Enacting property tax rates with a blindfold and one hand tied

A complication in the city’s impending property tax assessment overhaul has at least one NewsWorks reader confused. They’re not alone! Dave Davies set out to clear things up.

Last week Dave Davies wrote an Off-Mic post about the city of Philadelphia embarking on a much-needed property tax assessment overhaul.

Currently, properties are assigned a market value, which is then multiplied by 32 percent to get an “assessed value” to which a rate was applied to get your tax bill.

The fix, what’s being called the Actual Value Initiative, requires reassessing every property in the city and giving each one a single value, something like its real market price, and taxing that value.

It means the new assessed values will be much larger than the old ones, so tax rates would have to be lowered to achieve the same level of revenue as before.

One of the complicating factors in this process, however, is that these reassessments won’t be finished until the fall, and the mayor and the city council must tax rates this spring — before they know what property values will be.

In other words, they’ll have to take an educated stab in the dark to set the tax rate.

A response from one reader reflects the confusion this process will cause:

Dave, this seems factually inaccurate — to say they have to enact the rates now without knowing the values — is that because they have to have the new revenue ASAP? Would seem that they could release the new values in the fall and adjust the rates in spring 2013.—rabbit

Davies responds:

I’m late getting back to you on this, but wanted to double-check the law. The city enacts tax bills before the beginning of the fiscal year (July 1st) and can’t legally change them in the course of the fiscal year they cover. So they can’t enact rates in the fall, or make any changes that would take effect before July 1, 2013. That’s why they’re in a bind.

I thought this was in the city charter. Turns out it’s the result of court cases and city solicitors’ opinions based on charter provisions which govern the annual operating budget ordinance.

Thanks for your questions, folks. Keep them coming.