Butkovitz continues to criticize AVI assessments

Not a fan: City Con­trol­ler Alan Butkovitz re­leased a re­port he said shows the in­ac­curacies in the city’s Ac­tu­al Value Ini­ti­at­ive. TIMES FILE PHOTO

It’s no secret that City Con­trol­ler Alan Butkovitz is no fan of the city’s Ac­tu­al Value Ini­ti­at­ive.

Last week, Butkovitz re­leased a re­port he said showed just how big a blun­der it is, and that it is even more in­ac­cur­ate than the city’s cur­rent as­sess­ment sys­tem. 

The con­trol­ler has main­tained the city’s move to as­sess city prop­er­ties at 100 per­cent of their mar­ket val­ues isn’t fair, uni­form or even reas­on­able.

Butkovitz asked eco­nom­ist Robert Strauss, a pro­fess­or at Carne­gie Mel­lon Uni­versity, to eval­u­ate the city’s new as­sess­ment num­bers un­der AVI. 

Phil­adelphi­ans are in for “a rude shock,” Strauss said in a May 8 news con­fer­ence in the con­trol­ler’s of­fice. He called AVI a “well-in­ten­tioned policy change” that was not im­ple­men­ted prop­erly.

Look­ing at Of­fice of Prop­erty As­sess­ment re­cords and 30,000 sales re­cords, Strauss found AVI to be riddled with er­rors and in­com­plete data. Butkovitz said AVI is skewed against minor­ity neigh­bor­hoods. These prob­lems, he said, stem from the fact that the city didn’t spend the time or money to re­as­sess prop­er­ties cor­rectly and fairly.

Strauss said he looked at more home sales than OPA did to reach his con­clu­sions. In AVI, data is miss­ing or doesn’t make sense, Strauss said. AVI, he said, “would not be a term pa­per that would lead to a passing grade.”

In­di­vidu­al ex­amples of re­as­sess­ment muffs are not hard to find, and Of­fice of Prop­erty As­sess­ment rep­res­ent­at­ives have said er­rors were an­ti­cip­ated.

But the mis­takes in valu­ations were ex­pec­ted to be in a range of 15 per­cent either way. In oth­er words, if a house sold for $100,000, then it would as­sesses any­where from $85,000 to $115,000.

Strauss said he found that range to be much, much wider, which the con­trol­ler said is the op­pos­ite of what AVI was sup­posed to do —– make as­sess­ment val­ues close to mar­ket val­ues. Strauss said the dif­fer­ence between prop­erty sales prices and as­sess­ments were as high as 112 per­cent —and some­times 800 per­cent.

The city’s chief as­sessor, Rich­ie McK­eithen, stands by AVI.

“I’m sus­pect­ing he used a lot of data we wouldn’t have used,” McK­eithen said of Strauss. “That’s why his res­ults are so skewed versus ours.”

McK­eithen said OPA didn’t use fore­clos­ures or sales with­in a fam­ily, and didn’t use sales fig­ures that didn’t re­flect prop­er­ties’ cur­rent con­di­tions.

For ex­ample, he said, a prop­erty in very bad shape might have sold for $50,000 some years ago, but the buy­er fixed it up so that it’s now worth $350,000.

The pro­fess­or’s re­port also showed:

• There is evid­ence the more ex­pens­ive prop­er­ties are as­sessed at lower levels than less ex­pens­ive prop­er­ties.

• The me­di­an level of as­sess­ments rises in areas as they have in­creases in black res­id­ents. It falls in areas that have more white res­id­ents.

• OPA con­duc­ted a city­wide as­sess­ment of more than a half-mil­lion prop­er­ties us­ing stat­ist­ic­al mod­els, but such mod­el­ing is “only as good as the data about the prop­erty char­ac­ter­ist­ics used to pre­dict the 2014 val­ues.” Strauss found 30 per­cent of prop­er­ties don’t have in­form­a­tion about the num­ber of stor­ies or are coded as hav­ing “zero stor­ies.”

Strauss said al­most 30 per­cent of the prop­erty re­cords he ex­amined showed no in­form­a­tion about bath­rooms. 

McK­eithen said the city­wide re­as­sess­ment had star­ted be­fore he ar­rived in Au­gust 2010.

He said OPA in­creased staff from 130 to 218. Budget was in­creased to pay the new work­ers and for new com­puters and train­ing. He said OPA con­duc­ted field in­spec­tions of every res­id­en­tial prop­erty.

He said he re­sen­ted the state­ment that OPA didn’t put enough time in­to AVI. As an as­sessor, he said, you al­ways want more time.

City Coun­cil­man Mark Squilla (D-1st dist.) said he’s tak­ing a closer look at the Strauss re­port, but ad­ded that, if the data is wrong, the res­ults will be wrong no mat­ter what sys­tem is used to re­as­sess prop­er­ties.

“Garbage in, garbage out,” he wrote in a May 10 email to the North­east Times.

In light of the pro­fess­or’s find­ings, Butkovitz says the city has three al­tern­at­ives: First, use last year’s data and clean it up. Second, use the new data and clean it up. Or, third, pre­tend there’s no prob­lem.

Strauss ad­vised the city to fix AVI be­fore im­ple­ment­ing it be­cause it will pay in the long run if tax­pay­ers agree they’re be­ing taxed fairly. He said elec­ted of­fi­cials are prone to say they’ll fix it up later, but, he ad­ded, they might not still be in of­fice later.

Even if the city has to bor­row money to get as­sess­ments right, it should do that in­stead of just pre­tend­ing they’re right, Butkovitz said. Do­ing noth­ing has its costs, the con­trol­ler said. If the city loses a lot of as­sess­ment ap­peals, it could lose $245 mil­lion in tax rev­en­ues. Over four or five years, that rev­en­ue loss could top $1 bil­lion, Butkovitz said.

“Spend­ing $30 mil­lion to avoid a $1 bil­lion loss, that’s prudent,” the con­trol­ler said.

Butkovitz said he spent $27,500 for Strauss’s re­port.

Will the con­trol­ler’s fig­ures put the kibosh on AVI?

Coun­cil­wo­man Maria Quinones Sanc­hez (D-7th dist.) said she shares con­cerns about some of the as­sess­ments, but doesn’t think AVI will be stopped. And, al­though it might have to be ad­jus­ted for the next few years, she said it’s an im­prove­ment over the city’s cur­rent as­sess­ment meth­od. 

 “The [AVI] sys­tem is not per­fect, but it’s a whole lot bet­ter,” she said. ••

You can reach at jloftus@bsmphilly.com.

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