Appeal from the Order of the Court of Common Pleas of Cambria County in case of In Re: Appeal of Johnstown Associates from the Final Assessment of the Board of Assessment Appeals of Cambria County, Pennsylvania, No. 1976-5163.
Philip Baskin, with him Alan C. Jacobson, of Baskin & Sears, for appellant.
John W. Taylor, for appellee.
Judges Crumlish, Jr., Mencer, Rogers, DiSalle and MacPhail. President Judge Bowman and Judges Wilkinson, Jr., Blatt and Craig, did not participate. Opinion by Judge Rogers. President Judge Bowman did not participate in the decision this case. Judge DiSalle did not participate in the decision in this case.
Johnstown Associates has appealed from an order of the Court of Common Pleas of Cambria County dismissing its appeal from the assessment of its real estate for local tax purposes by the Cambria County Assessment Board. We affirm.
Johnstown owns a 2.5 acre parcel of land in City of Johnstown on which it constructed the Joseph Johns Towers, a ten story building containing 165 apartments. The building was constructed by Johnstown under the Department of Housing and Urban Development's (HUD) Section 236 program*fn1 for the creation of housing for low and middle income families. HUD subsidizes 6% of the 7% interest payable on the property's $2,823,600 mortgage. Rents for the apartments are fixed by HUD at below the rental market for comparable non-subsidized units. Johnstown cannot retain any increased rentals and cannot sell the property for 16-1/2 years.
The assessment at issue is for the year 1977. The Board, using the capitalization of income method, determined the fair market value of the property to be $1,807,910. In the assessment records this figure is broken down into land and building components with market values of $551,453 and $1,256,457, respectively. The Board used the predetermined ratio of assessment to market value established for Cambria County of 35% to arrive at an assessment of $632,770. All of the 1977 figures were not materially different from those of prior years, going back to 1974. Johnstown appealed the assessment.
The relevant statute is The Fourth to Eighth Class County Assessment Law (the Act), Act of May 21, 1943, P.L. 571, as amended, 72 P.S. § 5453.101 et seq. The Court of Common Pleas of Allegheny County heard Johnstown's appeal de novo as Section 704 of the Act, 72 P.S. § 5453.704 requires. The county produced its chief assessor who identified the assessment records of Johnstown's property which were offered and admitted into evidence. The chief assessor
then testified that the market value of Johnstown's property for assessment purposes, $1,807,910, was arrived at by capitalizing the net income of the project, $161,127, at the rate of 8.84%. The 8.84% rate was the total of 4.44% for taxes, 2.5% for depreciation, .9% for mortgage interest and 1% for equity investment. The division of the net income of $161,127 by the 8.84% capitalization figure produces the figure $1,823,000. This last was adjusted downward to the amount of $1,807,910, the actual value used as the base for assessment.
Johnstown's evidence of value consisted of the testimony of an appraiser who thought the market value of the property for assessment purposes should have been arrived at by the following calculations: From information compiled by the Institute of Real Estate Management, a private real estate research enterprise, it is learned with respect to apartment projects located in Region III consisting of Pennsylvania, Maryland, the District of Columbia, West Virginia and Virginia, that on the average the percentage of local taxes to gross income is 10.3%, and that the same percentage of local taxes to gross income for apartment projects nationwide is 12%. Johnstown's appraiser then says that the average of these two figures, 11.15%, should be multiplied by $331,723, the gross income of Johnstown's facility, producing $36,987 as the amount of local taxes Johnstown should be required to pay if it is to be treated in this respect uniformly with apartment projects in Region III and nationwide. To produce the amount of $36,987 in ...