School districts, municipalities lose as county taxpayers, big and small, win reductions in assessed property values and real estate taxes. Some blame economy; others cite countywide reassessment delay. A record may have been set in the Cocalico School District last year, though Superintendent Dr. Bruce Sensenig isn’t real thrilled about it.
In November, the Lancaster County Board of Assessment Appeals granted what may be the single biggest assessment reduction in county history. The mammoth SuperValu Distribution Center on Muddy Creek Road in East Cocalico Township asked the board to reduce the tax value of its property from $55.6 million to $43.8 million. The board agreed. That one adjustment could cost the Cocalico School District more than $250,000 in revenue this year. The school district has appealed the decision to Lancaster County Court. If the decision is upheld, the revenue loss would be “a significant piece of the puzzle for our budget for next year and going forward,” Sensenig said. But it’s not the only piece; other successful assessment appeals have reduced district revenues by another $150,000.
Cocalico is hardly alone. According the Lancaster County Property Assessment Office, 1,051 county property owners appealed their assessments for the 2013 tax year. It’s the second-highest single-year total in at least a decade, and a whopping 38 percent increase over the number of appeals filed for 2012. Nearly 71 percent of the appeals were for residential property — single-family homes, condominiums, mobile homes, even vacant land. But the biggest impact came from commercial and industrial adjustments —10 such parcels saw assessment reductions of at least $1 million last year. More than 80 percent of all appeals filed for 2013 resulted in reductions. Taxpayers saved millions. This, coupled with an increase in tax-exempt properties, resulted in a decline in the total assessed value of all property in nine county municipalities, and in parts of Lancaster City.
School districts, which rely heavily on property taxes, have been hit the hardest. Officials blame continued economic sluggishness for the increasing pace of appeals but also say county commissioners’ decision to delay a countywide reassessment until 2017 is a factor. They say appeals will likely continue. But they hope the worst is past. “Once the big players are done,” said Chris Johnston, business manager for Penn Manor School District, “it should settle down.”
800-plus win reductions
But the big players may not be done yet. In December, the Sunday News reported that Alcoa, one of the biggest taxpayers in Manheim Township, filed an appeal in Lancaster County Court seeking to reduce the value of its Manheim Pike property from $23.3 million to $12.9 million. In addition, Hospitality Associates of Lancaster, which owns the Lancaster Host Resort on Lincoln Highway East in East Lampeter Township, asked the court to reduce its assessment from $17.5 million to under $11 million. Both were among the 11 percent of appeals denied last year by the Lancaster County Board of Assessment Appeals. More than 800 property owners got a thumbs-up from the board.
The biggest by far was the SuperValu adjustment. The facility distributes groceries to the company’s Acme Markets division; it’s owned by ASP Realty LLC, of Boise, Idaho. Attempts to reach the firm were unsuccessful; the attorney representing the company in the Cocalico court case, John C. Hyon, of the Fairfield, N.J., firm Stavistky & Associates, did not respond to a telephone message left for him. The Rockvale Group also saw its tax bill reduced after successful appeals on four of the parcels that make up Rockvale Outlets in East Lampeter Township lowered the shopping center’s total assessment on those properties from $55.9 million to $46.7 million. An email message sent to David Ober, Rockvale Outlets general partner, was not answered.
Other major reductions:
• The former Skyline Homes Inc. mobile home manufacturing facility at 465 N. Reading Road in Ephrata Borough, owned by LNR Property LP, won a $1.4 million reduction, reducing the assessed value of the property from $3.6 million to $2.2 million.
• The Clark Associates building, owned by Calumet Enterprises (an affiliated holding company) at 2205 Old Philadelphia Pike, in East Lampeter Township, got a $1.3 million reduction, lowering the assessed value of the property from $5 million to $3.7 million.
Three farms were among the 30 steepest assessment reductions. One saw its taxable value reduced by $1 million; a second was reduced by $640,200; the third, by $452,600. Also, three single-family homes got reductions of more than $200,000 each.
Determining what’s fair
Determining a “fair” assessment can be complex. Each year a state agency called the State Tax Equalization Board issues a common level ratio for each county — basically, the average difference between assessments and sales prices for properties that sold in the county in the preceding year. The CLR multiplied by current fair market value is supposed to yield a “fair” assessment. The CLR for Lancaster County for tax year 2013 is 78.8**, meaning that owners of a home with a fair market value of $100,000 should be assessed at $78,800. Alternately, a figure called the common level ratio factor, the mathematical reciprocal of the common level ratio, can be used. That figure for Lancaster County for tax year 2013 is 1.27, meaning that multiplying the assessed value of a property by 1.27** should yield a fair market value of $100,000 for a house assessed at $78,800. If market value — as “proven” by an appraisal or comparable sales — is less than assessed value, say experts, an appeal may be in order.
**NOTE: The common level ratio factor has changed for the 2013-2014 tax year. Last year it was 1.27, this year it is 1.24 so the CLR would be roughly 80.645.
While the number of appeals filed for 2013 rocketed far past the 764 filed for tax year 2012, the total still paled in comparison to the whopping 9,084 who appealed after the last countywide reassessment in 2004. Appeals totaled 997 the next year, and continued to fall. For tax year 2008, just 268 total appeals were filed. But in the wake of the Great Recession, the numbers began creeping back up again. Tax year 2010 saw 440 appeals; there were 657 for 2011; 764 for 2012; 1,051 for 2013.
Equally as alarming for local government officials who count the money— or encouraging for property owners who pay it out — the number of successful appeals also soared. For tax year 2011, 58 percent of property owners who appealed won a lower assessment. For 2012, it was 69 percent; for 2013, 80.5 percent. All told, the number of assessment reductions for 2013 shaved $85.8 million off the county’s total assessment. Due to new development, the tax base continued to grow, but just barely: Between December 2011 and 2012, the assessed value of all county property, taxable and exempt, rose from just under $35 billion to $35.2 billion — an increase of .006 percent.
The economy, or postponement?
Local officials blame the economy for the quickening pace of appeals. “More people are taking a harder look at their re-occurring expenses, of which property taxes would be one,” said John Mavrides, the county’s director of assessment. He also noted that there are more attorneys who solicit appeals, sending out mass mailings to homeowners, offering to file an assessment appeal. Others say they’re certain the county commissioners’ decision to put off a countywide reassessment is a factor.
Kim Seldomridge is business manager for the Conestoga Valley School District, which has seen 50 successful appeals in the past two years, costing the district an estimated $610,000 annually. “Half of the appeals came within six weeks after the commissioners voted to postpone the countywide reassessment scheduled to go into effect January of 2013,” Seldomridge said via email. “So I have to think that had something to do with it.” Said Penn Manor’s Johnston, “In theory, if all properties are reassessed at the same time then there is a revenue-neutral effect. Properties that are currently ‘underassessed’ compared to the overall total would see an increase in taxes — those that are currently ‘overassessed’ would see their taxes decrease, however, the entire pool of revenue for the districts would remain the same. “By putting off the countywide reassessment, some properties are paying less by appealing their assessments, but those that are underassessed are not making up the difference,” he said.
County commissioners voted Aug. 7, 2011, to push the countywide reassessment back to 2017. That decision came six days past the Aug. 1 deadline to appeal a 2012 assessment and perhaps accounted for the surge in 2013 appeals. Scott Martin, chairman of the county commissioners, said that had the county reassessed, there probably would have been even more appeals. “Adams County did it right before we were supposed to,” Martin said, and according to news reports, owners appealed the new assessments on one out of every five properties in that county. “Try explaining [to a property owner] that your assessed value went up but your market value went down,” Martin said. “Right now, because of where the markets are, and because Lancaster County has been historically underassessed, one of our goals was to allow the market to straighten [property values] up” before the next assessment, Martin said.
Richard Nuffort, an attorney who has represented clients in numerous successful appeals — and currently represents Hospitality Associates Inc. in its appeal to Lancaster County Court — said the county’s decision to delay reassessment wasn’t a big factor in his clients’ decision to appeal. “It was the economy and the recession,” he said via email. “Commercial-industrial comparable sales were so miserable in 2009-2011 that appraisals for potential tax appeal candidates all came in low. “Market values appear to be recovering a bit, as occupancy rates improve. But it takes a while for values to come back,” he said.
Result: strained government budgets
Regardless of why the appeals piled up for 2013, the result is strained government budgets. Ephrata School District Business Manager Kristee Reichard said the tax base had been expanding — until last year. Then, in addition to several successful appeals, some of Ephrata Borough “was hard hit with flooding, and some of those homes were condemned, taking them off the tax rolls.” In all, she expects the district to lose out on about $200,000 in revenue this year.
In Penn Manor, three of the five municipalities within the district — Millersville Borough, Martic and Pequea townships — saw decreases in total assessments. Business Manager Johnston said, however, that continued growth in Manor Township helped balance things out. “We are looking at reduced revenue of about $18,667″ for the 2013 tax year. But that, he noted, comes in addition to $262,033 the district lost due to appeals for the previous tax year. “That lost revenue carries forward every year, since the lost amount of assessed value for those properties does not come back,” Johnston said. In addition, numerous properties went off the tax rolls as a result of new exemptions.
In Millersville Borough, which already has one of the highest concentrations of tax-exempt properties in the county, Student Lodging Inc., a nonprofit corporation that owns apartments and residence halls used by Millersville University students, received exemptions for its properties. Millersville Borough Manager Ed Arnold said Student Lodging made payments in lieu of taxes, or PILOT payments, to both the borough and Penn Manor School District, cushioning the blow.
Municipalities don’t rely on real estate tax revenue as heavily as school districts. For example, while the ASP Realty adjustment could cost the Cocalico School District more than $250,000, it would cost East Cocalico Township just under $5,000 in lost revenue. “We don’t like it,” said East Cocalico Township Manager Mark Heister, “but for $5,000, it’s not worth getting a lawyer out.”
While Ephrata Borough saw the tax value of all borough property fall by more than $3 million for the current tax year, that translates to $6,570. That’s not a lot of money, said Borough Manager Robert Thompson. But it is, he said, an ominous sign for a mature borough with little room left for new development. “We are not seeing new sources of revenue, and therefore any reductions in revenue have to be made up somewhere else,” he said. And he frets that publicity surrounding the issue — like this article — could compel others to appeal their assessments and drain even more revenue from borough coffers. But others are more cautiously optimistic. Said Conestoga Valley Business Manager Seldomridge, “I think it is likely that we will see fewer appeals in the future.” Added Penn Manor’s Johnston: “Most of the large taxpayers have gone through the process already. Since we aren’t blessed with a large commercial tax base in this district, there is a limit to the range of losses.”