Taxpayers and school officials are at odds over the implementation of the administration’s Actual Value Initiative leaving City Council scrambling to find ways to boost school funding without alienating taxpayers.
The issue dominated conversation in City Hall this week.
Members of the School Reform Commission, on Tuesday, asked Council to move forward with AVI this year. But, at a public hearing Wednesday evening many residents let Council members know they were unhappy with the change, which is expected to increase property taxes for many Philadelphians.
Council is wrestling with two related issues: whether to implement AVI — shifting the basis of property taxes from values based on a percentage of market value to full market valuation — this year and whether to provide more money for Philadelphia schools.
The move to AVI would automatically provide the school district with about $94 million in additional revenue in the next fiscal year. Its money the district needs but, AVI would also raise taxes for many property owners. Initial estimates suggest an average 8 percent increase.
And, as always, politics have muddied the debate.
Even members who appear to support more money for schools are unhappy with Council’s lack of authority over the School Reform Commission, which routinely asks for funds that Council has no control over.
“School and state officials have been feeding Philadelphians promises for years and decades about achievement and accountability and each year they request funds,” said Councilman Curtis Jones. “And, here we are with shortfalls, failing schools, decreasing staff and violence in the classroom. So, what happened?”
Nearly everyone agrees that AVI will have be implemented at some point. The question is when. Councilmen Bill Green and Mark Squilla want to wait one more year.
Green, who has been among those firmly against rolling out AVI this year, again attacked the administration for not providing enough information for Council to make an informed decision.
“I hope we get additional information and that the public begins to understand that they are paying the lion’s share of this shift to AVI and it is up to us to protect them with full information,” Green said. “The public has no idea what’s coming.”
Administration officials won’t have concrete assessment numbers until July, at the earliest, after Council is expected to approve a budget based on revenue projections. Yet, Mayor Michael Nutter is firm in his insistence the AVI move forward this year.
Lacking numbers from the administration, Green provided his own examples of how the move to full valuation could affect taxes.
In the first example, Green took a residential property now assessed at 30 to 40 percent of fair market value. For a residence worth $300,000 the assessed value is about $100,000 so taxes are about $3,000 annually. After the shift, that tax bill will rise to $3,420, with the city’s proposed homestead exemption.
For a commercial property, which is assessed at 70 to 80 percent of its market value, and is worth $1 million the tax bill is approximately $21,280 annually. Under AVI that would dip to $12,000.
“There will be a massive shift from the commercial and industrial sector on the order of several hundred million dollars, based on calculations from [the administration],” Green said. “If commercial and industrial businesses are going to get a windfall we need to do something about that.”
Green added that by his estimates the total revenue generated by property taxes on commercial properties today is about $484 million. For residential properties it is about $616 million. But, under AVI that would shift to more than $800 million for residential properties.
“Of course the administration has testified that they can’t confirm these numbers,” he said.
According to Green, the total value of all real estate in the city would jump from about $38 billion to as high as $152 billion.
Implementing AVI is not the only way to provide more money for the school district.
Council could also choose to change the way that property tax revenue is divided. At the moment, the district receives 55 percent of total property tax revenue. Traditionally, it has received 60 percent but over the last several years, as the city struggled to combat its own deficits, that ratio was changed. Council could now change it back.
It’s a move that at least one Council member supports.
“The district’s five-year plan … says that after they receive 60 percent of newly assessed property revenue they will not be back to us any time soon,” said Councilman W. Wilson Goode Jr.
Of course, Council could do both.
“All they want us to do is re-assess property fairly and then they want 60 percent of the cut,” said Goode.
As a measure of its indecision, Council keeps adding budget hearings to its schedule — three more have been added — as members anticipate more questions.
It was too early Thursday to anticipate what action could come out of those hearings.
“It could be anything,” said Council President Darrell Clarke. “There is no telling.”
In other news, Council also approved a resolution urging the state legislature to shoot down a law that would permit predatory lending — including a jump in interest rates now capped at 24 percent to up to 300 percent.
Seconds before the vote, Councilwoman Marian Tasco — long an opponent of predatory lending — gave a speech that appeared to favor the practice.
“After a period of true reflection my position has evolved,” she said. “People of all income brackets especially low-income Philadelphians should have the right and liberty to take out so-called predatory loans.”
Her comments drew looks of surprise and anger from colleagues, particularly Jones, who grew obviously more puzzled and angry as she spoke until finally interjecting: “I joke.”
Council also unanimously approved a resolution authorizing hearings on the impact of Nutter’s ban on serving outdoor meals for the homeless.
Finally, Councilwoman Blondell Reynolds Brown introduced a bill that would require a 5 to 10 percent bidding preference for Philadelphia firms bidding on city contracts.