Understanding the Impact of Changing Common Level Ratios on Commercial Property Taxes

The “Common Level Ratio” (CLR) is a figure calculated by a state administrative body every year for every county. The CLR reflects the relationship between assessed and (fair) market values. The CLR for each county is calculated by using data from each county’s assessment office. The interplay between the assessed and market values is primarily affected by changes in property sale values. 

Starting in early 2020, due in part because of the COVID-19 pandemic, a drastic drop in interest rates accompanied by an increased need for remote work resulted in a home-buying frenzy that sent sale prices soaring. The resulting housing shortfall kept prices high, with an estimated 45% increase in property values from just a few years prior. 

This increase in property values resulted in huge drops in the CLR. Accordingly, a property that was fairly assessed under the 2019 CLR is likely now massively over assessed under the current CLR. For example, the CLR for 2019 for Cumberland, Dauphin, and York counties was 92.3, 63.5, and 80.4 respectively. The CLR for 2023 for those same counties is 73.3, 43.3, and 53.5 respectively. This results in an average reduction of 22 points from 2019 to 2023. These numbers are uncommon and based on the unprecedented property market and should be acted on in order to ensure fair tax treatment. For example, a commercial property in Cumberland County with a market value of $1,000,000 that is being assessed under the 2019 CLR is going to have an assessed value of $923,000. But if the 2023 CLR is applied, that same property will have an assessed value of $733,000. When applied to the applicable millage rate, this $190,000 decrease in assessed value can result in significant tax savings. 

In most of Pennsylvania, property tax appeals must be filed by August 1^st, while some other counties have mid-August, September 1^st, or other deadlines. Each county has its own rules and regulations dealing with property tax appeals. It is important to discuss whether an appeal of your commercial property would be beneficial.