City Council's fortitude will soon be tested when it votes on adopting a new and less haphazard property-tax system that will draw howls of protest from some taxpayers when they see higher bills. But no matter how much pressure is applied, Council should stand strong. It must reform the existing inequitable and sometimes corrupt system, and it must explain to the public why those changes are necessary. That is a fairer and more fiscally responsible way to proceed than allowing the status quo to prevail.
Under the current system, property assessments vary so wildly that two identical rowhouses standing right next to each other can have very different tax bills. Some properties in poorer neighborhoods have relatively high assessments, and thus higher tax bills, while those in affluent areas have been underassessed and, as a result, have relatively lower tax bills. Fed up with the unfairness, voters passed a referendum in 2010 to change the system.
The new plan, called Actual Value Initiative (AVI), bases taxes on the actual market value of a property. Taxpayers who benefited from the inconsistencies of the current system, and those in up and coming areas like Northern Liberties, probably can expect higher tax bills.
Council will have some discretion on lessening the impact of those bills. They are considering a $30,000 homestead exemption, as well as protection for longtime residents of gentrifying neighborhoods where property values have shot up. They should also look at phasing in tax increases over a few years for some property owners, rather than hitting them with a higher bill all at once.
However, Council must also remember that for each $10 million in overall tax relief granted to one group, the tax rate for everyone goes up .01 percent.
Preliminary figures show the city's tax rate could be lower than previously predicted, which is good news after three years of property tax hikes. The Inquirer's Troy Graham reports that Mayor Nutter promised not to ask for a property-tax hike next year.
Council wisely postponed AVI last June because the city wasn't finished calculating new property assessments. The move also put off potential taxpayer anger at new and higher bills, but that day of reckoning is approaching.
Next month, the administration is expected to give Council more specific data on how the new tax system would impact neighborhoods. Members will then know which irate property owners are going to put their Council representative on speed dial.
Rather than just sit back and await the likely backlash, however, Council members should be up front with constituents. They would be wise to hold community meetings and explain the changes in advance. This will not mollify all complaints, but, as the mayor has said, "We owe the citizens this and we've owed it to them for a long, long time."