Consolidated County Assessment Law; Tax Assessment; Valuation of Advertising Signs
In Re: Consol. Appeals of Chester-Upland SD, et al, 200 A.3d 1052 (Pa. Cmwlth. 2018), allocatur granted July 24, 2019, appeal docket 57 MAP 2019
The Supreme Court granted allocatur to consider whether the presence of an outdoor advertising sign on a property is a proper consideration when determining the fair market value of the property for the purposes of a real estate tax assessment.
This case involves 26 appeals of real estate tax assessment determinations by the Delaware County Board of Assessment Appeals and the City of Chester Board of Revision of Taxes and Appeals concerning assessments for the 2015 and 2016 tax years for properties contained within either the Chester-Upland School District or the Chichester School District (School Districts). The School Districts challenged the assessments of 26 properties containing outdoor advertising signs that the school districts believed should have been higher because the signs provided “revenue that the property owners realized through ground leases or grants of easements to outdoor advertising companies that erected and operated a billboard on the properties.” Slip Op. at 4.
The Consolidated County Assessment Law (CCAL), 53 Pa. C.S. § 8811, defines what property will be assessed and taxed for real estate taxes and what forms of property are excluded from assessment. Section 8811(a) establishes “‘land, lots of ground, ground rents,’ and buildings situated on the real estate” as taxable real estate. Slip Op. at 3. Section 8811(b) provides that “signs and sign structures; machinery, tools, appliances and equipment in a mill, mine, manufactory or industrial establishment; silos and other structure related to the storage of animal feed and structures related to the storage of animal waste or composting; amusement park rides; wind turbine generators and related wind energy appliances and equipment; and high tunnels” are exceptions to real estate assessment and taxation. Id. The exclusion for signs and sign structures provides:
No sign or sign structure primarily used to support or display a sign shall be assessed as real property by a county for purposes of the taxation of real property by the county or a political subdivision located within the county or by a municipality located within the county authorized to assess real property for purposes of taxation, regardless of whether the sign or sign structure has become affixed to the real estate.
53 Pa. C.S. § 8811(b)(4).
The cases were consolidated, and the trial court ordered that Section 8811(b)(4) of CCAL supported the finding that presence of advertising signs was not to be considered in the real estate tax assessments. The trial court then issued an order amending the previous order to include interlocutory appeal by permission. The Commonwealth Court granted the School Districts’ interlocutory appeal to address “[w]hether a property’s fair market value for assessment purposes may include revenue generated from billboard leases, rents or easements?” Slip Op. at 5.
Commonwealth Court held that Section 8811(b)(4) does not prohibit consideration of the presence of advertising signs on the value of land according to the CCAL because it only excludes the valuations of an advertising sign or its sign structure, reasoning that:
… the Trial Court erroneously interpreted the sign-and-sign structure exclusion of Section 8811(b)(4) to foreclose any consideration of any potential income that a property owner may receive from the placement of a billboard on the property in arriving at a fair market value assessment. Section 8811(b)(4) unambiguously states that a taxing authority must not treat the value of a sign or its support structure as part of the real property subject to taxation in the assessment of the property. As our Supreme Court has explained with respect to the machinery exclusion of Section 8811(b)(1), the purpose of the exclusions is to move into a separate class of non-taxable property what would have been classified as taxable real estate under Section 8811(a) absent the exclusion. Jones and Laughlin Tax Assessment Case, 175 A.2d 856, 861 (Pa. 1961). However, there is no justification in the text of Section 8811 for the Trial Court’s holding that a valuation of the real property cannot consider the effect of a lease of the property to a billboard operator or the property’s suitability for a billboard use due to its location, zoning designation or other characteristic when arriving at the fair market value of the property. Rather, as applicable caselaw instructs, the valuation must consider “all [of the] relevant factors having a bearing on” a property’s fair market value, including the “ways in which a property hypothetically could be used by potential buyers.” Harley- Davidson [Motor Co. v. Springettsbury Township], 124 A.3d at 280, 283 [(Pa. 2015)] (emphasis in original). In addition, pursuant to Tech One Associates [v. Board of Property Assessments, Appeals and Review of Allegheny County], the appraiser must consider the “economic reality” of a long-term lease on a property that provides revenue to the property owner where appropriate. 53 A.3d at 703 [(Pa. 2012)]. Section 8811(b)(4), like the other exclusions of that subsection, plainly requires by its text only that the physical billboard sign and the structure that supports the signs be excluded from the valuation, but this provision does not have any effect on a taxing authority’s valuation of the land and other non-excluded or non-exempt taxable real estate situated on that land. Nor does the Section 8811(b)(4) exclusion alter the traditional methods of valuation set forth in the CCAL or the foundational principles of valuation set forth in our caselaw.
Slip Op. at 9-10.
The Supreme Court granted allocatur to consider:
Where a real estate owner leases real estate or grants an easement to a billboard owner to situate a billboard upon the real estate, is a taxing district prohibited by the statutory exclusion for “signs and sign structures” contained in 52 Pa.C.S. § 8811(b)(4) from considering the rents and other payments from the billboard owner to the parcel owner when valuing the real estate for the purposes of real estate tax assessment?