Nutter blames BRT for some fiscal woes

Posted: January 27, 2009

Though the collapsing economy can be blamed for most of Philadelphia's fiscal crisis, there is at least one whopping line-item shortfall - $180 million of the current $1 billion five-year deficit - that Mayor Nutter says cannot be pinned solely on the recession.

It stems in part, he contends, from a dramatically slowed pace of reassessments by the Board of Revision of Taxes (BRT), an independent agency that appraises city real estate for property-tax purposes.

"They have a duty and obligation to the citizens of this city and to our government to make sure that as many properties are being assessed as possible, and that they're done accurately and fairly," Nutter said.

"Right now, that's not happening."

The $180 million is the difference between what the city expected to collect in property taxes from 2009 to 2014, and what it now thinks it will get.

Although he acknowledged that declining property values had been a factor, Nutter singled out the BRT's alleged sluggishness. Led by seven board members appointed by city judges, the BRT adjusted the values of 18,000 properties last year, just 3 percent of real estate citywide. In 2007, it revalued 400,000 properties, or 69 percent.

The Nutter administration expected a 4.90 percent increase in property-tax collections this fiscal year. It will get only 2.29 percent more.

"It's very difficult to get done the things we need to get done if we're not assessing the proper number of properties," Nutter said.

The BRT says it is doing nothing improper.

In July, board members voted to adopt a new assessment system that they said would lead to more equitable and rational assessments. That transition has occupied the agency's staff and limited its reassessements, BRT spokesman Kevin Feeley said.

The agency, he said, is not responsible for meeting city revenue projections.

"They say the revenue targets are off. Well, excuse me," Feeley said. "Revenue ought to be determined by the tax rate, and it is not the BRT's job to be the unofficial tax collector for the city."

In theory, Feeley is correct. In practice, the BRT has acted for decades as a de facto taxing agency.

Unlike municipalities that adjust their millage rates to meet revenue needs and respond to changes in property values, Philadelphia has not touched its millage rate since 1989.

Instead, the city has relied on annual BRT assessment increases to raise revenue. The process - tantamount to a back-door tax hike - allows Council members and mayors to reap annual revenue gains without taking the political risk of openly raising taxes.

On top of that are the well-documented inequities and inconsistencies of BRT assessments. As an Inquirer investigation found over the summer, assessments in the city are off by 39 percent on average; some property owners pay too much in tax, others far too little. Such flaws have existed for years.

For critics of the city property-tax system, it is almost reason to rejoice. They express the hope that it will increase political pressure on Nutter, City Council and the BRT to finally right the wrongs.

"You were supposed to fix these things, you didn't, and now you turn around and say, 'Oh, my God, things are breaking down.' You're expecting, what, sympathy?" asked Brett Mandel, executive director of Philadelphia Forward, a group that has called for a system overhaul.

That overhaul is coming with the BRT's new assessment system, the Actual Value Initiative, to be launched perhaps as early as February or March.

Long a critic of the BRT, Nutter supports the new system. But he said he expected the BRT to keep up a steady assessment schedule using the old method until the new system was ready.

"In the meantime, their answer can't be to do virtually nothing," Nutter said.

Feeley said the agency had limited resources and was focusing on the Actual Value Initiative instead of pouring hours into a system it expects to ditch.

In Mandel's view, the BRT is right to limit what he calls "sham assessments" until the new program is running.

Nutter, though, said he was skeptical that the BRT was as close as it claimed to beginning the Actual Value Initiative.

"I think there's still a lot of work to be done, and I'm very concerned about where that project is or is not," he said.

When told that the BRT hoped to finish the job within two months, the mayor said he would be nervous about the quality of the agency's work on that timeline.

Some think Nutter is laying the groundwork for a campaign to overhaul the BRT and perhaps bring its assessing wing under his control. Doing so would require a change to the City Charter, which would have to go before voters.

"I have said publicly that we need to look at the entire structure of city government," Nutter said. "I have talked about some of the independent agencies . . . and can some of their duties be done in other parts of the government for efficiency or savings? The BRT would fall under that."

Feeley defended the agency's progress on the Actual Value Initiative, noting that it had hired two leading local property-tax experts - Kevin Gillen of the Wharton School of the University of Pennsylvania and Forrest Huffman of Temple University - as consultants on the project.

In the past, Nutter and other leading elected officials have said the move to the new assessment system ought to be revenue-neutral - generating no extra money for the city - so taxpayers don't view it as a tax increase masquerading as reform.

Given the budget crisis, and in particular the $180 million shortfall in projected real estate tax collections, it increasingly seems that the shift will not be revenue-neutral after all.

"Those revenue-neutral discussions from a year or two or three ago were light years ago," Nutter said. "The entire economic universe has changed dramatically."


Contact staff writer Patrick Kerkstra at 215-854-2827 or pkerkstra@phillynews.com.

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