by Pete Mazzaccaro
As Hill families settle into summer months – planning and going on vacations, sending kids to summer camp – Philadelphia is poised to increase property taxes under a new assessment system, hoping to raise more than $94 million to patch a shortfall in the Philadelphia Public School budget.
The new system is currently called the Actual Value Initiative. Under the new system, the city will reassess all Philadelphia properties and determine taxes based on what should represent an actual market value for the home.
The idea is not a new one. A similar proposal was made by former City Controller Jonathan Saidel 10 years ago. Mayor Michael Nutter’s administration is pushing AVI for the same reasons Saidel did: The current system is out of compliance with Pennsylvania state law that requires property taxes to be based on actual home values. And numerous studies have shown that the current system has taxed properties with low values at a disproportionately higher rate than more expensive homes.
Also, according to the administration, the city faces immediate challenges to its current system, including a state board assessment that found the city’s current system flawed and a threat that property owners could file a class-action suit against the city over the current system’s inequities.
City Council is currently wrestling with a number of budget bills and a number of different proposals to raise taxes because it seems that – no matter what happens – taxes will again have to be raised. Council has until June 30 to pass a budget, meaning those proposals will be front and center for the next month.
One of the counter proposals to the Nutter administration plan was introduced by City Councilman-at-Large Bill Green. Green’s proposal seeks to raise the $94 million needed by the administration, but attempts to control increases to residential property through a number of steps, including a reduced default mil rate and increased homestead exemptions – value that can be declared tax exempt for a homeowners primary residence.
Green said the problem with AVI as proposed by Nutter is that it would shift the burden of tax increases to residential taxpayers. He also pointed out that it is impossible for Council to understand exactly what kind of tax increase they would be voting for in AVI because the assessments on which new property taxes will be based are not scheduled to be completed until the fall, months after the budget is passed.
“Would you sign a contract to buy a house at a price based on a formula with variables that won’t be known until a month after you move in”? Green asked in a release announcing his legislation. “That is what the Administration has asked City Council to do with your property taxes. I fully support a uniform and fair system for taxing property, but no one envisioned enacting AVI without knowing the values first.
“In implementing AVI, we must proceed with full information, make data-based decisions and keep the public informed every step of the way.”
Green also released a property tax spreadsheet – available at his website, www.greenforphiladelphia.com – that allows homeowners to take a look at the new legislation, both his and the Nutter Administration’s, and see how it will impact them.
The Local took a look at four current homes for sale, their current tax bill according to the city’s Office of Property Assessment, and used Green’s spreadsheet to see what would happen to those tax bills if each house were assessed at their current sale price according to the popular real estate site trulia.com.
The results predictably show steadily increasing tax bills as home values rise. The spreadsheet includes numerous other scenarios based on possible homestead exemptions and with so-called smoothing proposals that would phase in new tax rates over the next three years. (For a broader picture and more examples, see home list below)
The least expensive house on the market in Chestnut Hill is selling for $249,900. Its current tax bill is $2,336.12, which is based on a city determined market value of $77,400. According to Green’s spreadsheet, the likely tax bill under the administration’s plan would be $3,655 – an increase of $1,319.
The Green amendments would lessen that home’s tax bill from $3,655 to $3,347, a $308 reduction. All rates were determined without factoring in a homestead exemption, which Green has proposed raising to $40,000 from $15,000.
On the other end of the scale, a $3.2 million dollar home for sale has a current tax bill of $24,749.57 based on a market assessment of $820,000. Under the administration’s plan, the home’s tax bill would rise to $46,805, an increase of $22,056. The Green amendments would lessen the bill to $42,861, a savings of $3,944.
According to Green, any home with a market value more than $120,000 should expect to see its property tax increase. This should assure property tax hikes for nearly every home in Chestnut Hill, where the average home price according to trulia.com is $893,352.*
Budget talks will commence this week in Council where, in addition to Green’s bill, City Council President Darrell Clarke has proposed several compromises that would further lessen the impact on homeowners by seeking $45 million by raising use and occupancy taxes on businesses.
Current Taxes vs New Taxes under Actual Value Initiative
The Local took a look at four homes that are currently for sale in Chestnut Hill and compared Sales prices to current city assessed values to look at how individual property taxes could increase. Actual increases will depend on city legislation and new property assessments due for completion this fall.
Sale Price $249,900
Assessed Value (City): $77,400
Current Tax: $2,336.12
Proposed Administration Tax: $3,655
Proposed with Smoothing: $3,218
Green Amendments: $3,347
Percent Increase: 43 to 56 percent
Sale Price: $765,000
Assessed Value (City): $240,000
Current Tax: $7,243.78
Proposed Administration Tax: $11,189
Proposed with Smoothing: $9,901
Green Amendments: $10,247
Percent Increase: 36 to 54 percent
Sale Price: $1,395,000
Assessed Value (City): $505,000
Current Tax: $15,242.11
Proposed Administration Tax: $20,404
Proposed with Smoothing: $19,125
Green Amendments: $18,685
Percent Increase : 22 to 33 percent
Sale Price $3,200,000
Assessed Value (City): $820,000
Current Tax: $24,749.57
Proposed Administration Tax: $46,805
Proposed with Smoothing: $38,489
Green Amendments: $42,861
Percent Increase: 55 to 89 percent
Sales price listed with Trulia.com Current tax and assessed value from Office of Property Assessments
Proposed tax values produced by Councilman Brill Green’s tax spreadsheet.
* Value taken on Monday, June 4.