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Philly property assessments are flawed, audit finds

An auditor found that issues in the city’s methods lead to inequities in assessments, which result many property owners paying more or less than their fair share in property taxes.

Mayor Jim Kenney and Council President Darrell L. Clarke. Their offices are at odds over the findings of an independent audit of the city's property assessment methods.
Mayor Jim Kenney and Council President Darrell L. Clarke. Their offices are at odds over the findings of an independent audit of the city's property assessment methods.Read moreDAVID SWANSON / Staff Photographer

Philadelphia’s property assessments do not meet accuracy standards and are plagued by deficient data, according to an audit of the city’s Office of Property Assessment released Thursday.

The audit, commissioned by City Council last year after a reassessment of residential properties sparked outrage by homeowners facing large tax increases, found that flaws in the city’s methods lead to inequities in assessments. An Inquirer and Daily News analysis found that more than 165,000 of the city’s properties — better than 35 percent of the total — were overassessed.

The audit’s impact remained unclear Thursday. It will have no immediate effect on existing assessments or thousands of pending appeals filed by taxpayers. But its release set off a public clash between Council President Darrell L. Clarke and Mayor Jim Kenney’s administration, which oversees the Office of Property Assessment (OPA).

Clarke used the audit to call for a change of leadership in the assessment office and the hiring of an outside company to help correct inaccurate data.

“Based on the existing operation of OPA, we clearly have some challenges,” Clarke told reporters.

Meanwhile, Kenney’s office said the audit was based on “faulty data," and criticized it for not including specific recommendations for improvement.

“It would be inappropriate, and frankly unfair, for the OPA team to become political scapegoats in light of the progress they have made," said Mike Dunn, a spokesperson for Kenney.

Clarke, who said the audit validated the concerns he has long raised about OPA, shot back. “The truly inappropriate thing to do would be to dismiss an independent assessment’s findings because they are politically inconvenient,” said Jane Roh, his spokesperson.

City Council paid J.F. Ryan Associates, Inc., a Massachusetts-based firm, $160,000 to complete the audit.

Among its findings:

  1. Assessments — the value assigned to a property to calculate real estate taxes — do not meet industry standards for residential and commercial properties as well as vacant land. 

  2. In many areas of the city, assessments are off, on average, by more than 15 percent. The report did not distinguish between properties that are overassessed or underassessed, finding simply that the assessments are not uniform.

  3. Land values vary greatly among similar properties, showing that assessments are not uniform.

  4. OPA has deficient data and does not document all of its procedures. “There are many activities performed either in an ad hoc manner or in disconnected ways that preclude either addressing or solving the problems," the report stated.

  5. The assessment methods are not made public, making it difficult for property owners to determine how their values were calculated.

While the Kenney administration took issue with the audit’s findings, Dunn said OPA has also hired its own consultant to recommend how to improve assessments.

“The value of the audit toward improving the work of OPA is extremely limited,” Dunn said. “Still, we take the spirit of the auditor’s concerns seriously.”

The audit also found some successes: Condominium assessments meet accuracy standards, and it applauded the informal appeal process, known as a first-level review. The city’s speed of reviewing first-level reviews, however, is lacking. The audit noted that only 36 percent of requests filed in May had been completed by mid-September, which was about two weeks before the deadline for taxpayers to formally appeal their assessment.

Councilman Alan Domb said he was pleased to hear that the audit found that inequities notwithstanding, the city’s total assessed value of properties nearly matches the total market value of the city. That was an improvement, he said.

“The goal here should be for Council and the administration to work together and come up with suggestions and reforms and recommendations to make the process better,” Domb said.

The Inquirer and Daily News analysis of the city’s most recent assessments found that assessment inaccuracy remains a problem, as lower-priced properties tend to be overassessed, resulting in owners paying more than their fair share in property taxes, while owners of higher-prices homes are getting relative tax breaks. City assessment officials disagreed with the newspapers’ findings, citing concerns similar to those they found with the audit released Thursday.

The average assessment of a single-family home increased 10.5 percent with last year’s reassessment, prompting City Council members to express doubts about OPA as they heard complaints from residents about large tax increases. Council rejected Kenney’s proposed 4.1 percent property tax rate increase last year, citing the tax increases that many residents already faced due to their increased assessments.

Philadelphia’s property assessments have long been a source of controversy. The city launched the Actual Value Initiative (AVI) in 2014 as a means of eliminating unfair and inaccurate assessments. Under AVI, the city assesses every property at 100 percent of market value, or the amount for which it could be sold.

City officials touted the AVI system as one that would do away with steep increases because assessments would be kept current and updated every year. Last year, however, was the first time since AVI began that the city reassessed all residential properties. The reassessment led to the largest number of appeal cases since 2014.