By Larry Farnese
The "Actual Value Initiative," an effort to comprehensively reassess Philadelphia's properties, is supposed to increase transparency and fairness by ensuring that people in similar houses and neighborhoods pay similar property taxes. It was not supposed to be used to increase overall tax revenue. However, the Nutter administration appears to be headed in that direction, having announced that the initiative will generate $90 million in new revenue in the coming fiscal year.
Pennsylvania law would not permit such a reassessment windfall anywhere else in the state, and it should not be allowed in Philadelphia.
Moving to full valuation by itself is no easy task. Not only does the city have to reassess all its property — a task it's not expected to complete until the fall — but City Council has to put mechanisms in place to ensure that individual homeowners don't see their tax bills skyrocket in a single year. That's why reassessment was always billed as "revenue-neutral." While individual homeowners might pay more or less in taxes, overall revenue would not change.
It's important to note that the city needs assistance from Harrisburg to complete the reassessment. State legislation is required to allow the city to lower tax rates to accommodate new property valuations. The legislature also has to allow Philadelphia to enact a homestead exemption, a vehicle for taxpayer relief that's currently available only outside the city. Additional legislation is needed to give Mayor Nutter control of the Board of Revision of Taxes and bring Philadelphia's assessor certification standards in line with those for the rest of the state.
Philadelphia's state legislators are ready to help with all of this. But as experience has shown, getting the rest of Harrisburg to help Philadelphia is a task that will not be accomplished quickly or easily. Using reassessment to cloak a tax increase, as the administration is planning to do, further complicates this already complicated problem. It also threatens to undermine the very confidence in the system that the effort was meant to restore.
While the administration claims the $90 million revenue boost represents uncaptured property appreciation, that only obscures what amounts to a simple algebra problem. The city collected about $880 million in property taxes last year. To make reassessment revenue-neutral, rates can be adjusted so that when they are applied to the new values, the city's property tax collections are still about $880 million.
The idea that property reassessments should not be used for stealth tax increases is not new. For many years, school boards and local governments in every other part of Pennsylvania have been subject to "anti-windfall" laws that require them to lower tax rates to ensure that revenue does not rise substantially due to property reassessment.
If they need more revenue, school boards and local governments can debate whether taxes should be increased. But they cannot use reassessment to avoid a debate.
The city's reassessment process needs to be open and transparent. Let's get all the property values right first. Then let's establish the correct tax rates and protect financially vulnerable homeowners. And then there can be a public debate about the need for new revenue and how it might be raised.
Any other course could jeopardize the property-tax reform that has been sought in Philadelphia for so long.