Hundreds of thousands of Philadelphia homeowners received property tax hikes this year — and will again next year — even though the city’s tax rate hasn’t changed.
How is that possible? In Philadelphia, an increase in a property’s assessed value also raises taxes. Other counties must adjust their tax rates after reassessments, and are limited in how much additional revenue they can raise by revaluations.
So whom should city taxpayers hold accountable if they are upset about rising assessments and taxes?
As the May 21 primary for mayor and City Council approaches, here’s what voters should know about their elected officials’ role in the assessment and property tax system.
How is the tax rate set?
Council sets the tax rate, and can reconsider it every year.
The annual budget process begins with a proposal from the mayor, followed by hearings and deliberations by Council, which passes a budget for the mayor to sign into law.
Last March, Mayor Jim Kenney proposed a property tax rate increase. Then in April, homeowners learned that a reassessment of all residential properties in the city would result in tax hikes for many, even if the rate did not change. Council members, citing anger about the assessment spikes, did not approve the rate increase.
Even without a rate change, the Kenney administration predicted that the reassessment would raise an additional $85 million for the city and School District.
The process is underway again this year, and Kenney has not proposed a rate increase. But taxes will be going up for most property owners anyway. According to the 2020 assessments released this month, hundreds of thousands of properties will have increases, while about 80,000 values will decrease. Assuming the tax rate stays the same, the administration estimates that the changes will raise an additional $53 million.
Can Council do anything to protect homeowners from rising assessments?
While Council rejected last year’s proposed tax rate increase, it also has the power to lower the tax rate.
Councilman Allan Domb said Council should be more transparent about that, rather than simply pointing fingers at the Office of Property Assessment for its valuations.
“If we don’t change the rate, and we raise the assessments, it’s really a tax increase,” Domb said. “And that’s the administration and Council’s choice. But we should just say what it is.”
Mike Dunn, a spokesperson for Kenney, said the administration is open to proposals to adjust tax rates. But he warned that the city faces rising expenses, including costs of labor, pensions, and contracting.
“Adjusting the millage would require the city to fill the resulting budget gap caused by rising costs by other means — such as increases to other taxes or by cutting city services," Dunn said.
What would it mean for Philadelphia to be ‘revenue-neutral’?
Other counties in Pennsylvania are required to adjust their tax rates after reassessments, and have limits on how much additional money they can raise as a result.
Delaware County, which is undergoing a court-ordered revaluation, has committed to making its changes revenue-neutral.
In Philadelphia, that is not the case; the city reassesses properties every year, and because the city is committed to keeping assessments in line with true market values, many homeowners can expect to see increases as long as the real estate market in their neighborhood is strong.
Are the city’s elected officials willing to consider ‘revenue-neutral’ assessments?
Council President Darrell L. Clarke said he would be open to discussions about adjusting the tax rate.
“If it calls for a lowering of the rate to accommodate our ability to keep reasonable taxes for our residents, then so be it," he said.
But he was quick to add that school funding is often the biggest budget challenge: “If it were not for the last several years where we’ve had to put close to a billion dollars of local revenue into schools because of lack of state funding … our need to raise the rate would have been much lower.”
Dunn said Philadelphia’s regular reassessments “lessen the impact of rising market values in any given year" and reduce the need for revenue neutrality.
“The mayor believes that mandated revenue neutrality is not appropriate in Philadelphia in light of this commitment, and in light of the enormous range of relief programs that mitigate the impact of property tax increases for our most vulnerable homeowners.”
Alan Butkovitz, the former city controller who is one of Kenney’s challengers in the Democratic primary, held a news conference outside City Hall recently to call for revenue-neutral assessments.
“There’s got to be a balance to it,” he said. “Part of it is, you need to run the city on an efficient management basis.”
What else can the mayor and Council do about taxes?
The city has a number of taxpayer-relief programs to help homeowners who struggle to pay their bills.
And in the wake of a reassessment for residential properties that resulted in significant tax hikes for many homeowners, Council members blamed OPA, commissioned an audit that found its data are flawed, and called for new leadership of the department.
The Kenney administration disagreed with the audit’s findings and defended OPA, but did hire its own consultant to make recommendations for improvements. The mayor also gave in to calls for new OPA leadership and launched a search for a new chief assessor.
Clarke said pushing for greater accuracy and transparency in assessments is a top priority.
“You’ve got to fix OPA, because the bottom line is, with bad data, which is what we’ve been getting, the assessments are going to be flawed,” Clarke said. “The thing we need to be focusing on is fixing OPA.”
Asked how he can ensure that the agency improves, Clarke acknowledged Council doesn’t hold that power.
“OPA,” he said, “is under the executive branch.”