by Sue Ann Rybak
If you haven’t gotten your valentine’s present don’t worry you will – it’s in the mail. The City of Philadelphia Proposed 2014 Property Market Value Notices are scheduled to go out on Friday, Feb. 15.
Richie McKeithen, chief assessor for the Office of Property Assessment, told a group of about 75 residents at the Actual Value Initiative and Real Estate Tax Discussion Panel meeting that everyone should have their property market value notices by March 5. The meeting, which was sponsored by the Chestnut Hill Community Association was held Tuesday, Feb. 12 at the Norwood-Fontbonne Academy, 8900 Norwood Ave.
The format for Tuesday’s meeting was different then the first meeting held in November. Attendees were asked to write their questions on index cards, which were then answered by members of the panel composed of McKeithen, chief assessment officer at the Office of Property Anna Wallace Adams and communications and community outreach coordinator at the OPA Kate Dreher. CHCA president Brien Tilley served as moderator.
While the specifics of Mayor Nutter’s Actual Value Initiative (AVI) are still up in the air, the decision to overhaul the city’s property tax system is not.
In the past, Philadelphia has used a fractional assessment system that converts the “certified market value” of land to an “assessed value” based on a “predetermined ratio,” which in Philadelphia’s case is 32 percent. Under AVI, a new tax rate would be applied to 100 percent of the actual market value.
“We’re moving away from the fractional system,” Adams said.
She said that under AVI the city hopes to create “a fair and accurate system that is easy to understand.”
But what that rate will be has not yet been established.
Reviewing your notice of proposed valuation
Dreher said when you receive the notice be sure to review all the information and make sure it is correct. She said also be sure to check the description of your property.
Residents should also check the notice to see if they were approved for a Homestead Exemption. The Homestead Exemption applies to owner-occupied primary residences. Currently, the proposed Homestead Exemption would reduce a total market value assessment by $30,000.
Dreher said there were some situations in which a resident might not be approved for the exemption. Those reasons included an application that wasn’t processed in time or an application that was incomplete. Dreher said in order to qualify for the exemption residents must own their own home and live in it as their primary residence. There are no other requirements. The next deadline to apply for the Homestead Exemption is July 31, 2013.
Dreher said if owners have questions they should call the the hotline number 215-686-9200.
“The assessment process is an estimated value based on several factors,” McKeithen said. “The assessment is subjective. It’s based on some judgement that we have made about your property.”
He said on the notice under Property Characteristics it will say what type of property you have: a 3-story house, a two-story house, a twin or rancher.
“Assessments are based on comparable sales,” McKeithen said. “We looked at sales that occurred over the last five years and time adjusted those sales into different categories.”
He said foreclosures or family transactions would be filtered out of the evaluation.
“We only looked at transactions between a willing buyer and a willing seller,” McKeithen said. “The assessment is not the same as an appraisal. We are not going to be as meticulous as that. Location is going to be the driving force in your property value.”
He said the city is divided up into 640 Geographical Mapping Areas (GMAs), sub-neighborhood selections where “small pockets of activity have occurred throughout the city.”
He said the value of a property was determined by “a whole host of characteristics” including the condition of your property, the square footage of your property, its location, the availability of parking, the era in which it was built, central air and other amenities.
Residents will also receive a first level review form with their notice.
“The first level review is an appeal process for OPA,” McKeithen said. “It’s something we haven’t done before. It gives you the opportunity to talk with an officer of OPA without having to go downtown and having a formal appeal hearing with the board of revision. The first level review process is an information sharing opportunity for you to share information with us, and us to share information with you.”
After the initial presentation, Tilley read the participants’ questions. One question asked if the mayor and City Council were still committed to making AVI “revenue neutral,” which would mean that the total amount of taxes generated in AVI’s first year would be no larger than the revenue collected under the old system.
Adams said the city plans on bringing in the same amount of revenue as it did this year from the real estate tax.
“Based on our current assessment process assuming we don’t have any relief measures [such as the Homestead Exemption] the tax rate will be somewhere between 1.2 and 1.3 percent,” Adams said.
Another question asked how the new assessments would affect the 10-year abatement construction? McKeithen said that the portion that is abated will remain abated.
“For example if 40 percent of your property is abated, when the new assessments are generated you will still receive a 40 percent ratio,” McKeithen said.
He added that low-income seniors who qualify for a property tax freeze through the Philadelphia Revenue Department will not effected by AVI, as long as they meet the income requirements.
One attendee asked what was being done about collecting delinquent taxes.
“Philadelphia is owed roughly $295 million in property taxes, interests and penalties,” according to a report by the PEW Center’s Philadelphia Research Initiative, and “about 20 percent of that amount is listed as ‘written off’ because the delinquencies are more than 10 years old and presumed to be uncollectible.”
“It’s a big challenge,” Adams said. “We know what we need to be doing.”
She said the city is using a wide variety of initiatives including working to freeze people’s bank accounts, working with collection agencies and investing $40 million in new IT systems to understand exactly where the delinquencies are.
“Is there a dollar figure that you need to raise through this new program,” Tilley asked. “And does the city plan to buffer the school district’s financial crisis?”
“The school district is still in a very dire financial state, but right now the city is not planning on generating any more revenue through the real estate tax,” Adams said.
She added that the amount was the same as this year.
At least one Hiller voiced her frustration with the city’s new methods, including the fact that much about how the Homestead Exemption would be applied remains up in the air.
“It seems to me that with the Homestead Exemption there will be winners and losers,” said Mary Walsh, a Chestnut Hill resident. “There will be people whose taxes are going to go up and their taxes will be delayed and there will be other people whose taxes will be going down and their decrease will be delayed. I don’t understand why the city is doing this.”
Adams said the city knew that commercial properties, particularly large commercial properties were assessed closer to their real value than residential properties and that under AVI, there would be a shift in the tax burden from those large commercial properties to residential properties.
“The Homestead Exemption shifts some of that burden back to everyone else,” Adams said.
But according to the report from the The Philadelphia Research Initiative, if the city’s aggregate taxable value is 90 billion the rate would have to be 11 percent higher than it would have been without the exemption. In that scenario, the rate would likely rise above the 1.2 percent rate referenced by the OPA.
As a result of the higher rate, owners of more expensive homes would end up paying higher tax bills than they would have in the absence of the Homestead Exemption.
Many attendees at Tuesday’s night meeting categorized the benefit of the exemption as smoke and mirrors. Walsh said having a Homestead Exemption would essentially be “no relief” because it would mean the tax rate would go up.
Tax Relief legislation recently introduced
Relief, however, is certainly on the mind of lawmakers in the city.
Last month, Council President Clarke and the Philadelphia Delegation of the Pennsylvania House of Representatives, chaired by state Rep. Cherelle L. Parker, D-Phila., announced their proposed property tax relief package for Philadelphia homeowners.
“We recognize the financial strain the new tax system may place on many city homeowners and homestead relief may not be enough,” said Parker in a statement. “Therefore, the delegation is proposing common-sense legislation in an effort to provide relief to residents as they transition to the new rates under AVI.”
“These reforms are not only necessary but they will become the lifeblood of the next generation in terms of how we generate revenue,” said State Sen. Anthony Williams, D-Phila.
The property tax relief package consists of four pieces of legislation:
HB 388, sponsored Parker, will provide the City of Philadelphia with additional authority to collect delinquent property taxes. The city will be authorized to place liens on all properties under common ownership in Pennsylvania when at least one is delinquent in the taxes owed to the city of Philadelphia. When the property owner attempts to sell any of his/her property located within the Commonwealth, the lien must be satisfied.
HB 389, sponsored by Rep. Michelle Brownlee, proposes a constitutional amendment authorizing two classes of properties (residential and commercial) to be taxed at different rates in the City of Philadelphia. Currently, all property in Philadelphia is taxed at the same rate.
HB 390, sponsored by Rep. Mike McGeehan, is recommending a bill to give the City of Philadelphia the ability to provide eligible Philadelphia homeowners with the option to make property tax payments in periodic installments.
HB 391, sponsored by Rep. Mike O’Brien, is offering a bill to provide relief for long term owner-occupants by amending the First and Second County Property Tax Relief Act to afford Philadelphia the same authority to use age and financial need when considering relief for long term owner-occupants, often referred to as gentrification relief.
The next community meeting on AVI in the Northwest will be held at 5 p.m. on March 5 at the 14th Police District located at 43 W. Haines Street. For more information about AVI go to www.phila.gov.