Tax appeals filed for some of Allegheny County’s most valuable properties

The owners of some of Allegheny County’s most valuable properties are seeking a change to their property tax bills, according to records obtained by the Union Progress, in what could be a blow to budgets for the county, municipalities and school districts across the region.

Appeals have been filed for 21 of the 50 land parcels in the county that have the highest valuation and aren’t exempt from taxes. Those who filed by the March 31 deadline include the owners of roughly 1 in 7 parcels containing office buildings in Downtown Pittsburgh and the Strip District, the Rivers Casino, the Amazon warehouse in Findlay, and shopping plazas ranging from Robinson Town Centre to smaller strip malls.

Thousands of suburban homeowners have joined the throng of companies appealing their land’s tax value for 2022, 2023 or both. All likely are seeking to take advantage of a favorable court ruling from last fall that significantly altered the way a property’s current market value gets converted into the “base year” value used to calculate taxes.

The county’s Board of Property Assessment Appeals and Review will conduct hearings for each appealed property, during which the owner and taxing bodies can present evidence as to what its fair market value should be. The board’s decision is appealable to the county Board of Viewers, and then to the state courts.

Ira Weiss, the longtime lawyer for the Pittsburgh school district, told the Union Progress that the county under Executive Rich Fitzgerald has “driven this train into the river” and local governments throughout the county are likely to face tough financial choices.

“That is an unfortunate legacy of this administration,” he said. “It affects every property owner in Allegheny County and every local government in Allegheny County. No one is immune from the negative impacts of this.”

The potential upheaval stems from the fundamental disconnect that real estate market conditions are always changing, but most land in the county last had its value reassessed in 2012.

To deal with this, a number called the Common Level Ratio is used to shrink current fair market values back to the 2012 “base year.” The county’s CLR for 2022 appeals was originally set at 81.1%, with the high percentage suggesting little change in property values over the past several years, and meant a property with a current fair market value of $100,000 would be taxed at $81,100.

Many municipalities and school districts have kept an eye on real estate sales and often appeal a property’s tax value if it’s surpassed by the sale price, in what has become known as a “newcomer’s tax.” For example, a couple bought a home in Wilkinsburg assessed at $87,100 for a market price of $205,000. The borough’s school district appealed the home’s tax assessment, which was upgraded to $179,400, increasing the annual property tax bill by around $5,000.

The couple, Madelyn Gioffre and Shaquille Charles, ended up becoming the lead plaintiff in a lawsuit filed two years ago that essentially said some of their increased tax bill was an ill-gotten gain. The suit alleged the county submitted skewed data to the state agency that calculates the CLR, leading to an inflated CLR and thus a larger assessment and property tax bill.

Alan Hertzberg, a judge on Allegheny County’s Court of Common Pleas, wrote in an opinion last November that the county had “failed to administer the property tax assessment appeal system in a just and impartial manner.” He noted county officials have since worked to correct the problem.

Hertzberg set the CLR at 63.6% for 2022, meaning the Wilkinsburg couple’s home would have been assessed at about $130,400 if the lower rate had been in effect when the school district had filed its appeal. County Council created a special appeals period for the 2022 tax year, allowing residents and businesses a chance to take advantage of the decreased CLR and lower their property tax bill.

Pittsburgh’s school district appealed the ruling to Commonwealth Court, which heard arguments earlier this month.

Among the areas hardest hit by appeals is Pittsburgh’s 1st Ward, which includes parts of Downtown and Uptown, with challenges lodged by property owners against 1 in every 3 dollars in taxable value.

Among the buildings to appeal their tax bills are One, Two and Three Gateway Center; 525 William Penn Place; and 11 Stanwix St. A cluster of skyscrapers along Grant Street, including the U.S. Steel Tower, 601 Grant St. and the Union Trust Building, also filed appeals.

Highwoods Properties, which owns PPG Place and EQT Plaza, appealed the tax bills of both buildings. The North Carolina company said last year it would sell them and focus its efforts on areas with “favorable economic and demographic trends.” It did not respond to a request for comment.

PNC Bank is appealing several of its properties, including One PNC Plaza and Two PNC Plaza on Liberty Avenue and the Tower at PNC Plaza on Fifth Avenue. It declined to comment.

The COVID-19 pandemic significantly altered the real estate market of central business districts across the country, including in Pittsburgh, with remote work giving way to emptier office buildings and more seats on public transit. Several local real estate firms, including CBRE, estimated earlier this month that Downtown’s office vacancy rate stood at around 20%.

Jason Yarbrough, a partner at the law firm Meyer, Unkovic & Scott, told the Union Progress that commercial property owners are likely to use what’s known as the income approach to value their properties. They will show how much income they make from the property, through rent and other means, and how that may have changed over time.

“Those properties are likely worth much different today than they were five years ago,” he said. “There’s way more vacancies, and the amount that those property owners can achieve in rents is much less now because demand is different.”

It isn’t clear how the city plans to respond to the surge in appeals. Representatives for Mayor Ed Gainey and City Council President Theresa Kail-Smith didn’t respond to requests for comment.

Weiss, the city school district’s lawyer, said the district will do its own research on what a commercial property’s market value should be. He added there is “no question” taxing bodies now face a significant potential liability for tax refunds dating back to at least last year, depending on how the hearings go, while at the same time they are limited by a state law called Act 1 in how much they can raise taxes to make up a potential shortfall.

“This is really a perfect storm of financial challenges for school districts,” he said.

County spokesperson Amie Downs said county officials wouldn’t be able to speculate on the potential impact of the tax appeals, adding it would be “inappropriate for them to do so.”

Owners of other commercial properties, such as large retail plazas, are also seeking to lower their tax bills.

Among the most impacted is Robinson, home to three major shopping centers with dozens of stores and restaurants — The Mall at Robinson, Robinson Town Centre and Settlers Ridge. They are all appealing their tax bills.

The centers’ owners didn’t respond to a request for comment. Neither did Robinson officials.

Smaller centers are also seeking tax relief, such as Brentwood Town Square in the county’s southern suburbs. Assessed at nearly $22 million, it’s the borough’s second most valuable parcel on the tax rolls and represents about 5% of the borough’s taxable land.

Neither the development’s owner, Echo Realty, nor Brentwood officials responded to a request for comment.