This time the property owners want refunds.
Unfortunately, they are right, but they will never get them.
Allegheny County has been sued again concerning the Allegheny County assessment system. This time a group of homeowners has filed suit against Allegheny County, the city of Pittsburgh, its public schools and the Woodland Hills School District. Basically, the suit is seeking a refund of certain property taxes for 2006 through 2009.
The suit is based upon the fact that since the Pennsylvania Supreme Court ruled last year that the 2002 base year is unconstitutional, that there should be a class action allowing for refunds to some 50,000 property owners. The plaintiffs are first seeking class action status, and then want to seek the property tax refunds. My opinion is that the plaintiffs are right, however, for the reasons that follow, the property taxes will never be refunded.
For history purposes, the reason the Pennsylvania Supreme Court ruled that there was a lack of uniformity in Allegheny County was because the current system is unfair to property owners with declining values.
For example, if a home sold in 2002 for $100,000 and then depreciated and sold again in 2008, for $50,000; should that property owner be forced to pay taxes on a value of $100,000 (the 02 value), even though it sold for half that amount six years later? Of course, not. This is one of the reasons why the 2002 base year was declared unconstitutional. The law does not allow the system to discriminate against certain property owners.
The plaintiffs in the new February 2010 lawsuit are arguing that since the Allegheny County system was declared illegal, that certain property owners have been overpaying in taxes, and thus are entitled to property tax refunds.
I wholeheartedly agree from a practical and moral perspective. If residents are paying more than their fair share of property taxes because the county used an illegal system, common sense would tell you that they deserve either tax credits or refunds.
From a legal perspective, what the property owners are asking for is a legal impossibility
First, without an alternative system in place to assess what the correct amount of taxes should have been, it will be systematically impossible to calculate refunds per property owner. Everybody was paying under the same illegal system.
Second, if you issue refunds to certain property owners, you would be then be discriminating against the property owners not receiving refunds.
Third, the school districts and taxing entities have already set their millage rates and paid their expenses for 2006, 2007, 2008, and 2009. If the school districts and taxing entities were ordered to issue vast refunds, not in their current budgets, almost all property owners would realize enormous tax increases in new millage rates being set for 2011. Point being, they would need to raise this revenue somewhere.
Fourth and perhaps most important, I am not aware of any liability on the taxing bodies for the wrongdoings of the assessing body. In essence, you would be punishing the school districts and taxing entities to issue refunds, since the County screwed up the assessments. The taxing bodies just used what Allegheny County told them to.
For these reasons, I applaud the lawsuit, however, highly doubt that one single resident will ever see an issued refund from the new lawsuit. I think the lawsuit was based more on principle than on an expectation of actually receiving refunds or money.
For more information, visit www.pghfirm.com.
Noah Paul Fardo, Esq.
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Noah Paul Fardo is the managing partner of Flaherty Fardo, LLC. His experience includes over 10 years of reducing property taxes for commercial and residential property owners in western Pennsylvania and Allegheny County.