by Pete Mazzaccaro

I started receiving calls last week from Hill residents concerned about the Actual Value Initiative. Those who called didn’t really understand it. They wondered what, if any, the real impact would be. They wondered if it was something that might be covered by the Local.

To be honest, like many of those who called, AVI wasn’t really on my radar. I tend not to spend a lot of time covering citywide issues that are generally handled very well by our city’s daily paper, The Philadelphia Inquirer. It’s not that I don’t think it’s important. It’s just that from week to week, there’s a lot going on in our neighborhood that demands attention.

This time though, the issue is different. AVI is an initiative that seeks to base Philadelphia property taxes on real market values. The theory goes like this: Homeowners in lower income parts of the city – with lower property values – are currently paying a disproportionately higher reported tax rate than homeowners with higher property values.

AVI will not only right this wrong, but it will make property taxes in the city much easier to decipher. Instead of plugging an arbitrary market value into an algebraic formula, homeowners will be able to apply a standard mil rate to their home’s value. This is what property owners across America already do everywhere else.

While straightening out the convoluted current system and adding a little more equity are certainly admirable goals, the reality is that good estimates have established that anyone with a home worth more than $120,000 can expect an increase in their annual property tax bill.

In Chestnut Hill, where the average home sale price is nearly $900,000, AVI is suddenly a local issue. It’s safe to say that nearly everyone who owns property in Chestnut Hill will experience sharp tax increases, regardless of how AVI is implemented in the next few years. And that impact goes beyond just higher taxes.

As City Councilman Bill Green pointed out, how can anyone sell or buy a home in Philadelphia right now when property taxes will not be determined until assessments are completed in the fall? Would you buy a house when you don’t know what the annual taxes will be? It’s likely that even modestly astute homebuyers will be waiting through the summer before they buy.

Also, it’s well known that the relationship between homeownership and taxes in Philadelphia is a balancing act. Any homeowner in Chestnut Hill will tell you that Philadelphia property taxes are low, but that those low taxes need to be weighed against reduced services – public schools being at the top of that equation.

Since many Hill residents send their children to private schools, the lower property taxes and the walkable amenities of a neighborhood like Chestnut Hill make it worthwhile.

Will higher taxes tip the equation into a move to the suburbs for Hill residents? That remains to be seen (and it won’t be easy selling those houses if the tax to service mix does pass that threshold).

I certainly don’t envy city lawmakers, faced with a $94 million shortfall in the school budget. There’s not much they can do other than raise taxes or cut spending – none of which are easy solutions.

It’s certain at this point that taxes will go up. We truly hope that, for the sake of the city and Chestnut Hill, they won’t hit the tipping point that begins to send people scrambling for new addresses in Montgomery County.

 

  • Eric

    The % of real market value used to determine the new taxes is said to be around 1.8% with some modest deductions, mainly a $30,000 “homestead exemption” for long time homeowners. New Jersey has the highest average tax rate in the nation at about 1.8%

  • Jjennabell2

    Good for City Council. Giving the school board more money would just be a way of funneling cash to friends of the SRC members who have already set up the skeletons of charter schools and school bus companies, just waiting to have those contracts handed to them. It is all a joke. Why should I pay more taxes so that friends of Ramos can get rich? Already started looking for a job in Delaware.