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School Districts, Property Taxes & Fair Share
How does a school district benefit from a strong commercial real estate market?
What are the legal implications for a school district to pursue under-assessed
commercial properties? The questions are endless, but the bottom line is
significant additional property tax revenues to a school district - revenues
that are simply fair share.
The far majority of most school tax budgets are derived from property taxes.
These property taxes also likely include commercial real estate such as golf
courses, motel/hotels, shopping centers and malls, office buildings, apartment
complexes, distribution warehouses, and mobile home parks. These properties are
very much in demand, with rising property values from increased revenues,
increasing net income, and very favorable long term financing. The bottom line
is commercial real estate values are very much on the rise.
Reassessments throughout Pennsylvania's 67 counties are infrequent at best, and
sometimes decades from reassessment to reassessment. Only a few counties are
currently being re-assessed during this strong economic period. A few were
re-assessed in the 1990's but relied on commercial property sales from the
early or mid-1990's.
The question remains. Are school districts getting their fair share?
The primary legal issue is the appropriateness of a school district appealing
commercial properties to the local Board of Assessment Appeals on the basis
that their assessments may be incorrect. The General County Assessment Law
provides that:
The corporate authorities of any county, city borough, town, township, school
district or poor district, which may feel aggrieved by any assessment of any
property or other subject of taxation for its corporate purposes, shall have
the right to appeal there from in the same manner, subject to the same
procedure, and with like effect, as if the such appeal were taken by a taxable
with respect to his property.
The rights of school districts regarding the above were addressed in the recent
Millcreek Township School District v. Erie County Board of Assessment Appeals
case in 1999. The Pennsylvania Commonwealth Court found that there was an
absolute right for a school district to file an appeal to a board of assessment
appeals on the same basis as a taxpayer appealing his/her assessment.
The Pennsylvania Constitution provides for uniformity, but also provides for
school districts' rights to appeal. In past years, there may have been isolated
situations warranted for appeals by school districts. These situations are no
longer isolated.
Now these opportunities for appeals are widespread, with implications to school
districts representing substantial portions of many budgets. These districts
can be urban or rural, with rural school districts potentially benefiting from
under-assessed mobile home parks, and urban school districts potentially
benefiting from under-assessed shopping malls, with hotel/motels, golf courses,
apartment complexes and offices in many districts.
The disparity of market values of these commercial properties in the "new
economy" never existed in the "old economy".
For many years, many school districts have faced assessment appeals from
over-assessed real estate. Although some commercial properties may have been
appealed generally resulting from the advent of the Pennsylvania Common Level
Ratios, established in 1982, most appeals were typically manufacturing
properties and factories. Manufacturing properties and factories most always
will decline in value over time from increasing physical deterioration and
functional obsolescence.
Utilizing the skills of a professional commercial real estate appraiser,
knowledgeable of the techniques for analyzing these largest commercial
properties in any district, offer new opportunities to school districts. These
escalating commercial real estate values of the late 1990s are now supporting
an undisputable model for appeals. This model of a new source of property tax
revenue to school districts is only now becoming a very substantial
opportunity!
You may be familiar with Russell H. Conwell's "Acres of Diamonds" speech. The
founder of Temple University gave this speech over 6,000 times in the late
1800s and early 1900s. It is considered by some to be the speech given more
than any other speech ever. The story tells of someone who searched around the
world for riches, only to discover that these riches were in his own backyard.
A school district needs to continually search for sources of revenues, but some
riches may be in its own back yards.
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