Lower Allen Township property tax increase

Property owners in Lower Allen Township (Cumberland County) face a 20% property tax increase in 2013.  Pennlive has more details. Lower Allen Township commissioners will vote on the budget containing this increase in December.

Real estate tax incentives and a potential new skyscraper in Pittsburgh

The City of Pittsburgh has provided tax breaks for real estate development in recent years, but that program is now in jeopardy because City Council has delayed the extension of those tax incentives. In response, residents and the Mayor have publicly attributed much of Pittsburgh's recent development to this abatement program:

Delilah and Randy Rains gave up their Mt. Lebanon home to move downtown to a once vacant but now rehabilitated condo along Penn Avenue in the Cultural District — with a special 10-year reduction in property taxes.

“The basic attraction for us down here was to live in the Cultural District and to be downtown, but the incentive or the benefits of having the tax abatement just made the decision that much easier,” said Randy Rains.

The Otto Milk Building in the Strip, now 60 condo units, is another example of why [Mayor] Ravenstahl hopes council will extend these tax breaks.

“They’ve been critically important. The tax abatement program, for example, has allowed 13 developments to happen,” added [Mayor] Ravenstahl.

h/t KDKA TV

Maybe other municipalities should learn the relation between tax reductions and economic activity.

In related news, Oxford Development will make a major announcement on Thursday. Observers have speculated that the announcement will involve a new skyscraper in downtown Pittsburgh, according to KDKA TV. Another possibility is that an existing large building will be renovated.

Pennsylvania HB 1696; Moratorium on county wide reassessments.

At the end of June, the Pennsylvania legislature enacted HB 1696, which imposes a moratorium on county wide reassessments in 4th class counties.

The full text of the bill appears here.

The Almanac covers the effects of this law on Washington County's reassessment plans.

The list of Pennsylvania's fourth class counties is as follows: Beaver, Butler, Cambria, Cumberland, Fayette, Schuylkill, Washington. The effect of this bill on Cumberland County is expected to be minimal, as Cumberland engaged in reassessment in 2010.

CCAP contains a breakdown of all Pennsylvania counties by class.

The moratorium shall last until November 2012 or until further reform is enacted - whichever occurs later.

Tax assessment appeal litigation exploding throughout the United States

I predicted in January that tax assessment appeals would become more common as market values declined, especially if municipalities raised taxes or other fees.

Bloomberg now reports on a "fiscal flood that threatens to swamp local government budgets across the U.S. . . . " Bloomberg's article focuses on Michigan, but also includes data from Illinois, Nevada and New Jersey.

This trend indicates future revenue shortfalls for municipalities:

Municipal budgets “tend to lag economic conditions” by 18 months to several years, according to a National League of Cities report in October that Pagano [Unniversity of Illinois professor] co-wrote.

“The full weight of the decline in housing values has yet to hit the budgets of many cities and property tax revenues will likely decline further in 2011 and 2012,” the report said.

When the effect of today's appeals finally hits municipalities, we can expect more revenue raising measures that will create further declines in the value of real estate.

City of York to raise real estate taxes.

Fox 43 News in York reports that the Mayor of York has proposed an increase in city property taxes in the amount of 11.9% for 2011. The measure must be voted on by York City Council by the end of 2010.

Increases in costs (any costs) tend to have an inverse effect on the value of properties - especially investment properties. These increased taxes, if approved should be taken into consideration in any assessment appeals for York city properties starting in 2011.

Philadelphia property tax increase.

The Philadelphia City Council has approved a 9.9% hike in property taxes, together with increases in trash fees. This will have the usual dampening effect on real estate values in the City. As costs increase (especially taxes), net operating income declines and sale prices decline. On the bright side, with comparable sales numbers declining, those owners who manage to hang on to their properties will have a better chance at challenging their tax assessments.

The tax hike awaits final approval next week.

NBCPhiladelphia.com reports that the tax hike is supposed to be "temporary" - lasting only two years. But do not count on this tax increase going away, regardless of how they characterize it now.

Harrisburg property tax increase; declining values and increasing costs

I wrote earlier this week about recommendations from consultants to the City of Harrisburg that the city raise property taxes by 117%. These recommendations also included large increases in water, sewer and trash fees. I wrote yesterday about the negative effect of these increases on the bottom line for investment properties within the city and, ultimately, on the assessed values of such properties.

This proposal (or anything remotely similar) would have far reaching consequences beyond the assessments and the tax revenues generated therefrom. Major property tax increases depress real estate prices. A sudden decrease in values resulting from a tax increase would trap owners in their properties. Properties with cash flow insufficient to support the new taxes (as well as the prior expenses and the mortgages) will be harder to sell for an amount sufficient to payoff the mortgages. This will be especially true if some city investors manage to sell their properties in order to avoid the new expenses, thus driving down prices in general.

Owners of investment properties might actually be trapped in their city properties. Situations like this often end up being resolved through foreclosure and/or bankruptcy. We could very well be entering a period of general decline in the city, characterized by falling values, higher taxes, abandoned and foreclosed properties, and deferred maintenance.

Harrisburg; Real estate taxes; Municipal charges; market valuation; assessment appeals

Two days ago, I linked to a story about the possibility that Pennsylvania's capital city would more than double property taxes, while raising fees for municipal services like trash, sewer and water. I speculated on the effect such increases would have on real estate values and prices.

Harrisburg quadrupled the trash rates only two years ago. Doubling those rates now (as the current recommendations suggest) would amount to an eight fold increase since the end of 2007. Raising property taxes by 117% on top of the trash increase (together with 20% increases in the already-high sewer and water rates) would seriously affect the bottom line of investment properties within the city. An adverse affect on the profitability of investment properties is more than a mere academic or political matter. Operating revenue is a major component in valuation of investment properties. When net revenue declines, market value declines also.

Harrisburg skyline (city-data.com) - the battleground for upcoming assessment wars




A reduction in the market value of investment properties will result in applications by owners for a corresponding reduction in the assessed value of those properties. While local tax authorities will be reluctant to approve such reductions, the courts are the final arbiters of such matters. Declining real estate values (with the resulting loss of tax revenue) will offset many of the gains the city hopes to realize by raising taxes.

Assessment litigation, already common in Harrisburg and Dauphin County, PA, will become even more common for many years to come if the latest tax recommendations are enacted.

Harrisburg City; Increased property taxes, sewer, water and trash

The City of Harrisburg is considering multiple tax increases in order to avoid bankruptcy, according to the Patriot-News today:

Buried in the 25-page report is a list of "potential deficit reduction actions" the city could take. They were not mentioned in the news conference nor fully explained in the report.

Those potential actions include doubling the parking tax, increasing water rates by 20 percent, increasing sewer rates by 20 percent, doubling sanitation fees, doubling parking violation fines, instituting five furlough days a year for employees, increasing property taxes by 117 percent in 2011, and selling the city’s parking garages.

All of these items are considered high already by local residents and investors. Increasing these items would create an negative impact on property values, especially for investment properties. All of these items would reduce NOI (net operating income), which is a major component of valuation.

As a silver lining, once the new taxes take effect, property owners could apply for a reduction in their assessment. Assessment reduction is a difficult process and involves many variables. These new taxes are only recommendations at this point, so it is impossible at this point to know exactly what will take place or how much it will affect real estate values.
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Update - click here for more discussion of how this proposal would affect assessments.
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Update - click here for a discussion of the effects on valuation and sales.
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Update - click here for a discussion of the potential for increased tax sales and related problems.