A statistical finding by an obscure state agency could drastically cut property tax payments in Philadelphia and cost the city a up to two hundred million dollars in revenue, according to a veteran real estate lawyer.
The ruling leaves city officials scrambling to figure out what to do.The problem is rooted in the convoluted way property tax bills in Philadelphia and many other counties are determined. County assessors give a market value to each property, and the assessed value for tax purposes is some fraction of the market value. Tax rates are applied to the assessed value to get a property’s tax bill.But an agency called the State Tax Equalization Board has determined that the market values Philadelphia has assigned properties are way out of whack, and the assessed values for them will have to be adjusted downward if a taxpayer appeals his bill.Attorney Philip Korb, with the firm Ballard Spahr says this could mean a huge revenue loss for the city.”I looked at Philadelphia’s number and I was stunned,” Korb said. “It was something I never imagined and as soon as I saw the number I knew that this would be a very dramatic problem. I’m a city resident and I really don’t want to see the city go broke.”It’s not clear why the state board reached the statistical conclusions it did, but City Councilman Bill Green said the issue needs to be addressed quickly
“It could result in many property owners deciding to appeal their taxes and even if the city has the values correct, their tax bills could be almost halved,” Green said. “We certainly can’t afford that and we need to get to the bottom of this very quickly.”A simple solution would be for the city to raise property rates to compensate for the lower assessments, so everyone’s tax bill would stay the same. But the city has already set its tax rates for the current year, and the city charter prohibits changing them before July of 2012.
The city can also appeal the state board’s determination of its assessed value ratio.
City finance director Rob Dubow acknowledged in a brief telephone interview that the ruling was a cause for concern and that administration officials are considering their options.
“We’ll have to figure out what it means and what we should do,” Dubow said.