City leaders form agenda to seek property tax relief

Posted: October 18, 2012

Mayor Nutter, Council President Darrell L. Clarke, and School Reform Commission Chairman Pedro Ramos have united in pursuit of an aggressive legislative agenda in Harrisburg, seeking new powers for the city to assess, collect, and provide relief from property taxes.

The hoped-for measures, outlined in a letter Monday to Philadelphia's delegation in the state House of Representatives, would be designed to lessen the impact of Nutter's property tax-reform effort, the Actual Value Initiative (AVI), which would tax properties based on their market value.

The ideas were discussed often last spring as Council grappled with the consequences of instituting AVI - a tax rate possibly as high as 1.8 percent of market value and a drastic shift of the tax burden from commercial to residential properties.

Council ultimately delayed AVI for a year. If the city gains these new powers from the state, making the switch to AVI in the next budget could be less painful for homeowners and politicians alike.

Rep. Cherelle L. Parker, Democratic chairwoman of Philadelphia's House delegation, said this was the first time in her seven-year career that the mayor, Council, and SRC showed this kind of unity around a set of legislative ideas.

"There's a commitment to working together in the very near future to address property tax relief that we know people are going to need," she said.

In the letter to the delegation, the three also urged lawmakers to pass by today a key piece of legislation that would give the city the authority to lower the tax rate as it moves to AVI. The city is not allowed to lower the rate now because of a rule meant to protect the School District's funding.

Because property in the city is assessed well below market value, the tax rate is artificially high and would have to drop considerably under AVI to collect the same amount of money.

"It's one of the most important pieces of legislation the city needs to move forward," Parker said.

The legislature is scheduled to recess for the year Wednesday. A new General Assembly, possibly with new leadership, will return next year, making this the last chance to pass the bill with the current roster of lawmakers.

Democratic Rep. Michael H. O'Brien vowed to stop the legislation. His district includes areas like Northern Liberties and Queen Village, where he said some of his constituents could see huge tax rises.

"I can't do that to my people," he said. "That's not fair."

O'Brien has proposed amendments that would slow and effectively kill the bill, but he also said he would "remind my Republican colleagues that they came to Harrisburg with a mandate . . . not to raise taxes."

Nutter's spokesman, Mark McDonald, said other members of the delegation who had introduced amendments agreed to remove them.

"They understand the stakes and the time frame," he said. "Rep. O'Brien clearly is playing the role of obstructionist here."

The administration wants the bill passed before the results of a citywide reassessment are mailed in February and owners learn what value the city has attached to their properties.

O'Brien said he supported AVI as a remedy for the current property tax system. But he objects to the Nutter administration trying to legislate AVI before those numbers are known.

He said he would support in January a package of measures to implement AVI, including those discussed in the letter to the delegation. Those measures include:

The ability to tax commercial and residential properties at different rates. Although many cities in the Northeast do so, including New York and Boston, Pennsylvania's "uniformity clause" prevents it here.

That idea gained traction in the spring when it became apparent that AVI would result in huge tax cuts for commercial properties that have been taxed at a rate much closer to actual value.

The city has worked around the uniformity clause in the past by having an additional tax on businesses, the Use and Occupancy tax, which was raised by 19 percent this year.

"Our position is, why don't we just have flexibility and possibly eliminate the U and O," Clarke said Tuesday. Gaining this authority would be the most difficult since it would require an amendment to the state constitution.

The ability to place liens on all property that landlords own in the state if they are delinquent on taxes. The letter notes that putting liens only on specific delinquent properties "has not been sufficient to cause payments to be made."

Delinquent property owners owe the city hundreds of millions of dollars in taxes - a fact that homeowners facing tax hikes under AVI are quick to note.

"Understandably somebody who's being asked to pay additional taxes says, 'Well, why don't you collect that first?'" Clarke said. "That's a reasonable request."

Allow tax relief for longtime residents in gentrified neighborhoods to be based on income and age. So-called means testing is allowed now only in Allegheny County, which includes Pittsburgh.

Without means testing, gentrification relief would undoubtedly extend to wealthier longtime residents, who are not the intended targets.

O'Brien said he thought that a package of bills, including authorization for the city to lower the tax rate, could be done by March.

"He's probably the only Democrat in Philadelphia who feels that way," McDonald said. "And he's wrong."


Contact staff writer Troy Graham at 215-854-2730 or tgraham@phillynews.com, or follow on Twitter @troyjgraham.

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