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Pollution Stigma Impacts Value

by Tom Branham, Washington D.C., January 2016

 

In a benchmark decision, the Pennsylvania Supreme Court ruled that the stigma of environmental pollution is relevant to determining the fair market value of real estate for tax purposes.

 

The case, Harley-Davidson Motor Co. v. Springettsbury Township, involves an appeal over the assessment of a 230-acre piece of property owned by Harley-Davidson that was previously used for manufacturing weapons.

 

The state’s highest court ruled in favor of the motorcycle manufacturer. The decision said a trial court should have accounted for a settlement reached with the U.S. government to remediate the pollution on the land between the 1940s and 1980s.

 

“As all relevant factors having a bearing on the value of a property, including environmental contamination, must be considered in a fair market value determination, we hold that the potential impact of a settlement agreement regarding environmental remediation and ongoing limitations and maintenance as a by-product thereof, through a buyer-seller agreement, are relevant factors that must be taken into account,” the opinion stated.

 

Despite the fact that a settlement for the clean-up exists, there are still other potential impacts related to the environmental damage on the site such as restricted use or ongoing obligations to maintain engineering controls for future buyers. These are important issues relating to tax assessment value, the justices said.

 

The Supreme Court did not directly decide how to value contamination in any other context. However, the court's reasoning will surely be cited in future cases involving property-damage claims. The case will provide helpful authority for businesses that want to sell contaminated property and for those whose contaminated property has been appraised at full value by the county without consideration of all potential current and future costs.