Last December, no one knew what was coming.
Allegheny County had just wrapped up the first year of a contentious reassessment, a painful house-by-house accounting that kicked up property values across the region and launched 100,000 appeals. By Christmas, with most homeowners' appeals out of the way, the dust appeared to be settling.
But few realized the real fight was yet to come -- and it would take place on Grant Street.
In the past year, some of Pittsburgh's biggest commercial properties have won substantial tax breaks from the county, shedding a combined $1.4 billion in taxable value. That's more than four times the amount saved by city residents, who reaped only $385 million upon appeal.
The reductions have blown holes in Pittsburgh's and Pittsburgh Public Schools' budgets, which were formulated last December and had counted on assessments falling at a more gradual rate. Both entities now say they'll have to consider service cuts or rely on other revenue to balance their budgets.
"The magnitude of the reductions has taken us somewhat by surprise," said M. Janet Burkhardt, an attorney representing Pittsburgh Public Schools. "We took into account the certified value would go down a bit. But it went down way more than we anticipated."
The school district says it will likely fall short by $10.3 million. At the city, they're seeing a $3.5 million hole. Mayor-elect Bill Peduto has said he expects other revenue to fill the gap and is not considering a tax increase.
Among the city's most aggressive corporate appealers is BNY Mellon, which has lopped off nearly $71 million in assessed value from its Downtown properties since January. That's a loss of $1.5 million annually in county, city and school district taxes.
Earlier this year, BNY successfully fought to lower the assessment for its flagship tower at 500 Grant St. from $242 million to $214 million. A few blocks away, its building at 525 William Penn Place dropped from $88.7 million to $55.2 million.
Ms. Burkhardt singled out the financial giant for scorn, saying it is among a cadre of corporations that took advantage of the confusion surrounding the reassessment to cut its taxes. Because the city, county and school district were required by state law to reduce their millages to avoid incurring windfall revenue, BNY Mellon is actually paying less in property taxes on some buildings than it was two years ago.
"That's very aggressive," Ms. Burkhardt said. "And while we defend against these to the best of our ability, the school district doesn't have the resources to do appraisals on all of these and fight them."
BNY Mellon could not be reached for comment.
In some ways, these large numbers are to be expected. Commercial properties are generally worth more than their residential counterparts, and for a skyscraper, even a small percentage reduction in value comes out to millions of dollars.
But officials say the reassessment, which was conducted via computer analysis by Texas-based firm Tyler Technologies, consistently exaggerated the value of commercial buildings. Indeed, some of Downtown's biggest reductions came from properties with seriously wacky assessments, including the bankrupt Union Trust Building, which dropped from $49 million to $20 million upon appeal.
Other notable examples: The Downtown Macy's department store, which dropped from $67 million to $13.5 million, and the Wyndham Grand Hotel, down from $64.5 million to $23 million.
"We know there were problems within the assessment itself," city Controller Michael Lamb said. "In some cases, the appeals are right and the assessment itself was faulty. We know that's true."
Assessing commercial properties can be difficult. To a computer, a building owned by a private investor looks much the same as a building owned by the city Urban Redevelopment Authority -- but Pittsburghers know URA-owned properties generate less income and are worth a fraction of their privately owned peers, Ms. Burkhardt said.
Faulty or not, Tyler's computers supplied the total -- the value of all taxable property in the city -- and local governments got to work cutting their tax rates to match. Pittsburgh cut taxes 30 percent; the school district dropped its millage by the same proportion.
But Allegheny County took a different tack, reducing its tax rate by 17 percent. County Executive Rich Fitzgerald took some heat for the decision at the time, with county Controller Chelsa Wagner warning the administration that it was collecting too much money. (She preferred a millage rate of 4.23, a 25 percent reduction.)
"If we had set the millage at 4.23, this county government would be bankrupt," Mr. Fitzgerald said.
By necessity, Mr. Fitzgerald has a wider scope of vision -- his tax base includes the entire county, whose fortunes may differ from Pittsburgh's. He expects the total taxable value of Allegheny County properties to eventually hit $71.2 billion; as of October, it was at $75.2 billion.
Where will Pittsburgh be? Who knows. Ms. Burkhardt has been burnt before and isn't yet hazarding a guess.
"We don't have a crystal ball, and we don't have control," the school district lawyer said. "It's been a mess from the beginning."
Staff writer Moriah Balingit contributed to this report. Andrew McGill: firstname.lastname@example.org or 412-263-1497.