A class-action lawsuit filed by several hundred Philadelphia real-estate owners asks Commonwealth Court to void the budget deal made this year between City Council and the legislature, leading to a one-year delay in the city's use of more accurate property assessment figures.
If successful, the lawsuit could reduce Philadelphia property tax bills by as much as 25 percent but create equally large holes in the city and School District budgets, totaling $150 million or more. The individuals, partnerships, and corporations listed as plaintiffs own about 1,240 parcels in the city.
The lawsuit, filed Friday by the law firm Fox Rothschild, contends that Council and the legislature violated tax uniformity protections in the state and federal constitutions.
Lawmakers did so, the suit states, by deciding to base this year's real estate taxes on admittedly inaccurate property values from 2011 and suspending the use of a calculation intended to protect property owners from wide disparities between assessments and the actual value of their properties.
There was no immediate reaction to the lawsuit from the Nutter administration, which was focused on storm preparations.
Nutter signed onto the budget deal in June after Council rejected his efforts to redo the city's property tax assessments with a program known as Actual Value Initiative (AVI).
The final budget agreement pushed off the implementation of AVI until next year, but AVI is likely to face continuing opposition from some Council members, who remain concerned about the impact on constituents, particularly in gentrifying neighborhoods where real estate values have shot up significantly in recent years.
City real estate tax bills, scheduled to be mailed in January, will continue to reflect the assumption that property tax assessments amount to 32 percent of market value. But an analysis by the State Tax Equalization Board, based on sales data from 2009, concluded that on average, the assessments amounted to only 25 percent of market value.
The legislature passed a law allowing the 32 percent figure to remain in effect, making it harder for property owners to win assessment appeals.
The lawsuit argues that the current arrangements will continue forcing property owners "to pay taxes which are wholly based upon arbitrary and unreliable property values." That might undermine reassessment efforts throughout the state, according to the petition, "by legislating artificially high tax assessments in the year before that particular city undergoes a reassessment."
The lead plaintiff, Gerald S. Kaufman Group, owns the Terminal Commerce Building, 401 N. Broad St.
To read a copy of the full lawsuit in PDF format, click here.