In a ruling that ultimately could affect school budgets across the state, the Pennsylvania Supreme Court on Wednesday ordered Montgomery County Court to reconsider a decision that allowed the Upper Merion Area School District to appeal the assessments of four apartment buildings.
The owners of the complexes sued the district in May 2014 after the district appealed their assessments, which it argued were too low. After county court dismissed the case, Commonwealth Court concurred, saying a school district does not violate the state constitution’s “uniformity clause,” which requires that all taxes be uniform, when it seeks to increase revenue by appealing certain high-valued properties that it considers under-assessed.
Although state tax stipulates that except for new construction and certain improvements, assessments can be set only through a mass countywide appraisal, Pennsylvania courts have repeatedly ruled that school districts are permitted to appeal selectively. In 2011, the legislature passed Act 93, which agreed with the courts and says: “A change in assessment resulting from an appeal … shall not constitute a spot assessment.”
School officials maintain that taxing authorities, including school districts, have the same rights as taxpayers to file appeals on properties that appear to be under-assessed.
Wendy Rothstein, the attorney for Upper Merion, said the Supreme Court sent the case back to county court because it should not have been dismissed on preliminary objections.
“It was a procedural ruling. … It didn’t really get into substantive issues,” she said.
Attorney John S. Summers, who represents the apartment owners, called the ruling “a major decision.”
“The Pennsylvania Supreme Court interpreted the uniformity clause to prohibit school districts and other taxing authorities from making classifications among different type of properties and selectively appealing property assessments taking into account those classifications,” he said.
The apartment complexes — Valley Forge Towers, Abrams Run, Gulph Mills Village, and the Lafayette at Valley Forge — maintain the school district has singled out commercial properties and not residents for political reasons, since homeowners can vote in elections. Valley Forge Towers has since settled with the district.
“It’s a landmark ruling in holding that this kind of reverse appeal is unconstitutional,” Summers said.
School boards maintain that the assessment appeals are permitted and a source of funding for districts at a time when other funding sources have shriveled up or been eliminated.
“It’s a way for school boards to raise funds without raising taxes,” said Rothstein, who argued that Upper Merion has not targeted commercial properties exclusively.
At stake for school districts in future court rulings is millions of dollars in revenue, which would need to be made up by other taxpayers.
In the spring, State Rep. Warren Kampf (R., Chester) was the main sponsor of a bill that would restrict school districts and other taxing authorities from filing such appeals.
The bill has yet to receive a final vote. The Pennsylvania School Boards Association maintains that if approved, the law would result in the loss of $2 billion over the next decade for school districts.