decided: June 16, 1977.
JAMES D. PRIOR ET AL.
BOROUGH OF EDDYSTONE, APPELLANT. JAMES D. PRIOR ET AL. V. BOROUGH OF EDDYSTONE, APPELLEE
Appeals from the Order of the Court of Common Pleas of Delaware County in case of James D. Prior v. Borough of Eddystone, Misc. Docket A-33, Page 252, March 1976.
Edward J. Zetusky, Jr., for Borough of Eddystone.
Kenneth E. Aaron, with him Davidson & Aaron, for James D. Prior, et al.
President Judge Bowman and Judges Crumlish, Jr., Kramer, Wilkinson, Jr., Mencer, Rogers and Blatt. Opinion by Judge Mencer.
[ 30 Pa. Commw. Page 537]
We are confronted with two appeals from an order of the Court of Common Pleas of Delaware County which denied a petition of 28 nonresidents of the Borough of Eddystone (Borough), seeking to have the
[ 30 Pa. Commw. Page 538]
Borough's Earned Income Tax Ordinance declared invalid.*fn1 Both appeals enter on the following question: Is the aggregate amount of taxes that a borough may impose under The Local Tax Enabling Act*fn2 (Tax Act) limited to an amount equal to the product of 12 mills times the market valuation, rather than the assessed valuation, of real estate in the borough?
The court below concluded that it is assessed valuation of real estate to which the 12-mill limitation is applicable but denied the petition because it was convinced that Section 17(b) of the Tax Act, 53 P.S. § 6917(b),*fn3 "provides clear and unmistakable directional
[ 30 Pa. Commw. Page 539]
guides for the Borough, and . . . a remedy if action is not taken." The petitioners appealed here asserting that the court below should have declared the tax ordinance in question invalid because of that portion of Section 6 of the Tax Act, 53 P.S. § 6906, which reads as follows:
It shall be the duty of the court to declare the ordinance and the tax imposed thereby to be valid unless it concludes that the ordinance is unlawful or finds that the tax imposed is excessive or unreasonable; but the court shall not interfere with the reasonable discretion of the legislative body in selecting the subjects or fixing the rates of the tax. The court may declare invalid all or any portion of the ordinance or of the tax imposed or may reduce the rates of tax.
We affirm, but for the reason that we conclude that the aggregate amount of all taxes imposed by the Borough under the provisions of the Tax Act do not exceed the overall limit of tax revenues set by Section 17(a) of the Tax Act. Section 17(a) reads in pertinent part:
The aggregate amount of all taxes imposed by any political subdivision under this section and in effect during any fiscal year shall not exceed an amount equal to the product obtained
[ 30 Pa. Commw. Page 540]
by multiplying the latest total market valuation of real estate in such political subdivision, as determined by the board for the assessment and revision of taxes or any similar board established by the assessment laws which determines market values of real estate within the political subdivision, by twelve mills. In school districts of the second class, third class and fourth class and in any political subdivision within a county where no market values of real estate have been determined by the board for the assessment and revision of taxes, or any similar board, the aggregate amount of all taxes imposed under this section and in effect during any fiscal year shall not exceed an amount equal to the product obtained by multiplying the latest total market valuation of real estate in such school district, or other political subdivision, as certified by the State Tax Equalization Board, by twelve mills.
First, as was noted in Wm. Penn Parking Garage, Inc. v. City of Pittsburgh, 464 Pa. 168, 346 A.2d 269 (1975), Section 17(a) of the Tax Act establishes a limit on the aggregate amount of all taxes which may be imposed by political subdivisions. This provides the exclusive measure of whether the aggregate tax burden of the subdivision is "excessive or unreasonable" within the meaning of Section 6. Therefore, if the taxes imposed do not exceed the established limit on the aggregate amount of all taxes which may be imposed, the court may not declare the tax ordinance invalid as authorized by Section 6.
Here the parties agree, and the record discloses, that the Borough has imposed the following taxes by authority of the Tax Act and estimates that it will receive from each as follows:
[ 30 Pa. Commw. Page 541]
Real Estate Transfer Tax (1% rate) $2,000
Occupational Privilege Tax ($10) 30,000
Earned Income Tax (1/2 of 1%) 90,000
If the 12-mill limitation is applied to the $26,000,000 market valuation established by the State Tax Equalization Board, the Borough's aggregate tax limit would be $312,000, and the taxes imposed of approximately $122,000 would be well within the permissible limit.*fn4 However, if the 12-mill limitation is applied to the $7,508,655 assessed valuation as determined by the Board for Assessment and Revision of Taxes, the Borough's aggregate tax limit would be $90,103.86, and the approximately $122,000 tax imposition would be about 35 percent over the permissible limit.
[ 30 Pa. Commw. Page 542]
Thus, it can readily be appreciated that the outcome of this appeal is dependent upon whether the 12-mill limitation of Section 17(a) is applied to market valuation or assessed valuation of the real estate of the Borough. It is common knowledge that real estate frequently is not appraised at actual or market value and that there is a wide discrepancy between the ratio of assessed value to actual value, not only in different governmental units, but oftentimes within the same unit. Buerger v. Allegheny County Board of Page 542} Property Assessment, 188 Pa. Superior Ct. 561, 149 A.2d 466 (1959). Our Supreme Court has held that, within the meaning of statutes of this nature, the term "actual value" refers to market value. Baldwin-Lima-Hamilton Corporation Appeal, 412 Pa. 299, 194 A.2d 434 (1963). As defined by our Supreme Court, market value is the price which a purchaser, willing but not obliged to buy, would pay an owner, willing but not obliged to sell, taking into consideration all uses to which the property is adapted and might in reason be applied. United States Steel Corporation v. Board of Assessment and Revision of Taxes, 422 Pa. 463, 223 A.2d 92 (1966).
We believe that there is general recognizable difference between assessed valuation of real estate and market valuation of real estate. Accordingly, when the Legislature provided, in Section 17(a), that the tax limitation was to be determined by "multiplying the latest total market valuation of real estate . . . by twelve mills," it intended and meant market valuation and not assessed valuation. When the words of the statute are clear and free from all ambiguity, the letter of it is not to be disregarded under the pretext of pursuing its spirit. 1 Pa. C.S. § 1921(b). The words "market valuation" have a well-known meaning and are clear and free from all ambiguity. Accordingly, the lower court's order denying the petition to have the Borough's Earned Income Tax Ordinance declared invalid was correct because the taxes imposed under the authority of the Tax Act did not exceed the limitation imposed by Section 17(a) of the Tax Act, which limitation is properly computed by multiplying total market valuation of real estate by 12 mills.
Even if we would assume, for purpose of argument, that our conclusion relative to market valuation was in error, we would, as did the court below, be impelled to affirm the order under attack here because of our
[ 30 Pa. Commw. Page 543]
holding in Donnelly v. Borough of Media, 23 Pa. Commonwealth Ct. 115, 351 A.2d 299 (1976). In Donnelly, we held what is equally applicable here, that, "[f]irst, we are bound by the standard of review imposed by Section 6 of the Act, 53 P.S. § 6906, which directs us not to interfere with the reasonable discretion of the Borough in fixing the rates of the tax. The record discloses no facts which would justify a finding that Borough officials abused their discretion in estimating the revenue to be derived from a .5% tax on earned income and net profits. Second, Section 17 of the Act, 53 P.S. § 6917, sets forth the proper procedure for challenging a tax which proves to be excessive." 23 Pa. Commonwealth Ct. at 121, 351 A.2d at 303. Thus, at best, the petitioners below, appellants here, seek relief prematurely. City of Reading Earned Income Tax Case, 47 Pa. D. & C. 2d 421 (1969).
And Now, this 16th day of June, 1977, the appeal of the Borough of Eddystone, docketed at No. 1505 C.D. 1976, is quashed, and the appeal of James D. Prior, et al., docketed at No. 1521 C.D. 1976, is dismissed, and the order of the Court of Common Pleas of Delaware County under date of July 23, 1976, denying the petition of James D. Prior, et al., to declare Ordinance 441 of the Borough of Eddystone invalid, is hereby affirmed.