A Shaken Tax Landscape

The AVI will bring hikes in rising areas, cuts for others, such as big commercial sites. Scrutiny will be sharp.

Posted: February 18, 2013

The politicians and analysts have been talking for more than a year about the potential winners and losers from Mayor Nutter's property tax reform, and now the lines have been drawn.

The results of a citywide reassessment key to Nutter's Actual Value Initiative (AVI) were released Friday, and the data confirm some long-held expectations - wealthier, fast-changing neighborhoods are facing stiff increases, and many large commercial properties will see big drops in their bills.

Some hikes are jaw-dropping. Three condominiums in Rittenhouse Square, each valued at $71,000 last year, were assessed at more than $4 million - a change that could add more than $50,000 to each of their tax bills.

Meanwhile, Liberty Place, the Center City office tower and shopping mall, could see its tax bill cut in half, down by $2.7 million.

Neighborhoods such as Queen Village, Bella Vista, Fairmount, and University City face the worst of it. All are likely to see tax bills on the median home go up by more than $1,000.

The typical homes in Point Breeze and Powelton, neighborhoods on the battleground of gentrification, could see their bills multiply 21/2 times.

The big winners were neighborhoods in the most stable markets - Chestnut Hill, West Oak Lane, Eastwick, Wynnefield, and much of the Northeast, along with some struggling areas like Kingsessing and Feltonville. Eastwick shows the greatest median tax break at $525 annually.

It amounts to a massive redistribution of the city's property tax burden, and the stakes for both homeowners and politicians could be enormous. Scrutiny of the data will be intense.

Councilman Mark Squilla, whose First District in South Philadelphia is facing the biggest tax increases, received a briefing on AVI's impact on his area last week.

"It was," he said, "horrible."

AVI is meant to address a property tax system that was once so broken that only 3 percent of homeowners received bills based on their home's real value.

The rest paid bills based on assessments that were, on average, off by 39 percent, according to a 2008 Inquirer study.

Squilla, though, said the corrective could have dire consequences in his district. "It's not these residents' fault they've been underpaying," he said. "Now you want to get it all back in one year?"

Councilman Kenyatta Johnson, who like Squilla is serving his first term, also has a district in South Philadelphia, Southwest Center City, and Southwest Philadelphia, all facing some "glaring increases."

He would like to blunt those blows. "Contrary to popular belief, these aren't rich constituents," he said.

Both councilmen have discussed capping how much a homeowner's bill could go up in one year, or seeking some other measure to protect residents facing the most drastic increases.

"I'm not putting aside that they should pay their fair share," Johnson said. "We don't want people priced out of their homes."

The city has programs to freeze taxes and offer payment plans for low-income seniors, and a hardship plan for people having trouble paying their bills. Information on the programs is included in a packet being mailed to all homeowners.

"There are any number of folks who are eligible for programs who have never applied," Nutter said. "On our side of that, we might not have done as good a job of promoting."

The packet also has information on how people can appeal if they believe their assessments are wrong. The number of appeals - and especially successful appeals - could be one indicator of the reassessment's accuracy.

Nutter said on Friday that he alerted city assessors to a mistake in his property description. That act of civic-mindedness caused his assessment to go up $60,000.

Despite his inspirational tale, few are likely to call attention to assessments they think too low.

That leaves just those people who think they were over-assessed as likely to appeal - a smaller pool to judge the overall accuracy.

Nutter on Friday also emphasized that the reassessment is not a bill. A tax bill won't be available until after this spring's budget season when Council sets a tax rate.

The administration has said the tax rate would have to be 1.25 percent to bring in the same amount of money next year - or $1,250 per $100,000 of value.

That only would be the rate if Council does not provide any kind of relief to homeowners. Council passed a law last year that includes a $30,000 homestead exemption - meaning homeowners could deduct that amount from the value of a home for tax purposes.

An exemption could take about $100 million of the tax burden off a majority of homeowners and push it back to commercial, industrial, and other properties.

Tax breaks like the homestead raise the overall rate.

Nutter said Friday he didn't want to "prejudge" whether a homestead should be applied.

"I think we should generally have as many tools as possible to lessen the impact on citizens," he said. "But we also need to realize that the relief we provide has to be covered by the large universe of property owners."


Contact Troy Graham

at 215-854-2730 or tgraham@ phillynews.com, or follow on Twitter @troyjgraham.


 

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