West Mifflin Area School District and West Mifflin Borough have lost their appeal of the dramatic decrease in the property assessment of Century III Mall, and the price to the taxing bodies will be significant.
The West Mifflin Area School District must refund mall owner Simon Property Group about $1.8 million in tax revenue that it owes for the three-year period during which it appealed the mall's assessment. West Mifflin Borough must refund $534,580 to Simon.
But that's not the total cost.
The mall's reduction in assessment from $112 million in 2006 to the current $58 million means that on an annual basis the school district will receive $1.2 million less in real estate tax revenue from the property, and the municipality will lose $392,580.
West Mifflin Manager Howard Bednar said paying the refund amount won't be an issue for the borough because it has been placing Simon's tax payments in escrow for the past several years while the borough and school district appealed the reassessment.
"You hate to have to give this back, but it is money that's been held in escrow," Mr. Bednar said.
Additionally, Mr. Bednar said the borough set its budget this year in anticipation of losing the appeal of the Century III assessment. He also said balancing the budget without the mall revenue is difficult and is likely to get more difficult as other businesses in the municipality move out, including the GM finishing plant and Circuit City.
Things are even more difficult at the school district, where only some of the $1.8 million refund money has been held in escrow.
The balance will come from the district's general account for assessment appeals, said Business Manager Dennis Cmar.
"Paying the $1.8 million does have an impact just like going forward and losing the $1.2 million a year. Century III Mall is our largest property owner. This will have an impact on our budgeting," Mr. Cmar said.
When Century III opened in 1979, the 1.3 million-square-foot mall was the third-largest indoor shopping center in the world.
For the better part of three decades, it was a steady source of income for the West Mifflin school district and borough.
"This will put a hole in our budget because the valuation was fairly level all of those years and now we are presented a situation in which we lose $1.2 million a year," Mr. Cmar said.
Coincidentally, the school district's 2009-10 preliminary $46.1 million budget has a $1.8 million shortfall.
In approving the preliminary budget last week, the school board chose to draw from its reserve fund to cover the shortfall rather than raise taxes.
School district solicitor Jack Cambest, who handled the Century III Mall assessment appeal for the district and the municipality, said he didn't have much to work with in his argument against the lowered assessment, given the high vacancy rate at Century III.
He said the value of commercial properties is determined by deducting expenses from rental incomes. He said both sides in the assessment dispute hired their own appraisers and that there was not much difference in the appraisal reports.
"Unfortunately, because of the vacancies, rental income has not been very good there and both sides in the appeal had appraisals on the property and the appraisals were not very far apart," he said. "In terms of trying a case, there wasn't much dispute as to the value."
Correction/Clarification: (Published June 5, 2009) The West Mifflin School Board will not hold a budget meeting Saturday June 6m, 2009 as reported in this story as originally published on June 4, 2009 and no other date has been scheduled.
Mary Niederberger can be reached at email@example.com or 412-851-1512.