My name is Jacob Himmelstein. I'm chairman of the Pennsylvania Fair Tax Coalition. I'll only take two minutes of your time. I'm also professionally involved in taxes since I'm a public accountant, so I know a little bit from that point of view. And this happens to be not the first time I've testified in City Council about the land value tax, but the third time in 20 337 2/12/02 WHOLE - RES. 010700 (TAX REFORM) years. And I've always testified in favor of it, and I plan on doing it this time. The only thing that I would like to point out is that Allentown, their tax structure is in their Home Rule Charter. And the land value tax was actually voted on by the people of Allentown, not once, but twice and passed twice. And the biggest opposition came from the automobile dealers. But they were unsuccessful twice in financing a campaign against it. So that's all I want to say. I'm in favor of the land tax. My statement is being submitted.
Good afternoon, Madam President. My name is Bruce Anderson. Thank you for the opportunity to speak on the issue of tax reform this afternoon. First of all, let me say my testimony that I have submitted may sound harsh or may sound a little hyperbolic. But I like Philadelphia and it's one of the reasons that I'm here today. I currently reside in West Philadelphia. My wife and I moved 338 2/12/02 WHOLE - RES. 010700 (TAX REFORM) here in 1999 from San Francisco. She's a graduate student at Penn. She's earning a doctorate degree. When she's done getting her education, we're leaving Philadelphia. The City is a place with history, but we don't feel that it has much of a future. This is not where we want to raise our family. As a relatively newcomer, I look in awe in a lot of the things that Philadelphia has, the Art Museum, City Hall. It has a lot of great history. But I look with sadness at what it's become. Many of the problems that the City has have been years in the making, 40, 350 years. And people have not had the courage or the vision to change it. If you look at the best cities in the nation or the ones where people say they like to live there, the highest standard of living, they don't have a tax system like Philadelphia has. Philadelphia must choose to change. A few years ago I was in graduate school and one of my colleagues was working on his doctoral thesis. And his doctoral thesis related to the gradual decline of Philadelphia post World War II. 339 2/12/02 WHOLE - RES. 010700 (TAX REFORM) The working title of that document -- I never saw the finished document -- was "Philadelphia, They Never Miss an Opportunity to Miss an Opportunity." Again, Philadelphia must cost to reform its taxes, I think, if it wants to survive, if it wants strive. Personally, I think it needs to cut the wage tax and restructure the local property taxes with an eye towards eventually eliminating the wage tax. This will make the City a better and more attractive place to live and it will reverse the trends of urban decay, suburban sprawl, and it will promote economic growth. And I don't think I'm saying anything new here. But, again, Philadelphia wants to market itself as a knowledge capital with all its universities, with all of its institutions. But if the people when they get here do not find it an attractive place to live because of its taxation, they're going to leave as soon they get the education. And that's what happening in our case. I'm not being naive and saying and thinking that the City can do this on its own. But I believe that Philadelphia must take the lead in promoting regional cooperation. State laws control 340 2/12/02 WHOLE - RES. 010700 (TAX REFORM) many of the problems. The City needs to work on working with the suburban hubs of growth and getting a comprehensive regional agenda, going to Harrisburg and solving these problems. I want to, again, thank you for the time. I do like living in Philadelphia, but it's a difficult place to live in at times. And I wanted to address that issue. Thank you very much.
Thank you so much. Our next witness. Please identify for the record.
Good evening, Madam President, Members of Council. My name is Ralph Treadway of Eatontown, New Jersey. I thank you for the opportunity to speak to you about the very important issue, the land tax. I'd like to congratulate City Controller Saidel and his staff for a very courageous report and a very comprehensive report, the likes of which we have not seen in New Jersey in the past 30 years. You're in the process of deliberating on making use of most potent urban economic development tools available for Philadelphia or any other city. 341 2/12/02 WHOLE - RES. 010700 (TAX REFORM) Real property taxation based on land values. However, my brief comments will be on the equity and fairness issues involved in real property taxation. They have been touched on briefly and alluded to, but not directly as I'm going to say it and certainly not 1quite as harshly as I may be saying it. It is my belief that real property tax mechanism as practiced in Philadelphia and other cities as traditionally practiced in America and especially in New Jersey is often as restricting as limiting and as unfair as any of the old discriminatory laws from the old era of the old south. Maybe while this may be true, of course, the real property tax was not instituted and is not maintained with the same motives that lay behind the old Jim Crow legislation. However, unintended discriminatory aspects of the current Tax Code are a function of the evolution of an un-reformed property tax code in the light of sweeping technological change. Just a brief digression into history as how we got here, because the purpose of this paper and my comments to point out that the time has 342 2/12/02 WHOLE - RES. 010700 (TAX REFORM) arrived not only here in Philadelphia but across the nation and especially in many of the cities in New Jersey where I've gone research for property taxation change because the property tax as traditionally practiced is no longer applicable and no longer efficient for urban areas. Changes in the transportation technology, primarily the widespread adoption of personal transportation modes, the auto, and the withering of city building land use guiding centralized transportation modes had rendered the long-standing manner of real property taxation not only obsolete, but counter-productive and made the Real Property Tax Code as practiced in Philadelphia and elsewhere across America, a barrier to economic integration that work at cross purposes if not undermining the struggle for civil rights over the past 40 years. The end of World War II began an era of unprecedented property that has changed the entire nation, but left many cities, especially in New Jersey, or part of them economic backwaters. Right after the war in the American south, the rural population challenged by changing agricultural 343 2/12/02 WHOLE - RES. 010700 (TAX REFORM) technology at home and buoyed by the success stories from up north began a new wave of immigration to our northern cities hoping for the same opportunities that those same cities gave to previous waves of immigrants, including early migrants from the deep south. But the cities impacted by new transportation technology, changing fads and fashion were unable to provide the jobs, the means to, and the passage into the middle class as they had done for many in the past. Jobs were leaving the cities. Dwindling economic activity reduced cash economy opportunities. Falling real estate prices eliminated opportunities for sweat equity development. And indeed, wiped out a lot of sweat equity development that already begun. Indeed, no other previous immigrant group came more prepared to work hard, better prepared linguistically culturally than the post World War II immigration wave to the cities. But the cities were unable to provide the economic base to move that group, as they had many others, into the ranks of the middle class within a generation. Indeed, economic loss crushed hopes more than norm 344 2/12/02 WHOLE - RES.
010700 (TAX REFORM) than economic prosperity. Because of the change in transportation technology had not been properly adapted within urban conditions, the property tax have mutated from a progressive city-building institution to a malfunctioning revenue system that discouraged economic change, stymied individual initiative, rewarded sloth, changed negative disinvestment and speculation to being the only smart games in town and made economic development a semi-political process where connected developers competed for the best deal, usually one that protected them or insulated them from the same run-'em-up tax system that afflicted everyone else. Gone are the incentives for the sweat equity developer who after long days of work goes home to work on is house or on the one down the street he hopes to sell or rent out. Sweat equity developers, the guys and gals who built most of our cities, but they didn't build the big buildings in the cities but neighborhoods that made those cities work effectively, are now shut out of the development process that once was a great path to economic betterment. 345 2/12/02 WHOLE - RES. 010700 (TAX REFORM) We'll skip a little bit here. Economics may not be really a dismal science as often label to be, but it is an opaque science of layered consequences where all the causal relationships are not always evident or clearly outlined. But evidence of urban and downtown decline over the past two generations clearly points out that cities and downtowns have not benefited from the sweat equity developer, the little guy, and that he has been locked or excluded by a pernicious tax system. Wherever there are abandoned buildings, a shortage of decent living space, squalor amidst plenty, the market and the American spirit as embodied in the small-time sweat equity developer is being that thwarted by a malfunctioning tax system, sending out the wrong signals, rewarding the wrong behavior, denying a self-betterment opportunity that was there for many in the past but not allowed today. That, ladies and gentlemen, is economic discrimination, the effects of which are no less evil than the intentional discriminatory laws of the past. For few examples, if I may, in a 346 2/12/02 WHOLE - RES. 010700 (TAX REFORM) battered tattered southwest corner Asbury Park, New Jersey, every single residential property in a 16-block area will receive a tax cut under a land value base tax system, tax cuts that average 40 to 60 percent per dwelling, under a city-wide revenue neutral land value tax. Real property tax liabilities for each block in this department area would have declined by an average of 50 percent. Could you imagine the incentives to develop, especially for the sweat equity developer, in a neighborhood where taxes have dropped by an average of 50 percent and taxes won't rise appreciably on newly renovated building? However, the City Council of Asbury Park has recently passed on to a new waterfront developer the same tax advantages enjoyed by the previous waterfront developer whose failure held up and tied up waterfront development for more than a decade. 6 percent would have to be applied to land values to raise the same level of revenue. 6 percent, 80 percent of the residential properties in Patterson, New Jersey -- 347 2/12/02 WHOLE - RES. 010700 (TAX REFORM) 20,000 properties -- that's small by Philadelphia standards, but 80 percent of the residential properties would receive a significant tax break on the order of 30 to 40 percent. Wouldn't a tax break and removal of the threat of sharply increased assessments and taxes due to renovation efforts be a commanding incentive to pour one's sweat and time into the city's properties that is denied them? 04 percent, would bring tax relief to nearly 80 percent of the residential property owners and remove the threat of increased taxes for renovation efforts.
In Camden this is critically important because Camden has the lowest ratio of assessed improvement value to total assessed value of any municipality in the state. That, ladies and gentlemen, is why Camden is where it's at. 5 percent, much of the total assessed value. And that carries through on the individual assessments of the 33,000 properties. Wherever the tax on land is the lowest, that is the poor he is 348 2/12/02 WHOLE - RES. 010700 (TAX REFORM) City. That happens to be Camden's distinction. It's in much better shape. Camden is in much worse shape than Asbury Park; and Asbury Park is not in great shape. Much worse shape than Newark; and Newark is not great shape either. And it goes Paterson and the other cities in New Jersey. Raising the property tax in Camden by a factor of 6, applying it to land will bring real property taxes on residential properties to approximately the Camden County average. They are now about percent higher how than the county 13 average, but erroneously applied to 83 percent of 14 the total assessed value. 15 An additional note, Camden's ratio of 16 assessed improvement values as noted above, is the 17 highest in New Jersey at 83 percent where the norm 18 is closer than 60 percent. Based on the limited Philadelphia data that I have available, Philadelphia's ratio is 77 percent. Not a great percentage. Asbury Park's ratio is approximately 76, 77 percent. Newark is probably about 74 to 75 percent. The City of Philadelphia is moving in the direction of a 50 percent ratio. It is a move 349 2/12/02 WHOLE - RES. 010700 (TAX REFORM) certainly in a right direction and a movement away from the abyss to which your neighbor to east has sunk. I thank you, ladies and gentlemen. I'll entertain any questions if anybody has the energy.
One question on the very last comment. What do you mean about Philadelphia moved or is moving?
The proposal to base the land tax 50 percent on improvement values and 50 percent on land values brings the ratio of improvement taxes to total taxes to 50 percent. That's a movement in the right direction. Currently, Philadelphia taxes roughly about 77 percent of the total tax comes from the improvement. So Philadelphia is certainly moving in the right direction, away from -- in the opposite direction that Camden is in and opposite the abyss, to repeat myself.
What would the ultimate ratio be if we moved to fully land use value? 350 2/12/02 WHOLE - RES. 010700 (TAX REFORM)
Now you're talking my language. I'm the radical or the bull in the china shop. I certainly believe in that. If we went to a full land value, than the hundred percent of the tax would come from land values. Now, in the City of Asbury Park, if the --
Zero. Improvements would pay zero and land would pay the entire bill. In Asbury Park, which has a tax rate 68 percent higher than the Monmouth County average, their land value assessments and improvement property values are roughly one-half to two-thirds, a little less than two-thirds, than neighboring blue collar towns. If Asbury Park were to adopt a full land value taxation, in other words, shift over to land totally, they would most likely experience, other things being equal, holding expenses in line, keeping in line with inflation, they would probably experience a two-thirds increase in revenue and a one-third decrease in taxes over the first five years of that initiative. 351 2/12/02 WHOLE - RES. 010700 (TAX REFORM)
Rumors are around that Pittsburgh is moving away from land use tax.
They did. I am not familiar. The New Jersey papers and the national papers don't cover Pittsburgh very well. But I think there were some political factors. I don't know the exact reason. I do know that Pittsburgh has overcome the economic downturn caused by the contraction of the steel industry, which initially started to impact Pittsburgh very seriously. They seem to have survived that, and Pittsburgh was recipient of several national awards over the late '80s, early '90s era. The recent reasons for the refusal to go that way, I do not know.
I believe that was already covered in the record.
I believe it was, yes. I would state that New Jersey at one time, 30 years ago, under Governor Cahill's Tax Proposal Commission, a courageous report done, as I said, 30 years ago, did recommend that all of the cities in New Jersey move to a land value site value tax. And they even proposed a five-year formula do it in steps. So that one would not suddenly -- it's like 352 2/12/02 WHOLE - RES. 010700 (TAX REFORM) pulling off a major Band-aid on a major wound, inflict a lot of pain. Just for an example, if one were to shift to a land value tax in Camden tomorrow morning, of course, 80 percent of the residential properties would receive significant tax cuts. But those piles of scrap steel, the land under them would receive tax increases of about 480 percent. Right now, it would seem as though the scrap steel has votes in Camden than the people do. But that would -- Governor Cahill's proposal of 30 years ago would ameliorate that and make it a five-step method so that one could plan and adapt one's technology. And technology even of scrap yards and scrap heaps can be adapted and has been adapted to more efficient land use.
You came from San Francisco. I think you'll be missing a good bet if you leave Philadelphia upon graduation. We'd like to keep you and your energy here.
You're 353 2/12/02 WHOLE - RES. 010700 (TAX REFORM) welcome. Did you want to testify? Please identify yourself for the record.
My name is Sue Fowl I am a homeowner in Queen Village. I would love to stay there. I also have com from San Francisco, lived there for years, came back here thinking this 9 would be a lot cheaper. In comparison, real estate 10 taxes here to Queen Village, we more in California but we get more services. Education is better there. The streets are better. Things are a lot better. Here we're paying more than I did for a home. For $189,00 in California, here I'm paying the same amount of taxes for a $55,000 house. I would like to have the taxes be more even and more equitable for me to stay here and not go back to California because I love the history of Philadelphia. I'm originally from Elkins Park. I love it. I want to stay here. The taxes are getting too high. I want to keep the businesses in Philadelphia. I read that Pennsylvania is one of the few states that taxes on business receipts. We also have a high wage tax. We need to change the business thing so we can keep it in Philadelphia. 354 2/12/02 WHOLE - RES. 010700 (TAX REFORM) Thank you.
Thank you very much. Do we have anyone else that would like to testify?
Again, this if Francine Braithwaite, also known as Ruda Bartholomew. I wanted to address two things very quickly . One has to do with the ease of implementing this. We've been told by some that it would be very expensive. Using their projections on how many more feet there would have to be to have full reassessment of City properties, it might cost $7,000 on a one-time basis and then -- 7 million. I'm sorry. $7 million on a one-time basis which we've been encouraged to think might come out of some funds that are available in the Congress. Easily available there. And then after that, it would be a matter of flipping a switch and letting a computer chew up some information for about three minutes. On an annual basis we could update the land values and the assessments. There's very little question that if we went to a totally land based system, it would be the easiest and most 355 2/12/02 WHOLE - RES. 010700 (TAX REFORM) transparent way to do the actual taxation. The second thing is this: We want a land value tax, and it will be good for the City as it is. It's best if it also includes a reassessment a little down the road. And at that point, it would be necessary to readjust the ratios a bit with each reassessment or each five years of reassessment. Pittsburgh ran into a very big problem because despite clear specifications on how the reassessment was to be done, the Saber Systems Corporation just completely forgot, tossed them out of the window, cannot in any way, shape, or form be held accountable for any part of the specifications that the legislature wrote for it. So we've got a situation where there maybe some improvements, but basically we've got an invalid reassessment. And that's the reason for the hold that the City put on it. Everybody in Pittsburgh knows that every time there's been a ratcheting up of the ratio, there's been also a great improvement in the quality of life of Pittsburgh, and nobody is forgetting that. However, without the education as to why and how the land value tax works, in the face of big bills all of a sudden, people are upset. We don't have to go 356 2/12/02 WHOLE - RES. 010700 (TAX REFORM) that road. And so I encourage you, where people say it's going to be expensive or complex to do, to say, no, Francine and her friends knows some ways of getting it done inexpensively and clearly. And two, we don't have to have the kind of upheaval that Pittsburgh had. In part, because our movement has not known that large a reassessment before. We just didn't keep track of how important that was. We know now and you don't have to make the same mistake. Thank you.
Thank you. Is there anyone else to testify on this resolution? Seeing none, this Committee will stand in recess until the call of the Chair. Thank you all. (Hearing adjourned at 5:40 p.m.) - - - 357 2/12/02 WHOLE - RES. 010700 (TAX REFORM) C E R T I F I C A T I O N I HEREBY CERTIFY that the foregoing proceedings of the Council of the City of Philadelphia of February 12, 2002, were reported fully and accurately by me, and that this is a correct transcript of the same. RE: COMMITTEE OF THE WHOLE ___________________________ Josephine Cardillo, RPR and Notary Public ___________________________ Lisa C. Bradley, RPR and Notary Public