall remain in effect until the General Assembly has enacted legislation to address the declarations contained in section 2(1), (2), (3) and (4) or until December 31, 2013, whichever comes first. Section 5. Effective date.

This act shall take effect immediately.

36

Senate Bill 1439: Auditor General shall conduct a procedural and performance audit of a county reassessment.

PRINTER'S NO. THE GENERAL ASSEMBLY OF PENNSYLVANIA

2018

SENATE BILL No. 1439
INTRODUCED BY PIPPY, MARCH 16, 2012 REFERRED TO FINANCE, MARCH 16, 2012

Session of 2012

AN ACT Providing for property reassessment audits. The General Assembly of the Commonwealth of Pennsylvania hereby enacts as follows: Section 1. Short title.

This act shall be known and may be cited as the Property Reassessment Audit Act. Section 2. Legislative findings and declaration of policy.

The General Assembly finds and declares that: (1) Countywide reassessments, including court-ordered

reassessments, have been justified and initiated on the basis of data derived from the State Tax Equalization Board. Both a special performance audit conducted by the Auditor General in February of 2011 and a report issued by the Legislative

37

Budget and Finance Committee in July of 2010 questioned the veracity of data generated by the State Tax Equalization Board. (2) Reassessment valuation models that rely on the State

Tax Equalization Board sales data may exclude sales considered valid by the International Association of Assessing Officers guidelines, contributing to inaccurate valuation during a reassessment. (3) Inaccurate sales data, inappropriate modeling and

inaccurate property inventory data in reassessments affect the uniformity of taxation mandated by section 1 of Article VIII of the Constitution of Pennsylvania by yielding unnecessarily inaccurate valuations and disproportionate tax burdens. Section 3. Definitions.

The following words and phrases when used in this act shall have the meanings given to them in this section unless the context clearly indicates otherwise: "Board." The State Tax Equalization Board. The establishment of values for all properties

"Completion."

in the county and released on an informal basis to the public. "Contractor." A mass appraisal company or other contractors,

subcontractors or vendors involved in constructing the property inventory database or other activities related to establishing property values. "County." A county of the second class, second class A,

third class, fourth class, fifth class, sixth class, seventh

38

class or eighth class. Section 4. (a) Powers and duties of Auditor General.

Countywide reassessments.--The Auditor General shall

conduct a procedural and performance audit of a county or contractor conducting a reassessment initiated after the effective date of this section. The Auditor General shall conduct an investigation, conduct the audits, issue remedial recommendations and take any additional action as provided in this act. (b) Other reassessments.--The Auditor General may, or upon

the request of the Governor or a member of the General Assembly shall, investigate any countywide reassessment being conducted on the effective date of this section in accordance with section 5, except that no investigation may be initiated if more than six months have elapsed since the certification of any valuations by the county. (c) Prohibition.--No countywide reassessment may be

certified by a county until the certificate under section 7(e) has been issued. Section 5. (a) Investigations.

General.--The Auditor General shall investigate any

countywide reassessment in accordance with this section. (b) Procedure.-(1) The Auditor General shall provide written notice to

the governing body of the county and the county chief executive, if any, that an investigation has been initiated. County officials and employees shall cooperate with the

39

Auditor General or his designees and shall provide requested records within 30 days of a request. (2) The Auditor General, or his designee, may issue

subpoenas to compel the attendance of county officials, employees or contractors involved in the maintenance of the property inventory database and the production of any data or records in the possession of county officials, employees or contractors. If any person fails to comply with any subpoena under this paragraph or refuses to be sworn or testify as a witness, or if any person refuses to permit the Auditor General to inspect records, the Auditor General may, in addition to other remedies provided by law, petition the court of common pleas to order compliance. The court shall order compliance if it deems the testimony relevant to determining the accuracy of the valuations used in the reassessment. Nothing under this section shall authorize the disclosure of any information deemed proprietary by law or contract. (c) Contracts.--Notwithstanding any provision of law, a

contract for reassessment services executed after the effective date of this section shall include provisions providing for the mutual agreement of the parties to the contract that their officers, employees and agents shall cooperate with any investigation as provided in this section. (d) Report.--For investigations initiated under section

4(b), the Auditor General shall, within 60 days of the written notice provided under subsection (b), issue a report to the

40

governing body and chief executive of the county setting forth the results of the investigation and whether there are sufficient grounds to warrant judicial action as provided under section 6. Section 6. (a) Judicial action.

Petition.--If, after an investigation under section 5,

the Auditor General determines that sufficient evidence of inaccurate valuations exists to warrant procedural and performance audits under section 7, the Auditor General shall petition the Commonwealth Court to stay further use of the new assessed values until the time as the Auditor General has conducted the audits and issued remedial recommendations. Notice of the petition shall be provided to the governing body and chief executive of the county and its contractors. (b) Hearing.--Within 15 days of the petition under

subsection (a), the Commonwealth Court shall hold a hearing and obtain evidence as may be necessary to issue an order. (c) Order.--If the Commonwealth Court determines that

sufficient evidence of inaccurate valuation of property exists, it shall issue an order staying further implementation of the reassessment, including, if necessary, staying any determinations of formal appeals, pending the issuance of the report provided under section 7. The order may contain additional direction to the county to ensure the continuity of operations of all taxing districts pending the issuance of the report. (d) Extensions.--The Auditor General may petition the

41

Commonwealth Court for an extension of any deadlines provided for under this act if necessary to complete an audit or the implementation of recommendations. Section 7. (a) Audits.

General.--If required by this act, the Auditor General

shall conduct the following: (1) A performance audit of the county and the contractor

to determine whether the quantity or quality of work performed yields valuations of property of sufficient accuracy and fairness. Ratio studies between assessed values and market values, as determined through sales or appraisals, may be used. (2) A procedural audit to examine whether the county and

the contractor are following established or recommended procedures as set forth by the county or in accordance with law. (b) Personnel.--The Auditor General shall have the same

powers of investigation provided under section 5 and may employ accountants, assessors or statisticians who shall receive compensation as fixed by the Auditor General. (c) Reports.--The Auditor General shall issue a written

report setting forth the results of the audits and any remedial recommendations as provided under subsection (d), as follows: (1) For audits required under section 4(a), the Auditor

General shall issue the report to the governing body and chief executive of the county, not later than 90 days after the completion of the reassessment. The recommendations of

42

the Auditor General shall be implemented by the county within 90 days of the receipt of the report. (2) For audits required under section 6(c), the Auditor

General shall issue the report to the legislative body and chief executive of the county, if any, and the Commonwealth Court not later than 90 days after the date of the order. The recommendations of the Auditor General shall be implemented by the county within 90 days of the receipt of the report. (d) Recommendations.--The report shall contain

recommendations that the Auditor General believes may be necessary to better ensure the accuracy and fairness of the reassessment. The chief assessor of the county shall notify the Auditor General in writing when the recommendations have been fully implemented. (e) Certificate.--The Auditor General or Commonwealth Court

shall issue a written certificate to the county setting forth that either recommendations were not included in the audit or that all recommendations have been fully implemented by the county. (f) Appointed liaison.--If the Auditor General deems it

necessary to assist a county in the implementation of recommendations, the Auditor General may appoint a liaison to assist the county and report on the progress of the implementation. The liaison shall be an individual with at least five years' experience in reassessment practices and procedures, and shall receive compensation as determined by the Auditor General.

43

Section 8.

Reassessment appeals.

Nothing in this act shall affect the progress of informal appeals or conferences conducted by a county to resolve disputes over valuation. Notwithstanding any other provision of law, for audits conducted as required under section 4(a), formal appeals shall not be conducted until after the certification of the reassessment by the county. Section 9. Expiration.

This act shall expire December 31, 2015. Section 20. Effective date.

This act shall take effect in 60 days.

44

C. Comments

45

State Representative Jesse White

I want to thank the members of the Task Forces for their hard work and commitment to these issues. By bringing all the stakeholders together and engaging in focused, non-partisan analysis, we have finally developed a blueprint for real property tax reassessment reform. These reports strengthen my belief that until we correct the fundamental flaws in the reassessment process, a moratorium on court-ordered reassessments is essential to prevent the system from being abused to exploit loopholes in the anti-windfall provisions to increase tax revenue outside the scope of Act 1 of 2006. Any tool can become a weapon if placed in the wrong hands, and in my opinion, the reassessment process has been turned into a weapon to raise revenue instead of a tool for statistical measure to ensure equal and uniform taxation of properties. We must dramatically reduce this potential for abuse and restore the reassessment process to its rightful intent as an instrument to help taxpayers, not punish them. The need for both technical and policy-based solutions are evident, and I hope these reports will help guide my colleagues as we begin the work of crafting, debating and ultimately implementing these solutions in the weeks and months ahead. The input of the task force members came from a uniquely qualified group of stakeholders who possessed a combination of the knowledge of the strengths and weaknesses of the current reassessment system, a comprehensive knowledge of the legal restrictions placed upon us by the Pennsylvania Constitution, and a firm commitment to change a status quo we all recognize to be fundamentally flawed in various ways. I view these task force reports as the beginning of the conversation, not the end, and I look forward to working together to finally end decades of futility to reform the property tax reassessment process to protect and benefit the people of Pennsylvania.

___________________ Jesse White 46th Legislative District Washington/Allegheny/Beaver Counties
46

Pennsylvania School Boards Association
The Pennsylvania School Boards Association joins the other Task Force members in the recognition that the Commonwealth’s assessment laws are systemically flawed and in need of reform. PSBA encourages the General Assembly to move forward with the Task Force’s recommendations as soon as possible to develop and implement legislation to ensure that Pennsylvania’s property assessment system is fair to all taxpayers. The inequity perpetuated by the current patchwork of reassessment schedules and methods used across the state results in nothing but continual controversy among local governments, school districts, and taxpayers. There are currently numerous proposals in the General Assembly that attempt to address a small or specific symptom of our broken assessment laws; however, none of the proposals provides the required comprehensive solution to the underlying problem. Only comprehensive assessment legislation that adds predictability to the system by setting standards for when and how a reassessment is to be conducted will accomplish the goals of the Task Force and meet the constitutionally-mandated uniformity of taxation. One legislative proposal attempts to protect undervalued properties by prohibiting school districts and other taxing authorities from appealing the assessment of a property based on the sale of the property, undermining the goal of uniformity by increasing the discrepancy among taxable property and shifting the burden carrying undervalued properties to those taxpayers who are accurately assessed. Additionally, another proposal prohibits local taxing authorities from undertaking a court-ordered countywide reassessment of real property, which, again, does nothing to remedy the existing inequities in property assessments and denies certain property owners equal protection under the law. Other proposals attempt to impose additional anti-windfall provisions on school districts and taxing authorities following a reassessment, while some attempt to implement property tax reform with the goal of reducing or eliminating the burden of the property tax on local taxpayers altogether. At the heart of all of these proposals is Pennsylvania’s broken property assessment laws, which give rise to unconstitutional inequities that inevitably result from the prolonged use of old and outdated assessment values in areas where property values have changed at divergent rates. Implementing these current proposals would serve only as a temporary bandage, potentially mitigating a perceived issue in the short term, but ignoring the root of the problem and the need for a comprehensive solution. Without careful examination of the underlying problem with our assessment laws, these proposals will do nothing to reset the system and ensure that property owners who are fairly assessed and are paying their proportionate share of taxes are not burdened with carrying the weight of owners of under-assessed properties. The development and implementation of the recommendations set forth by this Task Force have the ability to transform and modernize Pennsylvania’s property assessment system and render the current proposals that address only a single symptom of this problem entirely moot. To ensure that property assessments are completed in a uniform and consistent manner, PSBA encourages the continued examination of our current assessment system and the adoption of solutions to ensure uniformity and fairness for all property owners. Only uniform assessment and appeal practices, accurate and timely property valuation, and increased transparency for the disclosure of how properties are valued and assessed will succeed in curing the problems with our current property assessment law.

47

Final Report of the House Resolution 344 Task Force on Property Valuation and Reassessment and the Pennsylvania State Tax Equalization Board

Date: April 10, 2012

Table of Contents
Acknowledgments ......................................................................................................................................................3 Introduction .................................................................................................................................................................3 Background..................................................................................................................................................................4 Topics of Study ...........................................................................................................................................................7 Develop Criteria and Procedures for Data Submission by the County to the State Tax Equalization Board ........................................................................................................................................................................7 Recommendations..............................................................................................................................................8 Address Insufficient Sample Data and to Assure and Disclose that the Sample Data Relied on to Develop a County's Performance Measures During a Reassessment is Representative of the Bulk of the County's Property Inventory ................................................................................................................................8 Recommendations..............................................................................................................................................9 Develop Criteria and Procedures for Data Collection .......................................................................................9 Recommendations............................................................................................................................................ 10 Determine the Viability of Creating a Uniform Training Program for Individuals and Organizations Collecting the Data ............................................................................................................................................... 10 Recommendations............................................................................................................................................ 10 Conclusion ................................................................................................................................................................. 10 Appendices ................................................................................................................................................................ 12 A. House Resolution 344 .................................................................................................................................... 13 B. Relevant Legislation ....................................................................................................................................... 19 Senate Bill 704 ................................................................................................................................................... 20 House Bill 84 ..................................................................................................................................................... 24 House Bill 1463 ................................................................................................................................................. 26 House Bill 2137 ................................................................................................................................................. 29 Senate Bill 1439 ................................................................................................................................................. 32 C. Comments ......................................................................................................................................................... 40 State Representative Jesse White ................................................................................................................... 41 Pennsylvania School Boards Association ..................................................................................................... 42 D. Additional Information .................................................................................................................................. 43 Assessors’ Association of Pennsylvania Rejection Code List..................................................................... 44

2

Acknowledgments
The members of the Task Force would like to thank the following groups and individuals for their assistance in this endeavor: The staff of the Local Government Commission with special thanks to Danette Hobbs Magee for their expertise and efforts in helping us to reach our goal. The staff of the Legislative Budget and Finance Committee with special thanks to Maryann Nardone for their expertise and efforts in helping us to reach our goal.

Introduction
The Pennsylvania House of Representatives adopted House Resolution 344 on June 27, 2011, by a vote of 199-0. This Resolution created a Task Force to study Pennsylvania’s current property tax assessment process and to address the following issues:     Develop criteria and procedures for data submission by the county to the State Tax Equalization Board (STEB) and verification by STEB; Address insufficient sample data and to assure and disclose that the sample data relied on to develop a county's performance measures during a reassessment is representative of the bulk of the county's property inventory; Develop criteria and procedures for data collection by those individuals or organizations conducting the collection of the data; and Determine the viability of creating a uniform training program for individuals and organizations collecting the data that is provided to the county assessor.

The Resolution established the membership of the Task Force and was comprised of the following members:            State Representative Thomas Creighton, Majority Chair of the House Local Government Committee; State Representative Robert L. Freeman, Minority Chair of the House Local Government Committee; State Representative Kerry A. Benninghoff, Majority Chair of the House Finance Committee; State Representative Phyllis Mundy, Minority Chair of the House Finance Committee; State Representative Jerry Knowles; State Representative Brandon Neuman; James Zurick, Chairman, representing the Pennsylvania State Tax Equalization Board; Daniel Guydish, Vice Chair, representing the Pennsylvania State Tax Equalization Board; Jenny Stratton, Policy Director, representing the Pennsylvania Department of Revenue; Amy Gill, Bureau of Research, representing the Pennsylvania Department of Revenue; Charles “JR” Hardester, CPE, Chief Assessor, Lawrence County, representing the Assessors’ Association of Pennsylvania; 3

  

Randy Waggoner, CPE, Chief Assessor, Perry County, representing the Assessors’ Association of Pennsylvania; James A. Hercik, CPE, Chief Assessor, Fayette County, representing the County Commissioners Association of Pennsylvania; Joan Righter Price, Esq., Solicitor, Montgomery County Board of Assessment, representing the County Commissioners Association of Pennsylvania.

Also present at Task Force meetings were Renee Reynolds, Executive Director of STEB and Greg Skotnicki, Assistant Director, Pennsylvania Department of Revenue, Bureau of Corporation Taxes. The staff to the Task Force began its work of compiling relevant materials and visiting counties in order to better understand how county assessment offices operate. The staff reviewed existing standards in other states as well as standards published by the International Association of Assessing Officers (IAAO). The staff also relied heavily upon the work that was already underway by the Assessors’ Association of Pennsylvania’s Assessment Law Committee. This committee is working on a list of desired reforms relating to property valuation and reassessment, as well as issues pertinent to data collected and generated by the STEB. The committee is represented by members of Assessors’ Association of Pennsylvania, County Commissioners Association of Pennsylvania, and staff of the Local Government Commission and the Legislative Budget and Finance Committee. The Task Force organized and selected Representative Jerry Knowles as the Chair of the HR 343 and HR 344 Task Forces and immediately began to address the issues stated within the Resolutions. Several meetings were convened to gather input from the various groups involved in the assessment process. The Task Force exchanged many ideas, suggestions and recommendations on issues regarding the real estate assessment process in Pennsylvania. This Task Force worked in conjunction with the House Resolution 343 Task Force which was tasked to study certain aspects of the property valuation and reassessment process.

Background
The property tax is the only tax that can be levied by school districts, counties, cities, townships, boroughs and incorporated towns. Historically, in Pennsylvania the property tax has been the main source of revenue for school districts and counties. Municipalities also receive a significant portion of their revenue from the property tax. In 2010, the General Assembly passed the Consolidated County Assessment Law,1 Act 93 of 2010. The Assessors’ Association of Pennsylvania – an affiliate of the County Commissioners Association of Pennsylvania – formed an Assessment Reform Committee in 2001. The Assessors’ Association of Pennsylvania charged the committee with creating a legislative proposal that would consolidate the current assessment laws, pertaining to counties of the second class A through the eighth class, into one new uniform assessment law. The 12-member

1

Title 53 of the Pennsylvania Consolidated Statutes (Municipalities Generally) at Section 8801 et seq.

4

committee was made up of a wide array of real estate assessment personnel (assessors and administrators) from various counties throughout the Commonwealth. Two staff persons from the Local Government Commission were appointed as the legislative staff to serve on the committee. Due to the technical nature of the work involved with consolidating the various assessment laws, a small subcommittee, including Commission staff, took on the tasks of preparing the initial draft of the consolidated assessment law and a sectionby-section commentary of the legislation. Staff also prepared the disposition and derivation tables. CCAP requested that the members of the Local Government Commission sponsor the final legislative proposal, which was eventually signed into law as Act 93 of 2010.2 Counties have the statutory responsibility to maintain the property tax assessment rolls within each county. With the exception of Philadelphia County, each county assessment office is responsible for valuing property and annually revising the property tax roll. Each county has an appointed Chief Assessor who must be certified by the State Board of Real Estate Appraisers as a Certified Pennsylvania Evaluator. The Chief Assessor is responsible for certifying the values on all real property within the county. A county is required to use the same approach to value real property. That is, in Pennsylvania, counties can choose whether to use a “base year”3 value or a “current market” value to arrive at an assessed value. Section 8842(a), (b) of the Consolidated County Assessment Law states: . . . In arriving at actual value, the county may utilize the current market value or it may adopt a base-year market value. . . . (i) In arriving at actual value, the price at which any property may actually have been sold, either in the base year or in the current taxable year, shall be considered but shall not be controlling. (ii) The selling price shall be subject to revision by increase or decrease to accomplish equalization with other similar property within the county . . . . Three approaches to value must be considered in conjunction with one another: cost (reproduction or replacement, as applicable, less depreciation and all forms of obsolescence), comparable sales, and income. Pennsylvania has a constitutional requirement for uniformity of taxation.4 A uniform assessment rate means that all properties in the county, whether residential, commercial, or industrial, should be assessed at a common level of assessment. The main tool at the disposal of a county to correct overall property market changes is a countywide reassessment. The STEB was created by Act 447 of 1947 “to compensate for differences in property values for across counties and to help the Pennsylvania Department of Education (PDE) ensure that

Local Government Commission, “The Consolidated County Assessment Law.” <(http://www.lgc.state.pa.us/ccal.shtml)> December 27, 2011. 3 “The year upon which real property market values are based for the most recent countywide revision of assessment of real property or other prior year upon which the market value of all real property of the county is based for assessment purposes. Real property market values shall be equalized within the county and any changes by the board shall be expressed in terms of base-year values.” 53 Pa.C.S. §8802. 4 “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.
2

5

poorer districts with a smaller property tax base receive more state aid.”5 The Board consists of a chairman and two members who are appointed by the Governor for a term of four years. STEB’s primary function is to determine the aggregate market value of taxable real property in each municipality and school district within the Commonwealth. Market values are certified and submitted annually to the PDE and the respective school districts, on or before July 1 of each year. The PDE uses these market values as a factor in the legislative formula for distribution of the state subsidies to each school district. Another function of the Board is to establish a common level ratio of assessed value to market value for each county for the prior calendar year. STEB is required to make the methodology for computing ratios available to the public, and certify the ratio to the Chief Assessor of each county each year. As the Task Force discussed these issues and possible solutions that they were charged with by the Resolution, concerns and questions surrounding current data produced by STEB continually surfaced. Many members of the Task Force agreed that they do not believe the STEB data is adequate and therefore, should not be used as a tool when determining whether a county needs to reassess. Data produced by STEB has come under much scrutiny and many problems have been identified. For instance, the Auditor General of Pennsylvania released a Special Performance Audit of the Pennsylvania State Tax Equalization Board, in February 2011. That report raised many questions as to the practices and operations of STEB. These included a lack of “quality assurance controls that would help verify that source data is correct, formulas are functioning as intended and results appear reasonable.”6 Until those problems are corrected, the data produced by STEB should not be utilized to determine any calculations regarding assessments in this Commonwealth. Renee Reynolds, Executive Director, of STEB and Mr. Guydish pointed out that many of the statistical shortcomings and other concerns that have been raised are a result of a lack of resources and staff due to budget cuts. Since the formation of this Task Force, Governor Tom Corbett, in his February 7, 2012 budget proposal, transferred STEB’s line item and administration to the Department of Community and Economic Development. In order to address this issue, as well as others faced by counties regarding data collection and inaccurate STEB data, the Pennsylvania House of Representatives passed House Resolution 344, forming a task force to address the various topics mentioned earlier in this report.

Pennsylvania’s System for Property Valuation and Reassessment, Legislative Budget and Finance Committee, July 2010, Page 75. 6 A Special Performance Audit of the Pennsylvania State Tax Equalization Board: Certification of Market Values, February 2011, Pennsylvania Department of the Auditor General, Bureau of Departmental Audits, page 2.
5

6

Topics of Study
House Resolution 344 charged the Task Force to study and provide recommendations on delineated topics. They include: develop criteria and procedures for data submission by the county to the STEB and verification by the STEB, address insufficient sample data and to assure and disclose that the sample data relied on to develop a county's performance measures during a reassessment is representative of the bulk of the county's property inventory, develop criteria and procedures for data collection by those individuals or organizations conducting the collection of the data, determine the viability of creating a uniform training program for individuals and organizations collecting the data that is provided to the county assessor, and report its results and present its findings to the House of Representatives. Based on information received from testimony and research, the Task Force provided several recommendations regarding the topics mentioned above. They are as follows:

Develop Criteria and Procedures for Data Submission by the County to the State Tax Equalization Board
In order for the process to work efficiently and equitably, the data that STEB receives from the counties must be consistent and accurate. It is important that STEB receives information from each county that can be easily adapted and utilized in drawing comparisons between counties and maintaining the Constitutional requirement of uniformity. It was clear during discussions that many members of the Task Force did not think the data provided by STEB was an accurate reflection of the actual market values of property in the Commonwealth. This was discussed on numerous occasions with several members pointing to the Auditor General’s report findings that there was a lack of due diligence and absence of controls in STEB’s certification and publication of inaccurate 2008 market values.7 When discussing these points, concerns were raised regarding a lack of uniform definitions and criteria to identify valid and invalid sales. It was stressed that a sale should not be rejected or determined invalid without a specific identifiable reason. County employees and STEB employees are often left to speculate what is considered a valid or invalid sale. The Assessors’ Association of Pennsylvania (AAP) shared with the Task Force a suggested table of rejection codes which they compiled. A copy of this table has been included in Appendix D of this report. Uniform definitions and criteria would go a long way toward keeping the data consistent from county to county. By providing a uniform definition to the counties, the data could clear the first major hurdle of reliability. An additional point regarding this issue is that a county must have some sort of a mechanism to assist them in determining the validity of a sale. It was suggested that perhaps a standardized verification of sale form could be required to be included with each recorded deed. This form would provide further detail as to the type of sale that was completed and provide a valuable tool to the county assessor.
7

A Special Performance Audit of the Pennsylvania State Tax Equalization Board: Certification of Market Values, Pages 18-21.

7

However, there are other institutional and procedural matters that need to be addressed before this data can be even considered reliable. They include a need for standard procedures of when STEB reviews sales submitted by counties. Currently, if a county submits its data electronically STEB accepts the data without any review. However, STEB does review data submitted manually and conducts trimming methods on that data. STEB stated that due to their understaffing they could not review all data received. The Task Force members discussed and agreed that once the uniform definitions and criteria were developed, all counties should be required to submit their data in electronic formats. This would most likely be accomplished by the counties entering the data directly into a standardized database accessed via the internet. It was further suggested that STEB should have a full-time statistician on staff to oversee all of the technical formulas and computations. STEB reminded the Task Force that due to recent budget cuts they simply do not have the resources to create this position. Recommendations STEB or another Commonwealth agency should be required to adopt an operations manual that sets forth standard procedures, including validation of sales and the statistical methods to be used by each county. This manual should include a uniform list of definitions to be used by counties and the Commonwealth to validate or invalidate sales. The Task Force recommends that its members continue to work with the Local Government Committee and Finance Committee of the House of Representatives as a working group, to further study the need for a verification form attached to every deed filed in the Recorder of Deeds Office. Mr. Hardester noted that the Assessors’ Association of Pennsylvania created a draft verification of sale form and will continue to work with the working group to further develop this form as well as any appropriate legislation. The Task Force also concluded that counties should be reporting their data to the state via a standardized electronic format. It was suggested that the Department of Revenue would be the likely agency to maintain this database. Further, STEB or another Commonwealth agency overseeing this data should have a full-time statistician on staff to maintain the technical formulas and computations involved in this process.

Address Insufficient Sample Data and to Assure and Disclose that the Sample Data Relied on to Develop a County's Performance Measures During a Reassessment is Representative of the Bulk of the County's Property Inventory
In order for STEB calculations to be accurate, the sales data received from the counties must correctly reflect the types of property in the county. As noted in the Legislative Budget and Finance Committee’s report: 8

The distribution of the types of property sold may not necessarily be representative of the property in the county…. Since the counties do not provide STEB with information on the overall composition of the county’s property inventory by property parcels and type, STEB has no way of determining if the sales data it uses to develop the [common level ratio] is representative of all of the property types in a county.8 If the information STEB receives is incomplete or inaccurate, then the resulting calculations will not be correct and could produce inequities when implemented. The Task Force briefly discussed this issue directly. However, it was at the core of all of our discussions relating to data collection by the counties. This issue would be addressed by an operations manual that spelled out the procedures and criteria that counties must following when collecting or compiling their data. Recommendations STEB or another Commonwealth agency should be required to adopt an operations manual that sets forth standard procedures, including, validation of sales and the statistical methods to be used by each county. This manual should include a uniform list of definitions to be used by counties and the Commonwealth to validate or invalidate sales.

Develop Criteria and Procedures for Data Collection
This is an important requirement as well. The initial collection of data by the counties must be accurate and give all entities that rely on this data the ability to compare among comparable properties within the county and similar properties located in other parts of the Commonwealth. It is vital that each county follow specific guidelines and data formats in order to ensure the data is comparable and accurate. As the previous issue, this point was the core of all of the Task Force discussions relating to data collection by the counties. The discussions continually pointed to the same conclusion that STEB or another Commonwealth agency should develop an operations manual establishing the procedures that County Assessors and county data collectors will follow. It was also discussed that there is a need for criteria, qualifications and training that is necessary for data collectors and to include these best practices or guidelines in the contract. It was felt that by requiring this of the initial data collectors the data being collected would become more consistent and comparable to other counties. This would go a long way in helping to make this data more reliable and equitable for the Commonwealth and the political subdivision’s purposes.

8

Pennsylvania’s System for Property Valuation and Reassessment, Pages 82-83.

9

Recommendations STEB or another Commonwealth agency should be required to develop and adopt an operations manual that sets forth standard procedures, including, validation of sales and the statistical methods to be used by each county. This manual should include a uniform list of definitions to be used by counties and the Commonwealth to validate or invalidate sales. The Assessors’ Association in consultation with the County Commissioners Association of Pennsylvania should develop criteria for what qualifications and training are necessary for data collectors and to include these best practices or guidelines in the model contract.

Determine the Viability of Creating a Uniform Training Program for Individuals and Organizations Collecting the Data
In order for the data collection to be consistent between counties of the Commonwealth the data collection methods used must be uniform. The Task Force was asked to determine the viability of creating a uniform training program for individuals and organizations collecting the data. The discussions continually pointed to the same conclusion that STEB or another Commonwealth agency should develop an operations manual establishing the procedures that County Assessors and county sales data collectors will follow. It was also discussed that there is a need for criteria, qualifications and training that is necessary for data collectors and to include these best practices or guidelines in the contract. A uniform training program would be beneficial to all involved in this process. It should give a better understanding of what is required of each data collector and give them a better understanding on the entire process so they know the importance of accurate data collection. It was felt that by requiring this of the initial data collectors the data being collected would become more consistent and comparable to other counties. This would go a long way in helping to make this data more reliable and equitable for the Commonwealth and the political subdivision’s purposes. Recommendations The Assessors’ Association in consultation with the County Commissioners Association of Pennsylvania should develop criteria for what qualifications and training are necessary for data collectors and to include these best practices or guidelines in the model contract.

Conclusion
The Task Force heard some revealing remarks about STEB. Many agreed with the Auditor General that there are systemic problems within STEB that need to be addressed. As long as STEB fails to address these issues, it is problematic for this Task Force to endorse the use of

10

STEB data for future calculations of the common level ratio or coefficient of dispersion9 or for use in calculating other state funding formulas. STEB has been given direction to resolve many of the existing problems in the Legislative Budget and Finance Committee Report,10 by the Auditor General’s Special Audit Report11 and now by this Task Force reaffirming many of the recommendations contained in both of those reports. The Task Force recognized that Governor Corbett’s 2012 budget proposal moved STEB to the Department of Community and Economic Development. Mr. Guydish noted that the Commonwealth’s funding of STEB has been inadequate, thus restricting their ability to perform functions and duties effectively. While the Task Force members acknowledged Mr. Guydish’s concerns, they agreed that STEB’s functions and duties should be moved to another Commonwealth agency. It was suggested that the Department of Revenue would be better suited for this role because the Department currently administers the Commonwealth’s Realty Transfer Tax. The six-month time frame did not allow a more in depth study of these very complicated issues; thus, was a driving factor in moving the Task Force toward their recommendation to continue to work as a working group with the House Local Government and Finance Committees. Task Force members encourage these legislative committees to continue to study and further refine the solutions and recommendations discussed in this report. Members of the Task Force have expressed to both Chairs of the House Local Government and Finance Committee their willingness to continue on in this working group capacity. It is the hope of Task Force members that this working group, in association with the committees, can produce several viable options in the months remaining in the current legislative session. Chairmen Tom Creighton and Robert Freeman have expressed their support for utilizing the House Local Government Committee to advance any legislative solutions and will continue to work with members of the Task Force and the House Finance Committee, in hopes of reaching a solution on many of these matters.

9

STEB is not required by law to calculate a coefficient of dispersion.

Pennsylvania’s System for Property Valuation and Reassessment. A Special Performance Audit of the Pennsylvania State Tax Equalization Board: Certification of Market Values, February 2011.
10 11

11

Appendices

12

A. House Resolution 344

13

PRINTER'S NO. THE GENERAL ASSEMBLY OF PENNSYLVANIA

2146

HOUSE RESOLUTION No. 344
Session of 2011
INTRODUCED BY NEUMAN, SACCONE AND WHITE, JUNE 21, 2011 REFERRED TO COMMITTEE ON LOCAL GOVERNMENT, JUNE 21, 2011

A RESOLUTION Establishing a task force to develop criteria and procedures for data submission, verification and collection to address insufficient sample data and to assure and disclose that the sample data relied on to develop a county's performance measures during a reassessment is representative of the bulk of the county's property inventory. WHEREAS, At the direction of the House of Representatives through House Resolution 334 of 2009, the Legislative Budget and Finance Committee (LBFC) prepared a report on Pennsylvania's System for Property Valuation and Reassessment and issued the report in 2010; and WHEREAS, The report includes a number of recommendations to enhance the current system, including the development of criteria and procedures for data submission by the county to the State Tax Equalization Board and verification by the State Tax Equalization Board to address insufficient sample data and to assure and disclose that the sample data relied on to develop a county's performance measures during a reassessment is
14

representative of the bulk of the county's property inventory; and WHEREAS, According to the LBFC report, the appraisal performance measures published by the State Tax Equalization Board are used by: taxpayers and local governments in property assessment appeals, the Department of Revenue for certain State realty transfer taxes and the courts when considering county assessment uniformity; and WHEREAS, Despite this, the State Tax Equalization Board has not been charged or provided the necessary resources to assure that data used to develop the measures are consistently reported by all counties and are representative of the bulk of the county's property inventory, both sold and unsold properties; and WHEREAS, County property inventories are substantially different and the differences currently are not taken into account in the development of a county's performance measures; and WHEREAS, When a county begins the process of a countywide reassessment, the initial step is to collect data on the current value of all property within the county. It is important that this initial level of data be accurate in order for the rest of the reassessment process, and any future use of this data, to be fair and equitable; and WHEREAS, Data collection criteria and procedures vary between data collectors within a county and are also different from county to county, thus making it difficult for the political

15

subdivisions and the Commonwealth to compare accurate property values from within a county and when comparing counties; therefore be it RESOLVED, That the House of Representatives appoint a task force to develop criteria and procedures for data submission by the county to the State Tax Equalization Board and verification by the State Tax Equalization Board to address insufficient sample data and to assure and disclose that the sample data relied on to develop a county's performance measures during a reassessment is representative of the bulk of the county's property inventory; and be it further RESOLVED, That the membership of the task force be made up of: (1) two members of the House of Representatives or their

designees, one appointed by the Majority Leader and one appointed by the Minority Leader; (2) two members of the House of Representatives or their

designees consisting of the chair and minority chair of the House Local Government Committee; (3) two members of the House of Representatives or their

designees consisting of the chair and minority chair of the House Finance Committee; (4) two appointees from each of the memberships listed

in this paragraph from a list submitted by each membership, one appointed by the Majority Leader and one appointed by the Minority Leader: (i) the State Tax Equalization Board;

16

(ii) (iii) and (iv)

the Department of Revenue; the Assessors' Association of Pennsylvania;

the County Commissioners Association of

Pennsylvania; and be it further RESOLVED, That the task force utilize the staff of the Standing Committee on Local Government and the Standing Committee on Finance in consultation with and assistance from the Local Government Commission and the Legislative Budget and Finance Committee; and be it further RESOLVED, That the task force be charged with developing criteria and procedures for data submission by the county to the State Tax Equalization Board and verification by the State Tax Equalization Board to address insufficient sample data and to assure and disclose that the sample data relied on to develop a county's performance measure during a reassessment is representative of the bulk of the county's property inventory; and be it further RESOLVED, That the task force be charged with developing criteria and procedures for data collection by those individuals or organizations conducting the collection of the data to determine the current value of properties and real estate within a county and providing that data to the county assessor, including the viability of creating a uniform training program for individuals and organizations collecting the data that is provided to the county assessor; and be it further

17

RESOLVED, That the task force report its results and present its findings to the Chief Clerk of the House of Representatives no later than six months after the adoption of this resolution.

18

B. Relevant Legislation

19

Senate Bill 704: Changes the Composition of the State Tax Equalization Board.

PRINTER'S NO. THE GENERAL ASSEMBLY OF PENNSYLVANIA

685

SENATE BILL No. 704
REFERRED TO FINANCE, FEBRUARY 25, 2011

Session of 2011

INTRODUCED BY GORDNER, YAW, PILEGGI, ARGALL, BROWNE, FERLO, FOLMER, HUGHES, McILHINNEY, MENSCH, ORIE AND RAFFERTY, FEBRUARY 25, 2011

AN ACT Amending the act of June 27, 1947 (P.L.1046, No.447), entitled, as amended, "An act providing for equalization of assessed valuations of real property throughout the Commonwealth for use in determining the amount and allocation of Commonwealth subsidies to school districts; providing for the establishing of a common level ratio for each county; creating a State Tax Equalization Board; and prescribing its powers and duties; imposing duties on certain local officers, agents, boards, commissions and departments; and making an appropriation," further providing for board membership, for chairman's authority and duties, and for quorum and hearings. The General Assembly of the Commonwealth of Pennsylvania hereby enacts as follows: Section 1. Section 2 of the act of June 27, 1947 (P.L.1046,

No.447), referred to as the State Tax Equalization Board Law, amended January 14, 1952 (1951 P.L.1909, No.525), is amended to read: Section 2. (a) Appointment of Board; Compensation.--

The board shall consist of [three] five members, three
20

of whom shall be public members, who shall be citizens of the United States, residents of Pennsylvania and qualified electors for a period of at least one (1) year next preceding their appointments. Each appointee shall be familiar by training or experience with the problems involved in the work of the board. (b) The public members of the board shall be appointed by

the Governor for terms of four (4) years each, or until their successors shall be duly appointed and shall have qualified. Any vacancy occurring shall be filled by appointment of the Governor for the unexpired term. Each member of the board shall devote his entire time to the duties of his office. A member of the board may, after notice and an opportunity to be heard, be removed for cause by the Governor. (c) The chairman of the board shall receive an annual salary

of twelve thousand dollars ($12,000), and each other public member thereof shall receive an annual salary of eleven thousand dollars ($11,000). (d) In addition to the public members, the board shall

consist of the Secretary of Education or his designee and the Secretary of Revenue or his designee. Section 2. Section 3. Sections 3 and 4 of the act are amended to read: Chairman; Authority and Duties.--The Governor

shall designate one of the public members as chairman. The chairman shall be in charge of the administration of the board, and the transaction of its routine business, and shall execute the orders and policies of the board. In the absence of the chairman, the member designated by him shall perform his duties

21

and, while so doing, shall have the authority of chairman. Section 4. Quorum.--[Two (2)] Three members of the board

shall constitute a quorum. A quorum, voting unanimously, shall be sufficient to exercise all the rights and perform all the duties of the board. Section 3. Section 16.1 of the act, added December 13, 1982

(P.L.1158, No.267), is amended to read: Section 16.1. Establishment of a Common Level Ratio.--(a)

The State Tax Equalization Board shall, annually, prior to July 1, establish for each county a common level ratio for the prior calendar year. (b) In arriving at such ratio, the board shall use

statistically acceptable techniques, including sales ratio studies. The board's method in arriving at the ratio shall be made available to the public. The ratio shall be certified to the chief assessor of each county and it shall be admissible as evidence in any appeal involving real property tax assessments. (c) Any political subdivision, school district or taxpayer

aggrieved by any finding, conclusion or any method or technique of the board made pursuant to this section may, in writing, state objections thereto and may appeal de novo such ratio determination to the Commonwealth Court. After receiving any objections, the board [may] shall grant a hearing and may modify or adjust its findings and computations as it shall appear proper. (d) If the common level ratio increases or decreases by ten

percent or more, the board shall immediately review its findings

22

prior to certification of the ratio. Section 4. This act shall take effect in 60 days.

23

House Bill 84: Would include Philadelphia County under the Assessors Certification Act. (Similar Legislation -- Senate Bill 1314)

PRIOR PRINTER'S NO. 42

PRINTER'S NO.

1539

THE GENERAL ASSEMBLY OF PENNSYLVANIA

HOUSE BILL No. 84

Session of 2011

INTRODUCED BY THOMAS, BISHOP, CALTAGIRONE, M. O'BRIEN AND YOUNGBLOOD, JANUARY 19, 2011 AS REPORTED FROM COMMITTEE ON URBAN AFFAIRS, HOUSE OF REPRESENTATIVES, AS AMENDED, APRIL 13, 2011

AN ACT Amending the act of April 16, 1992 (P.L.155, No.28), entitled "An act providing for the certification and recertification of assessors; establishing eligibility and training requirements; defining the powers and duties of the State Board of Certified Real Estate Appraisers relating to training, certification and recertification of assessors; and authorizing the board to establish fees," further providing for nonapplicability. The General Assembly of the Commonwealth of Pennsylvania hereby enacts as follows: Section 1. Section 11 of the act of April 16, 1992 (P.L.155,

No.28), known as the Assessors Certification Act, amended November 19, 2004 (P.L.834, No.100), is repealed: [Section 11. Nonapplicability.

This act shall not apply to counties of the first class.] Section 2. An assessor who is employed by a county of the
24

first class on the effective date of this section shall have three FOUR years from the effective date of this section to become certified under the act. Section 3. This act shall take effect in 60 days.

25

House Bill 1463: Creates a training program for Assessors

PRINTER'S NO. THE GENERAL ASSEMBLY OF PENNSYLVANIA

2017

HOUSE BILL No. 1463
INTRODUCED BY NEUMAN, JUNE 6, 2011

Session of 2011

REFERRED TO COMMITTEE ON PROFESSIONAL LICENSURE, JUNE 6, 2011

AN ACT Amending the act of April 16, 1992 (P.L.155, No.28), entitled "An act providing for the certification and recertification of assessors; establishing eligibility and training requirements; defining the powers and duties of the State Board of Certified Real Estate Appraisers relating to training, certification and recertification of assessors; and authorizing the board to establish fees," further providing for duties of board and for qualifications. The General Assembly of the Commonwealth of Pennsylvania hereby enacts as follows: Section 1. Section 4 of the act of April 16, 1992 (P.L.155,

No.28), known as the Assessors Certification Act, is amended by adding a subsection to read: Section 4. * * * (c.1) Training program.--The board shall establish and Duties of board.

administer a training program for persons who apply to be assessors, which program shall include instruction on the
26

following topics: (1) Historical and current Pennsylvania judicial

decisions affecting property valuation, assessment and reassessment. (2) The implications of Pennsylvania judicial decisions

for permissible valuation and assessment practices in this Commonwealth. (3) The manner in which an assessor's duties have been

and are currently impacted or may be impacted in the future by Pennsylvania judicial decisions. * * * Section 2. Section 5. * * * (b) Requirements.--An applicant shall meet the following Section 5(b) of the act is amended to read:

Qualifications.

requirements: (1) The applicant shall have a high school diploma, or

its equivalent, or two years of assessing experience. (2) (3) The applicant shall be at least 18 years of age. The applicant shall be a resident of this

Commonwealth for at least six months. (4) The applicant shall have successfully completed a

minimum of 90 hours of the basic courses of study approved by the board covering the appraisal assessing profession or any other professional courses acceptable to the board. At the discretion of the county commissioners, the county may reimburse county assessors for the costs of completing the

27

courses of study required by this subsection. (5) The applicant shall have successfully completed the

training program established by the board under section 4(c.1). Section 3. This act shall take effect in 60 days.

28

House Bill 2137: Impose a temporary moratorium on court-ordered property reassessments.

PRINTER'S NO. THE GENERAL ASSEMBLY OF PENNSYLVANIA

2989

HOUSE BILL No. 2137

Session of 2012

INTRODUCED BY SACCONE, WHITE, NEUMAN, EVANKOVICH, BLOOM, D. COSTA, P. COSTA, CUTLER, KORTZ, ROCK, SIMMONS AND SWANGER, JANUARY 23, 2012 REFERRED TO COMMITTEE ON URBAN AFFAIRS, JANUARY 23, 2012

AN ACT Providing for a temporary moratorium of court-ordered countywide reassessments and for reforms based upon study. The General Assembly of the Commonwealth of Pennsylvania hereby enacts as follows: Section 1. Short title.

This act shall be known and may be cited as the Property Tax Reassessment Moratorium Act. Section 2. Findings and purpose.

The General Assembly finds and declares as follows: (1) The method of property tax assessment in this

Commonwealth is fragmented and in need of reform. (2) The current method provides for little uniformity

between counties resulting in vast inequities of property assessments across this Commonwealth.
29

(3)

Further, the tax assessment system provides little

protection for homeowners who experience sudden and dramatic increases in their property assessments as a result of a countywide assessment. (4) Failure to address the problem has led to the

potential for devastating tax increases that would be harmful to the citizens and economic well-being of this Commonwealth. (5) A study was conducted of the Commonwealth's property

assessment system. (6) The study addressed the proper policies and

procedures necessary to ensure uniformity among counties and a comparative analysis of the property assessment systems in other states. (7) The study concluded that changes are needed and the

General Assembly should enact legislation to address issues raised by the study. Section 3. Definitions.

The following words and phrases when used in this act shall have the meanings given to them in this section unless the context clearly indicates otherwise: "Local taxing authority." Any political subdivision

authorized to impose real property taxes. Section 4. (a) Moratorium.

Prohibition.--No local taxing authority may undertake,

on or after the effective date of this section, the process of a court-ordered countywide reassessment of real property for purposes of levying property taxes; however, counties currently

30

conducting a court-ordered countywide reassessment as of the effective date of this section may, at the discretion of the county, continue the process. (b) End of prohibition.--The prohibition under subsection

(a) shall remain in effect until the General Assembly has enacted legislation to address the declarations contained in section 2(1), (2), (3) and (4) or until December 31, 2013, whichever comes first. Section 5. Effective date.

This act shall take effect immediately.

31

Senate Bill 1439: Auditor General shall conduct a procedural and performance audit of a county reassessment.

PRINTER'S NO. THE GENERAL ASSEMBLY OF PENNSYLVANIA

2018

SENATE BILL No. 1439
INTRODUCED BY PIPPY, MARCH 16, 2012 REFERRED TO FINANCE, MARCH 16, 2012

Session of 2012

AN ACT Providing for property reassessment audits. The General Assembly of the Commonwealth of Pennsylvania hereby enacts as follows: Section 1. Short title.

This act shall be known and may be cited as the Property Reassessment Audit Act. Section 2. Legislative findings and declaration of policy.

The General Assembly finds and declares that: (1) Countywide reassessments, including court-ordered

reassessments, have been justified and initiated on the basis of data derived from the State Tax Equalization Board. Both a special performance audit conducted by the Auditor General in February of 2011 and a report issued by the Legislative

32

Budget and Finance Committee in July of 2010 questioned the veracity of data generated by the State Tax Equalization Board. (2) Reassessment valuation models that rely on the State

Tax Equalization Board sales data may exclude sales considered valid by the International Association of Assessing Officers guidelines, contributing to inaccurate valuation during a reassessment. (3) Inaccurate sales data, inappropriate modeling and

inaccurate property inventory data in reassessments affect the uniformity of taxation mandated by section 1 of Article VIII of the Constitution of Pennsylvania by yielding unnecessarily inaccurate valuations and disproportionate tax burdens. Section 3. Definitions.

The following words and phrases when used in this act shall have the meanings given to them in this section unless the context clearly indicates otherwise: "Board." The State Tax Equalization Board. The establishment of values for all properties

"Completion."

in the county and released on an informal basis to the public. "Contractor." A mass appraisal company or other contractors,

subcontractors or vendors involved in constructing the property inventory database or other activities related to establishing property values. "County." A county of the second class, second class A,

third class, fourth class, fifth class, sixth class, seventh

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class or eighth class. Section 4. (a) Powers and duties of Auditor General.

Countywide reassessments.--The Auditor General shall

conduct a procedural and performance audit of a county or contractor conducting a reassessment initiated after the effective date of this section. The Auditor General shall conduct an investigation, conduct the audits, issue remedial recommendations and take any additional action as provided in this act. (b) Other reassessments.--The Auditor General may, or upon

the request of the Governor or a member of the General Assembly shall, investigate any countywide reassessment being conducted on the effective date of this section in accordance with section 5, except that no investigation may be initiated if more than six months have elapsed since the certification of any valuations by the county. (c) Prohibition.--No countywide reassessment may be

certified by a county until the certificate under section 7(e) has been issued. Section 5. (a) Investigations.

General.--The Auditor General shall investigate any

countywide reassessment in accordance with this section. (b) Procedure.-(1) The Auditor General shall provide written notice to

the governing body of the county and the county chief executive, if any, that an investigation has been initiated. County officials and employees shall cooperate with the

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Auditor General or his designees and shall provide requested records within 30 days of a request. (2) The Auditor General, or his designee, may issue

subpoenas to compel the attendance of county officials, employees or contractors involved in the maintenance of the property inventory database and the production of any data or records in the possession of county officials, employees or contractors. If any person fails to comply with any subpoena under this paragraph or refuses to be sworn or testify as a witness, or if any person refuses to permit the Auditor General to inspect records, the Auditor General may, in addition to other remedies provided by law, petition the court of common pleas to order compliance. The court shall order compliance if it deems the testimony relevant to determining the accuracy of the valuations used in the reassessment. Nothing under this section shall authorize the disclosure of any information deemed proprietary by law or contract. (c) Contracts.--Notwithstanding any provision of law, a

contract for reassessment services executed after the effective date of this section shall include provisions providing for the mutual agreement of the parties to the contract that their officers, employees and agents shall cooperate with any investigation as provided in this section. (d) Report.--For investigations initiated under section

4(b), the Auditor General shall, within 60 days of the written notice provided under subsection (b), issue a report to the

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governing body and chief executive of the county setting forth the results of the investigation and whether there are sufficient grounds to warrant judicial action as provided under section 6. Section 6. (a) Judicial action.

Petition.--If, after an investigation under section 5,

the Auditor General determines that sufficient evidence of inaccurate valuations exists to warrant procedural and performance audits under section 7, the Auditor General shall petition the Commonwealth Court to stay further use of the new assessed values until the time as the Auditor General has conducted the audits and issued remedial recommendations. Notice of the petition shall be provided to the governing body and chief executive of the county and its contractors. (b) Hearing.--Within 15 days of the petition under

subsection (a), the Commonwealth Court shall hold a hearing and obtain evidence as may be necessary to issue an order. (c) Order.--If the Commonwealth Court determines that

sufficient evidence of inaccurate valuation of property exists, it shall issue an order staying further implementation of the reassessment, including, if necessary, staying any determinations of formal appeals, pending the issuance of the report provided under section 7. The order may contain additional direction to the county to ensure the continuity of operations of all taxing districts pending the issuance of the report. (d) Extensions.--The Auditor General may petition the

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Commonwealth Court for an extension of any deadlines provided for under this act if necessary to complete an audit or the implementation of recommendations. Section 7. (a) Audits.

General.--If required by this act, the Auditor General

shall conduct the following: (1) A performance audit of the county and the contractor

to determine whether the quantity or quality of work performed yields valuations of property of sufficient accuracy and fairness. Ratio studies between assessed values and market values, as determined through sales or appraisals, may be used. (2) A procedural audit to examine whether the county and

the contractor are following established or recommended procedures as set forth by the county or in accordance with law. (b) Personnel.--The Auditor General shall have the same

powers of investigation provided under section 5 and may employ accountants, assessors or statisticians who shall receive compensation as fixed by the Auditor General. (c) Reports.--The Auditor General shall issue a written

report setting forth the results of the audits and any remedial recommendations as provided under subsection (d), as follows: (1) For audits required under section 4(a), the Auditor

General shall issue the report to the governing body and chief executive of the county, not later than 90 days after the completion of the reassessment. The recommendations of

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the Auditor General shall be implemented by the county within 90 days of the receipt of the report. (2) For audits required under section 6(c), the Auditor

General shall issue the report to the legislative body and chief executive of the county, if any, and the Commonwealth Court not later than 90 days after the date of the order. The recommendations of the Auditor General shall be implemented by the county within 90 days of the receipt of the report. (d) Recommendations.--The report shall contain

recommendations that the Auditor General believes may be necessary to better ensure the accuracy and fairness of the reassessment. The chief assessor of the county shall notify the Auditor General in writing when the recommendations have been fully implemented. (e) Certificate.--The Auditor General or Commonwealth Court

shall issue a written certificate to the county setting forth that either recommendations were not included in the audit or that all recommendations have been fully implemented by the county. (f) Appointed liaison.--If the Auditor General deems it

necessary to assist a county in the implementation of recommendations, the Auditor General may appoint a liaison to assist the county and report on the progress of the implementation. The liaison shall be an individual with at least five years' experience in reassessment practices and procedures, and shall receive compensation as determined by the Auditor General.

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Section 8.

Reassessment appeals.

Nothing in this act shall affect the progress of informal appeals or conferences conducted by a county to resolve disputes over valuation. Notwithstanding any other provision of law, for audits conducted as required under section 4(a), formal appeals shall not be conducted until after the certification of the reassessment by the county. Section 9. Expiration.

This act shall expire December 31, 2015. Section 20. Effective date.

This act shall take effect in 60 days.

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C. Comments

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State Representative Jesse White

I want to thank the members of the Task Forces for their hard work and commitment to these issues. By bringing all the stakeholders together and engaging in focused, non-partisan analysis, we have finally developed a blueprint for real property tax reassessment reform. These reports strengthen my belief that until we correct the fundamental flaws in the reassessment process, a moratorium on court-ordered reassessments is essential to prevent the system from being abused to exploit loopholes in the anti-windfall provisions to increase tax revenue outside the scope of Act 1 of 2006. Any tool can become a weapon if placed in the wrong hands, and in my opinion, the reassessment process has been turned into a weapon to raise revenue instead of a tool for statistical measure to ensure equal and uniform taxation of properties. We must dramatically reduce this potential for abuse and restore the reassessment process to its rightful intent as an instrument to help taxpayers, not punish them. The need for both technical and policy-based solutions are evident, and I hope these reports will help guide my colleagues as we begin the work of crafting, debating and ultimately implementing these solutions in the weeks and months ahead. The input of the task force members came from a uniquely qualified group of stakeholders who possessed a combination of the knowledge of the strengths and weaknesses of the current reassessment system, a comprehensive knowledge of the legal restrictions placed upon us by the Pennsylvania Constitution, and a firm commitment to change a status quo we all recognize to be fundamentally flawed in various ways. I view these task force reports as the beginning of the conversation, not the end, and I look forward to working together to finally end decades of futility to reform the property tax reassessment process to protect and benefit the people of Pennsylvania.

___________________ Jesse White 46th Legislative District Washington/Allegheny/Beaver Counties

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Pennsylvania School Boards Association
The Pennsylvania School Boards Association joins the other Task Force members in the recognition that the Commonwealth’s assessment laws are systemically flawed and in need of reform. PSBA encourages the General Assembly to move forward with the Task Force’s recommendations as soon as possible to develop and implement legislation to ensure that Pennsylvania’s property assessment system is fair to all taxpayers. The inequity perpetuated by the current patchwork of reassessment schedules and methods used across the state results in nothing but continual controversy among local governments, school districts, and taxpayers. There are currently numerous proposals in the General Assembly that attempt to address a small or specific symptom of our broken assessment laws; however, none of the proposals provides the required comprehensive solution to the underlying problem. Only comprehensive assessment legislation that adds predictability to the system by setting standards for when and how a reassessment is to be conducted will accomplish the goals of the Task Force and meet the constitutionally-mandated uniformity of taxation. One legislative proposal attempts to protect undervalued properties by prohibiting school districts and other taxing authorities from appealing the assessment of a property based on the sale of the property, undermining the goal of uniformity by increasing the discrepancy among taxable property and shifting the burden carrying undervalued properties to those taxpayers who are accurately assessed. Additionally, another proposal prohibits local taxing authorities from undertaking a court-ordered countywide reassessment of real property, which, again, does nothing to remedy the existing inequities in property assessments and denies certain property owners equal protection under the law. Other proposals attempt to impose additional anti-windfall provisions on school districts and taxing authorities following a reassessment, while some attempt to implement property tax reform with the goal of reducing or eliminating the burden of the property tax on local taxpayers altogether. At the heart of all of these proposals is Pennsylvania’s broken property assessment laws, which give rise to unconstitutional inequities that inevitably result from the prolonged use of old and outdated assessment values in areas where property values have changed at divergent rates. Implementing these current proposals would serve only as a temporary bandage, potentially mitigating a perceived issue in the short term, but ignoring the root of the problem and the need for a comprehensive solution. Without careful examination of the underlying problem with our assessment laws, these proposals will do nothing to reset the system and ensure that property owners who are fairly assessed and are paying their proportionate share of taxes are not burdened with carrying the weight of owners of under-assessed properties. The development and implementation of the recommendations set forth by this Task Force have the ability to transform and modernize Pennsylvania’s property assessment system and render the current proposals that address only a single symptom of this problem entirely moot. To ensure that property assessments are completed in a uniform and consistent manner, PSBA encourages the continued examination of our current assessment system and the adoption of solutions to ensure uniformity and fairness for all property owners. Only uniform assessment and appeal practices, accurate and timely property valuation, and increased transparency for the disclosure of how properties are valued and assessed will succeed in curing the problems with our current property assessment law.

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D. Additional Information

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Assessors’ Association of Pennsylvania Rejection Code List

Rejection Codes Code 00 01 Code Name Valid Sale No Assessed Valuation Sale of Property conveying only a portion of the assessed unit and/or have no Assessed Value at time of Transfer, i.e. Subdivisions, Splits or Cutoffs. Transfer between family members where no consideration is available. Transfer with consideration will need further research to determine the validity of the sale. Generally, these sales will be invalid. Sales between close relatives (parents, children, aunts, uncles, nephews, nieces, grandparents) are usually non-open-market transactions. If the following factors apply during the follow-up verification, the sale may be considered a valid transaction. • The property was exposed on the open market. • The asking and selling price was within the range that any party purchasing the property would be expected to pay. • The sale meets all other criteria of being an open-market, arm’s-length transaction. Sales between Corporate Affiliates are usually non-open-market transactions involving business considerations not related to the real estate.. If the following factors apply during the follow-up verification, the sale may be considered a valid transaction. • The property was exposed on the open market. • The asking and selling price was within the range that any party purchasing the property would be expected to pay. • The sale meets all other criteria of being an open-market, arm’s-length transaction. Acquisitions or divestments by large corporations, pension funds, or real estate investment trust (REITs) that involve multiple parcels typically are invalid sales for ratio studies. Property examples IAAO Description

02

Family Transfer

03

Corporate Affiliates / A transfer between related corporate entities. For Acquisitions or Divestments example, the certificate of residence is the same as the current mailing address on record then more than likely they are affiliates. Sales between related entities will most likely be invalid because they would be considered corporate affiliates.

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Rejection Codes Code 04 Code Name Government/Public Utility Property examples Sales to or from any governmental agency are usually invalid (See IAAO description) . Each sale in this category should be thoroughly researched prior to use in any study. These sales include but are not limited to schools, municipal buildings, or former utility buildings and Rightsof-way. IAAO Description Sales to government agencies can involve an element of compulsion and often occur at prices higher than would otherwise be expected. When the governmental agency is the seller, values typically fall on the low end of the value range. The latter should not be considered in model calibration or ratio studies unless an analysis indicates governmental sales have affected the market in specific market areas or neighborhoods.

05

Charitable/Religious/ Sale to or from any religious or other non-profit A sale to such an organization can involve an Educational institutions or organizations are usually invalid sales for ratio studies. element of philanthropy, and a sale by such an other Tax Exempt Agencies These sales can include but are not limited to organization can involve a nominal churches and hospitals. This will also include the consideration or restrictive covenants. These sale of a tax exempt property. The sale of a tax sales often involve partial gifts and therefore are exempt property should be removed from all ratio generally not representative of market value. studies because there could be questionable elements of the sale. Financial Institutions Property transfers where the financial institution is the Grantee (See Code 08). Property transfers where the financial institution is the grantee could be in lieu of foreclosure are most likely a forced sale. The exception could be but not limited to vacant land sales for the construction of a new bank. The reviewer should consider whether the sale was part of a corporate divestment of bank assets or a restructuring of the business of the bank. Where the financial institution is the Grantor, the sale will need further research to determine if the sale should be rejected. Items to research would be: 1. These sales are often made in lieu of foreclosure and are not exposed to the open market. However, open-market sales in which a financial institution is a willing buyer, such as the purchase of vacant land for a branch may be considered potentially valid transactions. The majority of the sales in which the financial institution is the seller are properties that were formerly foreclosed on by the financial institution. Also, they are easily identified because the seller is the financial institution. These sales typically are on the low side of the value range because the financial institution is highly motivated to sell and may be required by Condition of home at time of sale banking regulations to remove the property compared to time from its books. The longer the property is of assessment. carried on the books by the financial institution, Time on Market. the lower the asking price is likely to be. If the Conditions of sale. financial institution was ordered by banking regulators to dispose of the property regardless of the sale price, the sale should not be included as a valid transaction. Sales in which a financial institution is the seller typically should be considered as potentially valid for model calibration and ratio studies if they comprise more than 20 percent of sales in a specific market area. A sale involving a conveyance of less than the full interest in a property should be excluded as a valid transaction. Sometimes all the partial interest owners of a property may agree to

06

2. 3.

07

Part Interest Sales

A transfer of property that is less than the entire fee simple interest in a property is not a valid sale for ratio studies. Examples of this would be the sale of a 1/3 interest, sale of the mineral rights or

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Rejection Codes Code Code Name Property examples IAAO Description

sale of an improvement subject to a ground lease. syndication and sell their portions of the estate to a buyer (typically on the same day). However, the sum of all the sale prices may not necessarily indicate the market value of the whole property. These transfers should not be used as valid sales without thorough testing, analysis, and documentation. 08 Forced Sale/ Sheriff Sale These sales usually include all sales from the These sales should never be considered for Sheriff, Tax Claim Bureau and other forced sales, model calibration or ratio studies. The seller in including sales pursuant to judicial order. these sales is usually a sheriff, receiver, or other court officer. A foreclosure is not a sale but the legal process by which a lien on a property is enforced. These sales are often made in lieu of foreclosure and are not exposed to the open market. Sales which include additional side lots to a primary residence or when multiple lots are identified on one deed with one consideration. These sales will generally be considered invalid because it is often impossible to determine the actual consideration paid for any one parcel. A multiple-parcel sale is a transaction involving more than one parcel of real property. These transactions present special considerations and should be researched and analyzed prior to being used for valuation or ratio studies. If the appraiser needs to include multiple-parcel sales, it should be determined whether the parcels are contiguous and whether the sale is a single economic unit or multiple economic units. Regardless of whether the parcels are contiguous, any multiple-parcel sale that involves multiple economic units generally should not be used in valuation or ratio studies. The sum of the appraised values for the parcels involved in the transaction should be compared to the total sale price. A conveyance by an executor or trustee under powers granted in a will may not represent fair market value, particularly if the sale takes place soon after the will has been filed and admitted to probate in order to satisfy the decedent’s debts or the wishes of an heir. Land contracts (also known as contracts for deeds) and other installment purchase agreements in which title is not transferred until the contract is fulfilled require careful analysis. Deeds in fulfillment of a land contract often reflect market conditions several years in the past, and such dated information should not be considered. Sales data from land contracts also can reflect the value of the financing arrangements. In such

09

Multiple-parcel Sale

10

Estate Sale

When the deed states the executor or executrix is conveying the property then a question should be posed about the validity. Generally, estate sales are considered invalid for ratio studies. If property was listed for sale and exposed to the market for a reasonable period of time, the sale may be valid. These sales are usually long term agreements to purchase the property and often do not represent the current fair market value of the property. Accordingly, they are invalid sales for purposes of ratio studies. Also known as Article of Agreements or Installment Land Contracts., these sales are often contingent on factors not directly related to the real estate..

11

Land Contract

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Rejection Codes Code Code Name Property examples IAAO Description instances, if the transaction is recent, the sale price should be adjusted for financing, if warranted, and included as a valid transaction (see Section 7.4.4). Because the contract itself often is not recorded, discovery of these sales is difficult until the deed is finally recorded. The sale then is likely to be too old to be used. 12 Auctions Absolute auction sales are invalid but if the following criteria is met for an auction sale, then it could be considered valid: • Was the auction well-advertised? • Was the auction well-attended? • Did the seller have a minimum bid or the right of refusal on all bids (with reserve)? Absolute auctions do not have a low bid clause or right of refusal and typically are advertised as absolute auctions. The property is sold to the highest bidder whatever that bid may be. All absolute auctions should be considered invalid. Before auction sales should be considered as valid transactions, the following criteria should be met: • Was the auction well-advertised? • Was the auction well-attended? • Did the seller have a minimum bid or the right of refusal on all bids (with reserve)? This is the date on which the sale was closed or completed. Not all jurisdictions require recordation of deeds; therefore, the deed date should be considered the most reliable date of sale, not the recording date. If a copy of the deed is not available, the date on the sales verification questionnaire should be used.

13

Date of Transfer

The date of execution of a deed is the date of sale. As long as the document is recorded in the same calendar year, the sale is valid. However, if the date of execution is in a different year than it is recorded, the sale should be considered invalid.

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Time on Market

The amount of time a property is actively listed Sales of properties that have been exposed to the on the market. Actively usually means with a open market too long, not long enough, or not at realtor or other real estate professional. all may not represent market value. The jurisdiction should monitor typical marketing time. The typical marketing time may be longer in a depressed market. Relocation When a relocation company takes possession of a property in order to liquidate the property. This can be very difficult to identify because the relocation company isn’t always mentioned in the deed. A deed other than a warranty deed and does not fall into one of the other categories. The can be but not limited to Special Warranty Deeds, Bargain & Sale Deed, and Quit Claim Deeds. These sales are invalid for ratio studies. Sales in which title is in doubt tend to be below market value. When a sale is made on other than a warranty deed, there is a question of whether the title is merchantable. A quitclaim deed is an example. A leaseback is defined as the sale of a building, land, or other property to a buyer under special arrangements for simultaneously leasing it on a long-term basis to the original seller, usually with an option to renew the lease. These transactions are also referred to as sale and

15

Corporate Company

16

Sale of Doubtful Title

17

Lease Purchases/ Leaseback A long term arrangement between buyer and seller where buyer will rent property for certain amount of time with the option to purchase the property at the fair market value at time of lease expiration.

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Rejection Codes Code Code Name Property examples IAAO Description leaseback and sale-leaseback. Leasebacks occur in the commercial and industrial class of property. Sales involving leasebacks are generally invalid because the sale price is unlikely to represent the market value of the property. This can be determined only by further verification of the sale 18 Partial Assessment Sales where the sale price includes the improvement but the assessment office has not yet assessed the new construction are invalid for ratio studies. Sale that includes Personal Property is invalid unless the consideration paid for the real estate is set forth separately. The sale of properties which include special tax abatement programs. These sales will generally be considered invalid for ratio studies. They may be considered valid if the reviewer’s research indicates the price paid was comparable to similar properties sold on the open market and not influenced by the preferential assessment.

19

Equipment/Personal Property Special or Preferred Assessments (i.e. Clean and Green, Lerta, KOZ, TIF, PILOT, etc.)

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21

Duplicate sales / Deed of Sale of a property that occurs more than once in Correction the same calendar year. A transfer of property is done for the sole purpose of correcting defects in the title. These sales usually have no consideration.

22

Other (Needs Explanation)

This code requires explanation why the appraiser feels the sale should be invalid. A sale should not be rejected as invalid unless a specific reason to do so is identified. Grouping of Reject Codes

1.

Always invalid – the following codes should always be removed from ratio studies and other statistical studies 01 03 04 05 07 08 11 13 16 No Assessed Value Corporate Affiliates / Acquisitions / Divestments Government / Public Utility Tax Exempt Properties Partial Interest Sales Forced Sale / Quit Claim Land Contract Date of Transfer Sale of Doubtful Title

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17 18 19 21

Lease Purchase Partial Assessment Equipment/Personal Property Duplicate Sales

2.

Require more Research – The following codes will require additional research to determine their validity 02 06 09 10 12 14 15 20 22 Family Transfer Financial Institutions Multi-parcel Sales (If computer system can combine the parcels into one sales record) Estate Sale Auction Sales Time on the Market Corporate relocation Company Special or Preferred Assessments (C&G, LERTA, KOZ) Other with a required Explanation

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