Lower Merion tax appeals on apartment and commercial buildings broke state law, a court rules

In the way that it sought to bump up property tax bills on apartment and commercial properties, the Lower Merion School District violated the Pennsylvania Constitution, a Montgomery Court ruled this week in a decision that could affect districts elsewhere in the state.

The judge found that the school district, which includes Narberth and is one of the state’s wealthiest, discriminated in its choice of targets for so-called reverse appeals, in which a taxing entity seeks to raise the assessments that are the basis of tax bills.

Reverse appeals are legal, and have been common practice in some Pennsylvania school districts for decades.

But by chasing commercial parcels and apartment complexes and including only a handful of single-family residences, Judge Thomas C. Branca found that the district was afoul of the constitution’s “uniformity” clause, which requires that all classes of property are treated equally for tax purposes.

In the last four years, districts countywide have filed 525 reverse appeals, 88 of those by Lower Merion, according to the county assessment office.

As for whether Lower Merion will appeal, “The district is still reviewing the decision in order to make a determination as to next steps,” its attorneys said in an emailed statement.

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“The opinion has very large significance,” said John Summers, who argued the case on behalf of the owner of an 8.2-acre lot on Rock Hill Road in Bala Cynwyd with an annual tax bill of $32,500, according to county records.

Summers also was the attorney in a similar case — referenced several times in Branca’s decision — in which the state Supreme Court affirmed that an Upper Merion Township complex had been unfairly targeted.

The case centered on the 2017 assessment year and the Rock Hill Road property, which now carries a county-estimated market value of about $2.2 million.

That year, the district hired a consultant to search for properties that were underassessed by $1 million or more.

The firm identified 29 such properties — 26 that were apartment complexes or commercial parcels, and three single-family residences.

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Lower Merion has more than 1,000 commercial properties, and 82 apartment complexes, which constitute less than 15% of all real estate parcels.

By contrast, it is home to more than 17,000 single-family residences, including some of the region’s and the state’s priciest.

The plaintiff’s consultant found at least 30 residential properties that were underassessed by at least $1 million, one by almost $4 million.

In effect, commercial properties were being treated differently, contrary to Pennsylvania’s often mind-challenging assessment protocols, Branca concluded.

Establishing the $1 million threshold was no defense, the judge said, because the district didn’t institute it “without regard to the type of property in question.”

Don’t blame the county assessors. For the most part misassessment is naturally occurring in Pennsylvania.

Save for new construction and appeals, an assessment in a given county can’t be changed unless all properties are reassessed, a costly and politically unpopular process.

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Montgomery County hasn’t done it since the turn of the millennium, and since then properties have appreciated robustly in places such as Lower Merion, not so much in the likes of Norristown.

When the mass appraisal was finished, the county’s “ratio” of assessment to real value was 100%. Currently, based on the most recent annual sales survey, on average properties are just a bit more than three times more valuable than they were 25 years ago, and the countywide ratio stands at 35.5%. Theoretically, assessment on all properties should equal 35.5% of value.

Reality is a whole other matter, as that ratio varies from town to town and neighborhood to neighborhood.

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Using the county standard, it would be unnatural if Lower Merion didn’t have a harvest of underassessed houses. The judge suggested that the district should have looked harder.

In defense against the allegation of violating the uniformity clause, he wrote, “The court concludes that the school district’s appeal of three token residential properties is not sufficient.”