Farnese withdraws amendment on property tax

The dual effort to remake the city's property-tax system and raise more money for Philadelphia's school district took a small step forward Monday after a state legislator agreed to pull an amendment that could have gotten in the way of both those changes.

State Sen. Larry Farnese's decision was a compromise with City Council President Darrell L. Clarke, who agreed that Council would vote separately on the property-tax proposal, known as the Actual Value Initiative, and on raising the additional $94 million the School District says it needs to open classrooms in the fall.

Farnese's amendment would have required separate votes. By killing his amendment, Farnese (D., Phila.), removed a barrier to passage of a state Senate bill that the city needs to restructure its property-tax system so that assessments are based on market values. The state bill would allow the city to lower its tax rate, also known as the millage rate.

The Actual Value Initiative (AVI) is designed to fix the city's property tax system, in which assessments, and bills, vary widely for similar properties. As a result of inaccurate and inequitable assessments over decades, many higher-end neighborhoods have paid less than their fair share, while some poorer neighborhoods carry a greater tax load than they should. AVI would do away with the city's practice of taxing properties on a fraction of their value and establish assessments based on actual market prices.

Proponents of AVI have argued that such a politically explosive policy issue should not be combined with an increase in overall real estate taxes.

Mayor Nutter, however, has proposed using AVI to generate an additional $94 million in revenues next year for the desperate School District.

Nutter argues that the city will merely capture the increase in property values missed over the last decade with a broken assessment system. Critics view his proposal as a backdoor tax increase that will result in a greater burden on property owners.

Separating the votes could make it tough for some on Council, especially those who live in areas where property values have been rising, said Councilwoman Maria Quiñones Sánchez.

"It's a tougher vote," she said. "Now we're asking people to vote for a direct tax increase."

Even so, she and Councilmen W. Wilson Goode Jr. and Bill Green expressed hope that both property-tax reform and new money for the schools would move forward, possibly as soon as this week.

"We'll get it done," Quiñones Sánchez said.

State Rep. John Taylor, the lone Philadelphia Republican in the GOP-controlled state House, said he believed the bill that allows the city to lower the millage rate would pass in the Senate but that there was more work to do to get it through the House.

Even so, Farnese's announcement gives incentives for Republican legislators who are not from Philadelphia to approve the law because it reduces confusion about what the city wants, said State Sen. Anthony Hardy Williams, a Philadelphia Democrat.

"Why would a Republican majority support enabling legislation for a Democratic county when the Democratic delegation is split or indifferent?" Williams said. "The fact that now we are coalescing is very important."

Nutter also was encouraged by Monday's developments, said his spokesman, Mark McDonald.

But reforming the property-tax system, widely reviled as unfair, and finding money for the schools are still not assured. Council is still weighing how to redo assessments without hitting some constituents with much larger bills. Councilmen Jim Kenney and Mark Squilla are working on a proposal that would limit property-tax increases to triple the current bill for people who have lived in their houses for at least 10 years and live in rapidly gentrifying neighborhoods, for example.

Council also may choose to raise revenue by increasing taxes on something other than residential properties. Council members Green and Clarke have both proposed hiking the commercial use-and-occupancy tax for commercial properties, whose property tax bills are expected to go down with AVI, though the two council members don't agree on the amount..

Council will meet in committee today on 16 budget bills, with a first budget vote possible at the regular Council meeting Thursday. Several on Council said they expected Thursday's meeting to be crazy, with proposals flying back and forth.

Pressed for details, Clarke said only, "Stay tuned."