Under Mayor Nutter’s proposed Actual Value Initiative (AVI), homes and commercial properties will be taxed at their actual market values, as determined by the city. But the Mayor’s proposal leaves the new tax rate undetermined until after re-assessments are complete, which the Administration projects will not be until late summer – after Council is required to pass the budget.
“Would you sign a contract to buy a house with a price based on a formula with variables that won’t be known until a month after you move in? That is what the Administration has asked City Council to do with your property taxes,” Green observed. “I fully support a uniform and fair system for taxing property, but no one envisioned enacting AVI without knowing the values first. In implementing AVI, we must proceed with full information, make data-based decisions, and keep the public informed every step of the way.”
Among other concerns, Green argues that AVI will result in a $200 million to $300 million shift of the city’s real estate tax burden from commercial and industrial property owners to residential ones, whose aggregate tax bills may increase by 25% or more. This tax shift is the real “hidden tax” of AVI. “I assume this massive shift of tax burden to homeowners was not intended, but it should have been disclosed and known rather than discovered,” Green stated. “That we only discovered this tax shifting in the final weeks before the budget is due begs the question of what else don’t we know? It appears that the ‘unknown unknowns’ may exceed the many ‘known unknowns.’”
The lack of meaningful data about AVI prompted Councilman Green to create a spreadsheet to allow citizens and businesses to see the potential effect of AVI on their tax bills, with and without his amendments. The spreadsheet estimates the aggregate value of residential property, commercial and industrial property, and total real estate – as the relationship between those three factors will drive the eventual tax rate and the share each sector and, ultimately, each homeowner, will pay. The spreadsheet is based on data from the Administration, Econsult, and actual values estimated by the Bureau of Revision of Taxes in 2009, among other sources. The spreadsheet reflects the Councilman’s best estimate of how AVI will play out on the ground and demonstrates, based on conservative assumptions, that the tax shift from businesses to homeowners will be significant and immediate.
The tax shift to homeowners is not the only problem with the AVI proposal presented to City Council. Other issues include a $94M tax increase for the School District (which would be disproportionately borne by homeowners), 2.5% “default rate” that could potentially double real estate tax collections, a so-called “smoothing” plan that will cause some taxpayers to pay even higher taxes in the first two years of AVI than they would without “smoothing,” and a homestead exemption set at such a low level it would provide scant relief to homeowners.
Councilman Green has introduced legislation to address each of these issues.
UPDATED JUNE 8TH: Download the Homestead Exemption Application here
Click here for a full press release about the legislation
Click here for the tax estimator spreadsheet
Click here for copies of amendments
Click here for a summary of proposed amendments
Click here for sample commercial property info
Click here for a summary fact sheet for the spreadsheet