City Council’s unease with the Actual Value Initiative — the shift from property taxes based on partial values to one based on full market values — was apparent this week during budget hearings.
A number of members are concerned that the shift, which was supposed to be revenue neutral, is actually a tax increase.
“You need to address the outstanding questions as relates to the math of this on the issue of whether or not we are asking the public for a tax increase,” said Majority Leader Curtis Jones Jr. on Wednesday morning as he summed up concerns about AVI.
Jones was just one member of Council who peppered Finance Director Rob Dubow and Budget Director Rebecca Rhynhart with questions and comments over several days this week as Council dug into Mayor Michael Nutter’s $3.6 billion budget proposal.
The administration’s budget numbers show that the move to AVI would provide an additional $90 million in funding for the school district this year, for a total of $673 million. The city, which splits property tax revenue with the district, would collect $458 million, roughly the same amount it collected last year.
Administration officials have avoided calling that extra revenue a tax increase, and instead say it represents the amount captured by increasing property values, which have risen since the city froze assessments in 2010.
But council members, who now appear to be fielding more questions from angry constituents, are nervous.
“This AVI issue is probably going to be the most difficult and angry issue that we’re facing — maybe since I came into council in ’92,” said Councilman Jim Kenney. “I can’t yet find a justification for explaining to people that I represent, citywide, why the additional $90 million makes sense.”
Kenney, like many of his colleagues, voted for property tax increases in several recent budget cycles, and said this week he supports funding for public schools. But, noting that in testimony Monday School Reform Commission Chairman Pedro Ramos said previous school administrations were guilty of “bad fiscal policy,” Kenney added that he wanted a better idea of how the district would spend the additional money.
His questions and comments suggested that council might feel more comfortable if revenue figures were changed to eliminate the added $90 million for the district.
“Would you agree with me, subjectively, that with the $90 million off the table it would be difficult for people to argue that this is fact a tax increase?” he asked Dubow, who declined to “get into whether it’s a tax increase.”
Dubow then added that he was sure the district was aware that it would need to justify the added money.
Last year council approved a 3.9 percent property tax increase after school officials, led by former Superintendent Arlene Ackerman, said if it didn’t the district would be forced to get rid of full-day kindergarten and yellow buses.
“We were spun,” said Jones, agreeing with Kenney that he would need to know where any additional money was being spent.
Council members are also concerned about how the administration plans to roll out AVI.
The mayor wants to see it done this year. Under the administration’s plan, residents will receive their new assessments in October, and bills based on the new numbers in December.
That concerns council members who are being asked to make decisions based on budget numbers that could change as residents challenge tax bills through city appeals and maybe even court challenges.
“If we for some reason go forward and find out what we’re doing here, the formulation, the method is not legal … and all those appeals are granted we’d collect less revenue, correct?” asked Councilman Mark Squilla.
Dubow said the city had factored greater appeals, losses and lower collections when drawing up the budget.
“We’re assuming that goes up substantially,” he said.
At last week’s city council meeting, Squilla emerged as one of the prime opponents of AVI after he introduced legislation that would freeze property tax millage rates and assessments at current levels.
Squilla also raised concerns about a portion of the city’s AVI plan that would create a $15,000 exemption for residents’ primary residence. That portion of the plan needs approval by the state legislature before it can be enacted.
“We’re still at a point where we cannot give the public real information because we don’t know everything that is going to happen,” said Squilla.