Philadelphia City Council puts off the property tax horror show for a year

 

AVI, RIP.

I was in Washington last week, but I could almost hear the sighs of relief when Philadelphia City Council decided to just say no to Mayor Nutter’s controversial proposal to put Philadelphia’s property taxes on a market-value assessment basis.

Technically, members didn’t say no. They just said, “not this year.”

The sighs of relief came from homeowners worried about skyrocketing tax bills and Council members fearing their wrath. So the plan is to keep the clunky property tax system we have now for another year, and deal with the transformation next year, when assessors finish valuations for all our real estate.

While there are plenty of good reasons not to embrace the little monster the Actual Value Initiative has become, I think by next year it will be a much bigger monster, with more scales, horns, warts, fangs and claws than any Council member will want to deal with.

Just how messed-up is this

First, the good reasons not to embrace the market value plan now.

Council members’ basic beef is that the Nutter team wanted them to approve this switch (read here if this is new to you) before anybody knows just how much their property value will rise (or fall) and how much their tax bill may rise (or fall). Nutter’s legislation didn’t have a tax rate – it asked Council to approve a formula for determining rates when the assessments are done.

The basic problem here is that Philadelphia’s property assessments are so sloppy and out-of-date that when the city begins actually taxing property on what it’s really worth, some dramatic changes could take place.

And as Council members began doing their own analysis, some troubling prospects emerged. One is that the change would likely transfer of tens of millions of dollars worth of property tax burden from businesses to residential property owners.

And that means residential taxpayers would, in the aggregate, pay more than was originally thought.

The Nutter administration originally gave Council members charts showing how various neighborhoods in their districts might fare under the switch. In many neighborhoods taxes would be going down. Where there were increases, most seemed moderate.

More current analyses – done by Councilman Bill Green and others – suggest that far fewer neighborhoods will get tax decreases and some of the increases will be really, really big.

A Council technical staff analysis suggests that, contrary to what administration folks originally said, the losers in the transformation may outnumber the winners. Not what Council members want to tell their constituents.

Another troubling prospect is that while some businesses, like owners of center city office buildings will see big tax decreases, smaller businesses on neighborhood commercial strips could get whacked with big increases.

Since nobody knows just how big these effects will be until they get the actual assessments in the fall, Council is just going to wait.

The fire next time

But there are problems with putting off the reckoning with the property tax dilemma a year.

A state board has already ruled that the city’s assessments are so far off that taxpayers appealing their bills have to get an advantage, and that problem will only get worse (this is complicated – explainer here).

But the bigger problem is that most of the complaints listed above are rooted less in a lack of information than in the fact that we’ve had a property assessment system that’s been so screwed-up for so long.

People who’ve been way under-assessed will get whacked. And businesses who’ve been paying more than their relative share will get a break.

While Council members deserve better information, getting it will probably just make the pain of fixing the system more apparent, to them and their constituents.

Add to that the fact that every Council member will be a year closer to re-election and the assessments will be one more year out-of-date, and you have a nasty political challenge waiting for City Council a year from now.

In fact, while I don’t think the Nutter administration planned to impose this transition without actual assessments, it had to become apparent to them at some point that it might be easier to get this thing approved before people saw new tax bills.

I can only imagine what we’re in for next year.

A legacy of politics

I can’t leave the issue without noting that the city’s screwed-up property tax assessment system is a product of the Board of Revision of Taxes, one of very few agencies in city government in recent decades still ruled by political patronage.

But I’m also told that one reason the city didn’t get the new property reassessments done in time for this budget season is that the city’s lumbering civil service system couldn’t accommodate the prompt hiring of enough tax assessors.

Twin evils of bad government: empowered hacks and slow-moving bureaucracy. Together, they’ve created a monster.