An obscure Pennsylvania state tax board has upped the pressure on Philadelphia to adopt more accurate property assessments.
The move by the State Tax Equalization Board in Harrisburg opens the window for property-tax appeals - especially by owners of valuable Center City office towers - that could cost the city millions in revenue.
"This will launch a flood of commercial appeals and millions of dollars of tax reductions," said Philip B. Korb, a real estate lawyer at Ballard Spahr L.L.P.
At issue is the relationship between the assessed value and the market value of real estate in the collection of property taxes. Property tax is based on a percentage of the market value, known as the assessed value. In Philadelphia, the assessed value is 32 percent of the market values, which have long been inaccurate.
Every year, the tax equalization board, established in 1947 to ensure the fair distribution of state school subsidies among counties, uses sales data it receives from counties to calculate the difference between the assessed value and the actual market value of real estate.
The point is to determine the accuracy of the assessment ratios used by county tax officials.
The equalization board's figure is known as the common level ratio. It's important because if the ratio calculated by the equalization board differs by more than 15 percent from what the county says it uses, then the board's ratio must be used when a taxpayer appeals a tax assessment.
The city's common level ratio for 2010 was 32 percent, but this year the figure is 18.1 percent, which means the overall actual market value of properties in the data provided to the state board was considerably higher than last year.
It is not clear how that happened, at a time when property values are stagnant at best. No one from the city's Office of Property Assessment was available to offer an explanation Friday.
Councilman Bill Green said he suspected a data problem. "What we don't know is whether or not we sent good data or bad data, whether or not there used to be some culling of data in a way that the transition from the BRT to OPA didn't continue," said Green, referring to the replacement of the Bureau of Revision of Taxes by the Office of Property Assessment. "It's something that someone needs to get to the bottom of quickly," Green said.
