With AVI debate delayed, city's property tax unfairness continues

Posted: July 12, 2012

WHEN City Council members were considering Mayor Nutter's Actual Value Initiative (AVI), which sought to fix the city's broken property-tax system, they worried about the losers who'd be hit with big tax hikes.

But Council's vote last month to delay AVI for a year just replaces one set of losers with another one. Because the city's current assessments are inaccurate, some homeowners and businesses are overpaying in property taxes while others are underpaying. Instead of possibly getting a lower tax bill, people who are overpaying are getting a tax hike for the third year in a row.

Kevin Gillen, vice president of financial-consulting firm Econsult, estimated that 262,000 households in Philadelphia are relatively overassessed, while 188,000 are relatively underassessed. Econsult worked as Council's consultant on AVI.

Under AVI, the city wouldn't have finished reassessing all properties in Philadelphia until this fall, and Council thought it was too risky to approve the overhaul without that data.

Community leaders say many people in overassessed properties don't know they're being screwed by the status quo.

Shannon Chanty Nuon bought a house this year in Point Breeze for $13,000. But according to the city, its "market value" is $22,000. The house's property taxes for 2012 were about $660.

Nuon didn't know she could be overpaying. She said she hasn't been following the debate over AVI. Under one scenario Council was debating, which would have likely put the tax rate at 1.8 percent, her new tax bill would have dropped to about $230 if the city agreed her house was worth $13,000.

"I thought the taxes were a bit too much," said Nuon. "I'm very upset by it."

According to an It's Our Money analysis of recent sales data compiled by the Philadelphia Public Interest Information Network, properties with similar tax bills have sold for vastly different prices. A Fishtown house that recently sold for $145,000 had a property-tax bill of $755 for 2012, which is an effective tax rate of .5 percent on the sales price. Comparatively, a North Philly house that sold for $5,000 had a $905 tax bill this year, an effective tax rate of 18.1 percent on the sales price.

Barbara McCone, 61, bought a house in South Philly for $5,000 in January. She said it was a "total wreck." But according to the city, its "market value" is $22,300. Her annual property taxes are about $670.

That means she's paying an effective tax rate of 13 percent.

McCone, who also hasn't been following the AVI debate, said she didn't know she was probably overpaying. But she wasn't upset, even though her tax bill could have been $90 under the 1.8 percent rate Council had debated.

"I know of other homes in the city that have really high taxes compared to mine," she said.

Gillen said neighborhoods that are overpaying include Elmwood, Cobbs Creek, Germantown, Fern Rock and Nicetown.

Marsha Wall, president of the Southwest Community Advisory Group, was stunned that the middle- and lower-income homeowners in her area are apparently paying more than their fair share.

"It's very, very unfair," she said. "It always falls on the shoulders of the unfortunate."

Betty Turner, president of Germantown Community Connection, said there were valid concerns about AVI, but delaying it comes at a cost.

"Isn't keeping a broken property-tax system for another year just keeping a broken tax system for another year while the problem escalates?" she asked.

Gillen and others said that if assessments were more accurate, overpaying households would likely get small tax breaks, while underpaying households would be hit with much larger tax hikes.

"There's a whole lot of low-valued properties, which will see teeny tax decreases," said Councilman Bill Green. "The up-and-coming areas will get hit in the stomach."

Holly Otterbein writes for It's Our Money, a joint project of the Daily News and WHYY funded by the William Penn Foundation that works to shed light on where your tax dollars are going.

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