Passing AVI allowed Council to take other revenue measures

Posted: June 24, 2013

Scrapping the city's broken property-tax system and passing Mayor Nutter's reformist Actual Value Initiative was an enormous political and practical undertaking for City Council that dominated the recently completed budget season.

In the process, the uncertainty over AVI's impact created its own gravitational pull, inspiring at least a dozen other tax and fiscal initiatives, many of them long-standing issues given new urgency by the specter of exploding tax bills for some homeowners.

At the top of that list: improving the city's poor track record of collecting delinquent taxes.

But that was only the beginning. There were also bills to:

Change the tax abatement on new construction.

Examine taxes on nonprofits and charities.

Increase the payment the Philadelphia Gas Works makes to the city.

All were designed to put more money in the city's wallet.

Would those bills have been in play if not for AVI?

"Probably not," Councilman James F. Kenney said. "We may have had the debate on tax collection because of the school crisis, but not a lot of the rest."

Through the recession, Council twice raised property taxes to bail out the city and School District budgets. When the district went to Council this year for help filling a $304 million shortfall, another property-tax hike was never discussed.

A third hike would have been unlikely under any circumstances, but especially not with AVI.

Though the new system will collect the same amount of money as last year, the tax burden is being shifted in some dramatic ways. Homeowners in recently hot real estate markets are facing some of the stiffest tax hikes.

The cry Council heard from constituents was to collect the more than $500 million in back taxes, penalties, and interest the city is owed - about half from a decade's worth of delinquent property taxes.

Council held two days of hearings on collecting back taxes with an eye toward shrinking the property-tax rate.

The mayor, meanwhile, announced a program to invest $40 million over the next five years in technology and employees to chase down back taxes.

Following a consultant's recommendation, he also established the post of chief revenue collections officer and named Thomas Knudsen, who was credited with saving PGW from the brink of economic ruin, to fill it.

Finance Director Rob Dubow said Friday that those moves would have been made regardless of AVI, but "I do think they got more attention than they would have because of AVI."

Council members Bill Green, Curtis Jones Jr., and Maria Quiñones Sánchez proposed a tax-delinquency bill in 2008, during their freshman terms, to set up a payment plan for poor homeowners and move more quickly to take properties from delinquent slumlords and speculators.

A bill to accomplish that finally passed this month.

Given the AVI debate, Green said, "it was a hard thing to vote against."

Green also was the author of two bills to collect taxes from nonprofits and charities on commercial activity not related to their missions. Both bills passed.

"AVI . . . made it possible to introduce and support ideas that had been floating around for a while and may not have a lot of support in another context," Green said.

Councilman W. Wilson Goode Jr. said after Nutter and Council "were forced to tax our way out" of the recession, "it was natural that AVI would generate a greater discussion."

Goode led a drive in the spring to cap the amount of value that could be abated under the city's 10-year tax abatement program for new home construction.

With the AVI debate and the recent history of tax hikes, he said, "it seemed to be the right time to talk about it."

Goode expects to call for a final vote on his proposal at the first or second meeting after Council returns from summer recess in September.

Contact Troy Graham

at 215-854-2730,,

or follow on Twitter @troyjgraham.

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