Assessors have begun fanning out across Philadelphia neighborhoods this month as part of the effort to affix an "actual value" on the city's 577,000 properties - and to correct a property-tax system rife with inequities.

City officials hope to have an assessor physically inspect each of the city's parcels by the spring of 2012. Home and business owners should be notified of their new assessed values by the fall of 2012.

"We are going to value the property based on what it would sell for," Richie McKeithen, the city's chief assessment officer, said Tuesday. "We are going to track the market and follow it."

The sticky political question of how the city will set the tax rate based on actual value - and whose taxes will increase as a result - is "something we kind of have to work out with Council," City Finance Director Rob Dubow said Tuesday.

The city also must pass a budget and set a tax rate for fiscal 2013 by the end of June 2012 - before the reassessment is complete. It is unclear how Nutter and Council will resolve that problem.

The current tax rate is based on assessments that should, by law, be a consistent percentage of actual value. But they are often wildly inequitable - taxes for two virtually identical homes can vary widely.

Values are so out of whack that Nutter froze reassessments on most properties last year. And in January a group of taxpayers sued the city, asking a Common Pleas Court judge to declare the city's property-tax system illegal and require a new system.

The mayor and Council also must decide whether the new tax rate should be set at a level to bring in more money, essentially continuing the temporary tax increases passed the last two years.

Administration officials acknowledged this year that they expected to collect about 20 percent more revenue under actual value - or about $200 million more - than the $1 billion collected in 2010.

They argue that the city should be able to capture the rise of property values not reflected in the city's data during a decade of incomplete assessments and the two-year assessment freeze.

Assessors are now focusing on the city's 423,000 single-family homes and 30,000 condominiums. Later in the year, they expect to start inspecting commercial and industrial properties.

Because the city's rowhouse neighborhoods typically have properties with nearly identical floor plans and amenities, McKeithen said, assessors can inspect many homes from street level.

In less homogenous and in transitioning area, assessors may knock on doors to interview owners. They also may leave door hangers asking owners to provide information on their properties.

Assessors also will look at data such as sales of comparable homes and construction permits. Owners will be able to appeal new assessments.

The city plans to do a full assessment every year.

"We haven't done this in so long - if we've ever done it," McKeithen said. "We are literally starting from scratch."