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July 28, 2014, 10:37 pm

Council divided over tax reform

Despite a looming deadline, a splintered City Council seems unable to reach a consensus on what to do about Mayor Michael Nutter’s Actual Value Initiative.

There are now at least nine AVI related proposals before Council — four introduced this week. They include the one the mayor unveiled in his budget, and offer Council options that range from putting AVI off for another year to passing it and including one of several homestead exemptions — they range from $15,000 to $60,000 – to simply passing Nutter’s proposal as he’s requested.

That last option seems unlikely.

AVI, the shift from a traditional property tax system, where taxes are based on a fraction of a property’s value, to one based on full market values, has had Council at odds for months.

Members seemed as scattered this week as they have since Nutter rolled out his budget in March.

There are two major schools of thought: one would put off AVI until next year; and another that would move ahead this year, as long as the mayor’s proposal is tweaked. But, even within those broad parameters, disagreement remains.

Councilmen W. Wilson Goode and Bill Green have both said they could get behind AVI this year if certain changes are made. But their differences rose to the surface at Thursday’s Council meeting.

Goode’s train of thought more closely aligns with the administration’s. He supports AVI — as long as it includes a large enough homestead exemption.

“Lost in this discussion until recently is the fact that a full reassessment should mean a lower tax bill for the majority of homeowners,” said Goode. “If we offer the right homestead exemption … their [tax] bill will do down.”

According to Goode, there are about 16,000 homes in Philadelphia valued less than $20,000; 30,000 homes worth between $20,000 and $40,000; 68,000 homes valued between $40,000 and $60,000; about 50,000 valued between $60,000 and $70,000.

“When we begin to add all this up there are about 250,000 homes that fall at the median value [of $120,000] or below, about 75 percent of homes in Philadelphia are around median value or below,” Goode said. “That’s the overwhelming majority of homeowners.”

The administration has proposed a $15,000 homestead exemption. Two others — exemptions at $40,000 and $60,000 — have also been proposed. In recent Council meetings, Goode has spoken in favor of the $60,000 option.

In an argument similar to the one made by the Nutter administration, Goode argued Thursday that it’s unfair to make those low and middle income taxpayers wait another year to see their taxes go down.

In a subtle jab at Green, he added, “We can’t let people trick thousands of homeowners out of their tax cut with spreadsheets and media spin.”

Earlier this week, Green unveiled a spreadsheet on his website that helps property owners estimate how several of the proposals would affect their tax bills. He contended that tax bills will rise for many city residents, and that the move to AVI will shift the lion’s share of the tax burden to residential properties, which will see taxes rise by about $200 million, while giving a break, estimated at $100 million, to owners of commercial and industrial properties.

To offset that, he has suggested raising the use and occupancy tax and increasing the homestead exemption. Green is also against a “smoothing” mechanism included in the administration proposal. It was supposed to help spread the effects of any tax increase over three years.

“It hurts more people than it helps,” said Green.

In addition, Green consistently said that the administration hasn’t provided Council with information needed to make a prudent decision.

“It has been a week of more, and less, clarity,” Green said, noting that the administration has finally said that the total value of all of the city’s real estate is about $90 billion.

Green has been trying to coax that number out of the administration, because it will be used to calculate the final millage rate needed to make the move to AVI revenue neutral.

Many Council members who have spoken on the issue — Green and Councilman Mark Squilla chief among them — have said they’re concerned about the lack of information provided by the administration. Councilwoman Jannie Blackwell, who has been publicly silent on the issue, added her voice to their cause this week backing Squilla’s proposal that Council delay AVI for another year, at which point all property assessments will be done and Council will have more information.

“[He] has some legislation that says we wait until we get everything done. It seems to me that makes more sense,” she said. “The Senate has to move. The House has to move to allow AVI. We don’t have answers from the administration. I don’t know how we move forward.”

Assessments are not expected to be done until July. Council must vote on a budget by June.

The entire issue is complicated this year by the fact that Nutter’s budget proposal includes an extra $94 million for the school district.

One thing Council seems to agree on is that the district needs more money, but members have not been convinced that $94 million is the magic number.

On Thursday, Council President Darrell Clarke introduced four new proposals, the bills were paired, two setting real estate tax rates — one with AVI and one without — and two setting tax rates for the use and occupancy tax — one with AVI and one without.

“We’re providing every opportunity to provide a mix or particular tax that could receive nine votes,” he said. “Over the last several weeks there has been significant division.”

Under each, the district could get more money — but only about $85 million.

Asked why none of his proposals would generate the $94 million requested by the school district, Clarke replied, “It’s rare that individuals get what they ask for.”

Technically, Council is required to pass a budget by June 1. In the past, that deadline has been sidestepped by recessing rather than adjourning the final meeting in May allowing Council to legally vote after the deadline. Given the intensity of this year’s debate, that is expected to happen again.

Even Council leaders are hard pressed to guess when a budget might finally be approved.

“That is a question that I only wish I could answer, but when you’re talking about 18 individuals at the municipal level, and now more recently the state House and Senate, and ultimately the governor, that’s a whole lot of people to come to a consensus in a timely way,” Clarke told reporters after this week’s meeting.

A much harder deadline is June 30, the end of the fiscal year.

Clarke pointed out that the city’s tax legislation expires on June 30 — whether or not Council acts on AVI.

“We will have to do something very shortly,” Clarke said. “At the end of the day, June 30 is the ultimate deadline.”

Council has another budget hearing at 10 a.m. Wednesday and will meet again Thursday in a special Council session.

 

Contact staff writer Eric Mayes at (215) 893-5742 or This email address is being protected from spambots. You need JavaScript enabled to view it. .