By Christopher Briem, on January 30th, 2012
So this is interesting and no, this isn’t really about assessments. I mean, it is about assessments, but there are so many bigger issues rolled into this new legal development.
In the new litigant a week merry-go-round in Judge Wettick’s courtroom (it really must be getting crowded), the latest is the (collective) property owner of one R.J. Casey Industrial Park who has a slew of issues.
One of many points is a contention that it is against Pennsylvania’s uniformity clause to assess commercial property differently than residential property which is indeed how it is done here and most everywhere else. Problem with that is that commercial properties across the state have been assessed different than residential properties for decades. So I will let the attorneys fight over that one, it is just one of the issues.
Then they seem to point out the dearth of information on the assessment. Here are points 16 and 17 in their filing:
16. Regarding commercial properties, the Property Record Cards available for purchase on the Third Floor of the County Office Building, do not contain any information on the New Assessments.
17. Accordingly, unlike residential property owners, commercial property owners evaluating their New Assessments have no access to any information that the County used to determine the New Assessments.
Lots of capitals in that, but to be sure I feel their pain. Though I do get a chuckle of someone really digging up (and dusting off) a property record card and expecting to find much relating to the latest machinations written down in ink. Are those things still written in cursive? For the record, the online information is just a small part of what what went into determining new residential values. I see no reduced form from any of the many regressions that were used. ‘Comps’ are at most part of the equation and many overinterpret their role in the assessment I am pretty sure. There is a funny story back from when the original 2001 Sabre numbers came out which didn’t really used comps the same way CLT did. The county web site did not list any ‘comps’ for a property, but people so expected to see them that eventually the web site was altered to show a few comparable properties that were picked ex post… though the properties listed really had no specific input into setting a particular property value becuase of the way the Sabre Systems algorithms worked. (that is a very short version of a very very long story.. but I digress).
To be fair I should go back to point 15 in the filing which is clearer and shows they did start out digitial:
15. Regarding Commercial Properties, the county provides no information online regarding the comparable sales used to determine New Assessments or even the gross square footage of an improvement on a commercial property. The County does provide this information online for residential properties.
Well, some information at least. Otherwise ditto.
Nonetheless, the motivation in the end must be to get a lower assessment and a lower tax bill. First off realize that for commercial property across the nation the standard for property assessment is not market valuation that it commonly is for residential values but “Highest and Best Use of the real property”. For a lot of properties that distinction may not be such a big deal, but for some in certain unique locations it could be a big deal.
So here the property owner is upset having seen their assessment for 6 properties jump from $2.7 million to $11.3 million. A scary 340% increase in nominal value. Even with our notional revenue neutrality it works out to a potential tax increase of 280%, so more than enough to be upset. So.. is the increased assessment some gross error on the part of the assessors, or is something else going on? Could it be the highest and best use for the property has changed?
Again, like the Mt. Washington parking space, we may have found the most exceptional case out there. Is there anything unique about this property?
So where is this property? All of the properties at issue in the filing are located in the otherwise depopulated Chateau neighborhood (why we still call it a neighborhood is another issue since literally no more than 10 people live there.. likely a lot less.. unless you count folks sleeping under the slots machines I guess). The properties in question are all along the riverfront a helf mile from the edge of a property recently redeveloped and otherwise known as 777 Casino Dr. Nice new bike trail cuts through the properties in question and there are some nice marinas there it looks like.
So lets ponder the ‘old’ assessment values which everyone likes to refer to as 2011 values which they really are not. They are, again, base year assessments based on what circumtance were in 2002, if not prior. Yes, the 2002 base year assessment really means that the ‘old’ values were based on what the market would bear for a property in 2002. Back then the idea of a casino was not yet really formed, and even if it was there was no thought the casino would be placed over on the North Shore there where the Rivers Casino wound up. Remember Don Barden really came in with a somewhat unexpected bid and was clearly not expected to beat out the Penguins backed project slated for the Lower Hill District, nor the Station Square locations that everyone was focusing on. The location on the North Shore and the big empty plot of land on the North Shore there was fallow and without anyone really expecting much to be made of it anytime soon. I am pretty sure that was a big drag on all nearby real estate. Even the North Shore Connector was so far from completion, and opposition so loud, that it would not have been reasonable for it to have had any impact on real estate values at the time. Now it is on the verge of opening. Could it not have some positive impact on land values anywhere near it.
So now, 10 years later.. it is not to say there is any vast demand for land over there and I am unclear was nearby development the casino has wrought… but would it really be reasonable to think there has not been any impact on nearby property which. In this case the 5 properties in question are add up to either 5 or 10 acres (I am confued because the itemized parce 22-J-67 is listed as being owned by the URA?? even though there is no mention of the URA in the filing??) of land all effectively riverfront parcels though I am not sure if they own all the way to the river itself.
Someday when we ever really see data out of all this I will work up a map of the value per acre along all of Pittsburgh’s rivers before and after the reassessment. It might be interesting to see how the price gradient moving away from the river has changed over time. It would be an interesting factoid at least to see if any of the vast efforts to redevelop our riverfronts have had any meaningful impact capitalized into real estate values of real estate close to the riverfront. Just imagine the counterfactual if they did not and what that would mean?
So there is a bit of Henry Georgism in the highest and best use construct. It is certainly true that the parcels might not currently be ‘worth’ the new higher assessments placed on them.. but if assessments stay low, and taxes stay low, there will that much less incentive to ever fully develop those properties to the “highest value” use. There is only so much riverfront property near the Casino (and the stadia and the science center) to be had. I think that is the core reason commercial properties are assessed differently to begin with.
I’m thinking there is a future casino-annex hotel latent in the geography there. Best and highest value use?
By Christopher Briem, on December 23rd, 2011
Let me make some introductions. Data meet news, news meet data.
I just caught this headline.. but the Patriot News had article over the weekend: Marcellus Shale industry brings ‘tsunami of jobs’ to Pa.. which really was more of an anecdotal story focused on a woman getting a job in the drilling industry here in Pennsylvania.
Yet below is what the state’s own data days about women working in Pennsylvania in these industries. I’ve seen virtually no news that really looks into just how one sided this looks. Given the coverage like above, you might think it was a tsunami of jobs for women. Maybe someone wants to go the next step and work out similar gender breakdowns for new hiring in the same industries in say Texas and Oklahoma and see how Pennsylvania compares.
New Hires by Gender in Mining, Quarrying, Oil and Gas Extraction Industries
Pennsylvania, 1st Half of 2010
Source: LEHD, which is a collaboration of state labor agencies and BLS.
By Christopher Briem, on December 8th, 2011
It’s going to be a migration story week. Via the AP and the New Jersey Star Ledger is the story of the day. It says that more and more residents of New Jersey are fleeing…. to Pennsylvania?
I thought we were a tax hell or something like that? Everyone should be fleeing Pennsylvania I thought. I know I read that somewhere???
Note that the New Jersey folks are probably not heading into the state for the shale gas jobs. Will have to look a bit more closely at this data myself to see if there is anything to be said about migration of shale workers into the state.
The parsing has only begun actually. Pittsburgh (city, region or pick your county) has always ranked near the top in a metric of what percentage of householders have lived in their current place of residence the longest. I will have to look at the data the folks are reporting on to see if that is still generally true or if we have budged out of the top spots.
and I have updated my regional migration report on the UCSUR publications page fwiw.
By Christopher Briem, on December 1st, 2011
First off,though it has nothing to do with what I started writing except that it talked about Bradford County and the international attention Pennsylvania shale gas development is getting. BBC looks at the whole Marcellus thing: How fracking affects a community in Pennsylvania
What really got me going was a far less read piece that also looked at some Marcellus impacts. A publication called Area Development has this: Natural Gas Boom Boosting Regional Economies. Iin passing they have a neat little factoid also about Bradford County. It says with clear implication that it is all Marcellus related
“In Bradford County, Pa., the 2009 unemployment rate of 10 percent has been halved because of Marcellus Shale gas development. ”
Half? I was like.. really? I had to go check. So here is the unemployment rate in Bradford County back a few years:
 So it is true that Bradford county had one month, one, where the local unemployment rate hit 9.9%. Problem is that the current unemployment rate is 6.4%, so half is quite a stretch. Skipping that the 9.9% was just one month and that the average unemployment rate in 2009 was 8.3% you really are getting further away from justifying that half claim. The kindest I could is that there was one month in April of 2011 that the county’s unemployment rate was 5.1%. So really cherry picking two specific months I’ve highlighted there with the two recent extremes in the unemployment rate might get you to justifying that half comment. But it raises a bigger question then does it not? Bradford County, the heart of Marcellus, has seen its unemployment rate go up a lot this year? Further, what is the best baseline to really judge the impact on the local labor force up there? One month in 2009, or all of 2009, or some earlier year. The average unemployment rate for 2008 was 5.3%. So yes, the current unemployment rate in Bradford county is up from what was the end of the recession technically. How about 2007? 4.7%. So now go back and think about that half claim. Methinks it all may be a bit more complicated than that.
By Christopher Briem, on November 25th, 2011
National Journal online has a focus on the failure that is Braddock. See: The Left-Behinds, subtitled: How three decades of flawed economic thinking have helped to create record numbers of long-term unemployed and undermine America’s middle class.
The whole meme of the piece comes down to this quote:
Braddock’s plight came from the structural decline of a major manufacturing industry
.
So again, this rosy vision that all was working in Braddock before steel decided to pick up and move away or shut down.
NOOOOOOOOOOOOOOOO. It just isn’t true. We’ve been through this before. The demographic and economic declines in Braddock, as with those in neighboring Duquesne, or Rankin, or Homestead all started long before the decline in local manufacturing employment or wages, nor did that decline accelerate in the last 3 decades that the National Journal article focuses on. Can’t even say it is a confusion of causation vs. causality; look at most any time series on economic conditions in Braddock and there isn’t even any spurious decline that started in the early 1980’s. It’s all weird revisionism. Paleo beer goggles of a happier past that really existed long long before anyone really remembers.
I wonder how many current residents of Braddock today are the “long term unemployed” that are vestiges of an industrial past? Those workers left Braddock long ago, and took with them their families most all before the bulk of the jobs went away. The article says Braddock is filled with “their children and grandchildren. These are the second and third generations of a lost tribe.”. Really? Even the mayor is not the 2nd or 3rd generation of a local steelworker; few of the very few remaining working age residents are either.
Then there is this quote:
U.S. Steel’s Edgar Thomson Steel Works chugs on, as it has since 1875, but it’s a sprawling corrugated-metal relic of its former self. Its parking lot is almost empty at midday, and it employs several hundred workers rather than the more than 10,000 who labored here at its peak.
You know.. Edgar Thompson has been pretty busy even during the depth of the recession. In fact US Steel brought work to Edgar Thompson from other plants because I have to believe it was the best business choice for them to do that. They even got in trouble with the Canadian government for first choosing to shut down it’s Hamilton, Ontario plant and not take work away from E.T.. Here is the big point though.. those several hundred workers at Edgar Thompson probably make as much steel as did thousands of their predecessors. That is called the increasing productivity which is pretty much a necessary condition for manufacturing competitiveness in the world. Yet, somehow that is bad? It has nothing to do with the current conditions of the residents of Braddock mind you, but still.
Now of course maybe I am being harsh and the story isn’t really about Braddock more than the metaphor it shows for the apocryphal Rust Belt or maybe the Pittsburgh region collectively. Of course there is the post earlier today where I pointed out that employment in the Pittsburgh region is pretty much at an all time high as of last month. All time. Not mentioned anywhere.
All that being said. Make no mistake we have failed Braddock. We failed it decades ago. Continue to fail it, and there really seems to be no reason to think we will not continue to fail it for a long time to come. But as long as we believe the mythos of what went wrong, it is pretty much impossible to ever hope anything will ever get any better.
By Christopher Briem, on November 22nd, 2011
Trib covers the Governor’s new panel charged with doing something to improve on manufacturing trends in Pennsylvania.
One of those things that needs a little historical perspective to even begin thinking about. Here is Pennsylvania’s manufacturing employment since 1969. Not exactly much change in trend which is remarkable in itself. Through significant booms and busts, not much deviation from trend.
For Pittsburgh it is not such a smooth glidepath. First there was the crash landing, and later in the 1990’s I suspect the trend would look more like the state’s if you took out the growth and decline of employment at the former Sony Plant in Westmoreland County which expanded a lot in late 1990’s only to go away completely.
By Christopher Briem, on November 21st, 2011
Just what I am pondering. From more recent work out of the Cleveland Fed: Manufacturing and Pollution: Trends in Old and New Industrial Centers is this graphic:
By Christopher Briem, on November 18th, 2011
So it at least rates a news story that the sale of the Steel Building downtown is somehow going to be exempt from the real estate transfer tax that most folks have to pay.
The Philadelphia Business Journal had a remarkable piece in the spring on the lack of interest in Pennsylvania in even thinking about changing this “89-11″ loophole. Basically the state dropped interest in reforming the loophole based on public input, which I can only speculate means the input was all from real estate owners and investors and I bet none from anyone else. No outrage, no change, no revenue.
So in this particular case, it seems that even if the sale had happened in Philadelphia, it would have been exempt from the transfer tax. Nonetheless, what I have pointed out before and before, is that Philadelphia captures a lot more of the transfer taxes than we do because of more stringent requirements on what is exempt. That could be fixed if the powers that be so chose. Unfortunately it is not a local issue, but like so much of city finances dependent on state legislation. Still if there is no political will for a change then it will never happen anyway.
So this one transaction lost the city of Pittsburgh more than the entire Library tax will bring in for more than a year. Maybe a year and a half or more, and that is without counting the additional revenue it would bring the school district and the state even. One transaction! Compare the amount of public effort focused on the library tax referendum and how much anyone will even notice that one article in the paper today.. to be forgotten about tomorrow. I am so confused by what generates public interest, let alone news coverage.
Makes you wonder what the cumulative loss to the city has been over the last decade in lost transfer tax revenues?
By Christopher Briem, on November 16th, 2011
Remember this is all about the capital of the Commonwealth of Pennsylvania.
The latest on the financial soap opera otherwise known as Harrisburg.
The real endgame playing out as Moody’s withdraws its rating on certain Harrisburg water bonds.
Yet money or not, money has to be spent on Harrisburg’s water infrastructure.
Harrisburg may get what it asked for in the end.
By Christopher Briem, on October 19th, 2011
The news is that Harrisburg has filed for bankruptcy. While technically true that they have filed for bankruptcy, this may be shot down before it all begins. The funniest part of this at the moment is that all the judges for this are in Tampa for a conference. So hold your breath.
Remember, bankruptcy has not been far below the horizon here in the past. The closest the city of Pittsburgh should have come to bankruptcy was in the early 1990’s just as Tom Murphy became mayor. Yet the history is that the City of Bridgeport, CT had just before that time tried to file bankruptcy but was denied by a federal court to even enter bankruptcy. Municipal (Chapter 9) bankruptcy is not like bankruptcy for you and me in lots of ways. US constitutional issues prevent a judge from exerting many of the powers over a state entity the same way might happen in recievership for an individual or company.
In Bridgeport’s case the court ruled that the city was not really broke enough to file for bankruptcy, i.e that it had the fiscal capacity to tax or borrow its way to meet its obligations. Unlike other bankruptcies which really look at assets and liabilities, Chapter 9 is more about cash and the fiscal capacity to raise cash. Most public assets are not going to be considered for sale or liquidation no matter, so there is no risk of the mayor’s chair being carted off to a flea market.
The thing is that while I believe the City of Pittsburgh was in a far worse shape than Bridgeport was at the time, that precedent was clearly the biggest thing on the mind of city lawyers who likely advised a bankruptcy filing would not go forward. I personally bet they were wrong on that and that Pittsburgh was not in as good shape as Bridgeport was and well over the line of insolvency in a public sense. There is even a school of thought that says if Bridgeport just waited another year before filing its fiscal condition would have been so bad that the court would have had no choice but to let the filing go forward.
Still I bet Bridgeport’s aborted bankruptcy is the only thing that kept the Murphy administration from filing for bankruptcy right as they took office when they were told the city was about to go cash zero. Prevented from bankruptcy all sorts of even worse things happened. The result was that over the subsequent decade city in succession ’sold’ or liquidated the water department into the water authority (long story there), the city’s debt ballooned, tax liens sold off to a third party without much concern for city of Pittsburgh development and no significant increase (Pension bonds were a wash I would say.. at best) in pension funding would leave us where we are today. So today we have more debt, more pension liability, no direct control of the water system (think of all the problems that has caused) and had much of a decade of neighborhood economic development arrested because it was held hostage by a wall street company that couldnt spell in Latin.
Then there is this logic people say the Commonwealth of Pennsylvania must ‘approve’ any bankruptcy filing. Also technically true in the legal sense. In the real world sense it is not so important. The lawyers might argue, but consider a few things. In Pennsylvania the state approval for letting a federal bankruptcy filing go forward is mostly embedded in the Act 47 law and process. There has been municipal bankruptcy in Pennsylvania, even one recently in the case of Westfall Township. Did Westfall get permmission to file for banktruptcy? I would argue it didn’t in that an Act 47 process only began after they filed and had a bankruptcy proceeding move forward. The state went along, but it was kind of after the fact. And in one of the stranger acts of jurisprudence.. some folks may remember the monster AHERF bankruptcy that still lives on in shaping the region’s state’s health care system. AHERF, even though it was not a municipality, was a Chapter 9 bankruptcy. Does not quite make sense to me, but I think it was just too big and too complex to really fit into a Chater 11.
In the bigger sense it does not matter if the state really approves a major bankruptcy or not. If bills go unpaid, or say bond payments don’t go out. Bad things happen and at some point someone would be forced to do something. The state would have little choice to ‘approve’ a bankruptcy, or a judge would find some way to rule that a filing could go forward.
Also unmentioned in the article is the story of Vallejo, California and its bankruptcy that is just about to come out of. That also is a case where I have argued the fundamental finances there are far better than they were (or are) here. Go figure and again think about all the victory signs last month when the state accepted the while pension accounting scheme. Is Vallejo a model for what may happen in Harrisburg? Probably not just yet.
So what happens now? My guess is that when the judges get back from Tampa and have a hearing on any of this they are likely to push back and say no… no filing for you. Sort of like the soup guy on Seinfeld. Federal judges are not going to want to get into what is, on top of everything else, a political circus in the city of Harrisburg. They will tell them they are not there to settle the city’s political problems, whether or not that is the verbiage of any actual ruling who knows. So a bankruptcy may happen… but I bet it is not right now.
Still, I am surprised the Commonwealth let this all get this far already. There are consequences across the state for such financial miasma in any one municipality, let alone in the state capital.
|
|
Most Popular Posts