The reassessment of Pittsburgh treated expensive land and buildings gently, while overestimating the values of low-priced properties.
The Allegheny County-run reassessment fell far short of the goal of distributing the tax burden fairly among owners of high-dollar properties and residents of modest homes.
Those are the findings of a Post-Gazette review of new assessments on 130,977 taxable properties in the city and Mount Oliver. The PG analyzed 2,099 arms-length sales (transactions in which the parties act independently and have no relationship with each other), which should suggest real market values. Zooming in on properties that changed hands in 2011 showed clear trends.
Assessments on 233 properties that recently sold for between $100,000 and $150,000 were, on average, accurate. Properties that recently sold for less than $100,000 were typically assessed for more than their sales prices. Those that sold for more than $150,000 were assessed for less than their price tags.
The trend bears out across city neighborhoods, with areas such as Shadyside and Squirrel Hill seeing assessments come in lower than recent sales prices, while Homewood and Knoxville are being saddled with tax obligations based on values that outstrip sales prices.
The ramifications: "Lower-value homes are paying a disproportionately higher portion of local governmental costs," said Rachel Weber, an associate professor of urban policy at the University of Illinois at Chicago's Great Cities Institute, who has studied property assessment and reviewed the Post-Gazette's findings. "Moreover, higher assessments could potentially suppress future purchases or development in lower-income locations."
Wesley Graham, the county's acting chief assessment officer, acknowledged that the reassessment was regressive -- assigning relatively low assessments to expensive properties -- but said it fell within industry standards.
"There's too many questions and too many problems with your analysis," he said of the Post-Gazette's review, saying the newspaper should have verified that each of the 2,099 sales studied was between disinterested parties. "Without that kind of verification, those numbers concern me."
Mr. Graham said county appraisers have the expertise to determine which sales reflect market conditions.
Assessments for Pittsburgh and Mount Oliver, which share a school district, were released in late December. Those for the county's eastern suburbs were mailed in late January. New tax values for the rest of the county are to be released this month and next, and all are to take effect in 2013, under orders from Common Pleas Court Senior Judge R. Stanton Wettick Jr.
On Thursday, attorney Don Driscoll, who represents some plaintiffs in the lawsuit that forced the reassessment, told Judge Wettick that he is worried about its fairness. A review of the eastern suburban data suggests that less affluent towns -- such as Rankin -- have seen much steeper increases in assessments than did their better-off neighbors, such as Plum, he said.
The Post-Gazette has not analyzed data from the eastern suburban reassessment but found that patterns in the city mirror those cited by Mr. Driscoll. He said inequities aren't likely to be ironed out through appeals.
"Many people, particularly lower-income people, do not have the wherewithal to successfully appeal," Mr. Driscoll said. "They may not be computer-savvy. ... They don't have the money to hire appraisers.
"They end up with higher assessed values, higher taxes, less ability to maintain their properties, and it just adds to the deterioration that these neighborhoods face."
City and Mount Oliver properties that sold for basement prices didn't get off cheap in the reassessment.
The 460 properties that sold last year for between $5,000 and $20,000 were, on average, assessed at nearly four times their sales prices. The 404 that sold for between $20,000 and $40,000 typically were assessed at more than double their sales prices.
At the other end of the market, the 219 properties that sold for $150,000 to $249,999 were, on average, assessed at 17 percent less than their sales prices.
"What you're seeing is consistent with what we're seeing," said city Controller Michael Lamb, whose office is studying the same reassessment data. "Low-end properties tend to be assessed, on a percentage basis, higher than high-end properties."
The assessments were produced by the county's Office of Property Assessments and contractor Cole Layer Trumble, a division of Dallas-based Tyler Technologies.
On Friday, Mr. Graham said that assessors used some two dozen mathematical models, each tailored to a different property type or neighborhood type.
For homes, the models started with the size, number of rooms, condition and other characteristics. They would then search for similar properties sold at market rates between mid-2008 and mid-2010, starting nearby but jumping to similar neighborhoods if necessary. They would base the assessment on the sales prices of those comparables.
Some property owners have complained that the comparable properties upon which their assessments are based are far afield, in neighborhoods with different real estate markets.
"We always have that problem, that the property owner says we used the wrong comparables," said Mr. Graham. The computers "pulled the best comparables to the subject [property] in the neighborhood that it could."
It worked, he said. The county's own study of the reassessment of the city and Mount Oliver suggests that the new numbers meet industry standards for consistency and fairness.
By one measure of fairness, a perfect assessment would get a score of 1, with any higher score meaning that the process favored expensive properties and any lower score meaning it favored cheap properties. The new values assigned to city and Mount Oliver got a score of 1.02, and the industry considers anything under 1.03 to be acceptable.
The score "means that we are valuing some of the higher-priced properties [too] low," Mr. Graham said, "... but well within standards."
The county's study shows "that the overall assessment in Pittsburgh is substantially uniform," said Robert Max Junker, a lawyer representing some of the property owners who sued to force the reassessment. "Without knowing more about what data CLT used to come to these results, I have to reserve judgment on the ultimate question of uniformity."
The county's study shows that two wards -- the 18th (1.17), which is Knoxville, and the 22nd (1.09), which includes Allegheny West -- were assessed regressively to a degree that was well outside of industry standards. Seven wards were on the borderline with 1.03 scores. Just five wards were found to have progressive assessments, meaning they favored low-priced properties.
Ms. Weber said the appraisal systems used nationally tend to produce results like the ones seen in Allegheny County. "Mass appraisal software may lead assessment officials to center value estimates toward the mean, which will increase estimates for low-valued homes and decrease them for high-valued homes."
The most expensive properties got the biggest breaks. For those parcels that sold for $250,000 to $1 million last year, the new assessments were, on average, 30 percent below the price.
That average was skewed by high sales prices of Downtown condominiums, for which assessments remain at pre-sale levels. For instance, a group of condos that sold throughout last year for between $343,000 and $757,500 were all assessed at $54,000. Mr. Graham said the reassessment did not take into account sales that occurred last year.
The trend of kid-glove assessments of expensive properties goes beyond condos. Of the 239 properties sold within the top price range last year, 205 were assessed for amounts lower than their price tags. On the other end of the spectrum, only eight of 460 properties that sold for $5,000 to $20,000 were assessed at less than their sale prices.
"When you're doing properties this fast, this quickly, sometimes appraisers seem to be a little gun-shy about putting on the value that they're seeing" for a high-end property, Mr. Graham said.
Dominick Gambino, who managed the county's Office of Property Assessments a decade ago, said the county may have neglected to track sales in neighborhoods closely with rising property values. "It's very hard to catch those very quickly appreciating properties," he said, adding that they can be properly assessed through close observation of the market and constant tweaking of the computer formulas used to generate values.
Mr. Gambino now runs a consulting company called Diversified Municipal Services. He said the big winners in the reassessment may be "people coming to Pittsburgh from outside places who think we are a bargain, [and] are willing to pay asking price" on big-ticket homes here. "Those are the properties that are getting a break."
He speculated that for low-end properties, the county may have tried to set nearly all home values by finding comparable, recently sold properties, though that method does not work well in poor neighborhoods. A decade ago, the county instead calculated what it would cost to rebuild very modest homes, then factored in their age to determine an assessment. he said.
Mr. Graham said that "cost option" was available to assessors this time around, but he did not know how often they used it, or under what circumstances.
According to the Post-Gazette's review, in Wards 1 (Downtown), 2 (Downtown, Strip), 4 (Oakland), 7 (Shadyside), 9 (Central Lawrenceville), 11 (Highland Park), 14 (Squirrel Hill), 16 (South Side and Hilltop, eastern parts) and 25 (Central Northside), average assessments on recently sold properties were lower than the average sales prices. That does not mean that residents in those areas will see tax cuts -- just that the reassessment may not have kept up with hot markets there.
Nor does the relative overassessment of, say, the 18th Ward -- where 55 properties were assessed, on average, at 49 percent more than their 2011 sales prices -- mean that most people there will see higher tax bills. The city and school district will have to adjust tax rates downward so they don't get illegal windfalls out of the reassessment, and that will turn many increased assessments into lower tax bills.
University of Pittsburgh researcher Chris Briem of the University Center for Social and Urban Research concluded that many low-end property owners will see their tax bills cut even though their neighbors' properties may be assessed at more than recent sales prices.
"Clearly the assessment has not eliminated inequity, but it is clearly a step toward a more equitable goal," he said. As millage drops, he said, owners of low-priced homes will benefit. "As much as they should? Of course not. But it is good for their own pocketbooks."
The only way that assessments can really keep pace with market changes, he said, is if they are updated regularly. Instead, reassessments are typically done only when courts order it.
Mr. Driscoll said the county can adjust its assessment system. "Right now, it's a limited opportunity that they have: They can reduce values, but they can't increase values if they see some systemic problem," said Mr. Driscoll. "I do think it's not too late to fix this."
Rich Lord: firstname.lastname@example.org or 412-263-1542.