In Pennsylvania, property reassessment is done on a countywide basis and at the discretion of each county. While the goal of reassessment is to ensure taxpayer equity and achieve uniformity and fairness in property valuations across the county, countywide reassessments are not consistently performed. As a result, over time, natural creep and market forces distort values creating erratic variation of over and undervalued property.
In some counties, reassessments are routine and periodic, while in others, property values are so inconsistent that a countywide reassessment is mandated by law. Regardless of how frequently or infrequently a county conducts a reassessment (an in some cases a reassessment hasn’t been done for decades), reassessment always signals concern among taxpayers that their property taxes will go up—but that’s not always the case.
Do school districts get more property tax revenue following a reassessment? No. The key term in reassessments is revenue neutrality. For school districts, reassessment is a zero sum game as the property tax millage rate used in the year before implementation of the new reassessed values is reduced to a new base millage rate. This new base millage rate drives out exactly the same revenue as generated in the prior fiscal year budget (excluding any natural growth).
From that base millage rate, school districts then follow the Act 1 requirements (as discussed last week). This means they can increase that base millage rate under Act 1 no differently than any other year. Additionally, immediately following a reassessment, Act 1 requires a school district to utilize the prior year’s Act 1 index. Meaning, in essence, that during a reassessment, a school district’s Act 1 index is the same for two years in a row.
Does a reassessment mean that property tax bills will increase? This answer is dependent on each individual property and whether that particular property parcel was generally under-assessed or over-assessed in the run-up to reassessment. As noted, while a school district does not get any additional property tax revenue on the reassessment itself (as the new base millage rate is set at a neutral level from the prior year), the rule of averages is that about one-third of taxpayers will see a small reduction in their tax bills, another one-third will see slight increases in their tax bills, and the final one-third will basically not see any difference at all.
Said another way, the final school district total reassessed value will increase at a certain total percentage number when all is said and done, and compared that total school district percent, each property owner’s percentage increase will be below, very close to or above that total school district percent.