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In The Beatles’ 1966 song “Taxman,” George Harrison proclaimed “I’m the taxman and you’re working for no one but me.” Cast as a tariff collector, Mayor Michael A. Nutter experienced a setback June 21, as City Council proposed a one-year delay to the Actual Value Initiative, a property tax plan he hopes will provide immediate funding for the strapped School District of Philadelphia.
The reprieve, which could become official today, represents a partial triumph for the Tax Fairness Coalition, a two-month-old body that includes eight area civics eager to have taxes levied accordingly once the City completes assessments. Even if the 17-member council upholds last week’s decision, businesses and homeowners will finance the district through bumps in their dues to the City’s coffers.
Nutter is seeking $94 million for the educational entity, but Council members, knowing evaluators would not complete property analysis before the June 30 budget deadline, refrained from siding with Nutter’s desire to accept a revenue target for real estate tax collections and to pass a formula to hit that goal. They instead have tentatively vowed to endow the district with $48.9 million, according to Council’s operating budget bill expected to face final passage today, with half coming from a 19 percent jolt to proprietors’ use-and-occupany fees and the rest pouring in from a 3.6 percent increase to present home estimations, according to published reports.
“We all support our neighborhood schools and are all willing to pay higher property taxes for them, but we needed to see a credible reform plan that includes accountability at the neighborhood level,” Jeff Hornstein, president of the coalition’s Queen Village Neighborhood Association, said. “Sadly, the plans we’ve seen are very short on details.”
The resident of the 300 block of Queen Street and members of the Bella Vista Town Watch, Dickinson Narrows and Pennsport civic associations, Hawthorne Empowerment Coalition, South of Broad Street and South of South neighborhood associations and Whitman Council Inc. have regularly visited City Council to promote their four principles, with calls for “data first, then policy” heading their approach, and have sought to have residents know the scope of the issue, which is capable of boggling even the most patient brain.
The City professes to assess properties at 32 percent of their market value, yet the State Tax Equalization Board revealed last year that it really values them at 18 percent of their worth. With that knowledge, property owners could appeal to have the lower percentage applied to their bill, a process the board noted could cost the City $50 million this year and $100 million next year if the reassessment remains unused, according to published reports. Although the City launched an appeal, Nutter has seen the initiative as a solution.
It would assess each property and assign it one value akin to its actual market price, taxing that valuation. In some cases, the new numbers might represent a staggering rise, which in turn would likely yield higher returns for the City, to the chagrin of homeowners. Aware of the City’s being owed $515.4 million in principal, penalties and interest on 103,000 tax delinquent accounts, Hornstein wants the aggressive pursuit of that total and also other measures to ease homeowners’ fiscal obligations to the municipality.
“Philadelphia is a particularly weird major city in that the vast bulk of property taxes are paid by residential property owners,” he said, noting the State constitution’s uniformity clause, which taxes all similar items at the same rate and commercial and residential property exactly, too.
His views reinforce the coalition’s call to make the system fairer by shifting a chunk of the property tax burden from residen0tial to commercial properties. Another ideal stresses the protection of homeowners through, among other ideas, a $30,000 homestead exemption they could deduct from the value of their spaces before applying the tax rate, and the fourth principle blends acquiring the delinquent funds with seeking revenue from the nonprofit sector. He knows tax abatement discussions need to intensify as well.
“It is pretty well accepted that abatements inflate property values,” he said. “Since the tax bills are artificially and temporarily low, buyers think they can afford more and so developers raise the selling price. These inflated prices then create higher comparables in neighborhoods with a preponderance of abated properties, translating into higher tax assessments for all residents.
“In some ways, this is the normal gentrification problem on steroids, long-term residents and those who did not benefit from abatements are penalized just for being near abated properties.”
As Queen Village contains numerous abated spots, Hornstein noted immediate implementation of the initiative would cripple many neighbors’ financial identities, adding Bella Vista, Pennsport and South of South dwellers would find themselves jeopardized because of their locations’ situations; therefore, the likely deferment brought a bit of relief.
“As the data trickled out, citizens and council members became increasingly alarmed at both the administration’s inability to provide a credible estimate of aggregate values and therefore of a tax rate, as well as the impact on actual people of ‘actual value,’” he said.
Preliminary estimates on the aggregate value of all property within the city totaled more than $100 billion, an amount City Council could have used to institute a 1.25 percent tax rate, or millage, according to published reports. As calculations dwindled, the rate hit 1.8 percent and thoughts of backing the Actual Value Initiative likewise diminished.
“If we’d done AVI, the chaos would have been disastrous for the City of Philadelphia,” 1st District City Councilman Mark Squilla, of Front Street and Snyder Avenue, said.
With City Council’s input, Hornstein and his mates, including Pennsport’s Rene Goodwin, will be plotting a public education campaign and will strive to reform the tax headache.
“If we can achieve comprehensive tax reform, eliminating the net profits portion and raising the gross receipts portion of the business tax, lowering wage taxes, shifting the burden to commercial property and to land, the city’s economy would be better off,” Hornstein said.
A resident of the 100 block of Federal Street, Goodwin understands the need for the reassessment yet does not want for it to thwart novelty.
“The city has to have an infusion of newness, with residents and businesses as the sources,” she said.
She worries the initiative, if not properly handled, will cause an exodus of economic and creative currency.
“AVI, going forward, must address the way of life for urban dwellers, which includes being able to travel only short distances for goods,” the lifelong Pennsporter said. “A fair system is needed, too, so that people do not ponder selling their homes midway through their abatement period. Everyone figures to suffer if taxation comes to dominate.”
Contact Staff Writer Joseph Myers at jmyers@southphillyreview.com or ext. 124.
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