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PA Supreme Court Holds That Presence of Environmental Remediation Agreement May Increase a Property’s Assessed Value

In a precedential opinion, the Pennsylvania Supreme Court recently held that the presence of a pre-existing clean-up agreement to address a contaminated property has the potential for increasing the assessed value of a property. Harley-Davidson Motor Company v. Central York School District may potentially provide taxing authorities the ability to maximize revenue return from contaminated properties.

This case involved a 229.24 acre parcel of commercial/industrial property in Springettsbury Township, York County owned by Harley-Davidson. From 1941 to 1964, the United States Navy and a predecessor in title used the property to operate a weapons manufacturing plant. As a result of this use, the property was contaminated with buried waste, including unexploded ordinance. In 1995, Harley-Davidson entered into an agreement with the United States where they agreed to share 100% of the remediation costs. Harley-Davidson currently participates in the “One Cleanup” program of the U.S. Environmental Protection Agency and the Pennsylvania Department of Environmental Protection regarding the property. This program permits owners of contaminated land to avoid environmental liability by complying with state remediation law. Harley-Davidson is addressing the contamination through Pennsylvania’s Land Recycling and Environmental Remediation Standards Act (“Act 2”).

This matter arose after Harley-Davidson appealed an increased property tax assessment by the York County Tax Assessment Office. Among other things, Harley-Davidson argued that the assessed value of the property should be reduced by the total cost of remediation. Central York School District (“School District”) argued that the agreement between the United States and Harley-Davidson made those parties 100% responsible for the cleanup costs and the environmental issues at the site did not preclude the contemplated “highest and best use” (warehousing and office space) for the property. Therefore, the existence of the contamination should not negatively affect the property’s assessed value. Nonetheless, the School District’s appraiser recommended a 5% environmental stigma reduction.

Attorneys from Stock and Leader, representing the School District, convinced the Supreme Court that the existence of the cleanup agreement and the liability protection afforded under Act 2 were factors that could be considered when calculating a property’s assessed value. The Court rejected Harley-Davidson’s argument that the assessed value should be reduced by the total cost of cleanup.
This case is important for several reasons. With respect to taxing authorities, it supports the notion that the presence of contamination on a property does not necessarily mean that the property must be assessed at a lower value. Owners of contaminated property should not, however, conclude that they should decline to enter into cleanup agreements with regulatory agencies or otherwise address contamination under the Act 2 program out of fear of increased tax liability. While this may be true in the short run, proactively addressing clean-up liabilities has the potential of increasing a property’s value, perhaps far outweighing any increased property tax increase.

Attorneys at Stock and Leader have considerable experience with tax assessment appeals, real estate transactions, municipal law, and environmental remediation issues and they stand prepared to consult with clients to address these sometimes complex and interrelated issues.

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