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In the niche world of Pennsylvania property assessments and the law governing when challenges to those assessments can be brought, a potentially monumental case looms on the horizon. For those unfamiliar with tax assessments, at the most basic level, every real estate parcel in Pennsylvania has an assessed value, and the real estate taxes payable by the property owner to the respective county, encompassing school district, and local municipality are determined from the property’s assessed value. Those assessed values can be challenged in certain circumstances (whether by the property owner, school district, or municipality), typically either in connection with a county-wide reassessment of all properties or when there is a sale or refinance of a property that suggests the assessed value differs substantially from the fair market value. In the case of Valley Forge Towers Apartments N, LP, et al, v. Upper Merion Area School District, et al, (the “Valley Forge Case”), which was recently argued in front of the Pennsylvania Supreme Court and for which a decision is expected soon, the question as to when it is appropriate for a school district to initiate a challenge to the assessed value of certain properties may soon be clarified.
The Valley Forge Case stems from allegations by taxpayers who own apartment buildings relating to the local school district contracting with a consulting firm to identify and recommend property assessments to be appealed. The taxpayers contend that, through its relationship with the consulting firm, the school district targeted certain classes of properties, such as apartment buildings and other commercial properties, and not residential property assessments. The taxpayers argue that such targeting constitutes spot assessments and violations of the Pennsylvania Constitution Uniformity Clause.
While the Valley Forge Case involves Upper Merion Area School District, other school districts throughout the state are believed to be similarly contracting with consulting firms to initiate tax assessment appeals against only certain classes of properties in a systematic and alleged unconstitutional effort to raise tax revenues. Recently, Gross McGinley attorneys Jack Gross and Samuel Cohen represented a property owner facing an assessment challenge initiated by the Allentown School District with no apparent basis or triggering event to explain why the school district suddenly was of the belief that the value of the property was under-assessed. This case resulted in a settlement to curb risk and litigation costs. Most of these cases likewise result in settlements where the property owners and school district agree to an adjusted assessed value in order to avoid litigation costs, but the Valley Forge Case has worked its way through our courts to the Pennsylvania Supreme Court. Apartment Associations and other interested parties have filed Amicus Briefs (legal documents filed at the Appellate level) to persuade the Court to prohibit selective assessment challenges on a class basis. It remains to be seen whether the Supreme Court will find school districts’ systematic targeting of assessed values of only certain classes of property to be constitutional.