Panel discussion on proposed real estate tax increases at CCRA ...

By Nicole Contosta

Staff Reporter

There wasnt an empty seat in the Academy of Vocal Arts auditorium last Wednesday, May 16th. Thats when residents packed the Center City Residents Associations (CCRAs) annual general membership meeting. Although members probably attended to elect the organizations new directors, review yearly updates and later sample refreshments, its this reporters hunch that the panel discussion on the Nutter Administrations real estate tax reform accounted for the particularly high turnout that night.

The discussion went as follows. Chris Satullo, WHYYs VP of News and Civic Dialogue moderated a discussion between Brett Mandel, who has served on the Philadelphia Tax Reform Commission, Lewis Rosman, the Director of Legislative Affairs in the Office of the Mayor and Holly Otterbein, a reporter for "Its our Money-More Bang for your Tax Bucks."

"Real Estate tax increases are inevitable, emotional, tedious and complex," Satullo said in reference to the Nutter Administrations proposal to increase real-estate taxes by another ten percent. "Its just like any other city but more so in Philadelphia." Satullo added in reference to the citys need for real-estate tax reform, which he said Otterbein would explain to the audience. Rosman, Satullo continued would discuss why its important to reassess property values and Mandel "will provide another view point."

"Its easy to forget why we need to reassess property values in anticipation of the tax bill," Otterbein said in her opening remarks. "The way theyre currently calculated is messed up. Theyre assessed unfairly and have been for many years now."

Otterbein then went on to illustrate how people of power abused their privilege to keep their property taxes low. In the past, "People who were connected to others in government would ask for a lower property assessment and receive it," Otterbein said. Identical houses were valued in different ways. As a result, when the mayor [at the time] told the BRT that the city needed more money for schools, the "BRT would go to a certain block and reassess it a higher rate."

Its a practice that drew immense criticism form reformers. In fact, Michael Nutter pledged to reform this practice during his first run for Mayor.

In 2010, City Council proposed abolishing the BRT. It became part of City Charter Vote in the 2010. "And voters overwhelmingly agreed [to abolish it]," Otterbein explained.

When Rosman began his remarks, he stressed that is "imperative for the Mayor to see a property tax increase for school district taxes." Romans remark refers to the fact that the additional ten percent real estate tax would generate 94 million to the cash strapped school district.

As Rosman continued his remarks, he expanded Otterbeins explanation of the need for real-estate reform in Philadelphia. "All properties are under-assessed some wildly, some mildly. Others moderately. There will be winners and losers. Some property taxes will go way up. Others will go down."

A few things have to be worked out," Rosman continued, adding, "City Council has to pass the Mayors tax reform." Rosmans last comment refers to the fact that some on City Council view Nutters tax reform "as a tax hike." Then theres the fact that the citys budget has to be approved by July. And the Administration will not finish reassessing houses until October of 2012.

"Because we will not have the assessments complete until the fall, we have asked City Council to increase the tax rate by ten percent," Rosman explained, adding that this increase is in addition to the ten percent tax increase from two years ago. "Part of the logic rests in the fact that real assessments have not been done for some time. 2004 was the last time a serious assessment went in. And since that time, property values have increased in Philadelphia by 25 percent," Rosman said explaining that this number takes into account that housing markets spike and decline.

Rosman then went on to explain the alternatives are possible for lower income homeowners such as the homestead discount, which can provide a reduction of $15,000. Then theres the proposal to smooth over paying the increased property taxes for three years.

But in Rosmans opinion, it remains vital to pass Mayor Nutters tax reform now. According to Rosman, commercial property owners do not pay their fare share of taxes, in part because they argue that Real Estate taxes are already "so messed up in Philly." As Rosman explains it, two thousand commercial property owners currently appeal their current real estate taxes. "If the Mayors tax reform doesnt go into place, this number will increase dramatically."

Bret Mandel, who has long argued that Philadelphia needs to reform its tax-code took a different position. Referring to his work on the Tax Reform Commission, Mandel explained, "We spent a lot of time wringing our hands on what we should do. If we fix it right, people will complain, if we do it wrong, there will be a 100% tax increase."

In Mandels opinion, "There will be reductions for commercial properties and huge increases for property owners with modest means." For Mandel, the tax reform also proves problematic because the tax increase will go into effect before the citys Real Estate assessment is complete. For Mandel, neither the "Three year buffer or the fifteen thousand dollar homestead will necessarily help. It might help decrease the pain for some, but it will be very painful for others."

Since the city will not know housing values until October, it will cause property owners to file appeals. But even if they do they, "will nonetheless have to pay the tax increases anyway."

For Mandel, this method is neither fair nor revenue neutral. "In addition to reassessing property values, were also making permanent the tax increases that were supposed to be temporary when passed two years ago," Mandel explained, adding that in his opinion, "the Schools will still be in a [severe] deficit even with the 94 million from the city. Theres also another secret tax increase in here thats supposed to come up again in another year. Thats not change. Thats not revenue neutral," Mandel argued.

"The assessors need to get it right first. If Council does nothing, the Real Estate tax will go down," Mandel concluded.

Hearty applause followed.

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