Capturing Real Estate Values? Capture This!

(April 2012)

Nutter Administration officials have recently been busy explaining how the plan to generate an additional $90 million through a much-needed citywide reassessment to set accurate Real Estate Tax values is NOT a tax increase.  Not only does the Mayor want to make permanent those “temporary” Real Estate Tax increases enacted in 2010 and 2011, and not only does he want to bring in another $90 million next year, he wants to do all this AND get credit for NOT raising taxes.  It’s a ridiculous exercise in double talk that is not convincing anyone. 

The Nutter Administration plans to complete a citywide reassessment to establish legitimate and correct values for every single property in Philadelphia to end decades of unfairness in real estate taxation.  That is a very good thing as the system is so broken that mere tweaks or band-aids could not possibly make it right.  

But (and you knew there would be a “but”) there is no way the City reassessment bureaucracy will finish its revaluation before City Council sets tax rates for the year, which must occur before July 1.  So, the Mayor has asked Council to approve the budget and set a new tax rate without knowing the new proposed values for properties.  The Mayor would have Council adopt a revenue goal, which would then be translated into a tax rate using a formula that would be applied to the new values when we learn what they are.  

Even though the City would be establishing the revenue goal and even though that number could be the same amount as last year (or more or less), Mayor Nutter insists that setting that revenue goal so that it incorporates the revenues generated by those “temporary” (now permanent) Real Estate Tax increases as well as an additional $90 million designated for the schools, it is NOT a tax increase.  But, he chooses to set the revenue target higher -- it IS a tax increase. 

The City’s Finance Director actually wrote the following words to make the case: 

"In order to set tax rates now and ensure that those new higher values don't lead to a tax windfall for the city, the administration has proposed to set a target revenue amount during the budget process, and then use that target to determine a lower millage rate than the current one, once assessments are known.  Using that target would allow the city to collect that amount of revenue - not more, not less. This approach assures that the city won't get a windfall and that the School District will get the benefit of the growth in property values over the last decade." 

I assume he wrote that statement down because there is no way he could actually say it with a straight face.  The $90 million tax hike is not a tax hike because it is simply capturing the growth in property values over the last decade and even if it is a tax hike, it doesn’t count because it is going to the School District and not the City?  Nonsense. 

Property values have certainly increased in many Philadelphia neighborhoods in the past decade, but it is certainly not true that values were correct a decade ago.  Additionally, the increase in value was absolutely not uniform across neighborhoods.  Finally, given scattershot reassessments in recent years, many property owners have already seen their assessments increased by much, much more than the 25-percent increase the City is intent on capturing. 

The entire point of the citywide reassessment is to end random and unfair assessments, so the City should be hyper-focused on getting current values correct.  If the City is truly concerned about how values have changed and how that has benefited certain property owners, then the City should figure out which property owners have been paying too little over time, have them pay their fair share, and then give some refunds to the property owners who have been paying too much. 

Of course, that is not what the Nutter Administration wants to do.  Instead, they want to generate more money from those who have been historically underassessed and tell the overassessed victims that their bills might be lower moving forward -- all the while, taxpayers will be coughing up an extra the $90 million.  Thank us very much.