On Thursday, Council gave preliminary approval to a package of budget bills that would put off until 2013 Nutter's planned shift to a property-tax system based on market values known as AVI and provide schools with $40 million through a small property-tax hike and an increase in the use-an-occupancy tax on businesses.
The administration warned of a ruling by the State Tax Equalization Board (STEB) that could cost the city and the school district more than $100 million because of appeals if AVI isn't implemented for the 2012-13 fiscal year, which begins on July 1.
At issue is the accuracy of the property assessments currently being used to calculate Philadelphia's tax bills. Philadelphia has long assessed properties at 32 percent of market value, which means a house worth $100,000 would theoretically be assessed at $32,000 for tax purposes.
But STEB last year determined that Philly's assessments were so off that properties were really being assessed at 18 percent of their value. That ruling meant that property owners could appeal and get the lower percentage applied to their bill, meaning a lower bill. After appeals from the city, the number was reset to 24.8, which still could mean appeal losses for the city.
Finance Director Rob Dubow estimates that the STEB ruling could cost the city $50 million in appeals this fiscal year, and as much as $100 million next year if AVI is not implemented.
Taylor said he was looking at a proposal that would require that the actual assessments of other properties on the block or neighborhood be considered during the appeal process. He said that now, the Board of Revision of Taxes considers only the "common-level ratio," which STEB recently set at 24.8 percent. Taylor said he has not yet drafted the plan.
Other state lawmakers are also looking into solutions to provide financial relief if the city is flooded with appeals.
Nutter had proposed shifting to AVI, and, through it, to collect an extra $94 million for schools along the way. But Council members became increasingly uneasy about the plan because assessments would not be ready before the June 30 budget deadline, state-enabling legislation was still pending and data from the administration on property values and the likely tax rate continued to change.
Mayoral spokesman Mark McDonald said the administration would continue to work with Council to discuss more funding for schools and AVI.
Council President Darrell Clarke has said the deal is not finalized and could be revised before the end of June. n
Daily News staff writer Catherine Lucey contributed to this report. Contact Jan Ransom at 215-854-5218 or Ransomj@phillynews.com, or follow on Twitter @Jan_Ransom.