Homeowners sick at heart over possibly huge property-tax increase

If the city's property-tax valuation overhaul happens, Candace DiCarlo already has a real-estate agent lined up to sell her South Philadelphia home.

"It's going to drive people out. They're going to ask me now to pay $5,500 a year [in property tax]," said DiCarlo, 59, a self-employed artist who lives on Broad Street near Washington Avenue. "I feel like I love the city and it doesn't love me back."

Community groups have warned that many homeowners could wind up with rude sticker shock when the Nutter administration moves to a tax system that relies on the market values of properties, an effort known as the "Actual Value Initiative."

DiCarlo could be one of them. She bought her home for $185,000 in 2001, but values in her neighborhood have risen. She thinks that her home could be assessed at up to $500,000, sending her tax bill well above the $2,275 that she currently pays. And, while there are tax-protection programs on the books, most are for the very poor or for seniors.

"I make a living," said DiCarlo. "I'm that middle section that gets squeezed every time. Do I give up my health insurance or what do I forgo so I can pay an extra $3,000?"

Critics have blasted Nutter for also trying to collect an extra $90 million in taxes for the school district next year when he shifts to the new system, calling it a "back-door tax increase." Nutter has insisted that he's just trying to accurately capture the increase in property value across the city. Recently, he upped his pressure on City Council to approve the plan, citing the growing budget woes at the school district, though many Council members remain uncommitted.

DiCarlo is a board member of the South Broad Street Neighborhood Association, part of a collection of neighborhood civic associations calling themselves the "Tax Fairness Coalition." They are urging lawmakers to delay implementing AVI for a year, until after the new assessments are released, and to enact protections for homeowners they identify as vulnerable.

"I know the city intended to have the numbers done in time for the budget. But they didn't," said Jeff Hornstein, president of the Queen Village Neighbors Association. "But to say to us, 'trust us,' it's not going to fly with us. We want to see the numbers. We want to have information before we move forward."

Broken system

Finance Director Rob Dubow said the city wants to avoid sticker shock for longtime homeowners, but he said the city can't keep the current broken system.

"There are a lot of competing factors here," said Dubow, who noted that the city is looking at protections like phasing in the new bills over three years and is trying to get state approval for a homestead exemption that would take $15,000 off all assessed values.

Mayor Nutter proposed moving the city to AVI in the fiscal year that begins July 1. The city's current system, which relies on fractional assessments, has long been decried as unfair and inaccurate.

Nutter's staff is not expected to finish assessing the city's properties by the June 30 budget deadline. So Nutter is asking City Council to approve a revenue target and then, after the assessments are known in the fall, set a tax rate to bring in that amount.

Council has complained about being asked to approve a budget with little information about how the tax changes will work. Even with the news this week about the looming budget gap at the school district, many members said they still wanted more information about AVI — and some said they wanted to debate the AVI shift and the extra money for schools as two separate issues.

Councilman Mark Squilla has introduced legislation to delay the move to AVI for another year. But the city is also concerned about a recent ruling by a state tax board that could cause a $41 million loss of revenue through appeals this year. If AVI is delayed, that amount could grow next year.

Precisely who will see their tax bills go up under AVI?

Part of the problem with the debate is that no one knows for sure. It is likely that areas with rapid growth, gentrification and development in the past decade could experience tax hikes because the current assessments haven't kept pace with the changing property values.

Parts of South Philadelphia, Northern Liberties, the Graduate Hospital area and pockets of West Philadelphia could all be on this list. Dubow said the city hopes to get some analysis about the average sale prices in neighborhoods to Council soon.

"A neighborhood like Northern Liberties, which is the fastest growing neighborhood in Philadelphia, is ground zero for this issue," said Matt Ruben, president of the Northern Liberties Neighbors Association. "There are a lot of people who are afraid that their property taxes are going to increase by huge amounts without warning."

There is some relief

There are several programs available for property tax relief. Low income seniors can freeze their bills at the current rate if they meet certain income guidelines. And other seniors, low-income residents and tax delinquents can apply for several payment-plan options.

But many residents think they're not going to get much support from those programs or the mayor's proposals to ease the pain.

"You do this without protections in place, you're sending out eviction notices to people," said Judy Appelbaum, 63, a board member for the Washington West Civic Association.

Appelbaum said that as she approaches retirement, she and her husband won't be able to absorb a major increase of the taxes on their home on Waverly Walkway, near 12th and Pine streets, which they bought for $162,000 in 1998. They currently pay $4,500 in taxes and Appelbaum thinks the bill will shoot up because the home could be assessed for $450,000 based on recent sales nearby.

"There have got to be protections for people who bought their homes when the values were very different," Appelbaum said.

There actually is a tax deferral law on the books that could potentially help some people, but it has never been utilized. Passed in 2002, the law states that if the assessed value of your property goes up by more than 15 percent, then you could be eligible for deferred payments, based on a review of your income, expenses and other assets. If approved for the deferral, you'd pay 6 percent interest on the deferred amount and the relief would be effective until you sell the property.

Dubow said the city will have to review the law to establish what the income requirements for the program might be — as well as what it would cost the city.

"And that's one of the things we'd have to look at, when we look at relief, is how it would effect revenues," Dubow said.

Contact Catherine Lucey at 215-854-4172 or luceyc@phillynews.com, or follow on Twitter @phillyclout. Read her blog at phillyclout.com.