O’Neill discusses tax overhaul at civic meeting

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.” ••

Re­port­er Wil­li­am Kenny can be reached at 215-354-3031 or wkenny@bsmphilly.com

You can reach at wkenny@bsmphilly.com.

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