News Column

U.S. Steel's property tax accords soften blow to neighbors

May 27, 2014

By Robert Zullo, Pittsburgh Post-Gazette

May 27--U.S. Steel has settled two of the three legal challenges filed after the huge assessment reductions the company won last year for its large industrial properties in Allegheny County opened big budget holes for some local school districts and municipalities.

The two settlements, which set the 2013 and 2014 tax values for parcels that compose the Edgar Thomson Works in Braddock and the Clairton Coke Works, are closer to the original county assessments the company challenged last year and soften the blow for school districts and municipalities that were facing what could have been severe reductions in real estate tax revenue.

"Basically, we've recovered about three quarters of that reduction," said Charles Lanna, business administrator for the Clairton School District, which was projecting a loss of $415,621 in revenue if the reduced assessment of the coke works granted by the Allegheny County Board of Property Assessment Appeals and Review remained in place. "It's not as bad as it was before."

The board reduced the assessed value of the parcels that make up the coke works from about $13.6 million to about $2.4 million after U.S. Steel invested in an appraisal and appealed last year.

The settlement, filed in April, increased that figure to more than $8.1 million.

Based on appraisals by Integra Realty Resources conducted on behalf of the steel giant, which came in the wake of the court-ordered countywide reassessment in 2012, the board slashed the value of the company's properties in and around Braddock, Clairton and West Mifflin from about $76.8 million to just under $17 million.

Using sales comparisons for other industrial properties -- and not factoring in the revenue they produce for U.S. Steel or the potential costs of environmental remediation -- the appraisals argued the county had set the value too high.

"Regional demand for heavy industrial steel-manufacturing or processing facilities for continued use is nearly nonexistent," the Edgar Thomson appraisal says. "Nearly every sale in the region in the last three years has been for an alternate industrial use or for liquidation as scrap."

The value of the Edgar Thomson works, which includes parcels in Braddock, North Braddock, East Pittsburgh and North Versailles, went from about $23.5 million to about $5.2 million, prompting the Borough of Braddock to pass an earned-income tax increase on residents and nonresidents to make up for the lost money, which officials there said was about $164,000, or roughly 30 percent of its real estate tax revenue.

Most of the Edgar Thomson parcels are in the Woodland Hills School District, which was one of three school systems to challenge the reduced assessments. The settlements restore about $5 million in value to those properties for tax purposes.

"We went through the process of doing a site inspection, receiving information from U.S. Steel about what was on that property, and we commissioned our own appraisal, which, as you can imagine, came in a lot higher," said Megan Ott, a lawyer who represented Woodland Hills in the case. "The total settlement value was relatively on par with our appraisal. ... The parties swapped appraisals, negotiated in good faith and came up with this settlement. From the taxing bodies' perspective, we were successful in significantly increasingly the value."

East Allegheny School District and East Pittsburgh Borough did not join the appeal, Ms. Ott said.

Braddock Borough Council President Tina Doose says there are no plans to revisit the tax increase passed in December, which raised the earned-income tax rate from 1.1 percent to 1.5 percent for residents and from 1.05 percent to 1.2 percent for nonresidents.

"We're not planning on changing anything around the EIT," she said. "We're just crunching the numbers and seeing where we are with everything. ... We still lost a lot of revenue."

And the biggest potential loss of tax value among U.S. Steel's properties in the county has yet to be settled.

Two properties in West Mifflin, site of the Irvin Works, dropped from a total of about $39.7 million to $9.4 million for tax purposes.

George S. Gobel, the school district's solicitor, did not respond to multiple requests for comment. However, West Mifflin School District's business manager, Dennis Cmar, and U.S. Steel both said negotiations are ongoing.

"U. S. Steel was able to reach agreement with Clairton, Braddock and other communities following negotiations based upon data available to all parties," company spokeswoman Courtney Boone wrote in an email. "West Mifflin is still ongoing, but we do hope to come to a mutually-agreed-upon settlement as we did in the other jurisdictions."

Ira Weiss, Clairton's school solicitor, said the county process for hearing appeals on large commercial properties worth big money to cash-strapped school districts and struggling steel towns is stacked in favor of the companies, which he said are often multinationals with little vested interest in them except "extracting the lifeblood."

"It was a good deal considering the state of the law on industrial property and considering the cost of moving forward and having a trial," Mr. Weiss said. "U.S. Steel, like a number of other large property owners in the county and the city, they use the system that's there. But the system, institutionally, is weighted toward parties like large property owners that have the capacity to spend large sums of money to achieve the value they want to achieve. It's good there are taxing bodies that step up and say, 'No, we're not going to let you do that. We're not going to let you steamroller us into submission.' "

David Montgomery, solicitor for the county appeals board, said the appeal process consists of two levels: a hearing before a hearing officer, whose recommendation on a given parcel's value is then reviewed by the board members, and then a proceeding before the county Board of Viewers, which is part of the county court system.

Mr. Montgomery said that although taxing bodies are notified of the initial hearing and often send representatives, they rarely submit their own evidence to challenge the appeal, preferring to wait for the second part, the "de novo" hearing before the Board of Viewers.

"They get a fresh look at it without being bound by our determination," Mr. Montgomery said. "The parties choose not to present evidence at our level as a strategy. ... If you know a major appeal like this is going to end up in court eventually, what they do is they take the appraisal and send it to their expert and their expert basically has a free shot at rebutting it."

Mr. Montgomery said it's common at an assessment appeal hearing for a hearing officer to make a recommendation to the board based on a single appraisal.

"If it has the [hallmarks] of reliability and credibility, it is generally going to be persuasive," he said, adding that three board members review the recommendations for properties worth $1 million or more.

Mr. Weiss said it's less a strategic decision than a financial one.

"The difficulty here is that because of the cost of getting an appraisal done on a property like this, most taxing bodies don't get an appraisal done for the assessment board hearing because it's likely there will be an appeal," Mr. Weiss said. "While an appraisal is persuasive, I also believe that, particularly in large complex appraisals like industrial properties, the board should review those appraisals much as a court does."

He added that with a huge volume of cases to process and part-time board members, cases involving large commercial properties and major consequences for school districts and municipalities should be considered with a more "inquiring" mindset, especially when the decision rests on some "very aggressive assumptions" by an appraiser.

"In large, complex cases, they should have a system where they're subject to a hearing by more than one person," Mr. Weiss said. "The board has an obligation to provide an adequate venue and environment for these hearings and not treat them in an assembly-line fashion. ... Very candidly, these hearings are scheduled as if the parties are double-parked on the curb."

Robert Zullo: rzullo@post-gazette.com or 412-263-3909. Twitter: @rczullo.

___

(c)2014 the Pittsburgh Post-Gazette

Visit the Pittsburgh Post-Gazette at www.post-gazette.com

Distributed by MCT Information Services


For more stories on investments and markets, please see HispanicBusiness' Finance Channel



Source: Pittsburgh Post-Gazette (PA)


Story Tools






HispanicBusiness.com Facebook Linkedin Twitter RSS Feed Email Alerts & Newsletters