Opinion
No. 16 MAP 2022
02-28-2023
GM BERKSHIRE HILLS LLC and GM Oberlin Berkshire Hills LLC, Appellants v. BERKS COUNTY BOARD OF ASSESSMENT and Wilson School District, Appellees
M. Janet Burkardt, Esq., Ira Weiss, Esq., Weiss Burkardt Kramer, LLC, for Amicus Curiae Pittsburgh School District. Edward J. Ciarimboli, Esq., Gregory E. Fellerman, Esq., Fellerman & Ciarmboli, Raymond Paul Wendolowski, Esq., Fellerman & Ciarimboli Law, P.C., for Amicus Curiae School District of Philadelphia. Alexander Mark Glassman, Esq., Rudolph Clarke, LLC, for Amicus Curiae North Penn School District, Bensalem Township School District, Norristown Area School District, Pennsbury School District, Hatboro-Horsham School District. Jennifer Weidler Karpchuk, Esq., Stewart M. Weintraub, Esq., Chamberlain Hrdlicka, for Amicus Curiae Alliance 4 Horne LLC, Alliance 3201 South 76th Street LLC, Alliance 3250 South 78th Street LLC, Wesco Industrial Products LLC, National Association of Property Tax Attorneys. Stuart Lee Knade, Esq., Pennsylvania School Boards Association, for Amicus Curiae Pennsylvania School Boards Association. Lawrence J. Arem, Esq., Matthew James McHugh, Esq., Glenn Aaron Weiner, Esq., Klehr Harrison Harvey Branzburg, LLP, for Appellants GM Berkshire Hills LLC, GM Oberlin Berkshire Hills LLC. Alicia Susan Luke, Esq., Fox Rothschild, LLP, John Joseph Miravich, Esq., for Appellee Wilson School District. Edwin Lewis Stock, Esq., RRS LEGAL LLC d/b/a RICK STOCK LAW, for Appellee Berks County Board of Assessment.
M. Janet Burkardt, Esq., Ira Weiss, Esq., Weiss Burkardt Kramer, LLC, for Amicus Curiae Pittsburgh School District.
Edward J. Ciarimboli, Esq., Gregory E. Fellerman, Esq., Fellerman & Ciarmboli, Raymond Paul Wendolowski, Esq., Fellerman & Ciarimboli Law, P.C., for Amicus Curiae School District of Philadelphia.
Alexander Mark Glassman, Esq., Rudolph Clarke, LLC, for Amicus Curiae North Penn School District, Bensalem Township School District, Norristown Area School District, Pennsbury School District, Hatboro-Horsham School District.
Jennifer Weidler Karpchuk, Esq., Stewart M. Weintraub, Esq., Chamberlain Hrdlicka, for Amicus Curiae Alliance 4 Horne LLC, Alliance 3201 South 76th Street LLC, Alliance 3250 South 78th Street LLC, Wesco Industrial Products LLC, National Association of Property Tax Attorneys.
Stuart Lee Knade, Esq., Pennsylvania School Boards Association, for Amicus Curiae Pennsylvania School Boards Association.
Lawrence J. Arem, Esq., Matthew James McHugh, Esq., Glenn Aaron Weiner, Esq., Klehr Harrison Harvey Branzburg, LLP, for Appellants GM Berkshire Hills LLC, GM Oberlin Berkshire Hills LLC.
Alicia Susan Luke, Esq., Fox Rothschild, LLP, John Joseph Miravich, Esq., for Appellee Wilson School District.
Edwin Lewis Stock, Esq., RRS LEGAL LLC d/b/a RICK STOCK LAW, for Appellee Berks County Board of Assessment.
ORDER
PER CURIAM
AND NOW, this 28th day of February, 2023, the Court being evenly divided, the order of the Commonwealth Court is AFFIRMED .
The Late Chief Justice Baer did not participate in the decision of this matter.
OPINION IN SUPPORT OF AFFIRMANCE
JUSTICE MUNDY
This appeal by allowance involves a challenge to a school district's method of selecting property assessments for appeal. We consider whether the use of a monetary threshold for recently-sold properties violates tax uniformity.
Under the Consolidated County Assessment Law (the "Assessment Law"), property owners may appeal their assessments when they believe the property's assessed value is too high. See 53 Pa.C.S. §§ 8844 (relating to administrative appeals to a county assessment board), 8854 (relating to appeals to court). Taxing districts such as school districts, see 53 Pa.C.S. § 8802 (defining "taxing districts" to include school districts), are correspondingly authorized to appeal the assessment of properties within their boundaries if they believe the assessment is too low. See id . § 8855. Although taxing districts have discretion to decide which assessments to appeal, the manner in which that discretion may be exercised is limited by the Uniformity Clause, which states:
Act of Oct. 27, 2010, P.L. 895, No. 93, § 2 (as amended 53 Pa.C.S. §§ 8801 -8868 ). The Assessment Law is a recodification of several prior acts relating to various classes of counties. It applies to, inter alia , counties of the second class A, as well as counties of the third through eighth classes. See 53 Pa.C.S. § 8801(b). There is no dispute that, at all relevant times, the Assessment Law applied in this case.
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. For example, taxing districts may not exercise their discretion in a discriminatory manner by targeting only certain types of properties for appeal, see Valley Forge Towers Apts. N, LP v. Upper Merion Area Sch. Dist. , 640 Pa. 489, 163 A.3d 962, 978 (2017) (holding a school district's policy violated the Uniformity Clause where it only appealed the assessments of commercial properties, while not appealing the assessments of other types of properties such as single-family homes), or by targeting only properties owned by persons living outside the taxing district as a way of avoiding political accountability. See id . at 979.
In the present case, the Wilson School District, located in Berks County, passed a resolution in 2018 to select certain property assessments in the district against which to lodge an appeal. The resolution established a policy whereby a property would only be selected if: (a) it was recently sold as shown by data provided by the State Taxation Equalization Board (the "STEB"), and (b) it appeared to be underassessed by at least $150,000, that is, the recent sales price times the common-level ratio (the "CLR") (here, 0.685), minus the current assessed value, was at least $150,000. The first criterion was included because the property's fair market value could be readily ascertained as reflected by the sales price. See Green v. Schuylkill Cty. Bd. of Assessment Appeals , 565 Pa. 185, 772 A.2d 419, 425 n.6 (2001) (noting the fair market value is the actual value of the property, defined as the price a purchaser, willing but not obliged to buy, would pay an owner, willing but not obliged to sell). The second criterion was included to ensure, in terms of the additional revenue expected from a successful appeal, that the appeal would be worth the cost. The selection criteria did not consider the type or use of the property or the residency status of the owner, and appeals initiated by the School District under the policy have involved industrial, farm, commercial, residential, and apartment complex properties.
The STEB was established by the State Tax Equalization Board Law. See 71 P.S. §§ 1709.1500 -1709.1521 (formerly 72 P.S. §§ 4656.1 -4656.17 ). Among other functions, it examines local tax assessment records and other public records, and it compiles data showing the prices at which real property in each school district has been sold. See 71 P.S. § 1709.1508.
The CLR is a countywide figure computed each year, see 71 P.S. § 1709.1516a(a), which represents the ratio of assessed value to current market value used generally in the county as last determined by the STEB. See Clifton v. Allegheny Cty. , 600 Pa. 662, 969 A.2d 1197, 1215 & n.26 (2009) ; Downingtown Area Sch. Dist. v. Chester Cty. Bd. of Assessment Appeals , 590 Pa. 459, 913 A.2d 194, 200 n.8 (2006). The STEB computes the CLR using published "statistically acceptable techniques, including sales ratio studies." 71 P.S. § 1709.1516a(b). The CLR utilized in the present case was the Berks County CLR for 2017, which was computed as the arithmetic mean of the individual sales ratios for every sale reported to the STEB by Berks County during calendar year 2017, excluding outliers. See 48 Pa. Bull. 3392 (June 2, 2018).
The subject property in this matter is the Berkshire Hills apartment complex in Reading, Berks County. The property is located within the School District. It recently sold for $54 million, but its assessed value at that time was $10.5 million, meaning its implied market value was $15.3 million, i.e. , the assessed value divided by the CLR. See Valley Forge Towers , 163 A.3d at 979 n.10. Hence, it met the selection criteria established by the School District. The School District therefore lodged an administrative appeal, challenging the $10.5 million assessment and seeking to have it raised. Responding to the appeal, the county assessment office raised the assessed value to $37 million (the CLR times the sales price).
The numbers are approximate. The apartment complex consists of two distinct parcels which are treated individually for assessment and taxation purposes. They are discussed in the aggregate here for simplicity and for consistency with the lower courts’ discussions. This approach has no effect on the legal analysis herein.
The property owners, Appellants herein ("Taxpayers"), appealed to the trial court, arguing the School District's policy created a subclassification of properties within the district targeted for appeal, thereby violating the Uniformity Clause. See McKnight Shopping Ctr., Inc. v. Bd. of Prop. Assessment, Appeals & Review , 417 Pa. 234, 209 A.2d 389, 392 (1965) (recognizing all real estate in the district is the class entitled to uniform treatment). The court held a hearing at which the School District's financial officer testified the $150,000 threshold was chosen because it is high enough to allow recoupment of appeal costs and low enough to capture properties of all types. She indicated, as well, that the district only used STEB data because ascertaining fair market value would otherwise require review of private records. The School District's solicitor testified the district lacks a discovery process to obtain such records. The district also supplied evidence it had recently appealed properties of many different types. The trial court noted the School District did not select properties based on their type or classification. It thus denied relief, holding the district's appeal policy was constitutional.
The Commonwealth Court affirmed in a published decision. See GM Berkshire Hills LLC v. Berks Cty. Bd. of Assessment , 257 A.3d 822 (Pa. Cmwlth. 2021). The court relied largely on Valley Forge Towers , which, as noted, had considered a school district's policy of only appealing assessments of commercial properties, while not appealing assessments of other types of property such as single-family homes. The school district there claimed it had a neutral motivation: the greater prospect of recouping appeal costs through enhanced tax revenue from commercial properties. This Court held that targeting specific types of property created a subclass of properties within the school district that were subject to differential treatment; the appeal policy was therefore discriminatory in violation of the Uniformity Clause. See id . at 978-80 (relying on Downingtown Area Sch. Dist. v. Chester Cty. Bd. of Assessment Appeals , 590 Pa. 459, 913 A.2d 194 (2006), and Clifton v. Allegheny Cty. , 600 Pa. 662, 969 A.2d 1197 (2009) ). The Valley Forge Towers Court added:
We pause at this juncture to clarify that nothing in this opinion should be construed
as suggesting that the use of a monetary threshold ... or some other selection criteria would violate uniformity if it were implemented without regard to the type of property in question or the residency status of its owner. Such methodologies are not presently before the Court.
Id . at 979 (footnote omitted).
In the present matter, the Commonwealth Court quoted the above passage and observed that, after Valley Forge Towers was decided, the Commonwealth Court had approved appeal policies which depended, not on property type, but solely on financial considerations, such as policies where an appeal was triggered by a realty-transfer tax being above a threshold amount, or where a consultant's report listed properties that might be under-assessed by at least a threshold amount. See GM Berkshire , 257 A.3d at 831-32 (citing cases). The court recognized Taxpayers here objected to an alleged sub-class of "properties under new ownership." It concluded, however, that the School District's policy rests on a monetary method, which lies within its discretion under Valley Forge Towers . The court indicated that, because the School District's method "is purely quantitative in nature, beginning with type-neutral listings of recent sales transactions in the monthly STEB reports, we find it does not present the type of constitutional infirmities present in Valley Forge Towers ." Id . at 834. Thus, the court held the policy does not violate the Uniformity Clause and affirmed the ruling of the trial court. See id .
Recognizing this case presents the scenario referred to in the above passage from Valley Forge Towers – namely, a taxing district having an appeal policy based on a monetary threshold which does not discriminate according to property type or use – we allowed further appeal limited to the following issues as stated by Taxpayers:
Do a school district's selective real estate tax assessment appeals violate the Uniformity Clause of the Pennsylvania Constitution when the school district chooses only recently-sold properties for appeal, leaving most properties in the district at outdated base-year values?
Do a school district's selective real estate tax assessment appeals violate the Uniformity Clause of the Pennsylvania Constitution when the school district chooses only certain recently-sold properties that would generate a minimum amount of additional tax revenue for appeal, leaving most properties in the district at outdated base-year values?
GM Berkshire Hills LLC v. Berks Cty. Bd. of Assessment, ––– Pa. ––––, 272 A.3d 446 (2022) (per curiam ).
Taxpayers presently highlight that all real estate in a taxing district constitutes a single class and that such districts may not divide properties into subclasses for different treatment. In this respect, they state the Uniformity Clause prohibits a systematic course of disparate treatment for a subset of properties, and this overrides any attempt otherwise to achieve greater uniformity through closer overall adherence to the CLR. As applied here, they contend the School District created a subclass of recently-purchased properties and targeted only those properties for appeal. They add that this subclass was further limited based on market value. Taxpayers additionally criticize the Commonwealth Court for approving a subclass based on economic or "quantitative" factors, pointing out that a property's appearance on a STEB report of recently-sold properties is not a quantitative factor. More generally, Taxpayers maintain a quantitative-versus-qualitative approach is unworkable in practice, suggesting as an example that if a particular neighborhood has experienced greater than average growth, an appeal policy targeting that neighborhood cannot be deemed purely quantitative or purely qualitative. Taxpayers forward a slippery-slope argument, positing that the intermediate court's ruling will allow for future subclasses based on factors such as property value, square footage, number of residents, number of parking spaces, age of improvements, size of carbon footprint, and the like.
Taxpayers are correct that all properties in a particular taxing district lie within a single class to be treated uniformly, and that taxing districts may not carve out subclasses for discriminatory treatment. See Appeal of F.W. Woolworth , 426 Pa. 583, 235 A.2d 793, 795 (1967). But taxing districts are statutorily authorized to appeal tax assessments, and they cannot reasonably appeal every property within their borders. As a consequence, they must be selective in deciding which properties to appeal, and any time a property is chosen for appeal the owner is likely to feel he or she is being subject to discriminatory treatment because neighboring properties have been left alone. That is a non-trivial concern which is potentially material under the Uniformity Clause. See Downingtown , 913 A.2d at 201 (acknowledging there is "substantial leeway for potential discrimination by local officials among similarly situated property owners who are underrepresented in the general population").
There are at least two ways tax uniformity can be undermined when a taxing district appeals the assessment of an individual property. The first and most obvious way arises from the fact that one property's assessment is subject to review and adjustment while other properties in the same taxing district are not. As we explained in Downingtown , after a countywide reassessment, "under normal economic conditions the STEB-calculated CLR tends to diminish each year, reflecting ongoing inflation and real estate appreciation." Downingtown , 913 A.2d at 203. If, during that process, one property's assessment is appealed and raised to its fair market value, or, more precisely, its fair-market-value times the established predetermined ratio ("EPR"), while a neighboring property remains unchallenged, non-uniformity can result. This is a realistic possibility where the CLR varies from the EPR by fifteen percent or less, as the Assessment Law indicates that in that scenario the EPR is to be used as a multiplier instead of the CLR:
The [common pleas] court, after determining the market value of the property ..., shall then apply the established predetermined ratio to that value unless the corresponding common level ratio ... varies by more than 15% from the established predetermined ratio, in which case the court shall apply the applicable common level ratio to the corresponding market value of the property.
53 Pa.C.S. § 8854(a)(3). See generally Downingtown , 913 A.2d at 202 n.13 (discussing fractional assessment using the EPR). In Downingtown we considered this provision as it appeared in the now-replaced Second Class A and Third Class County Assessments Law, and we described it as "an internal, systemic defect" arguably rendering the scheme unconstitutional on its face because, "as a mere consequence of the lodging of an assessment appeal, the benefit of equalization that is otherwise required" is lost over a thirty-percent range of deviation between the CLR and the EPR. Downingtown , 913 A.2d at 202. In the present case, however, non-uniformity has not arisen in this manner because, as mentioned, the fair market value of the subject property was multiplied by the CLR rather than the EPR, presumably because the CLR deviated from the applicable EPR by more than fifteen percent.
The CLR was traditionally determined by the county court based on expert testimony consisting of statistical analyses regarding the percentage of market value at which other properties were generally assessed throughout the taxing district. See, e.g. , Woolworth , 235 A.2d at 795 ; Appeal of Mass. Mut. Life Ins. Co. , 426 Pa. 566, 235 A.2d 790, 791 (1967) ; In re Brooks Bldg. , 391 Pa. 94, 137 A.2d 273, 276 (1958). Its computation was later formalized through statutory law. See supra note 3. Uniformity is enhanced when individual assessment ratios within a taxing district are brought into line with the CLR because then each property is taxed on the same percentage of its value. Accord Woolworth , 235 A.2d at 795 (observing uniformity "has as its heart" the equalization of the ratio among all properties in a taxing district). As a consequence, we have expressed that adjusting the assessed value of the subject property to conform with the CLR "is the essence of equalization, and thus, uniformity." Downingtown , 913 A.2d at 200.
The second way non-uniformity can arise is through a taxing district's property-selection policy. That situation came into focus in Valley Forge Towers , where the school district selected properties for appeal based on property type. The district decided to appeal only commercial properties ostensibly because those properties’ values were higher than the values of single-family homes, and hence, raising their assessments would result in a greater tax-revenue increase than doing the same with under-assessed single-family homes, including single-family homes which were under-assessed by a greater percentage. See Valley Forge Towers , 163 A.3d at 966. As noted, that approach was disapproved as inconsistent with the Uniformity Clause. We explained that, although the judicious use of public funds is a valid governmental objective, it may not be pursued by dividing the property within a taxing district into sub-classifications. See id . at 980 ("Where there is a conflict between maximizing revenue and ensuring that the taxing system is implemented in a non-discriminatory way, the Uniformity Clause requires that the latter goal be given primacy.").
It does not follow, though, that the Uniformity Clause precludes any and all efforts by taxing districts to select properties to appeal. Otherwise, it would prohibit a subclass described simply as "the properties selected by the taxing district for appeal." That, however, would be in substantial tension with our prior observation that, generally speaking, the particular appeal policy utilized by a taxing district lies within its discretion. See Valley Forge Towers , 163 A.3d at 980 ; see also id . at 977 ("There are other, nondiscriminatory, methods of deciding which properties to appeal."). It would also undermine uniformity because then property owners would be able to lodge appeals to reduce their assessments, but an aggrieved taxing district would not be able to seek an increase in a property's assessment through the statutory appeal process even where that property's assessment ratio (its assessed value divided by its market value, see Valley Forge Towers , 163 A.3d at 966 n.1 ) was well below the CLR.
What the Uniformity Clause does prohibit is the systemic differential treatment of a subclass of property defined, for example, by property type or residency status of the owner ( Valley Forge Towers ), or by neighborhood ( Clifton ). These types of factors are prohibited because their use creates property subclasses. Use of monetary figures and recent sales data is qualitatively different. Every property in a given taxing district can be bought and sold, and when that occurs a sales price is associated with the property. A sales price thus has two features making its use consistent with uniformity: it is not unique to one subset of property within the district; and as long as the transaction is undertaken at arm's length, it reflects the property's fair market value, an important piece of evidence in determining whether the property's assessment ratio varies widely from the norm. The recently-sold status of the property is also different from other characteristics because, unlike property type or use, fresh valuation data is not arbitrary but is directly connected to the ability to gauge whether the parcel's assessment is non-uniform.
In Clifton , no government policy expressly discriminated by neighborhood. Rather, the county's long-term use of the base year system without periodic reassessment led to a situation where the properties in some neighborhoods developed different assessment ratios than those in other neighborhoods. See Clifton , 969 A.2d at 1208, 1222. This Court determined the statutory scheme as applied in that manner led to such pervasive disparities as to violate uniformity. See id . at 1227-29. There is no suggestion in the present case that that type of non-uniformity is present within the School District.
Here, the School District seeks to take into consideration the real-world costs of lodging an assessment appeal, together with the practical limitations on the information available to it concerning the fair market values of the properties within its borders. It therefore selects properties where it possesses the necessary information to determine, first, that a particular assessment is too low, by virtue of the STEB's report on recent arm's-length real estate sales, and second, that the extra tax revenue expected from an appeal will make the appeal cost-effective to the School District.
There is nothing in our decisional law that prohibits this type of methodology, and Valley Forge Towers strongly suggested the Uniformity Clause would permit it. In this regard the School District's policy does not create a prohibited sub-class of properties defined by an impermissible characteristic such as type, use, neighborhood, or residency status of the owner; it tends to enhance uniformity by selecting for appeal the most non-uniform properties about which reliable information is readily available; and it represents an effort to use public funds responsibly. See Valley Forge Towers , 163 A.3d at 980 (stressing that maximizing revenue and ensuring non-discriminatory implementation of the taxing system do not necessarily conflict); accord Kennett Consol. Sch. Dist. v. Chester Cty. Bd. of Assessment Appeals , 228 A.3d 29, 41 (Pa. Cmwlth. 2020) ("Here, the District was using a monetary threshold only for the purpose of making prudent fiscal decisions, and not for the purpose of discriminating against sub-classes of properties."), appeal dismissed , ––– Pa. ––––, 259 A.3d 890 (2021) ; Weissenberger v. Chester Cty. Bd. of Assessment Appeals , 62 A.3d 501, 506 (Pa. Cmwlth. 2013) ("Judicious use of resources to legally increase revenue is a legitimate governmental purpose."). This, in turn, enhances fairness to the remaining taxpayers in the taxing district who would otherwise have to pay more of the cost of government than their proportionate share, as the taxing district would otherwise have to raise its millage rate to meet budgetary needs. See Clifton , 969 A.2d at 1228 ; see also Deitch Co. v. Bd. of Prop. Assessment, Appeals & Review of Allegheny Cty. , 417 Pa. 213, 209 A.2d 397, 401 (1965) (stating that taxpayers should pay neither more nor less than their proportionate share of the cost of government). Contrary to the assertion in the lead Opinion in Support of Reversal (OISR), see OISR at 252-53 (Donohue, J.), we do not here endorse a quantitative-versus-qualitative test as the Commonwealth Court apparently set forth. See GM Berkshire Hills , 257 A.3d at 834. Nothing in this opinion, for example, suggests that a policy under which a taxing district selects properties at random would violate uniformity, although that policy would not be based on quantitative factors.
We offer no opinion regarding other hypothetical criteria proffered by Taxpayers relating to such items as square footage, number parking spaces, and number of residents. See generally D.P. v. G.J.P. , 636 Pa. 574, 146 A.3d 204, 217 (2016) (noting our adjudicatory process is structured to cast a narrow focus on matters framed by litigants before the Court in a highly directed fashion, and, as such, we sit to decide concrete cases).
Separately, Taxpayers’ amici , the National Association of Property Tax Attorneys, et al. , posit non-uniformity will result if two neighboring taxing districts have different monetary thresholds. Amici note this could lead to adjacent identical properties, one in each taxing district, having non-uniform assessments because one taxing district lodges an appeal and the other does not. Before this Court, however, is the School District's policy aimed at reducing non-uniformity within its borders. Even assuming (without deciding) that uniformity is required across multiple taxing districts, if other districts use the tools supplied by the Assessments Law in a less effective or vigilant manner than the School District, that does not impact upon the constitutional validity of the School District's methodology.
Amici also query whether monetary thresholds constitute a pretext for targeting only commercial properties and should be disapproved on that basis. As that issue is not before us, its resolution must await a future dispute.
We also respectfully disagree with the OISR's contention that we "cannot explain in a principled way" how the factors utilized by the School District are different from impermissible ones such as property type or use. OISR at 253-54 (Donohue, J.). The difference is that the criteria used here focus in on those properties, regardless of type or use, which are demonstrably among the most non-uniform in the taxing district. In that contention and in others, the OISR overlooks that the selection policy does not solely target recently-sold properties, but further limits such properties to those whose assessments are the most non-uniform. See, e.g. , id . at 253-54 (describing the alleged subclassification as "newly-purchased" properties); id . at 254-55 (accusing the School District of focusing exclusively on a property being "newly purchased").
The OISR also implies a taxing district which appeals a certain property's assessment must also appeal all "similar" or "comparable" properties in the district. Id . at 254-55. The Uniformity Clause has never been interpreted to embrace such a requirement. Moreover, even if it were possible to provide a judicial standard for "comparability" or "similarity" under the Uniformity Clause, which is doubtful, a mandate along those lines would sweep in properties whose assessment ratios are already at or near the CLR, or even higher than the CLR. In such cases the taxing district would not be aggrieved by the assessment and thus would have no reason (or possibly standing) to appeal it. For their part, Taxpayers point out that counties may only reassess properties between countywide reassessments where the property has been subdivided or improved or has otherwise been physically changed. See 53 Pa.C.S. § 8817(a) ; see also id . § 8843 (prohibiting the county assessment office from engaging in spot reassessment). They argue the Commonwealth Court's ruling creates a "constitutional loophole" whereby one state actor (the taxing district) may spot reassess a recently-sold property although another state actor (the county) may not. Brief for Appellants at 21-22.
Applying the OISR's logic to those other properties could lead to cascading iterations of new rounds of comparable or similar properties being appealed. Depending how flexible the judicial standard for similarity is, the end result might be that a substantial portion of all properties in the district would have to be appealed to make the initial appeal constitutionally valid – a result we find untenable.
Overall, the OISR posits that the School District's policy of conforming the assessment ratios of the most non-uniform properties to the CLR will result in "a citizen ha[ving] no reason to feel that he is bearing his proportionate share of the tax burden[.]" Id. at 251. As we have highlighted, however, conformance to the CLR is the very "essence of equalization, and thus, uniformity." Downingtown , 913 A.2d at 200 ; see supra note 5. It therefore appears the OISR has it backwards: conforming those properties to the CLR should give the owner and other citizens alike confidence that all involved are bearing their fair share of the cost of government.
Taxpayers in effect state that, if the county assessment authorities must stay their hand until they are prepared to reassess the whole county, as a matter of common sense the subsidiary taxing districts should have to do likewise. The simple answer is that the Assessment Law does not impose such a restriction. For one, and as already noted, the enactment expressly gives taxing districts the right to appeal assessments individually. Also, the statute prohibiting spot reassessment clarifies that a change in an assessment occasioned by an appeal initiated by a taxpayer or taxing district "shall not constitute a spot reassessment." 53 Pa.C.S. § 8843. Thus, if a "loophole" exists, it was created by the General Assembly, not the courts.
It is certainly understandable, as discussed, that Taxpayers feel they have been subjected to non-uniform treatment because many other properties within the School District have not been appealed, whereas Taxpayers have had to defend an appeal and have suffered an increase in assessment. See generally Delaware, L. & W.R. Co.’s Tax Assessment , 224 Pa. 240, 243, 73 A. 429 (1909) ("While every tax is a burden, it is more cheerfully borne when the citizen feels that he is only required to bear his proportionate share of that burden measured by the value of his property to that of his neighbor."). We reiterate, though, that the subject property's valuation has been raised so that its assessment ratio conforms with the CLR. It has not been raised to the purchase price of the property, which was $54 million. Unless there is a systemic deficiency where the CLR does not in fact represent the average assessment ratio of the properties in the district, the subject property's assessment has been adjusted to become as uniform as possible with the properties in the district as a whole. The validity of the CLR, which may be challenged by taxpayers and political subdivisions alike, see 71 P.S. § 1709.1516a(c), is not at issue in this dispute.
The record does not contain data suggesting the CLR, a countywide figure, deviates from the average assessment ratio in the School District. Variances of this nature could be problematic when enforcing uniformity across the county as a whole as well as within individual taxing districts simultaneously. Any difficulty along these lines is beyond the scope of the questions presented.
Finally, Taxpayers highlight the longstanding uniformity principle that the government may not make the rate of a tax to depend on the quantity (or value) of the item being taxed. See Brief for Appellants at 23-33. That precept has led this Court over the past century and a quarter to invalidate a number of different taxing schemes. See, e.g. , Cope's Estate , 191 Pa. 1, 43 A. 79 (1899) (inheritance tax statute that exempted the first $5,000 of estate property from taxation); Kelley v. Kalodner , 320 Pa. 180, 181 A. 598 (1935) (graduated-rate income tax). However, Taxpayers do not identify any facet of the School District's real estate tax that would constitute a fatal defect similar to the ones we have disapproved. They do not claim, for example, that any part of a parcel's value is exempt from taxation, or that the School District applies a different millage rate depending on the parcel's value. See Brief for Appellee at 29 (suggesting Taxpayers confuse a tax rate with a tax base ). The argument seems to be that the School District acted improperly by targeting Taxpayers’ property because of its high value, while electing not to appeal other recently-sold properties within the School District because they are of lower value.
See also Saulsbury v. Bethlehem Steel Co. , 413 Pa. 316, 196 A.2d 664 (1964) (occupational privilege tax which applied only to persons earning at least $600 annually); Amidon v. Kane , 444 Pa. 38, 279 A.2d 53 (1971) (facially flat personal income tax where the amount of income taxed depended on federal rules under which individual taxpayers could exempt different portions of their incomes); Mount Airy #1, LLC v. Dep't of Revenue , 638 Pa. 140, 154 A.3d 268 (2016) (slot machine gross terminal revenue (GTR) tax where one effective rate applied to casinos with GTR over $500 million and a different effective rate applied to other casinos); Nextel Commc'ns v. Dep't of Revenue , 642 Pa. 729, 171 A.3d 682 (2017) (provision which, when applied to corporations having a net-loss carryover greater than or equal to their net income for a particular year, allowed only corporations with net income of $3 million or less to avoid taxation completely).
That is another way of articulating the previous argument that the selection criteria are discriminatory. The position, as noted, would have greater force but for application of the CLR. Whenever an assessment appeal is lodged by a taxing district, the district's central litigation position is that the assessment as it exists is too low to accurately reflect the value of the property, taking into consideration the assessment ratios currently prevailing in the district as a whole. As long as the fair market value as determined by the court, see 53 Pa.C.S. § 8854(a)(2), is multiplied by the CLR before the millage rate is applied, the appeal is fundamentally aimed at equalizing the targeted property's assessment ratio with those otherwise prevailing in the district. As we expressed in Valley Forge Towers , even this salutary purpose cannot be accomplished through discriminatory means. But we would conclude, for the reasons given above, that the School District's means are not discriminatory but neutral. We realize that, because not all assessments in the district are appealed, and not all real property appreciates at the same rate, some variance in assessment ratios will occur every year after the base year until the next countywide reassessment. During that time, disparities can be heightened by such factors as population shifts, natural disasters, property development, property decay, and changes in property use. Still, in the present context, the Uniformity Clause only requires "rough uniformity," Beattie v. Allegheny Cty. , 589 Pa. 113, 907 A.2d 519, 530 (2006), that is, uniformity as nearly as practicable "in view of the instrumentalities with which and subjects upon which tax laws operate." Nextel , 171 A.3d at 696 (quoting Clifton , 969 A.2d at 1210 ). If pronounced inequalities become pervasive, relief compelling a countywide reassessment may be available. See, e.g. , Clifton , 969 A.2d at 1231 ; City of Lancaster v. Cty. of Lancaster , 143 Pa.Cmwlth. 476, 599 A.2d 289, 301 (1991) ; Millcreek Twp. Sch. Dist. v. Cty. of Erie , 714 A.2d 1095, 1109 (Pa. Cmwlth. 1998) ; Ackerman v. Carbon Cty , 703 A.2d 82, 89 (Pa. Cmwlth. 1997). In the interim, assessment appeals tending to enhance uniformity do not otherwise violate the Uniformity Clause so long as they are undertaken based on neutral factors such as those used by the School District in this matter.
In supporting reversal Justice Dougherty takes issue with the concept that conforming property assessments to the CLR enhances uniformity, see OISR at 258, notwithstanding that this Court has repeatedly affirmed that it does. See Downingtown , 913 A.2d at 200 (expressing that adjusting the assessed value of a property to conform with the CLR "is the essence of equalization, and thus, uniformity"); Woolworth , 235 A.2d at 795 (stating "uniformity has at its heart the equalization of the ratio among all properties in the district"). To support his contention, Justice Dougherty quotes a sentence fragment from Clifton stating "the CLR is not indicative of uniformity." Clifton , 969 A.2d at 1216. The context of that statement proves the opposite of his position: the point made in Clifton was that, if assessment ratios vary widely from the CLR, thus leading to a large coefficient of dispersion (COD), then the CLR as a mathematical number does not alone say anything about uniformity. Here, the School District's policy is aimed at conforming outlying assessment ratios to the CLR, and it thereby emphatically does promote uniformity as it lowers the COD. This is not a matter of legal opinion but simple mathematics. To the extent Justice Dougherty suggests the School District's policy violates uniformity because it targets outlier assessments for correction (a process that cannot help but improve overall uniformity), see OISR at 258-59, such a conclusion seems counterintuitive.
More generally, Justice Dougherty's complaint seems to be that individual appeals do not enhance uniformity as much as a comprehensive reassessment of all properties in the county. See id . at 258-59. This argument would apply similarly to appeals initiated by property owners in an attempt to lower their assessments, which have never been deemed constitutionally suspect. Regardless, even if we assume that the best solution, were it feasible, would be to reassess the entire county every year, it does not follow that more limited efforts at enhancing uniformity in the interim violate the Uniformity Clause. And under Justice Dougherty's reasoning, it is somehow more consistent with uniformity to allow Taxpayers here to continue to pay only 28 percent of their fair share of the cost of government, foisting the remaining costs onto others, rather than require them to pay their fair share as measured by the average assessment ratio in the taxing district.
Accordingly, we would affirm the order of the Commonwealth Court.
Justices Wecht and Brobson join this opinion in support of affirmance.
OPINION IN SUPPORT OF REVERSAL
JUSTICE DONOHUE
I would reverse the Commonwealth Court's order.
One hundred and twenty-three years ago, this Court described the Uniformity Clause of our Charter in simple and elegant words:
Uniformity Clause, Article VIII, Section 1 provides:
All taxes shall be uniform, upon the same class of subjects, within the territorial limits of the authority levying the tax, and shall be levied and collected under general laws.
Pa. Const. art. VIII, § 1.
The OISA criticizes my use of a quoted sentence fragment. See OISA at 249-50 n.11. The entire quoted sentence reads, "Like the EPR, the CLR is not indicative of uniformity." Clifton , 969 A.2d at 1216. The EPR is an assessed-to-market-value measurement system not at issue in this matter. Moreover, the OISA cites Downingtown to support the notion this Court has repeatedly affirmed the use of the CLR to enhance uniformity and suggests where a school district's policies are aimed at conforming outlying assessment ratios to the CLR, the process emphatically promotes uniformity. I note Downingtown preceded Clifton in terms of our exegesis of these matters, and the process of choosing targeted properties for appeal precisely because their difference in actual to assessed value is huge can be characterized as self-serving as easily as it can be seen as promoting uniformity.
While every tax is a burden, it is more cheerfully borne when the citizen feels that he is only required to bear his proportionate share of that burden measured by the value of his property to that of his neighbor. This is not an idle thought in the mind of the taxpayer, nor is it a mere speculative theory advocated by learned writers on the subject; but it is a fundamental principle written into the Constitutions and statutes of almost every state in this country. In Pennsylvania the framers of the new Constitution embodied this principle in our organic law in terms so plain that no one should misunderstand its meaning or doubt its application, and the people by the adoption of that instrument placed the seal of their approval upon a system
of taxation which has for its corner stone uniformity in the value, levy, and collection of all taxes.
Delaware, L. & W.R. Co.’s Tax Assessment , 224 Pa. 240, 73 A. 429, 430 (1909).
Today, the Opinion in Support of Affirmance ("OISA") disregards the cornerstone of the Uniformity Clause by placing its imprimatur on a blatant subclassification of property for tax assessment appeal purposes. As a result, a citizen has no reason to feel that he is bearing his proportionate share of the tax burden measured by the value of his property to that of his neighbor, and the promise of the Uniformity Clause has been broken.
The Wilson School District (the "School District"), located in Berks County, passed a resolution in 2018 to establish a method for selecting property assessments to appeal, implementing a policy under which a property's assessment would be appealed if it was both recently sold and appeared to be underassessed by at least $150,000. The OISA explains that these are two reasonable grounds for selecting which properties to appeal, highlighting, inter alia, the School District's "consideration [of] the real-world costs" and "the practical limitations on the information available to it[.]" OISA at 246. However, the question we are asked to answer today is not whether the motivations for the School District's property selection policy are sound or reasonable, but whether the policy is constitutional. To the best of my knowledge, there is no reasonableness exception to the Uniformity Clause.
As the OISA explains, under the Consolidated County Assessment Law (the "Assessment Law"), taxing districts, including school districts, are authorized to appeal the assessment of properties within their boundaries if they believe the assessment is too low. 53 Pa.C.S. § 8802 (defining "taxing districts" to include school districts); id. § 8855 (authorizing such appeals by taxing districts). Although taxing districts have discretion to decide which assessments to appeal, the manner in which that discretion may be exercised is limited by the Uniformity Clause of the Pennsylvania Constitution.
Act of Oct. 27, 2010, P.L. 895, No. 93, § 2 (as amended 53 Pa.C.S. §§ 8801 -8868 ).
I find it ironic that WSD's budget, made up of and relying exclusively on real estate tax dollars for implementation, presumably already includes funds earmarked for WSD's legal costs and thus, that budgetary line-item could well be increased the more successful assessment appeals are litigated, even though the costs of those appeals have already been recouped.
With regard to property taxation, we have explained:
First, all property in a taxing district is a single class, and, as a consequence, the Uniformity Clause does not permit the government, including taxing authorities, to treat different property sub-classifications in a disparate manner. Second, this prohibition applies to any intentional or systematic enforcement of the tax laws, and is not limited solely to wrongful conduct.
Valley Forge Towers Apartments N, LP v. Upper Merion Area Sch. Dist. , 640 Pa. 489, 163 A.3d 962, 975 (2017) (citations omitted). As such, this Court has invalidated assessment appeal policies that rely upon the creation of such subclassifications. For example, in Valley Forge Towers , we explained that "a taxing authority is not permitted to implement a program of only appealing the assessments of one subclassification of properties, where that subclassification is drawn according to property type—that is, its use as commercial, apartment complex, single-family residential, industrial, or the like." Id. at 978. In regard to the allegation that the school district in Valley Forge Towers targeted commercial properties with out-of-district owners to avoid political accountability from local residential property owners, we also reiterated that "the Uniformity Clause prohibits disparate treatment of subclassifications of property in order to avoid political accountability." Id. at 979 (citing Downingtown Area Sch. Dist. v. Chester Cnty. Bd. of Assessment Appeals , 590 Pa. 459, 913 A.2d 194, 201 (2006) (recognizing the potential for "discrimination by local officials among similarly situated property owners who are underrepresented in the general population")). Further, in Clifton v. Allegheny County , 600 Pa. 662, 969 A.2d 1197 (2009), this Court rejected a policy that had the effect of discriminating based upon the neighborhood in which the property was located.
As noted above, the School District policy requires that a property be selected for assessment appeal if: (1) it was recently sold as shown by data provided by the State Taxation Equalization Board (the "STEB"), and (2) it appeared to be underassessed by at least $150,000, i.e., if the recent sales price times the common-level ratio (the "CLR") (here, 0.685) minus the current assessed value was at least $150,000. Put differently, the School District first categorizes those properties targeted for assessment appeal based upon their newly-purchased status. The School District then further subdivides this class of properties based upon their sale price, appealing the assessments of such properties if they appear to be underassessed by at least $150,000. This requirement for a rigid $150,000 minimum difference necessarily targets properties based on their sale price. Accordingly, I fail to see how the School District's policy does not create an unconstitutional subclass of properties, which can be described as "properties recently purchased at a price exceeding an established threshold."
The STEB, which was established by the State Tax Equalization Board Law, see 71 P.S. §§ 1709.1500 -1709.1521, compiles data showing the prices at which real property in each school district has been sold. See 71 P.S. § 1709.1508.
In doing so, we expressly noted Allegheny County's argument "that case-by-case, corrective application of a county's CLR, through the [assessment] appeal process, adequately satisfies ... the Uniformity Clause[,]" was "unpersuasive." Id. at 1227.
In my view, neither of the above categorizations employed by the School District passes constitutional muster, either when considered individually or in tandem. In this regard, the Commonwealth Court found that the selection process here materially differed from that which we rejected in Valley Forge Towers , explaining:
There is a difference, however, between selection based on property type, a qualitative approach that Valley Forge Towers bars, and selection based on recent sales prices, which are quantitative and reflective of a property's accurate present value regardless of its type. Because the [School] District's method is purely quantitative in nature, beginning with type-neutral listings of recent sales transactions in the monthly STEB reports, we find it does not present the type of constitutional infirmities present in Valley Forge Towers .
GM Berkshire Hills LLC v. Berks Cnty. Bd. of Assessment , 257 A.3d 822, (Pa. Commw. 2021). The OISA appears to endorse this reasoning, stating:
What the Uniformity Clause does prohibit is the systemic differential treatment of a subclass of property defined, for example, by property type or residency status of the owner ( Valley Forge Towers ), or by neighborhood ( Clifton ). These types of factors are prohibited because their use creates property subclasses. Use of monetary figures and recent sales data is qualitatively different. Every property in a given taxing district can be bought and sold, and when that occurs a sales price is associated with the property. A sales price thus has two features making its use consistent with uniformity: it is not unique to one subset of property within the district; and as long as the transaction is undertaken at arm's length, it reflects the property's fair market value,
an important piece of evidence in determining whether the property's assessment ratio varies widely from the norm.
OISA at 245-46 (footnote omitted). Apparently recognizing that what it has explained (and endorsed) is a subclassification of properties, the OISA goes on to explain that the School District is "seek[ing] to take into consideration the real-world costs of lodging an assessment appeal, together with the practical limitations on the information available to it concerning the fair market values of the properties within its borders[,]" and notes that "[t]here is nothing in our decisional law that prohibits this type of methodology, and Valley Forge Towers strongly suggested the Uniformity Clause would permit it." Id. In other words, even if it looks like a subclassification and sounds like a subclassification, it isn't one if we say it isn't.
However, in Valley Forge Towers , we neither created nor employed any such "qualitative vs. quantitative" distinction. It is true that we, in unfortunate dicta, commented on the potential propriety of a purely monetary threshold in Valley Forge Towers . However, we have never decided whether such thresholds are permissible under the Uniformity Clause. In Valley Forge Towers , we tempered the nonjudicious comment by stating that our decision was limited to the issue before us:
We pause at this juncture to clarify that nothing in this opinion should be construed as suggesting that the use of a monetary threshold—such as the one challenged in Springfield [ ]—or some other selection criteria would violate uniformity if it were implemented without regard to the type of property in question or the residency status of its owner. Such methodologies are not presently before the Court.
In Springfield , the school district employed a methodology similar to that at issue here, only appealing properties for which a recent sales price was at least $500,000 greater than its implied market value (defined as the assessed value divided by the CLR). In re Springfield Sch. Dist. , 101 A.3d 835 (Pa. Commw. 2014). We explained in Valley Forge Towers that our disapproval of Springfield was based on, inter alia, the Springfield court's improperly requiring that the challengers prove wrongful conduct on the part of the school district. Valley Forge Towers , 163 A.3d at 975. In this regard, we twice indicated in Valley Forge Towers that our opinion did not reflect disapproval of the monetary method employed by the school district in Springfield . Id. at 975 n.13 & 979. However, we have also never approved of such methodology, and the Commonwealth Court's precedent in this regard (i.e., Springfield ) is not binding on this Court. Not disapproving the methodology is not the equivalent of giving approval.
Valley Forge Towers , 163 A.3d at 979 (footnote omitted). Any implication drawn from the discussion is non-binding dicta. See, e.g. , Castellani v. Scranton Times, L.P. , 633 Pa. 230, 124 A.3d 1229, 1243 n.11 (2015) (explaining that dicta is an opinion by a court "that is not essential to the decision," which "has no precedential value" even when it relates to "a question that is directly involved, briefed, and argued by counsel, and even passed on by the court"). Valley Forge Towers , consistent with our prior precedent, barred the systematic differential treatment of a subclass of property based upon the avoidance of political accountability, the "type" or use of the property and/or "the residency status of [the property's] owners." Valley Forge Towers , 163 A.3d at 980.
It is patent that selecting only newly purchased properties for an assessment appeal creates a subclassification of properties because this subclassification excludes the vast majority of properties in the school district. A newly purchased townhouse, identical to the townhouse of a neighbor in a contemporaneously built development will be subject to an assessment appeal and the neighboring townhouse will not. The owner of the recently purchased townhouse bears a disproportionate share of the tax burden in contravention of the Uniformity Clause.
Moreover, I am skeptical as to whether a purely monetary threshold based on a rigid figure (i.e., the $150,000 threshold employed by the School District) can comport with our Uniformity Clause jurisprudence. Such thresholds could easily serve as methods of circumventing our holdings in cases such as Clifton and Valley Forge Towers , as they could be set at amounts that would largely target only certain neighborhoods (i.e., those known to contain more expensive homes), property uses (large apartment buildings vs. small single-family homes), or types (commercial vs. residential). Under both Clifton and Valley Forge Towers , such pretextual thresholds would run afoul of the Uniformity Clause, regardless of whether they were intentionally created. See Clifton, 969 A.2d at 1227-29 (holding that although appeal policy did not expressly discriminate based on neighborhood, application of it led to pervasive disparities that violated Uniformity Clause); Valley Forge Towers , 163 A.3d at 975 (barring discriminatory policies based on property use and/or type). As such, blanket allowance of rigid monetary thresholds could violate uniformity, while general allowance would require courts to constantly draw lines based upon whether the record demonstrates that the monetary threshold is a mere pretext, either by design or in its impact.
Other than saying it is so, the OISA cannot explain in a principled way why such a "newly-purchased" subclassification is materially different from impermissible subclassifications such as property type, use or location in a certain neighborhood. For example, the fact that a property is recently sold is not a neutral factor simply because, as the OISA states, "[e]very property in a given taxing district can be bought and sold." OISA at 246. As indicated above, when addressing a Uniformity Clause challenge such as the present one, we are not concerned with the intention of a selection criteria, but with its impact. See Clifton, 969 A.2d at 1227-29 (invalidating appeal policy based on the pervasive disparities across neighborhoods in the policy's application).
The School District maintains that "sales price is a criteria that applies universally to all property types, and is the best, most objective evidence a taxing body can rely upon when identifying underassessed parcels." School District's Brief at 8-9. However, a sales price does not apply "universally" to all property in the district. See Valley Forge Towers , 163 A.3d at 974 ("[A]ll property in a taxing district is a single class, and, as a consequence, the Uniformity Clause does not permit the government, including taxing authorities, to treat different property subclassifications in a disparate manner."). Rather, only properties that have been recently sold will have a sale price. Further, a sale price is not only reliable "objective evidence" related to the property sold; it also serves as an indicator of the market value of all similar properties in the taxing district. However, in identifying properties to appeal, the School District only employs this "objective evidence" to target the newly-sold property itself and makes no effort to extrapolate from that sale price what common sense dictates regarding the value of comparable neighboring properties.
The School District further maintains that such properties are the only ones appropriate for assessment appeal due to the nature of such appeals. The School District notes that "a taxing body such as a school district has no legal right to demand access to a property or request financial records available to property owners to determine a property's value." School District's Brief at 9. The School District essentially argues that as such, it cannot bring assessment appeals in a manner that does not depend on newly-purchased status, relying on the following summary of the testimony of Attorney John Miravich, solicitor for the School District:
[Attorney Miravich] explained that a school district – and the attorney filing an assessment appeal on a school district's behalf – must have a good faith basis for doing so: "[A]s an officer of the court, I can't reasonably feel like I can file an assessment appeal and take a matter to the assessment board for them to make a decision, unless I have some factual basis for that." As a result, the [School] District is limited to the STEB reports, which constitute a compilation of information tied to the Recorder of Deeds, and any other public information that may be available, such as internet postings regarding the recently sold property.
Id. at 3 (internal citations omitted).
These concerns are self-serving. A taxing authority is given substantial leeway and power in initiating assessment appeals, power that the School District readily relies upon later in its brief to support the appeal policy at issue here. See id. at 12-13 (citing, inter alia, In re Springfield School Dist. , 879 A.2d 335, 341 (Pa. Commw. 2005) (observing that the Assessment Law "contains no limits on the process by which school districts decide to appeal")). Further, the above testimony of Attorney Miravich implicitly concedes that a host of other publicly available information is available to the School District. However, as explained above, the School District defaults to the sales price of newly-purchased properties, only appealing the assessments of such properties if, essentially, the sales price is high enough and without regard for what that sales price implies about surrounding properties. Targeting such recently-sold properties for disparate treatment simply because the School District has received this single new data point of information regarding those properties is precisely the type of policy that our jurisprudence, such as Valley Forge Towers and Clifton , has prohibited under the Uniformity Clause.
As an additional matter, in regard to the overall fairness of the School District's policy, the OISA suggests that application of the CLR mitigates any unfairness to Taxpayers and actually increases uniformity. Specifically, the OISA states:
We reiterate, though, that the subject property's valuation has been raised so that its assessment ratio conforms with the CLR. It has not been raised to the purchase price of the property, which was $54 million. Unless there is a systemic deficiency where the CLR does not in fact represent the average assessment ratio of the properties in the district, the subject property's assessment has been adjusted to become as uniform as possible with the properties in the district as a whole.
OISA at 248.
However, we rejected this position in Valley Forge Towers :
Although the aim of every such appeal is to conform the property's assessment with the CLR, the members of the sub-class are aware that they alone have been targeted for scrutiny solely due to their membership in the sub-class; moreover, they alone must bear the costs of defending against the appeal and of any follow-up litigation in court—costs which the [s]chool [d]istrict and its amici take pains to emphasize are quite substantial.
Valley Forge Towers , 163 A.3d at 979. Put simply, although application of the CLR may be intended to bring a certain property's valuation into line with the rest of the taxing district, application of the CLR is not the saving grace that the OISA finds it to be, as it cannot mitigate the constitutional infirmity of a taxing district's policy if that policy relies on impermissible subclassification(s) to select properties for appeal.
In addition, application of the CLR is simply not relevant to the type of Uniformity Clause challenge raised by Taxpayers, which is based on the existence of an impermissible subclassification in the School District's property-selection process. As the OISA recognizes at the outset, see OISA at 244-45, Taxpayers have not raised any challenge based on the amount of their property valuation, which would implicate the CLR.
As a final matter, it was suggested at oral argument that if the School District's current property-selection method is unconstitutional, then no method is constitutional. Understandably, the School District takes a narrow view of the assessment appeal process, focusing on the revenue-raising potential of each individual appeal. To be clear, all of our assessment appeal jurisprudence has its genesis in a taxing authority's need to generate revenue to pay for the many kinds of services they are required to provide, including for school districts, funding public education. The reason for devising methods to selectively appeal property assessments is to avoid the politically undesirable alternative of raising the millage for all property owners. Ultimately, the decision by county government not to conduct regular reassessments drives the need to selectively target properties for tax appeals. Under the Uniformity Clause, the lack of political will to address under-assessment of properties and the concomitant shortfall in tax revenue does not permit non-uniform treatment of properties and the resultant disproportionate taxation. The property assessment scheme employed by the School District creates a subclassification of property in violation of the Uniformity Clause. Thus, I would reverse the Commonwealth Court's order.
Regarding the issue of revenue generation, we have said:
Where there is a conflict between maximizing revenue and ensuring that the taxing system is implemented in a non-discriminatory way, the Uniformity Clause requires that the latter goal be given primacy. Cf. Clifton , 600 Pa. at 713, 969 A.2d at 1228 (indicating that rough uniformity in property assessment may not be submerged to the "legitimate governmental interest in creating and preserving a stable and predictable local real estate tax assessment system").
Valley Forge Towers , 163 A.3d at 980.
Chief Justice Todd and Justice Dougherty join this opinion in support of reversal.
OPINION IN SUPPORT OF REVERSAL
JUSTICE DOUGHERTY
I join Justice Donohue's Opinion in Support of Reversal and write separately to explain my slightly different rationale. Also, to the extent the propriety of a school district's selection method of property assessment appeals under the Uniformity Clause continues to be an issue in future cases, I write to suggest a legislative remedy for what is, in my view, the underlying problem in many — if not most — matters challenging individual property reassessments, i.e. , stagnant, artificially low overall property values in a taxing district resulting from infrequent, sometimes decades old, countywide property assessments.
In 2017, appellants GM Berkshire Hills, LLC and GM Oberlin Berkshire Hills, LLC ("Berkshire") purchased 47 residential buildings containing 408 rental units ("the property") for a combined sales price of $54,250,000. The assessed value of the property at the last countywide assessment conducted in 1994 was $10,448,700. In 2018, appellee Wilson School District ("WSD") used reports by the State Tax Equalization Board ("STEB") listing recent property sales including sales prices as representative of current property value, then multiplied that value by Berks County's common level ratio ("CLR") minus the 1994 assessed value. Under that formula, the property had a reassessed value of $37,161,300, and WSD filed the assessment appeal because that value exceeded a pre-determined $150,000 cost-benefit threshold considered to justify the cost of litigating an appeal.
I am of the opinion this methodology for choosing properties for reassessment violates the Uniformity Clause, and disagree with the characterization of the method as "neutral" because it employs the CLR which, according to the Opinion in Support of Affirmance ("OISA"), is fundamentally aimed at "equalizing the targeted property's assessment ratio with those otherwise prevailing in the district[,]" and because "assessment appeals tending to enhance uniformity do not otherwise violate the Uniformity Clause so long as they are undertaken based on neutral factors such as those used by [WSD] in this matter." OISA at 249-50. In my view, the method and factors employed here are not neutral, but are unreasonably discriminatory.
Regarding taxation generally, this Court has observed:
The Uniformity Clause of the Pennsylvania Constitution provides that "[a]ll 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. As we have interpreted it, the Uniformity Clause requires that every tax "operate alike on the classes of things or property subject to it." Commonwealth v. Overholt & Co. , , 200 A. 849, 853 (Pa. 1938). "While reasonable and practical classifications in tax legislation are justifiable and often permissible, when a method or formula for computing a tax will, in its operation or effect, produce arbitrary, unjust, or unreasonably discriminatory results, the uniformity requirement is violated." Clifton v. Allegheny Cty. , , 969 A.2d 1197, 1211 (Pa. 2009).
Mt. Airy #1, LLC v. Pa. Dep't of Revenue , 638 Pa. 140, 154 A.3d 268, 272-73 (2016).
Regarding uniformity of taxation upon property specifically, this Court has many times noted, "[p]roperty taxation ... is different. With property taxation, real property is the classification." Clifton , 969 A.2d at 1212 (emphasis in original), citing McKnight Shopping Ctr., Inc. v. Bd. of Prop. Assessment, Appeals & Review , 417 Pa. 234, 209 A.2d 389, 392 (1965). Thus, all property is treated as a single class regardless of any further sub-classification such as residential, commercial, farmland, etc. This interpretation supports the fundamental, underlying concept that, "in property taxation, the uniformity requirement is based on ‘the general principle that taxpayers should pay no more or less than their proportionate share of government.’ " Id. ,quoting Downingtown Area Sch. Dist. v. Chester Cty. Bd. of Assessment Appeals , 590 Pa. 459, 913 A.2d 194, 199 (2006). By using the term "government," we recognized that property taxes, in years past, provided funding for public schools, police departments, fire departments, and sanitation services. "Today in Pennsylvania, property taxation is primarily used to raise revenue for the maintenance of the counties’ public school systems[.]" Id. at 1202.
In endorsing WSD's method of choosing which parcels of real property to selectively appeal for reassessment, the OISA relies on principles of uniformity and equitable valuation generally applicable to base year methods of valuation. See id. at 1214-17 (explaining differences between the established predetermined ratio (EPR) method, the STEB method which calculates each county's CLR, and the coefficient of dispersion (COD) method). The OISA endorses the STEB method for spot reassessments in part by reliance on the CLR. After reiterating that "the subject property's valuation has been raised so that its assessment ratio conforms with the CLR[,]" OISA at 248, the OISA notes the validity of the CLR is not in dispute. The OISA recognizes any data which might suggest the CLR "deviates from the average assessment ratio in the [s]chool [d]istrict" could be "problematic" as regards uniformity, but "[a]ny difficulty along these lines is beyond the scope of the questions presented[,]" as no such data is part of the record. Id. at 248 n.9. Then, the OISA ultimately concludes "[a]s long as the fair market value as determined by the court is multiplied by the CLR before the millage rate is applied, the [assessment] appeal is fundamentally aimed at equalizing the targeted property's assessment ratio with those otherwise prevailing in the district." Id. at 249 (internal citation omitted).
I cannot agree. This Court has recognized that "the CLR is not indicative of uniformity." Clifton , 969 A.2d at 1216.1 Rather, the CLR may be a "useful tool for a taxpayer to demonstrate that his property has been over-assessed, as it allows him to compare the assessed-to-market value ratio of his property to the average ratio throughout the district." Id. WSD's use of the CLR as a tool for demonstrating under-assessment is not so simple. WSD's multiplication of the presumed fair-market value of any property by the CLR, in conjunction with WSD's additional computational parameters such as setting a monetary sum-certain for recoupment of appeal costs to only newly-purchased real property for determining which assessments to appeal, permits individual taxation to be determined by a method that, in my view, is not uniform or neutral.2 Although the OISA notes WSD's criteria identified properties of all types to appeal, it does not note whether any of the other appeals involved a tens of millions of dollars difference in assessed to reassessed value. Clearly, the difference here is huge, and in my view, Berkshire's resulting increased tax burden may stick out like the proverbial sore thumb precisely because WSD wields the hammer of a self-serving selection process.
Yet, the OISA appears to endorse the selection process precisely because it identifies outliers. The OISA repeatedly insists WSD's selection process does not create a prohibited subclass, but simply tends to "enhance uniformity by selecting for appeal the most non-uniform properties about which reliable information is readily available[,]" OISA at 246; the OISA states "the selection policy does not solely target recently-sold properties, but further limits such properties to those whose assessments are the most non-uniform." Id . at 247. The OISA also dismisses the suggestion "that [WSD] acted improperly by targeting [Berkshire's] property because of its high value, while electing not to appeal other recently-sold properties within the [s]chool [d]istrict because they are of lower value[,]" by noting the suggestion "would have greater force but for application of the CLR." Id . at 249. Thus, the OISA concludes use of the CLR results in "means [that] are not discriminatory but neutral[,]" id. at 249, when, in fact, the accuracy of the CLR in Berks County has not been established, the CLR is not indicative of uniformity, and the selection process is admittedly designed to identify those properties with the highest disparities between assessed to reassessed value. But a selection process so designed violates uniformity, in my view.
The reason for such great disparities in assessed to reassessed property values in any taxing district employing the base year method is in large measure due to the infrequency with which county-wide property assessments are conducted. In Clifton , supra , in connection with claims by property owners that their properties had been over-assessed, we considered whether Allegheny County's base year property taxation scheme, "which permit[ted] a single base year assessment to be used indefinitely," violated the Uniformity Clause. Clifton , 969 A.2d at 1222. We held that particular base year scheme was unconstitutional, as applied. See id. In so doing, we explained "the real-life effect[s] of long-term use of a base year system without reassessment ... prove the lack of uniformity that has arisen over the years[.]" Id. at 1226-27.3 This is so because "[p]roperty values may change over time and at different rates, but when a taxing body freezes values with, for instance, the prolonged use of a base year's property values, the resulting disparities throughout the taxing jurisdiction produce inequities, and those inequities tend to increase over time." Id. at 1225. "The lack of uniformity resulting from prolonged use of an outdated base year assessment, caused by market forces or other changes, cannot be characterized as a ‘classification’ in an effort to excuse the non-uniformity. For the aggrieved taxpayer, the classification is akin to the arbitrariness of being struck by lightning." Id. at 1228. Thus, in Clifton , to remedy the inequity caused by this constitutional infirmity, we agreed with the trial court that a county-wide reassessment was required, and we remanded for that purpose. See id. at 1230.
The same principles hold true for those situations in which a taxing district in an assessment appeal claims a property is under-assessed based on an outdated base year valuation, even where the CLR has been applied. Although the issue in Clifton was the constitutionality of the base year method itself, the present matter is vexing precisely because the base year assessment is outdated. The underlying inequity that arises by permitting clearly outdated, decades-old assessments to continue indefinitely for most properties in a district, while identifying the greatest outliers from those assessments to challenge, could be cured by more frequent county-wide assessments of all properties in each taxing district. I am cognizant of the political unpopularity frequent and costly county-wide property reassessments likely entail. However, the Uniformity Clause prohibits disparate treatment "in order to avoid political accountability." Valley Forge Towers Apartments N, LP v. Upper Merion Area Sch. Dist. , 640 Pa. 489, 163 A.3d 962, 979 (2017), citing Downingtown Area Sch. Dist. , 913 A.2d at 201.
Pennsylvania is one of only two states that does not have statutorily mandated reassessments on a fixed cycle. See Clifton , 969 A.2d at 1231 ("twenty-two of our sister states require annual reassessments, while twenty-six permit reassessments to be conducted at intervals over one year"). "Pennsylvania is the only state where legislation allows the use of a base year indefinitely ." Id. (emphasis added). It is not this Court's role to decide, nor is it capable of fixing, a point in time at which a base year valuation is so out-of-date it leads to unconstitutionally non-uniform spot reassessments. As we noted in Clifton , it is the exclusive prerogative of the legislature to fashion a more comprehensive and sound constitutional scheme. And, because an indefinite base year assessment method obviously cannot capture and reflect market fluctuations and other trends affecting future property values, in my view, the legislature would do well to repeal its indefinite use, and enact an assessment period encompassing a sound interval of years.
Accordingly, I would respectfully reverse.
Justice Donohue joins this opinion in support of reversal.