Property Reassessment

September 10, 2008

Phased-in reassessed tax hikes fail legal test

Officials: Temporary cutbacks illegal; other exceptions exist that could aid home owners.

By Jennifer Learn-Andes jandes@timesleader.com
Luzerne County Reporter
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Some Luzerne County property owners have suggested phasing in reassessment tax increases to help property owners adapt.

However, county officials say that is not a legal option.

“There’s no phase-in of taxes permitted in Pennsylvania,” said county minority Commissioner Stephen A. Urban.

Tim Barr of reassessment company 21st Century Appraisals Inc., concurred, saying legislators would have to change state law to allow temporary reductions based on reassessment-related increases.

“You can’t give preferential treatment to a specific class of people without it being written into the law,” Barr said. “To say someone’s going to get a reduction because he can’t afford to pay – there’s no basis to do that.”

Even if the county could offer the break, other property owners would have to be willing to cover the revenue lost from discounting taxes, Barr said.

County assessment office director Tony Alu backed up Urban and Barr, saying taxes must be levied on a property’s assessed value, regardless of ability to pay, unless the state makes an exception.

The state has enacted several tax-break exceptions, including the homestead exclusion for primary residences, the Clean and Green program for agricultural and open space land and the Keystone Opportunity Zone for economic development projects.

Urban said he would support state legislation gradually implementing reassessment tax increases until property owners are required to pay the full amount, though he won’t hold his breath for a majority of legislators to act.

The state requires property tax uniformity but doesn’t force counties to reassess, he said, allowing Luzerne and other counties to go decades without reassessment and causing some individual tax burdens to skyrocket.

The state restricts taxing bodies to a 10-percent revenue increase in the first year after reassessment, but there’s no cap on the increases of individual property owners, Urban said.

School and municipal officials would also have to sign on for a phase-in to have significant impact, he said.

“County commissioners don’t control school district or local taxes, which make up about 80 percent of the bill,” Urban said.

So what’s a financially strapped property owner to do?

County officials had been researching a law that would allow low-income homeowners to defer reassessment property tax increases by counting the debt as a lien against the property, but Barr said government officials have not embraced the concept.

Under the program, which is part of the state’s Act 50, eligible property owners would continue paying their existing property tax amounts but could delay payment of the increase until the property is sold or passed to heirs.

School and municipal officials would also have to agree to participate, and none have come forward expressing an interest, Barr said.

County officials have been advising property owners to sign up for homestead tax breaks and the state’s tax/rent rebate program.

Barr also expects more property owners will explore increasingly popular reverse mortgages, which allow senior citizens to convert some of their home equity into cash.

When a borrower sells the home or no longer uses it as a primary residence, the money received from the reverse mortgage must be paid back, along with interest and any applicable fees.

Wilkes-Barre attorney Lou Wetzel, a title agent, said he has started receiving more inquiries about reverse mortgages from lenders.

“I think the reassessment will create a situation where a lot of people will turn to reverse mortgages as a means to stay in their house,” Wetzel said.

Reverse mortgages were mistrusted because they were misunderstood in the past, he said. The government regulates reverse mortgages, and property owners are generally required to undergo counseling, possibly with their children, before approval is granted, he said.

Wetzel said the “ideal situation” occurs when adult children reassure their parents that they aren’t concerned about the reverse mortgage’s impact on their future inheritance.

“That relieves the parent of the worry,” he said.

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