A bill introduced Thursday in City Council would end Philadelphia’s practice of raising additional tax revenue from increasing property values.
The bill, sponsored by Council members Allan Domb and Brian O’Neill, would require the city to adjust its tax rate each year to ensure that rising assessments do not result in automatic tax increases for many residents.
Domb has criticized the city’s revaluations, which this year increased property assessments, or the values used to calculate property taxes, for hundreds of thousands of homeowners, as back-door tax hikes. In a budget hearing this month, he suggested that Council should have considered lowering the tax rate in response to rising assessments.
“The proposed Revenue Neutral Tax Bill will provide City Council with the oversight to make the city more fiscally responsible,” Domb said in a statement Thursday. “It will eliminate the city’s ability to increase revenues by raising homeowners’ property values.”
The legislation would require the city to calculate a “revenue neutral” tax rate for both the city portion and school district portion of the tax rate each year, by determining how much the city’s total value of taxable property changed due to assessment changes. The Office of Property Assessment finalizes assessment changes by March 31, which is during the city’s annual budget process.
“To ensure revenue neutrality, the tax rate must decrease if total tax assessments increase, and similarly, tax rates must increase if total tax assessments decrease,” the proposed bill states.
The bill mandates a revenue-neutral tax rate for 2020.
After that, it would still allow for adjusting the tax rate as needed, but only after determining a baseline rate that would not increase or decrease revenue. The mayor would be permitted to recommend changes to the revenue-neutral rate in a proposed budget, and City Council would have the power to adjust the rate before passing a budget.
Currently, the mayor’s proposed budget includes a tax rate and Council has the power to adjust the rate before passing a budget. But the city, unlike other counties in the state, is not required to adjust its tax rate in response to assessment changes.
The 2019 reassessment, which increased the median assessment of a single-family home by 10.5 percent, is expected to raise an additional $85 million in tax revenue for the city, according to officials. The recently released 2020 assessments are projected to generate an additional $53 million for the city.
Mike Dunn, a spokesman for Mayor Jim Kenney, said in an email Thursday that the administration had not had a chance to review the legislation. The administration has expressed opposition to revenue neutrality in assessments; Dunn said it would create a budget gap because the cost of running the city continues to rise.
“We have always maintained that any proposal to adjust property tax rates could be considered, so long as it takes into account the need to maintain city services and capital investments for our infrastructure and rising costs, including labor, pension, and contracting costs,” Dunn said.