Council sets AVI tax rate, votes to hike cigarette tax

After more than two years of sometimes caustic debate over Mayor Nutter's property-tax reform effort, Philadelphia City Council set a tax rate under the Actual Value Initiative on Thursday without so much as a whimper of protest.

Instead, the unsolved school-funding crisis remained the topic that drew full-throated public testimony and political speeches.

Council also unanimously passed a $2-a-pack cigarette tax - drawing applause from a gallery of school supporters - but that tax will not take effect without state permission. Winning approval from the Republican-dominated legislature is considered a long shot.

The property-tax bill, approved by an 11-5 vote with Councilwoman Marian B. Tasco absent, sets the tax rate at 1.34 percent of assessed value and allows for a $30,000 homestead exemption. That means the owner of a home worth $100,000 would pay taxes on $70,000 and would owe $938.

Voting against the bill were Democratic Council members Mark Squilla, Kenyatta Johnson, and Bill Green, and Republicans Brian J. O'Neill and David Oh. Squilla's and Johnson's districts, which include growing neighborhoods bordering Center City, face some of the biggest property-tax hikes under AVI.

A Council analysis this year found that with a $30,000 homestead exemption and so-called gentrification relief for longtime homeowners in growing neighborhoods, as many as 72 percent of homeowners could receive lower bills and just 10 percent would get bills that would rise by more than $400.

Nutter's spokesman, Mark McDonald, called the setting of the rate "historic," finishing a long effort to fix the city's once "inaccurate, inscrutable" system.

"Philadelphians can really look forward to an assessment system that will improve each year," he said.

Councilman James F. Kenney had been one of the staunchest critics of AVI, calling a recent citywide reassessment inaccurate, but he voted to approve the tax rate.

"It was going to pass anyway," he said. "I felt that if I was going to support gentrification and homestead, I should be on board."

He still warned of massive assessment appeals in the fall before the Board of Revision of Taxes. The deadline to appeal is Oct. 7.

"That's where we're going to concentrate now, getting folks understanding what their rights are," Kenney said. "The real relief will come there."

With the property-tax bill out of the way, the focus in Council before the scheduled Thursday recess will be on school funding.

Councilwoman Maria Quiñones Sánchez did not call for a vote Thursday on her proposal to raise $30 million for the schools through a second straight increase in the Use and Occupancy business tax.

Sánchez said she was several votes shy of the nine needed to pass her bill, which Nutter opposes, but believed she could get the necessary support if the state fails to green-light the cigarette tax.

"I think everybody has made clear they're interested in providing support for the schools," she said. "If every other means fails, I'm comfortable we'll get to the nine."

Nutter also has proposed to increase the liquor-by-the-drink tax as part of his plan to raise $95 million toward the School District's $304 million deficit.

There has not been enough support in Council to move the liquor-tax bill, let alone seek the necessary permission from state lawmakers.

The School District plans to lay off nearly 3,800 employees, including teachers and guidance counselors, unless the city and state provide more money and the teachers' union agrees to concessions.

The state House passed a budget this week that includes $30 million for Philadelphia schools, far short of the $120 million the district seeks from the state.

The Nutter administration and Gov. Corbett's staff have been discussing a number of other options, including making the temporary 1 percent sales tax hike in Philadelphia permanent and dedicating the money to the schools.

That tax hike was passed during the height of the recession in 2009 and is scheduled to expire next year, costing the city about $143 million annually.

Corbett, who faces reelection next year, is sensitive to the plight of Philadelphia's schools and wary of allowing the district's doomsday budget to become a campaign issue, sources close to him said.

Inquirer staff writer Angela Couloumbis contributed to this article.