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School District Real Estate Assessment Appeals Must Be Done on Uniform Basis or They Will Be Rejected

John T. Vogel, Esq., jvogel@tuckerlaw.com, (412) 594-5622

Downingtown Area School District v. Chester County Board of Assessment Appeal, 2023 Pa. Commw. LEXIS 161 (Pa. Commw. Ct. October 6, 2023). Commonwealth Court rejects assessment appeal despite school district-established threshold, where determination of properties was arbitrary.

While Pennsylvania appellate courts have allowed school district tax assessment appeals to proceed if thresholds are established, Commonwealth Court has ruled that even with such objective standards, appeal program implementation must be uniform and not discriminate against certain classes of properties. Under the Court’s ruling in Downingtown Area School District v. Chester County Board of Assessment Appeals, 2023 Pa. Commw. LEXIS 161 (Pa. Commw. Ct. October 6, 2023) appeals based on sales prices or potential annual tax revenue are permissible, but actual selection of properties for such appeals must follow established guidelines and not be arbitrary.for such appeals must follow established guidelines and not be arbitrary.

Case Background

The Downingtown Area School District established a policy to appeal any real property assessment that potentially resulted in annual additional tax revenue of $10,000 or more. The adopted policy did not limit the number of appeals the School District could file in a tax year. However, in 2019, the District hired Valbridge Property Associates to identify up to 15 properties that were likely to be under assessed by an amount sufficient to meet the $10,000 standard. 

The District submitted property tax appeals on the 15 property tax assessments Valbridge identified, and then added another complex owned by taxpayer Marchwood Apartments. Marchwood owned two separate tax parcels totaling 43.6 acres, in which there were 40 detached buildings with 504 residential apartments. It appears that Valbridge looked at property assessments in the District and the parties chose 15 to appeal as a “manageable number,” considering manpower and resources. Also, Valbridge excluded residential properties of less than 3,500 square feet in its initial analysis; the company further separated commercial properties into several categories. Moreover, once 15 properties were selected, no additional appeals took place despite many more properties that would meet the standards. Even after adding Marchwood to the list of appeals, an appeal was not filed on one qualifying parcel because it was represented by a “very aggressive” attorney.

The Court of Common Pleas of Chester County conducted a hearing on the School District’s appeal. The trial court found that the School District’s policy passed muster as it did not instruct the District to consider the type or nature of property when deciding whether to appeal the property’s assessment (even though since the policy’s implementation in 2012, the District filed an assessment appeal on just one residential parcel). The trial court rejected the taxpayer’s constitutional challenges to the appeal, concluding that if the Marchwood complex was not appealed, it would remain under assessed, which would be discriminatory against other property owners. The trial court also rejected that the District’s policy violated the state’s “uniformity clause,” which requires that all taxes be uniform on the same class of subjects.

The Court noted that absolute equality and perfect uniformity in taxation are not required under that Clause. The District policy’s $10,000 threshold was facially neutral, especially as such thresholds are permitted under prior state court rulings. Further, the policy did not effectively eliminate appeals of residential properties, thereby creating unconstitutional property subclassifications. As a result, the trial court ordered the assessment of the Marchwood complex be increased to comport with its fair market value. The taxpayer then appealed the court’s decision to Commonwealth Court.

Discussion

In its appeal to Commonwealth Court, Marchwood once again argued that the District’s policy violated the equal protection clause and uniformity clause. To address these, Commonwealth Court went through the history of the uniformity clause and assessment laws generally. The Court reiterated that within a taxing district all real properties are a “single class” and that the uniformity clause did not permit taxing authorities to treat different property subclassifications in a disparate manner. Therefore, where a taxing authority appeals only the assessments of a certain property type, it acts outside the applicable constitutional boundaries. But citing precedents, the Court repeated that appeals can be based on neutral selection criterion, such as a monetary threshold, so long as such are implemented without regard to the type of property in question or the residency status of the owner. This result holds true even if monetary thresholds are so high that it impacts only commercial property assessments.

Based on this history, the Court found that the Downingtown policy using a monetary threshold for identifying properties could be constitutional. However, the School District implemented its policy in an arbitrary fashion because it chose to appeal the assessment of 16 properties even though it knew that many more properties in the School District existed that satisfied this threshold. In addition, Valbridge testified that it did not have a hard and fast rule with respect to the methodology that he used to identify properties: its goal was to “maximize the return to the School District.” The Court took note that Marchwood complex was not on the original list of properties identified for an assessment appeal and the School District offered no explanation for the later selection; also, the Court negatively viewed the fact that the District rejected another commercial property for appeal, despite meeting the threshold, because its counsel was aggressive. The District’s decision to implement a piecemeal approach to its policy, deliberately leaving many under-assessed properties alone, resulted in disparate treatment counter to the uniformity clause, with such random application of a threshold creating a lack of uniformity. 

Overall, it appears that the Court, while affirming the use of uniform standards in carrying tax assessment appeals, had issues with loose or contradictory implementation of such school district tax policies, which seemed to have resulted in ad hoc basis decisions on appeals.

Practical Advice for School Districts

The Downingtown Court decision clarifies that while neutral criteria may pass constitutional scrutiny, it still must be implemented in a fair way. School District policies and practices establishing thresholds should be rigorously followed in order to deflect legal challenges to appeal programs. If you need assistance with a similar policy or appeal, please contact John Vogel at (412) 594-5622 or at jvogel@tuckerlaw.com.

For more information, contact John Vogel at (412) 594-5622 or at jvogel@tuckerlaw.com.

December 20, 2023

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