Philadelphia unfairly reassessed commercial properties in 2018 and should refund tax money to 700 property owners who are suing the city, their attorneys argued in one of the largest tax-appeal cases in the city’s history. Officials countered that they acted properly to raise values on real estate that had been underassessed.
The comments came in closing arguments before Senior Common Pleas Court Judge Gene Cohen at the end of a two-week trial. The owners sued the city after the reassessment significantly increased their tax bills. City officials have said about $63 million in tax revenue for the city and School District is at stake.
Cohen must decide whether Philadelphia improperly targeted commercial properties in the 2018 revaluation project — and if so, whether the owners of some of the city’s most prominent and valuable buildings should be reimbursed millions of dollars in tax revenue. The case involves apartment buildings and hotels, including One Liberty Place, Centre Square, and the Bellevue Hotel.
The lawsuit hinges on Pennsylvania’s “uniformity clause,” which requires that every property in a county be treated equally in assessments and that all properties be reassessed at the same time.
Laurence Shtasel of Blank Rome, one of the lawyers representing commercial property owners, argued Tuesday that the city had “engaged in an intentional and systematic reassessment of nonresidential properties,” because the 2018 revaluation project involved adjusting values only for commercial and industrial properties while leaving residential parcels largely untouched.
Glenn Weiner of Klehr Harrison Harvey Branzburg LLP, another lawyer representing the property owners, said the property owners involved in the case must be refunded for their 2018 tax payments.
“The argument that the city has other needs, the School District has other needs, other things it wants to spend money on, has no weight here,” Weiner said.
The judge questioned whether, if he orders refunds to the 700 property owners involved in the case for their 2018 taxes, if thousands of other commercial property owners could then also claim that they were owed refunds; the 2018 reassessment resulted in about $118 million in total additional revenue for the city and School District.
“It applies to everyone, does it not?” Cohen asked.
Deputy City Solicitor Benjamin Field cited that potential issue for why no other challenge to a mass assessment in Pennsylvania has included an order to refund taxes already paid. Issuing refunds to just 700 property owners would only increase uniformity issues, Field said.
Field also argued that Philadelphia had done nothing improper in its 2018 reassessment of commercial properties. Those parcels were previously underassessed, Field said, and the city is permitted under state law to analyze values and focus on a particular area most needing change.
“Nothing under Pennsylvania law at that time prohibited those determinations,” Field said.
The property owners, Field said, are simply asking for “a sanctuary of underassessment," and granting it would be unfair to the city’s other taxpayers.
Lawyers argued Tuesday over prior case law, over whether refunds to property owners would be necessary if the judge ruled against the city, and over pieces of evidence presented at trial.
But Cohen summed up the key question he will seek to answer: “whether or not commercial properties were unconstitutionally reassessed by the city.”