Talking the terrible ‘T’
— Assessed value, actual value, market value. Property taxes have you confused? Join the crowd . . .
During the next several months, Philadelphia City Council members will be figuring out how much the city’s going to charge you to live here. And sometime next month, you’re going to be mailed a number that will be key to Council’s arithmetic.
That number will be your house’s new assessment. It’s supposed to be the actual value of your property — about what you’d get for it if you sold it today.
Currently, the city uses only part of your property’s value to compute taxes. And many of the assessments are out of date or inconsistent. For example, houses that sold for $250,000 in different parts of the city could easily have assessment values — and resulting property taxes — that varied widely.
The mayor’s office and some Council members have touted assigning actual values to properties as a way of making real estate taxes fairer. Councilman Dennis O’Brien (R-at large) said the move is “long overdue in Philadelphia.”
Using the Actual Value Initiative, or AVI, a house worth $100,000, for example, would be assessed by the city at $100,000. But because so many elements of the change to AVI have yet to be worked out, it is uncertain how individuals will be affected.
Jim Dover, a retiree who lives near Archbishop Ryan High School, is worried that the taxes on his row house will soar.
“Every year, it’s been going up a hundred, a hundred, and last time, it was two hundred,” he said in a Jan. 4 interview.
He said he and his neighbors, many of whom also are retirees, are paying about $2,000 a year in taxes on their houses. He said he’s afraid a new assessment might push his taxes to $3,000, a figure close to what he said suburban property owners pay.
“That’s crazy!” he said. “This is Philadelphia. We don’t have properties; we have homes.”
Changes in assessments, by law, are supposed to be “revenue neutral,” which means the total revenue the city takes in via property taxes can’t rise. To do that, the city has to lower its tax rate when it raises the value of its properties, according to Councilman Brian O’Neill (R-10th dist.)
Some property owners might find their taxes drop because some properties currently are assessed too high.
“My staff is finding some properties have been overpaying over the years and, indeed, should receive a tax cut under AVI,” said Councilman Bill Green (D-at large).
According to O’Neill, the mayor has put the city’s total real estate value at more than $96 billion. The mayor’s previous calculations were based on estimates of about $80 billion, and this new, higher estimate is likely to mean a lower tax rate for individual properties.
Right now, the tax rate that is being mentioned most often by city officials is 1.3 mills. A mill is one one-thousandth, or 0.001. So, if the city council sets the tax rate at 1.3 mills, a homeowner would multiply his or her new property assessment figure by 0.0013. For example, the tax on a property assessed at $100,000 would be $1,300.
O’Neill favors a rate set at no higher than 1.3 mills, but said, “1.2 should be our goal.”
WHAT’S YOUR NUMBER?
Reassessment is not the only thing that could affect tax bills.
One is a proposal to offer a break — a homestead exemption — to property owners who live in their homes. The homestead exemption would shave dollars off the actual value figure, O’Neill explained, but the exact number hasn’t been set yet.
If that exemption were as high as $30,000, O’Neill said, more than 35,000 properties would generate no taxes at all because they’re worth no more than $30,000.
“That’s ludicrous,” said state Rep. Ed Neilson (D-169th dist.) “That means not paying for trash collection, for plowing. Everybody needs to pay a fair share.”
City Councilman Bill Greenlee (D-at large) said everyone should pay at least some tax. Some homeowners paying nothing wouldn’t be fair, “and it wouldn’t sit well with people.”
Philadelphia is the only Pennsylvania county that doesn’t have a homestead exemption, Neilson said. The state legislature, however, has given the city the OK to institute one.
Green said the city has about 320,000 owner-occupied properties that would be eligible for the homestead exemption. Already, more than 200,000 property owners have applied for the tax break, he said.
LESS = MORE
The homestead exemption would mean less revenue from those properties, so to make up that money, the tax millage rate would have to rise. Green said he is opposed to the homestead exemption for that reason.
Most Council members contacted by the Northeast Times over the past two weeks are concerned about a homestead exemption erasing taxes on some properties.
Councilwoman Maria Quinones Sanchez (D-7th dist.) said there are a few areas of her district, which stretches from North Philly into the Lower Northeast, that would get close to paying nothing if Council approves a $30,000 homestead exemption.
Last year, she said, discussions about the exemption started at $15,000 and rose to $30,000. Because the higher exemption would push up the tax rate, Sanchez favors the $15,000 figure.
If the final proposal is $30,000 to help higher-value areas, Sanchez stated, “then I would consider, if legal, a minimum tax.”
Another player in the city’s tax computations could be the Pennsylvania Legislature.
State lawmakers might give Council the tools to sculpt fairer taxes.
One such tool, Sanchez said, would be giving the city authorization to tax commercial properties more than it taxes residential properties.
“As it currently stands, large businesses are getting tax reductions while small businesses, particularly in neighborhoods, are getting an increase,” Sanchez said.
THE COST OF UPGRADES
Councilwoman Blondell Reynolds Brown (D-at large) said in a Jan. 4 interview that she is in favor of what she calls “protections” like the homestead exemption, but she doesn’t like the idea of people skating on taxes.
Another protection that is sure to be discussed is a so-called “gentrification clause,” offering multiyear tax increase abatements on properties that are in the city’s hottest real estate areas. Without such an exemption, owners of those properties would see huge increases in their tax bills.
What form this “gentrification” clause would take would have to be negotiated, but like the homestead exemption, the effect would be to push up the overall tax rate.
“According to the administration,” Green stated, “each $10 million in relief adds 0.01 to the rate.”
And right now, notions of what that rate will be, or should be, range from it’s too early to say to more than 1.4 mills.
But Council members aren’t the only ones talking about taxes.
City Controller Alan Butkovitz, a longtime AVI critic, last month told members of the Take Back Your Neighborhood civic association that he wants a tax rate no higher than 1.2 mils.
HOW LOW can it go?
Councilman Mark Squilla (D-1st dist.) wants it to be even lower — closer to 1 mill, but no higher than 1.2 mills.
Councilman-at-large W. Wilson Goode Jr. sees getting close to 1.3 mills as realistic. Like Squilla, Goode said it’s early in the game.
“It’s still very, very, very, very, very, very, very, very early,” Brown said, adding she wouldn’t even want to guess at what the rate will be.
Councilman Bobby Henon (D-6th dist.) said he will push for the lowest rate while considering other factors. In an e-mail to the Northeast Times, Henon said he wants to look at neighborhood details and data while considering tax impacts on his district, which is primarily in the Northeast.
O’Brien, too, said it is too early to determine millage, but he said any exemption would increase millage.
Through aide Crystal Jacobs Shipman, Councilwoman Marian B. Tasco (D-9th dist.) said providing an opinion on AVI would be premature because Council has yet to receive all the data it needs.
Getting the money the city needs and making the tax rate fair while making sure “people aren’t hit with a hammer” is a “complex, layered problem,” Brown said.
No matter what solution to that problem Council comes up with, taxpayers aren’t going to feel it immediately. This year, homeowners’ taxes are based on the old numbers.
AWAITING THE MAYOR
Mayor Michael Nutter is expected to bring his new budget to Council in March. A recommended tax rate will be part of that budget, according to the mayor’s spokesman, Mark McDonald.
Council will hold hearings and the majority of the 17-member body will approve a budget and accompanying tax rate by the end of May, McDonald said. That rate won’t be applied until March 2014.
Butkovitz said taxpayers should “be all over City Council” on this issue.
The best way to contact members is by a handwritten signed letter, said Neilson.
“Start out with your district Council members, then the at-large members, and then, the mayor,” he said.
O’Neill suggested residents contact elected officials by phone, mail, e-mail or by making appointments. He stressed residents should give their names, addresses and phone numbers.
“Let people know you’re real, not anonymous, and that you vote,” he said. ••
Reporter John Loftus can be reached at 215-354-3110 or email@example.com