Political risk may doom property-tax reform in Philadelphia

Council President Darrell L. Clarke (left) with members William Greenlee and James F. Kenney. Council backed off property-tax reform to wait for data due this fall.
Council President Darrell L. Clarke (left) with members William Greenlee and James F. Kenney. Council backed off property-tax reform to wait for data due this fall. (ED HILLE / Staff Photographer)
Posted: July 06, 2012

Philadelphia City Council members took a pass this year on Mayor Nutter's politically risky plan to tear down a broken property-tax system and start over, but they pledged - in writing, no less - to install his Actual Value Initiative (AVI) next year.

Absolutely. For sure. You can count on it.

Right?

"I have serious doubts AVI will ever be enacted," said City Controller Alan Butkovitz. "Look at what just happened. When City Council got to the precipice and saw all the consequences, they recoiled."

But didn't they write into law their intention to switch next year to a system that taxes property based on actual value?

"If history is any lesson, it won't happen," said lawyer Kenneth L. Metzner, who represented a group of tax activists who sued the city last year to force reform.

"I think it's going to take one of two things: either a lawsuit or some inspired and dedicated leadership from City Council and the administration," he said, "which we haven't seen yet."

Metzner said his clients intended to provide political cover for "what everyone agrees needs to be done." But the administration fought their lawsuit, successfully arguing the activists lacked standing in court.

"I wonder if they're kicking themselves, because it could have been a useful tool," he said. Metzner said that he had no plans for a new lawsuit, but that "doesn't mean circumstances won't change."

Even court orders have proved ineffective against the political and practical hurdles of messing with property taxes.

In Allegheny County, which includes Pittsburgh, leaders have been thumbing their noses at judges for a decade and building their political careers in the process.

Former County Executive Dan Onorato promised to never accept a court-ordered property assessment, even after he was threatened with jail. Onorato ended up becoming the Democratic gubernatorial nominee.

His successor, Rich Fitzgerald, has been following the same playbook, throwing out new property-assessment numbers in January for the cities of Pittsburgh and Mount Oliver.

"It's one of those things, the longer you wait the worse it gets, and people chicken out," said Robert P. Strauss, a professor of economics and public policy at Carnegie Mellon University and a longtime watcher of Allegheny County's assessment wars.

In Philadelphia, waiting another year means getting closer to an election cycle that promises a heated Democratic primary battle to replace Nutter.

Tax bills under a new system would be due at the end of March 2014. By that summer, mayoral candidates are likely to begin lining up for the May 2015 primary.

Butkovitz is considered a likely candidate, as are Council members W. Wilson Goode Jr., Bill Green, and James F. Kenney, and State Sen. Anthony Hardy Williams, all of whom played prominent roles in this year's AVI debate.

Of them, Butkovitz is the only one saying AVI will not - and should not - come into force. "I was the first guy against this," he said.

But Council members did not back off AVI because of political peril. They had good reason, considering the citywide reassessment key to the new system would not be complete until the fall.

That meant Council was asked to vote without knowing the ultimate tax rate and the impact on homeowners and businesses - or how to provide relief to those hit the hardest by the changes.

"You can't operate in the dark when it comes to the value of people's property and how you're going to tax them on it," Kenney said last week.

Still, there were plenty of votes for AVI when the projected tax rate was 1.2 percent of a property's value. But as more information became available, the estimated tax rate edged as high as 1.8 percent and the support withered.

"Some folks, under a 1.8 millage rate, would have paid $6,000 to $7,000 more in taxes in one year," Kenney said. "I don't know anybody who can afford that."

Over the weekend, the state legislature passed a bill that gives the city one year of relief from property tax appeals that could have arisen from not switching to an actual value system. The state bill - like the property-tax bill Council passed last week - says that the city will move to actual value in the next fiscal year.

Neither bill binds the city to institute AVI - Council could amend its law, and the legislature could extend the relief - but the administration promoted the General Assembly's action as another sign of AVI's inevitability.

"It should remove any doubt that we will get to full value," said city Finance Director Rob Dubow.

Kenney and fellow Councilman Mark Squilla talked last week about exploring caps for how much a tax bill could rise under actual value.

Several Council members said they could set a millage rate that was acceptable even if it brought in less revenue; other taxes could be raised or cuts made to the budget.

"I think the millage needs to be fair," Kenney said. "The mayor's not running for office again. His millage idea will be different than ours."

Squilla, who led the charge to abandon AVI this year, agreed that the city needs to move to a new, fair system next year.

"This one-year delay is just a delay so we can get the information necessary . . . to come up with the proper safeguards," he said.

The delay also means perpetuating an inequitable system that hurts many poor and middle-class homeowners whose properties are overvalued, said Tom Massaro, a former city housing director.

The advantage of waiting, he said, is the chance to have a much more varied and open public dialogue about the impact of AVI.

"The critical nexus is this: Will the next nine months be used to educate and inform the public?" Massaro said. "Or will it be used with increasing venom to outrage people over significantly increasing bills?"

Council President Darrell L. Clarke promised to use the time wisely.

"It's more important for us to get it right than get it done expeditiously," he said. "I'm prepared to work throughout the recess . . . and the next several months to ensure that we have a package prepared for the next fiscal year."

So Council members are saying all the right things: We need to reform the system, and we'll do it right and soon.

Jim Roddey thought instituting Allegheny County's first reassessment in 33 years was the right thing when he became county executive in 2000. He knew the risks, but a court had ordered the reassessment, and the work was nearly complete when he took office.

"Of course, as soon as it occurred, I got the blame," said Roddey, who lost to Onorato four years later. "Whatever plan you have, it will be opposed by someone."

He stressed the importance of having good numbers. He said the reassessment now being battled over in Allegheny County was rushed and done poorly.

In a row of houses, he said, "three could be gutted, and three could have marble staircases, and they're assessed the same.

"The last assessment, they didn't even go into the houses," Roddey said. "They just did drive-bys."

Butkovitz said Philadelphia's reassessment inevitably includes "horror stories."

If there are enough of those stories, he said, "that will cast doubt on the legitimacy of the whole process.

"Yeah, there could be political consequences, but there should be," he said. "You're [messing] with people's lives."


Contact Troy Graham

at 215-854-2730 or tgraham@phillynews.com, or

follow on Twitter @troyjgraham.

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