NO HIDDEN HIKE! Coalition Forms To Block mayor’s Quick AVI Hike

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BY TONY WEST/ An unprecedented coalition of elected officials has formed a phalanx, sworn to halt Mayor Michael Nutter’s proposal to work a hefty hike in property-tax revenues by changing the method of assessment, even before its new property-value calculations are known.

State Sen. Larry Farnese (D-S. Phila.) was joined at his office last week by Pennsylvania Senators and Representatives from Philadelphia, members of Philadelphia’s City Council and community activists to jointly call upon Mayor Nutter to implement a fair property-assessment program and to explore better funding alternatives for the School District of Philadelphia.

IN AN UNPRECEDENTED move, Phila. members of General Assembly, City Council, and community leaders, called together by State Sen. Larry Farnese, warn Mayor Michael Nutter not to “backdoor” another real estate tax hike.

They vowed to press ahead on legal moves in Harrisburg that would thwart any attempt by the Mayor to push through a de facto tax hike by means of the Actual Value Initiative, which would reflect the full market value of properties. Although the Mayor says his move will be “revenue-neutral” – the new AVI tax rate will generate the same amount of taxes as the rate on the present “assessed” value, a rather arbitrary number not related to market value – the Mayor insists property values in general have gone up, so the property-tax take should go up too.

Not so fast, said the resistors. They rejected the idea that a new tax rate should be set before the “actual values” of the AVI have been calculated first.

“The Nutter Administration’s implementation of the Actual Value Initiative, or AVI, is a back-door tax increase. It’s also not the only way to help the financially struggling School District of Philadelphia,” said Farnese. “Today, we’ve come together to call for joint action in the State Capital and in City Hall. We need to keep AVI truly revenue-neutral, or delay its implementation for one year until the reassessment is actually completed. We also want to explore other taxing alternatives to fund our schools. Enough is enough. The taxpayers of Philadelphia deserve to be treated with fairness and honesty.”

The Actual Value Initiative, which will affect more than 577,000 Philadelphia property owners, was originally intended to level the playing field by creating fairness for all property owners in addition to ensuring that people in similar houses and neighborhoods pay similar property taxes. Unfortunately, it has become the Nutter Administration’s financial solution for the School District of Philadelphia’s $94 million budget deficit, affecting thousands of homeowners.

The Pennsylvania Senate has already unanimously approved legislation that would authorize a homestead exemption in Philadelphia (SB 1301), and would give the Mayor all nine board appointments to a newly-reconstituted Board of Revision of Taxes (SB 1302). He needs these bills to carry out his plan. They are now in committee in the House.

But Farnese is introducing legislation (SB 1303) that would allow City Council – if it chooses – to delay AVI for one year, or to fund schools through other taxing alternatives. In the near future, the Senate will also consider additional legislation proposed by Farnese to bring Philadelphia’s assessor-certification standards in line with the rest of the state.

If this bill sticks, the Mayor’s plan cannot be used to balance the books for Fiscal Year 2012-13.

State Sen. Mike Stack (D-Northeast) has also introduced legislation that would prevent the City of Philadelphia from increasing property taxes until it first improves its tax-collection rate, which is currently an abysmal 80%. “The taxpayers are ground down. Many folks who own property often don’t have kids,” he said. “The people send us to Harrisburg and we should stand up for them.”

State Rep. Brendan Boyle (D-Northeast) is introducing a measure (HB 2397) that would require any change in assessment methods to be revenue-neutral. In recent years, he said, property-taxes have crept up steadily – 9% on top of 3½%, on top of an earlier 9%. “It’s unfair and it’s wrong” he said.

State Rep. Mike O’Brien (D-Kensington) outlined a method whereby the School District’s $97 million shortfall can be fully funded without a property-tax increase, in time for schools to open this fall. O’Brien recently introduced legislation to temporarily divert gaming revenue used for wage-tax reductions to the Philadelphia School District. His bill would re-prioritize the use of these gaming funds for the next five years.

O’Brien accused the Nutter Administration of “governing in a panic. In pushing forward with AVI, they are oblivious and indifferent to the angst they are causing city homeowners and the parents of our schoolchildren, as well as to the consequences of their actions.

“Re-prioritizing this funding of about $88 million would give everyone time to consider, implement and benefit from changes to the way we assess properties and administer our schools,” O’Brien said.”

“We all understand the need to do something about property taxes and a fairer system of valuation,” O’Brien said. “But we’re not going to govern by crisis. The administration needs to take a step back and really listen to the alternatives.”

Neighborhoods that have undergone gentrification pose the biggest problems in initiating any tax reform; one way or another, sooner or later, their taxes are destined to be jacked up. And that will hurt people who based life plans on housing at one level of taxation, and may not have the means to make money to pay higher taxes.

Councilman Mark Squilla’s 1st Dist. contains a lot of gentrified areas. “It is unfair for people, through no fault of their own, to be pushed out of their homes by higher taxes.”

Seniors are particularly vulnerable, said State Rep. Rosita Youngblood (D-Northwest). “Of my homeowners, 19% are seniors,” she said. “These people are in their golden years. Where are they going to find the money to pay extra?”

Her colleague Michelle Brownlee (D-N. Phila.) was blunt: “We are moving too far, too fast,” she stated.

“I get emails every day from worried constituents,” said State Rep. Maria Donatucci (D-S. Phila.). She said the Mayor will have to come up with a plan to soften the blow for many homeowners.

Councilman Bill Green spoke ominously of larger flaws in the Mayor’s plan. “Wake up!” he warned. The Mayor’s initiative, he said, would shift a large burden from commercial-property owners onto the backs of residential owners.

One reform still far down the pike: bagging Pennsylvania’s infamous “uniformity clause”, which compels all real estate to be taxed at the same rate. In most other states, municipalities are permitted to tax commercial real estate at a higher rate than residential properties. That’s usually okay with big commercial operators because they can pass this cost on to their tenants.

Pennsylvania forbids this. Instead, the City is forced to rely on instruments like the wage tax, which businesses loathe.

So any move that would make a bad commercial/residential tax ratio even worse could do serious harm, these rebels charge.

Jeff Hornstein, president of Queen Village Neighbors Association, spoke on behalf of 16 civic groups that maintain their communities could be devastated by a hasty AVI without ways to “protect the vulnerable.”

Most scathing of all was civic activist and budget watchdog Brett Mandel, who is eyeing another run for City Controller in 2013. The Nutter Administration’s approach, he snapped, amounted to “Ready, fire, aim!”

Other lawmakers have made known they stand with the rush-job resisters. State Rep. James Roebuck (D-W. Phila.) and State Sen. LeAnna Washington (D-Northwest) have signed on.

Squilla and Green said they are seeking for a nine-vote majority on City Council to block the Mayor’s proposed rush to introduce AVI taxation sight unseen. They don’t have it yet, they noted.

Although the dust hasn’t settled yet, such a broad-based, coordinated revolt against a core mayoral policy has not been seen for a generation at least.

The City collected approximately $1.047 billion in property taxes in the last tax year ($458 million for the City’s general fund and $589 million for the School District). If the reassessment was truly revenue-neutral, then the City’s total property-tax collections after reassessment would be approximately $1.047 billion. In an honest, revenue-neutral process, the resistors assert, a city would determine the total property values and then adjust the millage rate to ensure that the total revenue did not result in a windfall.

The idea that property reassessments should not be used as a stealth tax increase is not a new one. For many years, school boards and local governments in every other Pennsylvania County have been subject to “anti-windfall” legislation when a City conducts a property reassessment. These laws require taxing authorities to lower tax rates to make sure tax bills do not rise above a small percentage. If additional revenue is needed, the school boards or county governments can debate the need for, and then vote on, a tax increase.

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