Ready or not, Philadelphia is going to get a complete property tax overhaul, so homeowners should prepare themselves to fight for affordable tax bills, according to City Councilman Brian O’Neill.
Speaking at the monthly meeting of the Somerton Civic Association on Dec. 11, O’Neill reported that his efforts to delay indefinitely the implementation of Mayor Michael Nutter’s Actual Value Initiative appear ill-fated. He said Council seems poised to pass some form of the property tax restructuring in time for fiscal year 2014.
“This is like a freight train right now with so many reasons it will pass,” said O’Neill (R-10th dist.)
That means homeowners can expect to receive notice of their 2014 assessments in February and would have until sometime in October to appeal them. Once appeals are done, the city will send out final 2014 bills.
O’Neill’s major concerns with AVI are that Nutter plans to manipulate the new scheme to increase the city’s property tax revenues and that many individual homeowners will see large and immediate hikes.
“I believe a forty percent increase will be on the low end in an average, nice neighborhood where people would want to move into the city,” O’Neill said. “I think it’s going to be in that area.”
Somerton could be one of those areas. Some folks there are already at their wit’s end about property taxes, even without AVI.
During last week’s meeting, one woman complained about her 2013 tax bill that reflects three consecutive years of citywide property tax increases. At the mayor’s urging, Council passed “temporary” rate hikes of 10 percent for 2011 and another 4 percent for 2012, primarily to pump more money into the city’s desperately insolvent public school system, which is facing a $1.3 billion budget deficit over the next five years, according to Nutter.
Earlier this year, the mayor successfully lobbied Council to make both of those temporary increases permanent and to impose another 2 percent property tax increase for 2013.
It was done “all in one vote. So it really was a 16 percent increase, although you’ve been paying 14 percent,” O’Neill said.
By law, the administration must get Council’s approval before raising tax rates, something that Council had not done since W. Wilson Goode occupied the mayor’s office from 1984 to 1992, O’Neill said.
However, homeowners have seen their tax bills increase many times since the Goode era through neighborhood-based reassessments by the city’s Board of Revision of Taxes. In Somerton, for example, it seemed like the BRT raised property assessments every few years, O’Neill said. Folks who obtain city permits for property improvements often get reassessed, too.
As a result of these localized reassessments, property owners in some sections of the city have been paying taxes on as little as 15 to 20 percent of their actual, market-driven property values, while others have been paying as high as 75 or 80 percent of actual value. Meanwhile, some commercial property owners have been paying 100 percent, according to the councilman.
While the objective of AVI is to make assessments uniform for everybody, O’Neill fears that the current assessments are so wide-ranging that many folks will be in for a very rude awakening if their new rates aren’t implemented gradually.
“We’re all over the place. You can’t just flip a switch,” he said.
Many homeowners will see some relief through the new homestead exemption and possibly through a proposed gentrification exemption.
The homestead exemption will allow home owner-occupants to deduct $30,000 from the assessed value of their homes before taxes. Landlords and renters are not eligible. The gentrification exemption, if passed by Council, would lower tax bills on properties that have gained significant value in a short period of time.
Nonetheless, O’Neill believes, the new tax bills will still be too high for many folks, particularly in difficult economic times. And the relief measures will only increase the burden on taxpayers as a whole.
“Actual value should never be done all at once with the underlying issues we have in the city. … You’re doing too much at once. The numbers are so out of whack. You have to do it gradually,” O’Neill said. “I think six years [for implementation] is the right number.”
The councilman is confident that the workers who do the new assessing will be able to assign fair market values for most properties. The BRT no longer handles that duty, although as things stand, it will continue to hear appeals.
The big political battle, O’Neill believes, will be over the new tax rate or millage. Nutter has said that he wants to generate more money from property taxes because he believes that the city’s tax revenues have for years failed to keep pace with rising property values. In short, he claims, property values have risen, but tax proceeds have not.
O’Neill argues that AVI is the wrong vehicle for making such a correction.
“I think the problem is going to be less on the assessments than making sure the millage is right,” the councilman said.
“It should be revenue neutral when we switch from these fractional [assessments]. The city shouldn’t make money. If [the administration and Council] want to raise taxes, they should do it the next year.
“Actual value is a good thing [if it’s kept] separate and apart from the current status of Philadelphia.” ••