The Actual Value Initiative: What are you worth?
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 And many of the assessments are out of date or inconsistent.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.
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.
What’s supposed to be the sure thing, however, is that overall taxes are “revenue neutral.”
Individuals might pay more or might pay less, but the total the city takes stays the same. To do that, the city has to lower its tax rate when it raises the value of its properties.
Some 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).
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.
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. Such exemption would shave dollars off the actual value.
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 for this story 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.
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. Councilman Mark Squilla (D-1st dist.) wants the rate to be low — close 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.
Councilman Bobby Henon (D-6th dist.) said he will push for the lowest rate while considering other factors. In an e-mail, Henon said he wants to look at neighborhood details and data while considering tax impacts on his district, which is primarily in the Northeast.
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. ••
The new real estate assessments residents receive next month will include a form on how to ask for a review of the number.
Submitting the form will trigger a “review with the assessor who did the property, or, if that person is gone, then the new assessor who is handling that area,” Mayor Michael Nutter’s spokesman Mark McDonald said in an e-mail. “This is a newly formalized process.”
Councilman Brian O’Neill (R-10th dist.) advised anyone who wants to appeal to do it soon.
“If you feel you’ve been assessed too high, act quickly, ask for help,” the councilman said.
O’Neill said a property owner should pay attention to the new assessment “and ask if this number is fair, because it’s going to stick for a really long time.”
Councilman Bill Green believes many residents won’t like what they see.
“We should expect a significant increase in appeals,” the at-large Democrat stated in an e-mail. “The Office of Property Assessment could be completely overwhelmed by the increase and may not have the capacity to handle it.”
Those who want to appeal their assessments would do so through the Bureau of the Revision of Taxes. Appeals will be due by early fall, McDonald said.••
Reporter John Loftus can be reached at 215-354-3110 or email@example.com.