by Sue Ann Rybak
More than 150 residents packed the Commons Building at Norwood-Fontbonne Academy to hear a number of elected officials and other city officials discuss the controversial Actual Value Initiative and Real Estate Tax.
The Chestnut Hill Community Association arranged for the panel to answers questions regarding the implementation of AVI. The panel consisted of 8th District Councilwoman Cindy Bass, Councilman At-Large David Oh, City Controller Alan Butkovitz, Raquel Meadows, a representative from Councilman At-Large Bill Green’s Office, Brett Mandel, Chair, Philadelphia Tax Reform Commission Real Estate Working Group and Ellen Mattleman Kaplan, Vice President of Committee of Seventy.
AVI is intended to make the current real estate tax more fair by using market values that are based on the current “actual value” of the real estate. The existing real estate law applies a tax rate to the assessed value of a property. The assessed value is currently set by the city at 32 percent of the market value.
After tense debates last summer, City Council postponed the implementation of AVI until 2014 because it lacked the data to determine the aggregate value of the city’s real estate. Law makers complained at the time that they were being asked to set a tax rate independent of the fundamental information they needed. A higher aggregate value would lower the millage rate homeowners would have to pay.
While it’s implementation might be controversial, every member of last night’s panel agreed that Philadelphia’s real estate tax must be fixed and that something like AVI would likely replace it.
Kaplan said property owners need to understand that the current system is not fair. She added that people need to understand why its not equitable and why its important to change the system. Kaplan said people need to know “in clear terms that are easy to digest exactly what AVI is and whether their property taxes are going to increase or decrease.”
She said elected officials need to make sure the problems with the old system don’t reoccur with the new system.
“It has to be an open and transparent process,” Kaplan said.
Mandel said most people would agree that the current system is broken.
“If everybody in this room went out and bought a house in Philadelphia for a $100,000, everybody would pay a dramatically different amount in taxes because we don’t value properly, and we don’t value consistently,” Mandel said.
Mandel said in some cases, residents with very modest properties are paying more than residents with extravagant homes.
“That’s not good,” he said. “That’s not right. That’s not legal. We have to fix the system. The question is how are we going to make a transition from a system that is woefully screwed up and horribly unfair to a system that is fair and accurate.”
Butkovitz said he was angry about the way AVI was first proposed and argued that the best communities in the city would be devastated.
He said when city council adjourned in June, the purposed rate was 1.8 percent. He said that Chestnut Hill residents could face an increase in taxes by as much as $2,000. He added that AVI would devastate many homeowners.
“I had a lady in Fairmont who came up to me in tears because she is 75 years old, and her property is gCity Council’s plan, he said would kill residents, to which he received a round of applause from the audience.
“This is not a science experiment in some laboratory in some graduate school,” he said. “This is people’s real lives.”
Meadows said the Councilman Green “believes that AVI has to happen, will happen, should happen and legally it has to happen.”
“If the City Council doesn’t pass AVI this Spring, then it will be court ordered,” Meadows said.
Mandel said there was no question about if the system needed to be fixed.
“Everybody on this panel, except someone whose name rhythms with ‘what-no-kiss’ is telling you the system is broken,” he said. “The question is not should we fix the system. The question is how should we fix the system and more importantly what you should do when you leave this room.”
Mandel said people need to tell their councilperson that the values need to be accurate and the tax needs to be revenue neutral.
“This is not climate change,” Mandel said. “We have to do something about it.”
Bass agreed with Mandel’s statement.
“It’s really not an option about whether we can keep the system,” Bass said. “This system is a problem. We need to get rid of it quick, fast and in a hurry.”
Bass said one the reason the council “put the brakes on” is because it lacks the accurate data.
“We’re kind of throwing stuff up on the wall and hoping it sticks,” Bass said.
She added that in order to move forward the council needs to hear residents answers to the problem.
Residents in the audience were happy to oblige.
Tolis Vardakis, of Chestnut Hill, said one solution was to reduce the cost of city government.
“The cost Chestnut Hill residents are paying for lousy services is extremely high,” Vardakis said. “Drop the DROP and other benefits that are so outlandish. Nobody in the private industry gets those benefits.”
Elizabeth Olson, of Chestnut Hill, said AVI will result in the same problems as the current tax system because placing a tax on what the value of a house is at in “any single moment in time” is extremely difficult.
“Real estate is not like a dollar bill,” She said. “It is utterly house by house.”
She said no one has addressed by what standard a property is going to be evaluated by.
“It is a problem that is not being satisfactory addressed in a propriety way,” Olson said.
Olson said the failure to implement a fair and accurate evaluation will result in the city being inundated with law suits.
Sanjiv Jain, a Chestnut Hill property owner, said residents need to know when they can expect to know the values and what the time table will be.
“The impact on the city is effectively none,” Jain said.
He said if someone is not able to pay their taxes, they will eventually be replaced by someone who can. Jain compared the proposed tax increases to Hurricane Sandy.
“Sandy came through and most of us are fine,” Jain said. “But, if you’re home was the one that got torn down the impact is devastating. I have racked my brain and the only thing I can come up with is if the hit is tolerable. If the impact was capped at 5 percent per year. There would be wounds but they would not be fatal. If it’s a pain that’s tolerable we can absorb it.”
Butkovitz adamantly agreed with Jain. He said it’s not a matter of whether AVI is going to pass but at what tax rate.
“People need to make sure the tax rate that is passed by city council is as close to 1 percent as possible,” Butkovitz said. “The reason people are upset is because the tax rate that is under discussion is 1.8 percent. The answers depends upon you. A one percent increase is tolerable.”
After the panel session ended, CHCA president Brien Tilley said he was pleased with the way it went.
“I think the community was clear in saying they’re ready to deal with a tax structure that’s fair,” CHCA President Brien Tilley said. “Be fair and give us truthful answers and we can live with it. But, also realize if it’s not fair there could be serious fallout.”