STOPPING A.V.I.: ‘Collect Back Taxes First,’ Say N.E. Solons

Filed under: Featured News,Government |

BY TONY WEST/ Beleaguered Philadelphia homeowners staring at a back-door tax increase may find rescue in an unlikely place: Harrisburg.

Concerns over Mayor Michael Nutter’s Actual Value Initiative have prompted two state lawmakers to scrutinize the plan more closely. State Sen. Mike Stack and State Rep. Mike McGeehan (both D-Northeast) are offering alternative solutions that would put pressure on the City to collect property taxes on delinquent homeowners and would ease the impending financial burden on taxpayers.

No one disputes the current system (if it can be called one) of assessing property taxes is complex, chaotic, arbitrary, unjust, and probably illegal as well. The City was looking into ways of transitioning to taxation based on true market value under the Street Administration. Now, in Street’s successor’s second term, it’s still looking.

Spurred by revenue shortfalls, Nutter is moving to jump-start the process in the 2012-13 Fiscal Year. While he calls the AVI plan “revenue-neutral,” it would measure new wealth based on real-estate prices which have risen substantially in some parts of town, thereby bringing in an additional $90 million in taxes – but at the expense of many longtime homeowners.

Not so fast, say Stack and McGeehan. Before the City takes more money from taxpayers, it should collect the money it’s owed by tax-dodgers. Philadelphia has a tax delinquency rate of 19%. Delinquent taxpayers owe the city over $470 million as of 2011. Both lawmakers are urging the Nutter administration to prioritize property tax collections by going after the delinquent taxpayers first.

Stack has introduced SB 1505, which would prohibit the City of Philadelphia from increasing property taxes if the City’s property-tax collection rate is less than 95%. Currently it stands at 81%. “This is way lower than most other municipalities achieve,” Stack explained. “A typical expectation for tax collection is 95%.”

SPEAKING FROM front porch of a Tacony householder, State Sen. Mike Stack and State Rep. Mike McGeehan announced launch of measures that will, among other things, stop Phila. from raising real-estate taxes until it achieves 95% tax-collection rate -- far cry from this city's 81% rate, which Stack called "broken for a long time." We're mad as hell and we're not going to take it anymore, McGeehan insisted.

Stack and McGeehan met last week with longtime homeowners in the Tacony section of the city who fear getting clobbered by AVI. “How much more can we afford?” asked business owner Georgeanne Labovitz. “The City can’t keep taking and expecting us to keep giving.”

Stack said the owners of the Thomas W. Buck Hosiery building in Kensington, which caught fire and killed two Philadelphia firefighters, owe nearly $400,000 in back property taxes. “A tragedy could have been prevented if these property owners, who also have a stack of Dept. of Licenses & Inspections violations against them, were taken to task by the city,” Stack said. “Instead, the city is targeting longtime homeowners, many of whom have spent most of their lives in their large old houses or inherited homes from family members.

“Let’s call this plan what it is — a tax hike,” said Stack. “Philadelphians have already endured two years of so-called temporary tax increases. Rather than placing the burden on the homeowners who pay their taxes, the city should first go after the many property owners who have failed to pay their taxes.”

McGeehan plans to introduce companion legislation in the State House of Representatives soon. “Philadelphians are taxed enough, and they are going to be punished after this reassessment,” said McGeehan. “Our wallets are being tapped again because the City let the property-assessment system spiral out of control. We need to offer some protection from the financial pain that many residents will endure soon.”

Stack and McGeehan have also introduced legislation that would ease the burden on Philadelphia homeowners upon reassessment. Their identical legislation (SB 1504 and HB 1600) would impose a homestead property-tax exemption for owner-occupied properties, from both city and school district taxes. The bill would also give home-owning senior citizens in Philadelphia with household incomes of $60,000 or less, the option to defer the payment of property-tax increases until they sell their house. Homeowners who have lived at their primary residence for 20 or more years would receive the same tax-deferment opportunity. Recently unemployed homeowners would receive a one-year deferment, which would be collected upon the sale of the home.

Another bill introduced by McGeehan would put Philadelphia homeowners on par with the rest of the state under the General County Assessment Law. Currently, all Pennsylvania jurisdictions except Philadelphia may reduce their tax rates for one year to equal the preceding year upon reassessment. HB 937 would offer Philadelphians the same anti-windfall protection, as well as an annual 5% cap on each preceding assessment.

“The City’s former Board of Revision of Taxes created absolute chaos out of the property-assessment system, which is why we’re faced with this current plan to overhaul the system,” McGeehan said. “Many Philadelphia homeowners will be hit hard by this reassessment through no fault of their own. They deserve some cushion to ease the financial blow.”

Philadelphia’s property taxes are such a big mystery, it’s not even clear why they haven’t been fixed to date, after years of trying. The Nutter Administration has consistently cited obsolete and mutually incompatible information systems in the different departments that deal with delinquent properties – the Revenue Dept., the Law Dept., Licensing & Inspections, and the Sheriff’s Office. Each of these agencies also has a different set of internal objectives and priorities; if they’re not pulling in the same direction, it may be hard to get them to coordinate on a common task.

Other local governments manage coordinate different departments well enough to collect taxes, however.

State Rep. Brendan Boyle (D-Northeast) has joined the effort, introducing legislation to ensure Philadelphia’s planned reassessment will be revenue-neutral.

“As the City proceeds to implement full-value reassessment, the transition should not unfairly burden our neighbors who will find the value of their properties vastly different – seemingly overnight,” Boyle said. “Similarly, this change in policy should not provide an unreasonable windfall to city government. My bill would protect Philadelphians from an outrageous hike in their property taxes while not depriving city officials of much-needed revenue,” he continued. “This balance will allow both parties to adjust much more smoothly to the new assessment design.”

Boyle also intends to amend any existing legislation that concerns Philadelphia’s planned reassessment with his revenue-neutral requirement.

Can these Notheast lawmakers’ relief efforts arrive in time to forestall AVI? If their measures aren’t passed by December, they will die in the General Assembly. In a legislature totally controlled by Republicans, it is often hard for Democrats to put their own agenda on a fast track.

In this case, though, the two Northeast Donkeys are appealing to a core Elephant urge: stopping tax increases. If Stack and McGeehan play their cards right, they may be able to put a temporary halt on AVI – and give the City’s fiscal gurus a new hot project: going after that missing $470 million as fast as possible.

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