COUNCIL OF THE CITY OF PHILADELPHIA COMMITTEE ON LAW AND GOVERNMENT - - - Room 400, City Hall Philadelphia, Pennsylvania Monday, February 12, 2007, 10:45 a.m. - - - BILL 060576 - Ordinance calling on citizens to urge BRT to retain current method of real-estate tax assessment... RES. 060590 - Proposing amendment to Charter calling on citizens to urge BRT to retain current method of real-estate tax assessment... BILL 060849 - Providing that citizens urge U.S. to make year '07 the time to redeploy troops out of harm's way in Iraq... RES. 060861 - Proposing amendment to Charter Providing that citizens urge U.S. to make year '07 the time to redeploy troops out of harm's way in Iraq... COUNCILMEMBERS PRESENT: William K. Greenlee, Chairman Carol Ann Campbell Jack Kelly Frank Rizzo Daniel J. Savage V A R A L L O Incorporated Litigation Support Specialists 1835 Market Street, Suite 600 Philadelphia, Pennsylvania 19103 215.561.2220 215.567.2670 2/12/07 LAW AND GOVERNMENT WITNESS Bill 060576 , Resolution 060590 David Glancey, Chairman, BRT............ 15 Alan Butkovitz, City Controller......... 57 Sean McNeeley, Director of Policy....... 82 Alisa Orduna-Sneed, Partnership CDC..... 111 B. Reavis, Walnut Hill Community Assoc. 115 Ann Agee, Private Citizen............... 121 Mary Jenkins, Mantua Community Planners 126 Ruth Adams, West Powelton CCC........... 130 Bill 060849, Resolution 060861 Granny Peace Brigade - Marlena Santoya....................... 137 - Nina Huizinga......................... 139 Bill Perry, Veterans for America........ 143 C. Santos, National Alliance, Women Vets 145 Iraq Veterans Against the War - Kelly Dougherty....................... 158 - Mark LaChance......................... 165 Mike Felker, Veterans for Peace......... 167 Eugene Miller, Philadelphia Citizen..... 168 Libby Schwartz.......................... 171 Northeast Philly for Peace and Justice 3 2/12/07 LAW & GOV'T-BILL 060576, RES. 060590
Good morning, everybody. Will you all settle down, please. I'm sorry for the delay. We got started a little late. The Committee on Law and Government is now in session. For those of you in attendance -- and I think pretty much there's a split room here. We're going to deal with the bill and resolution dealing with the Board of Revision of Taxes first and then with the Iraq question. We'll try to move as quickly as possible. Just for the record, we have a quorum here consisting of Councilman Rizzo, Councilman Kelly, myself, and Councilman Savage. If I could ask Bill Boyle, the clerk of the committee, to please read Bill No. 060576 and Resolution 060590, please.
Ordinance 060576, an ordinance providing for the submission to the qualified electors of 4 2/12/07 LAW & GOV'T-BILL 060576, RES. 060590 the City of Philadelphia of an amendment to Article VIII, Chapter 5 of the Philadelphia Home Rule Charter, entitled "Referenda Approved by the Voters," by adding a new section calling on the citizens of Philadelphia to urge the Board of Revision of Taxes (BRT) to retain its current method of real-estate tax assessment and not change the method as proposed under the BRT's Full Valuation Initiative; fixing the date of a special election for such purposes; prescribing the form of ballot questions to be voted on; and authorizing the appropriate officers to publish notice and to make arrangements for the special election. Resolution No. 060590, a resolution proposing an amendment to Article VIII, Chapter 5 of the Philadelphia Home Rule Charter, entitled "Referenda Approved by the Voters," by adding a new section calling on the citizens of Philadelphia to urge the 5 2/12/07 LAW & GOV'T-BILL 060576, RES. 060590 Philadelphia Board of Revision of Taxes (BRT) to retain its current method of real-estate tax assessment and not change the method as proposed under the BRT's Full Valuation Initiative.
Thank you very much. Both these bill and the resolution were introduced by Councilwoman Blackwell. Councilwoman, would you like to make a statement?
Thank you. I would like to thank you as chair and this committee for considering both these resolutions today -- or all four. And with regard to this issue of full tax valuation, let me say that, having been around here longer than I will admit, I've been here for equalization of taxes twice. I've been here a long time, and every time we deal with taxes, John and Jane Q. Public. 6 2/12/07 LAW & GOV'T-BILL 060576, RES. 060590 I've read through old information, whether it be Penn or no 4 matter who. I read through old testimony to try to be fair to this committee 'cause I know some of you are concerned, as is the Administration, who support full tax valuation, but I believe that given the fact that we're going to have hearings on the gas rate increase, the Governor's talked about a state tax increase, and given the time -- you know, I just had a fire in my district last night, a few blocks away, at 59th and Walnut, and more and more are having fires because people can't afford to live with heat and pay their other bills. So given the fact that I do believe that this legislation is not tight -- we're talking about lowering the millage rate, and none of that is specific. A lot of questions are raised. We talked about homesteading, 7 2/12/07 LAW & GOV'T-BILL 060576, RES. 060590 deferments, all kinds of things, but nobody's talked about specific answers to what we do to help seniors and people in need and people who work every day; those answers aren't very specific, but the specific interest is that we raise these taxes. So, you know, if they want us to consider this issue, then we should have specific information available on how we help other people. There's not even legislation afoot on what the millage rate would be, so I don't think that we are prepared at this time to consider this legislation. Once everything is organized -- when we had hearings before, they mentioned all these different freezes and caps and homesteading and deferments, all of these things, and we're no further along in that area than we were before. So that is why I'm asking this committee to consider this bill, 8 2/12/07 LAW & GOV'T-BILL 060576, RES. 060590 consider the populace that elect us, and the fact that they really will not stand for an increase in their taxes, and I think that we should listen to them and realize that at this time that they don't. And I am certain that I'm -- just as sure as I am sitting here that if we put it on the ballot, you will see overwhelmingly that the citizens of this city do not want full tax valuation. Thank you.
Yes. Thank you, Mr. Chairman. I couldn't agree with Councilwoman Blackwell more so. I think that -- I think we have the right to listen to all of the testimony, Mr. Chairman, this morning, and I don't 9 2/12/07 LAW & GOV'T-BILL 060576, RES. 060590 think we should be making any rash judgments or decisions on this bill; it's too important. I think we ought to -- we should listen to the -- of course, the Board of Revision of Taxes as well as the people, the citizens of Philadelphia. But I think Councilwoman Blackwell has a good point, that this is going to be so important that I think that right now, I would suggest that we withhold any vote on this legislation until we hear from everyone and everyone has an opportunity to give their opinions on this bill. Thank you, Mr. Chairman.
Well, I agree with my colleague Councilman Kelly that this is something that needs to be further evaluated. And I had a 10 2/12/07 LAW & GOV'T-BILL 060576, RES. 060590 conversation with my colleague before the Council session. I think there are some things that we can do before getting to the point where we want to go to full value. Other municipalities bill constituents, taxpayers each quarter; we get a tax bill at the end of the year. I know we have a payment process, a partial payment process, but I think it would be easier for people to be able to pay quarterly their tax bill. I think it would be also -- and I can't understand. The Revenue Department wants to collect revenue. If people are stuck and they want to put their tax payment on a credit card, if they're fortunate enough to have a credit card, that they charge them a premium to do that. So there's a lot of things I think we can do to help our taxpayers get more revenue into the City before we take this -- take this next step. 11 2/12/07 LAW & GOV'T-BILL 060576, RES. 060590 So I'm suggesting likewise that we hold on to this.
Okay. Thank you, Councilman. I'm going to recognize Councilman DiCicco in just a second, but our first witness is going to be Mr. David Glancey, Chairman of the Board of Revision of Taxes. Maybe you could come up to the witness table. Excuse me, Councilman. Councilman DiCicco.
Thank you, Mr. Chairman. Everybody's agreeing with everybody this morning, which is unusual here. (Laughter.)
I guess my concern is, I'm a bit confused. A year 12 2/12/07 LAW & GOV'T-BILL 060576, RES. 060590 or two ago -- I lose track of time, as most of us do in this business -- I conducted, I think, three days worth of hearings with the Board of Revision of Taxes to talk about this proposal to do full-value reassessments. I've conducted probably a dozen or so meetings during the course of the last year, year and a half, throughout my entire district, meeting with various community associations and residents, to talk about what the plan of full valuation means to them -- would have meant to them. I thought -- and this is where I'm confused, and Mr. Glancey can probably straighten this out for us this morning -- it was agreed that because there are so many other factors that need to be addressed before we can move forward with full-value reassessment, notwithstanding the state legislation that we would need to enact those safeguards that would protect senior 13 2/12/07 LAW & GOV'T-BILL 060576, RES. 060590 citizens, people on fixed incomes, folks who have been longtime residents from being taxed out of their homes because the neighborhood has now been gentrified. And as a result of all of those discussions, the hearings in this council, it was my understanding that the Board of Revision of Taxes was going to forgo any attempt to do full-value reassessment for at least a year or two, which, in my opinion, was probably the best thing we can do because we will have possibly a new City Council or some new members of City Council, and we certainly will have a new Mayor, and we need to be able to address that not only in a political year, when we're running all for reelection, because a lot of the decisions may be made based on our political salvation over the next three months. So Mr. Glancey maybe can straighten -- can answer that question 14 2/12/07 LAW & GOV'T-BILL 060576, RES. 060590 because I'm kind of confused as to why we're back at the same spot that we originally thought was being tabled for about a year or two.
Thank you, Councilman. Before I recognize Mr. Glancey, if I could just say to all witnesses, especially if you have written testimony: If you could be as brief as possible, if you could paraphrase your written statement. All written statement will be a made a part of the record. And please be aware, those of you who are testifying on the Board of Revision of Taxes issue, we have half a room here that's here on a whole different issue. So if you could, again, be as brief as possible so that these -- so that we can try to get through these hearings as quickly as possible. End of speech. 15 2/12/07 LAW & GOV'T-BILL 060576, RES. 060590 Mr. Glancey, welcome. Please identify yourself for the record and proceed.
Mr. Chairman, thank you very much. My name is David Glancey and I'm Chairman of the Philadelphia Board of Revision of Taxes. Just let me say something in response to Councilman DiCicco's query, and also, it goes directly to what Councilwoman Blackwell stated earlier. If -- I couldn't agree more than what -- than what she just said about having deliberate and significant hearings about all of the things that would surround full-value taxation. There would have to be, I would say, legislative discussions here and in Harrisburg, discussions of not only the current bills that are before you and before the state legislature, but those hearings, as we have said, I guess, basically as much as a year ago, that we need to have those kinds of hearings 16 2/12/07 LAW & GOV'T-BILL 060576, RES. 060590 before we can go forward with anything. And just so that you know, the timeline -- and I think this would answer Councilman DiCicco's query specifically -- is that the delay in this project is for two reasons: One, we want to make sure that we have the best quality product that we could possibly put out. But even more so, we wanted also to make sure that in this kind of super-heated session that we have now in 2007, we did not want something this serious to get in the way of what is taking place in 2007 by way of mayoral elections, by way of Councilmen elections. And as the Councilman said, and both Councilmen said, it's very important that any new members, along with all of the other members who have to deliberate on this, have the time, have what I would say the quiet time in order to do that as opposed to any super-heated campaign. 17 2/12/07 LAW & GOV'T-BILL 060576, RES. 060590 So Councilwoman Blackwell, I agree with everything that you said, with the exception that I don't think that this particular resolution does that. It seems to me that this resolution, in a sense, cuts off debate as opposed to allows for debate. And my -- and respectfully, I think what we need to do is to continue this debate. For sure we need to know what property tax buffers we're talking about. And I've been to maybe 45 community meetings over the last year or so, and at every one of those meetings, I've stated to those in the community that we at the BRT will not go forward -- will not go forward -- fully with this project until there are property tax relief measures for all of our citizens, including our senior citizens. So all of those things have to be shaped yet. Obviously, a millage 18 2/12/07 LAW & GOV'T-BILL 060576, RES. 060590 rate has to be shaped, and that's going to come when we produce taxable assessments under this new system. And for a timeline, the taxable assessments for the Administration and for City Council -- and remember that this is -- this is always going to be flexible because we need to have these other pieces of the puzzle together. But currently, we're not talking about even producing those taxable market value/assessments until the end of 2007, beginning of 2008. And this program, as -- and if everything went right, as of today, you're not looking at anything -- any new tax bill 18 sent out until 2009. So this is really -- we're about a year and a half, almost two years away, and we need that time to do just what you said, to have those kinds of really hard conversations, very slow and methodical deliberations, and bringing all the pieces of the puzzle 19 2/12/07 LAW & GOV'T-BILL 060576, RES. 060590 together. Mr. Chairman, I'll try to summarize this testimony. It's -- it might be somewhat difficult, so if I sound like I'm jumping around --
We understand you're an attorney Mr. Glancey, so we'll take that into consideration.
Right. The full-value program really puts values on property, not taxes. We never -- we are not the taxing body in the City of Philadelphia. And putting accurate and current market values on our properties are mandated by state statute. We are driven by the state law. Administration. And the tough job here is really for the Administration for City Council and, to a certain degree, our state legislators to set whatever the tax rates are and to set whatever the tax relief measures 20 2/12/07 LAW & GOV'T-BILL 060576, RES. 060590 might be. Let me just give you a really quick and dirty example. If the value of my house is a thousand dollars and the tax rate is zero, my tax rate -- my taxes are zero. If the value of Councilman DiCicco's home is $100,000 and the tax rate is zero, the taxes are zero. If, Mr. Chairman, the value of your home is $5 million and the tax rate is zero, then the taxes are zero. The point I'm making is that it's not -- the value of property does not drive this; the causal connection between taxes is the tax rate, not the value of the property. The current system, quite frankly, I believe, can be fairly characterized as having back door increases for property owners. The tax rate in Philadelphia has not changed in 17 years, almost a generation. On our website, we show pictures of Mayor Goode, Charles 21 2/12/07 LAW & GOV'T-BILL 060576, RES. 060590 Barkley, and Jim McMahon to show you when the last real-property tax rate was changed. It was almost a generation ago. And I say that because the value -- the property values have gone up over those years, and the tax rate 9 has stayed the same. Well, effectively, 10 that is a property tax increase for a 11 homeowner. 12 If the property tax rate had 13 dropped, then you could -- you could 14 somehow get a property -- kind of a 15 neutral -- a revenue-neutral kind of 16 system. That doesn't exist today. 17 And it is not the fault -- and I really want to emphasize this. It is not the fault of this council or this mayor, nor any previous councils nor any previous mayors; it's not the fault of the governing bodies. It is a systemic problem, and that systemic problem should be corrected, and I think it must be corrected. 22 2/12/07 LAW & GOV'T-BILL 060576, RES. 060590 Finally, we must follow state law, and we can't be divested of our statutory responsibility by a referendum conducted pursuant to a municipal ordinance. We take an oath of office, and we take that oath very seriously, and we must perform under the taking of that oath. So with that, that's basically the summary of my testimony, and I thank you very much for allowing me to appear here today.
Okay. Thank you, Mr. Glancey. Just a quick question on my part. So basically what you're saying, because this would be, I guess, an advisory -- if this is put on the ballot, it's advisory in that --
Do you still feel because of your mandated -- that you're mandated by law to still follow basically what you're doing now 23 2/12/07 LAW & GOV'T-BILL 060576, RES. 060590 anyway.
And, again, no 7 disrespect. We understand that you have the right to do that and the right to enact it.
We just want to point out the fact that we have to obey the law.
And the law says that we have to put current values on properties. What it also means is that we have to work together with you to put together those pieces that are necessary to make such a program a success.
Yeah. I know you used the word "revenue-neutral" in your testimony, and I remember in the hearings that Councilman DiCicco 24 2/12/07 LAW & GOV'T-BILL 060576, RES. 060590 referred to that that was a word that -- that was a phrase that kept getting used back and forth many times, and I'm assuming that's certainly where we come in too --
-- in making sure that that is revenue-neutral by lowering the -- if indeed full valuation goes through, and I'll be honest with you, as a person, you still got to convince me totally that that's necessary.
But since you -- it would be, if it goes up, then it would be incumbent on Council -- that's where we would really come in, to have to lower the rate of taxes.
I -- I -- I don't think there's any doubt that -- but also, you have to remember that the Administration comes up with the revenue estimates based on what the spending 25 2/12/07 LAW & GOV'T-BILL 060576, RES. 060590 might be.
So they will probably come up with a tax rate. You certainly have the right to change that and the authority to change that, but that's -- that would be up to you.
And really, what you've just said falls right into what I'm talking about. Yeah, we need to continue this kind of deliberative talk each step of the way, slowly and methodically, to get this done properly.
Mr. Glancey, in a perfect world, what you described is -- is great, but in the debate about the full value, I've talked to people in 2/12/07 LAW & GOV'T-BILL 060576, RES. 060590 other areas of the commonwealth and in New Jersey that trusted their elected officials to do the right thing. That hasn't happened. Unfortunately, in some of those municipalities, people that believed that councils would represent them appropriately and adjust that millage appropriately, that people that are paying in -- I heard in one radio show just over the weekend, when they moved into their community it was 4,000, now it's 6, now it's 7, now it's 8, now it's 9, and people are starting to move because they can't afford to pay the taxes. You know, you trust the people that make these decisions, but I think, unfortunately, the people that are represented don't have the same trust that we have.
I understand 27 2/12/07 LAW & GOV'T-BILL 060576, RES. 060590 that. (Applause.)
And I trust this body and I trust the legislative bodies to do the right thing, and I trust that this legislative body will do the right thing should such a system be here.
No question. No 16 question. You might -- just so that -- kind of parenthetically. Every county that surrounds Philadelphia, going as far west as York and as far north as Berks, does it this way, the way I've described.
Right. And do you believe any of those communities, the taxes have not increased? 28 2/12/07 LAW & GOV'T-BILL 060576, RES. 060590
I -- you know what? I think in some of those communities, they not only have not increased, but they've been reduced when they changed that system, but there have been -- again, in a real estate market all boats do not rise at the same time.
That is right. There are segments of a county that may see an increase and other segments that would see a decrease.
You just 29 2/12/07 LAW & GOV'T-BILL 060576, RES. 060590 made me think of something. There have been some reassessments done of certain communities. They did the reassessment during the bubble, when things were really high, and they've stayed. Do we have anything in the legislation that will adjust on the value, the market value? I know there are people paying in other areas. Their houses were assessed for probably 20,000 more than they're actually worth today.
The legislation says "current value," so that would obviously include any lowering of value, it would seem to me. The Board of Revision of Taxes, as I have testified any number of times -- and you may or may not have heard it -- we currently lower property values where we see sales that have stated that our current value is incorrect. So we have no problem in 30 2/12/07 LAW & GOV'T-BILL 060576, RES. 060590 doing that. As a matter of fact, we feel like we're kind of an arbitrator, like the umpire. It doesn't matter to us whether the value -- what the value is, as long as it's right. So if the value has to be lowered, we're happy to do that.
Thank you very much. In piggybacking on what Councilman Rizzo just said, I understand that the other counties -- for example, Allegheny County, they have done the changes, as you state, but Bill No. 24 060787 and the state legislature prevented age and income eligibility for 31 2/12/07 LAW & GOV'T-BILL 060576, RES. 060590 tax relief in Philadelphia. So other counties have done this. Their taxes have gone up, but the exemption is not permitted in Philadelphia. So, again, our people are not allowed to get a -- to get any tax exemptions, and we're told that we have to go to the state to get these caps or tax relief. So, you know, that deals with that issue. I mean, obviously, we were told initially that if we had this millage rate lowered, it would be, as the Chairman said, revenue-neutral, but we don't have any figures on what that millage rate is. And we still don't know, if it is revenue-neutral, why there is such a problem. They gave us some examples in some of the old information from the last hearing about how some folks' taxes could go up and some down. And we need -- Mr. Chairman, before we move this kind of legislation, 32 2/12/07 LAW & GOV'T-BILL 060576, RES. 060590 we need discussion on how taxes are even assessed, what -- you know, what the criteria is, who gets what relief. We know that people can live on different streets in the same neighborhood and have different taxes. I mean, they asked us to deal with this; let's have a discussion on what that means and who it affects and how you determine that criteria. And what I'd like to ask Mr. Glancey is, you mentioned something happening in '08, so would that mean this summer, people would get new tax assessments?
No, no. This summer, what will happen is just -- the program that we've -- currently exists, as it has existed for the past seven years or so. It will be the old system in the summer. Excuse me. That is the summer of '07 for '08. What we're talking about is for '09, so there wouldn't be notice until 33 2/12/07 LAW & GOV'T-BILL 060576, RES. 060590 sometime in the middle of 2008, what I was saying were tax assessments for you folks, for the Council and the legislators and the Administration to take a look at so that you would have plenty of time to look at what those assessments would be and what revenue would be generated by those assessment. And, Councilwoman, Curtis Thomas has introduced legislation to go exactly to what you were talking about, where Allegheny County has the ability to have some gentrification legislation, we do not. Curtis Thomas's legislation is in Harrisburg. And, obviously, I couldn't agree with you more that the methodology that we use has to be completely transparent. I'm -- we're happy to do that. And we try to -- and I think we do this that today on our website as to what we're doing now. But any new methodology, I couldn't agree with you more, has to be 34 2/12/07 LAW & GOV'T-BILL 060576, RES. 060590 seen by everybody and has to be tested by everybody, and there has to be that level of confidence, I think, that citizens need, that everybody is being treated fairly.
There are also issues about the School District and how we would have to change what they get and their assessment and how that would have to be adjusted. That alone is a complicated process in terms of what we do or what we believe about the School District and what we think about these issues. Do you agree in terms of --
I -- in my conversations with attorneys from the City and also attorneys from the House Appropriations Committee -- not the Senate Appropriations but the House Appropriations Committee. They believe that Act 46, as it is written, was okay, that you can -- what we're changing are millage rates, 35 2/12/07 LAW & GOV'T-BILL 060576, RES. 060590 not the yield from those millage rates. And they believe that Act 46, as it is written, allows for that to take place. And, again, I just want to go back to what you mentioned about Allegheny County. The major problem they've had in Allegheny County, and I say this with all due respect to the council president, Dan Amarato (sp?), that school districts in certain boroughs and townships did not lower the tax rates. The values went up because the county did you what they were supposed to do. But, unlike Philadelphia, there is not unified tax rate out there. There are probably 200 jurisdiction. And is in some of those jurisdictions, the tax rates didn't get lowered. There were these incredibly unfair windfalls, I think, to those particular jurisdictions. And that is why they're having what I would consider a problem that 36 2/12/07 LAW & GOV'T-BILL 060576, RES. 060590 they shouldn't have to have if everybody could have gotten together initially like we're talking about here to make these kinds of judgments in a uniform way. It is a big puzzle, there's no 8 question, and all of the pieces have to be put together to make a puzzle as complicated as this to work in a fair and uniform fashion. If that doesn't happen, if those conversations don't happen, I'm on your side. I agree with you that this shouldn't go forward until we do that.
And so what is your opinion on us having the legislation so that the public understands so that you get a message? And every -- not you narrowly you, but that the elected officials and the Administration and all who deal with this issue, from the state to the city and beyond, get a message from the people of Philadelphia as to how they 37 2/12/07 LAW & GOV'T-BILL 060576, RES. 060590 feel about this issue?
I -- again, I think that kind of message would be a good message. I don't think it resides in the current resolution that's before us. I think -- as I said, I think that the current resolution says, you know, Tell 'em to stop. It kind of stops all debate, it stops all argument, it stops all deliberation. I think if you're suggesting that this resolution and bill be amended to say the people want to have more -- I don't know what it would say, but if you're suggesting that all of these pieces have to be put together before we go forward with this, I think the BRT could support legislation like that. And even though, as you know, I may not be a City employee very long, I would be happy to volunteer my services to help draft such legislation after that. I don't know if that would be of 38 2/12/07 LAW & GOV'T-BILL 060576, RES. 060590 any assistance to you.
Absolutely it would. Thank you very much, Mr. Glancey.
Yeah, thank you again, Mr. Chairman. I don't know if the Councilwoman has had Mr. Glancey and his team have had any of these discussions throughout your district as I have. As David said, he may not be here much longer. Unfortunately, he will -- well, fortunately for him, he's retiring, and we wish you luck. But it was a very enlightening experience having the BRT folks come out and talk to folks in the communities that I represent. Even though some folks may not have agreed with the presentation, at least there was a full 39 2/12/07 LAW & GOV'T-BILL 060576, RES. 060590 understanding. And as a result of that -- and I left this out of my earlier remarks -- we have about seven or eight bills that came out of City Council, four -- three or four which I had introduced, to talk about some of those issues. While I'm giving those protections to longtime residents, senior citizens, people on fixed income and the like, again, some of those bills require enacting state legislation. So if we -- if we do something in regards to your resolution, which basically says, cut it, it's over, it's done, it's never really going to go away, and at some point, we're going to have to face that reality, my suggestion is that we continue to have those discussions, and maybe the BRT, under -- either with Mr. Glancey or other folks who will be left behind, can come out to your community and explain what full-value reassessment could mean to 40 2/12/07 LAW & GOV'T-BILL 060576, RES. 060590 them notwithstanding those pieces of legislation that we will eventually hopefully get from the State that will give us the authority in Philadelphia to enact legislation to give those folks the protection that we want them to have.
Let me thank my colleague. And, Mr. Chairman, let me say that I didn't hold meetings on taxes going up 'cause I like my job. (Laughter.)
And I know that -- and I know that my people -- that my people would get rid of -- minus some pockets. You know, I represent a lot -- several universities -- four in fact, but let me say that the legislation only says that we maintain -- should we maintain our current level. And as you know, we don't -- it 41 2/12/07 LAW & GOV'T-BILL 060576, RES. 060590 only raises the question to the taxpayers; it doesn't make anybody do anything, but it just says that we should maintain our current method. That's all we're saying. It does not stop debate and does not stop the ability for us to talk about Representative Thomas's legislation or come up with ways to protect those people we think should be protected.
I appreciate your comments. First of all, I was not having meetings so I could tell people that their taxes were going up.
Well, you got that -- you have that rich Center City area.
Well, I 42 2/12/07 LAW & GOV'T-BILL 060576, RES. 060590 have a huge Center City area, but I also have blue-collar neighborhoods and I have very poor neighborhoods as well. My conversations and the purpose of the meetings was to let people know firsthand what the process of full-value reassessment could have meant to them, or could mean to them, because there was a lot of speculation, a lot of stories that were being written. And, yes, there may have been full-value reassessment where, passed as it was presented, without any safeguards, it certainly could have had an effect with a lot of my constituents in raising their taxes. And I think that goes to the heart of what I'm suggesting, which is that, you know, we need to continue this debate, whether it's full-value reassessment as apparently has been presented or some form of that, not to cut off that discussion. I think we do 43 2/12/07 LAW & GOV'T-BILL 060576, RES. 060590 a greater injustice to our constituents if we do that. And that's really what I'm all about. I'm not supporting full value, but something needs to be changed. What we have in place today is flawed, and I think we all agree on that, so some change will have to be made. We want to make the change that is in the best interest of our constituents so that people don't see any dramatic increases in their real-estate taxes as we almost saw back in 2003, if you can recall, when there were some significant increases that were being proposed then. So the current formula with which we tax real estate, everyone agrees, needs to be changed. There -- it has -- it can't stay the same way because if it does, we're never going to be able to get some parity, or we're never going to have some uniformity, if you will, in the way we assess and pose 44 2/12/07 LAW & GOV'T-BILL 060576, RES. 060590 real-estate tax on all of our constituents.
Mr. Chairman, this is my last comment on the issue.
And that is, obviously, the City -- every -- the cities always needs money. I'd feel better knowing, you know, what we're looking for, and that's -- and then I would feel better about what it is in a real discussion, what dollars the City needs, and then we could have a discussion on what we do. But in terms of us having to change it, I mean, look at SEPTA, for example. I got the Market Street elevator project, 46th to 63rd, I go up to 60th, and we have to come up with a tax. We've already talked to the City Solicitor about coming up with something to save those residences and commercial properties. 45 2/12/07 LAW & GOV'T-BILL 060576, RES. 060590 Now, we realize this affects some 568,000 properties in Philadelphia, but we believe that until you have something better, you keep what you have. I don't know that we have to at this point do something different because we don't have a detailed plan for how that is defined. Until we do that, then I think we keep what we have. Seventeen years we've survived, I've heard that, but I haven't heard anything that improves it. I've heard about this plan that brings in more money, granted. Cities always need money. We support our city, we love our city, we know the city needs money. That's a separate question that we're not discussing today. We're discussing this legislation that is going to make folks' tax bills go up, and that's here, that's what is at stake. If the law has been in effect for 40 years and if there's 46 2/12/07 LAW & GOV'T-BILL 060576, RES. 060590 some years we haven't changed it, well, it can last a little while longer, in my opinion. (Applause.)
I know 7 Councilman Kelly has a question, but do 8 you have a direct response to that, 9 Mr. Glancey? 10
Yeah. 11 Councilwoman, I appreciate -- again, 12 respectfully, I would disagree with the 13 statement that this does not cut off 14 debate. 15 If you're saying that the 16 resolution says, Do not change the way 17 the system is, you're effectively cutting off the debate. The system has to change. We all just kind of agreed with that. And so the -- again, a resolution that would go towards that to have, you know, deliberate, slow, and very meaningful deliberations and debate about this is a different story from 47 2/12/07 LAW & GOV'T-BILL 060576, RES. 060590 simply saying that this system -- we want to keep the same system we have. And secondly, if we -- and I honestly mean this as an attorney. If we do not change the system, somebody's going to change it for us, and that, I believe, will be a court. And when a court steps in, you don't have the authority and the ability to shape the way the process is, which I think we would have if all of us worked together.
Thank you, Mr. Glancey. Councilman Kelly has been waiting for a while. The Chair recognizes Councilman Kelly.
Thank you, Mr. Chairman. Let me be crystal-clear about this. Right now, if we decided -- or as the system is now, no changes would be made until mid-2008 to be effective in the year 2009? 48 2/12/07 LAW & GOV'T-BILL 060576, RES. 060590
And state law does require us, whether we go with the old system or a new system, it requires the BRT to do a full evaluation or assessment of properties; is that correct?
The language of the statute is "value properties at current value" --
Or "base-year value," which is under attack right now, but the more --
So nothing would be done anyway until mid 2008, which would give us an opportunity to listen to all sides of the debate. And I think you made a very good point, Mr. Glancey, when you mentioned that if we don't do it, then 49 2/12/07 LAW & GOV'T-BILL 060576, RES. 060590 someone else will, and the someone else probably will not have the same interests of the people and the citizens and residents of Philadelphia as we do.
And that's one thing, Councilwoman, that I think we should really take to heart when we -- when we fully -- when we get into these meetings. So, therefore, I think that you -- you did make a good point, that we have to do something, but I think that we have to have many more meetings about this. We have to get the -- we have to get the right ratio. We have to, of course, include our state representatives, we have to get our state legislators involved in this because they have an interest in this also, and they have responsibility, and I think that all of us have to work for the best interests of the residents of Philadelphia. 50 2/12/07 LAW & GOV'T-BILL 060576, RES. 060590 With that, I just wanted to be perfectly clear that nothing will be done until mid-2008 --
Mr. Glancey, so there would not be a effort to preempt what we want to do here so we have the ability to shape it, who would you suggest we communicate with or you communicate with to let 'em know that, you know, we're working on this, but we need a little room to breathe so they don't do what you described.
Who are the appropriate people that we need to start 51 2/12/07 LAW & GOV'T-BILL 060576, RES. 060590 communicating with?
Yes. In my office, the new chairperson, and although I can't say who that's going to be because the board will more likely than not make that decision, if you're asking my preference, I would suggest that you contact Robert Nix in my office. I think you would contact in the State House of Representatives Dwight Evans' office. In the State Senate, I don't know who to contact at this point. But the legislation that we have seen has really come out of a working group of legislators and some City folks. Charles McPherson from this council was involved in that working group as was I, as was, as I said, Dwight Evans, Kathy Mandarino. I believe George Kenny was involved in that working group. So there was a series of state 52 2/12/07 LAW & GOV'T-BILL 060576, RES. 060590 reps that can be involved in that, dealing with the City Council folks. And, you know, I certainly don't feel that I should tell you who in Council ought to be the contact. You folks will figure that out yourselves. Clearly working with the BRT, working with the Law Department, and I would start with the City Solicitor himself to work with the Law Department. And on the Administration currently, it is the Chief of Staff and the Deputy Chief of Staff, Sean McNeeley.
Thank you. Let me just say, in terms of us having to go to court, I'm not worried 53 2/12/07 LAW & GOV'T-BILL 060576, RES. 060590 about that. Every agency has lawyers. And we can fight, you can have class action suits. But I still believe that it is important that the -- that we send a message because I don't know understand what the fear is. Any law we make we can amend or unmake. So, you know, all we're doing is sending a message; we're not saying what can or should or legally happen. All we're doing is asking if we want it to change. And I think that people are more comfortable having a statement on this. People are afraid out there. They keep hearing their taxes are going to go up along with everything else. As I said, we know that state tax, they're talking about raising that a percentage; gas companies coming in for a rate increase. Everywhere we look, money has gone up. The water company wants an increase. Everybody wants an increase. So I want the citizens of our 54 2/12/07 LAW & GOV'T-BILL 060576, RES. 060590 city to know that we understand their pressures and their pain, and we support them in not asking for one. We're only asking, Shall it go up? This does not mandate anything, but it certainly sends a message to BRT and to the State and everybody else that the citizens of our city can't afford an increase, and certainly we're not ready for that. Again, there's been no talk about criteria; there's been no talk about who's affected, who's not affected what kind of breaks we can get, what we do for small businesses like my SEPTA and other seniors. We're just not ready for that. And I think it gives us a little bit better control. As a council, it gives us a better opportunity to say, This is where we stand, and it gives us a stronger negotiating point for the rest of the people, the Administration, and the 55 2/12/07 LAW & GOV'T-BILL 060576, RES. 060590 state officials, it puts us in a stronger negotiating point to protect the citizens of our city who need protection. Thank you, Mr. Chairman.
Any other questions? Briefly if you could, Mr. Glancey, 'cause we have a lot of testifiers. If I could just say for the record that the next witness will be City Controller Alan Butkovitz, if he could be ready to go.
-- I left out a person who should be a part of this when I was giving names to Councilman Rizzo, and that is Controller Alan Butkovitz. 56 2/12/07 LAW & GOV'T-BILL 060576, RES. 060590
He certainly ought to be involved in any of these deliberations.
Thank you for all the time you've spent over these years on this issue.
Thank you. Before Mr. Butkovitz starts speaking, I know many people out there are huddled up, and I know it's cold in here. I wish we could do something about that, but we apologize. It's been like that way for a while, hasn't it, Councilwoman Blackwell?
Good 57 2/12/07 LAW & GOV'T-BILL 060576, RES. 060590 morning, Mr. Butkovitz. Could you identify yourself for the record and proceed with your testimony.
Good morning. I'm City Controller Alan Butkovitz. Do I begin?
I mean, at the outset, I would like to recognize this council's proud tradition as really the people's city council. In a big city, especially the District Council people have a long record of being the buffers and the protectors of just rowhouse people in Philadelphia, and that's what we're asking, that you do that again. Just about everybody I'm looking at here -- Councilman DiCicco and Councilman Rizzo, Councilwoman Blackwell, Kelly, and even before he was a councilmember, Councilman Greenlee -- have had very strong reputations in their communities for keeping out toxic 58 2/12/07 LAW & GOV'T-BILL 060576, RES. 060590 types of changes in communities and for making sure that people get their real value's worth from City government. Now, tax policy is something that has been at the center of debate in Philadelphia for years, and 8 everybody's been consulted -- academic 9 experts, special interests, everybody 10 except the real-estate taxpayers and the 11 people of Philadelphia. 12 And the effort in this ballot 13 question is to finally bring the people 14 into this conversation. 15 And I would commend Councilwoman Blackwell's work in sponsoring this ordinance, and we have been working closely with her and her staff in trying to devise language that should be understandable, because it's really a simple point. And the language that we are recommending and have recommended is very simple: Do you hereby urge the stopping of the real-estate tax 59 2/12/07 LAW & GOV'T-BILL 060576, RES. 060590 increases on homes and real estate of Philadelphia by the Philadelphia Board of Revision of Taxes by use of the new method of figuring taxes called "full valuation"? Now, that language has been submitted, and it constantly gets tinkered with. I understand the City Solicitor doesn't like it and has devised a question that has what we learned in 2nd and 3rd grade, that it's difficult to mix a positive with a negative, because you ask somebody, "You don't want to do that, do you"? Now is the right answer yes, or is it no? Why do we want to phrase questions in a way that will just confuse people? Because we're afraid of really giving it to people straight and letting people's honest opinions be assessed. We count on this council and this committee to be the people's 60 2/12/07 LAW & GOV'T-BILL 060576, RES. 060590 protecter on that and to knock out that kind of lawyer-ish verbiage and just give it to people straight. Now, on the substantive question of the full -- it's not just full valuation; it's the whole trend line of what is happening to tax policy and real-estate taxes in Philadelphia. We are really in the midst of experiencing a tremendous positive surge in Philadelphia, and it's unusual. People are used to the cities being the place where you go to work in the morning and then you go home to the suburbs at night; and in many parts of Philadelphia, that is now reversed. Councilman DiCicco -- I know it has been controversial, but Councilman DiCicco did a -- it's not that common that you have an initiative emerge in Philadelphia that turns out to be a model for the rest of the country and that you can say really took off. And his initial on the tax abatements 61 2/12/07 LAW & GOV'T-BILL 060576, RES. 060590 changed the situation that I vividly recall. Back in the mid-1990s, people said there would never be new residential development in Philadelphia. Nobody would ever build skyscrapers, nobody would ever build houses. I'm all over Philadelphia now. They are building houses, and they are getting 200 and $300,000 for it. Now why is that? Because there was this concept that Councilman DiCicco had that people would take a risk and make an investment if there was a significant economic incentive in it. And then at some point, there would be a critical mass because there would be enough development that it would support itself, and that the entire value of the neighborhood and properties values would go up.
And it turns out that that has been borne out to be true. The problem with the proposed full-valuation reassessment is a 62 2/12/07 LAW & GOV'T-BILL 060576, RES. 060590 completely contrary idea. Now that the positive spillover effects of the abatements have expanded beyond Center City to areas like 17th and Christian and Strawberry Mansion, and other people are beginning to realize the positive critical mass in their neighborhoods of increasing property values, at least in those neighborhoods that are not totally rich right now, once you start pulling in a substantially increased real-estate tax value, you have issued a death sentence on the redevelopment of those communities, right? )
Every place else in the country -- you know, when they had problems in the auto industry in Detroit, the state government, the politicians of Michigan, they did whatever they had to do to go to Washington to get special relief for the auto industry. Every other place in the Midwest is boosterish. 63 2/12/07 LAW & GOV'T-BILL 060576, RES. 060590 Philadelphia somehow has this idea that if something -- if we start a good trend, we should cash in on it right away. In effect, we kill the goose that laid the golden egg. We have -- the reason we haven't had tax increases in the last few years is because we're doing such a great business of buying and selling properties, and the properties are worth so much that we got -- we had a 500 percent increase in transfer-tax revenue in the City since 1991. In 2006, we got $234 million. The reason we have any kind of surplus in our fund balance is because people want to buy properties in Philadelphia. Now, there's a lot of disadvantages to living in Philadelphia. People pay higher auto insurance rates. People -- there is a crime tax, there is a riskiness to it. A lot of things are more expensive in Philadelphia. 64 2/12/07 LAW & GOV'T-BILL 060576, RES. 060590 Why do we hear policy experts say, Well, you know what? Real-estate taxes are lower in Philadelphia than they are in the suburbs, and they're lower than they are in most other places, and that's unfair. Why do we always have to go in the direction that we match whatever the thing that is not good in someplace else. All the years that I was in Harrisburg, we heard comments that the Pennsylvania income tax was too low because New York had a higher income tax. What Philadelphia should be doing is taking advantage and emphasizing those things that happen to miraculously be working in its favor right now. And one of them is that we are a bargain in real-estate values between New York and Washington and with Montgomery County and the other Philadelphia suburbs, that we now have experienced the benefit of the baby 65 2/12/07 LAW & GOV'T-BILL 060576, RES. 060590 boomers getting old enough that their kids are out of the house and the schools are not the primary consideration, and they can live where it's exciting -- and they consider Philadelphia exciting and happening. And why don't we design policies that encourage that so that we can have a diverse tax base and that we can thrive in Philadelphia. Let alone all of the people of various types that will be hurt if there is a real-estate tax shock increase. People, the abatement is generally a great idea, but it creates oddities that are unfair to people. So you can be in a situation where you're living in a million-dollar condominium with no taxes for ten years, and the guys across the street from you, who might be on fixed incomes and didn't do anything, suddenly they're living in a neighborhood that's worth a lot more money. They don't have an abatement; 66 2/12/07 LAW & GOV'T-BILL 060576, RES. 060590 their taxes go up. What will happen with full valuation is that there will be constant and immediate reassessment to the most current recent sales data. So we have a problem with the increase in reassessments, whether we have full valuation or not. But full valuation will make it fast and constant, and, I believe, will set in motion a reverse migration out of Center City and of these prospering areas. And, in fact, we would have the irony of people being hit with much higher real-estate tax bills at a time when they're also suffering 'cause their property values will go down 'cause nobody will want to buy a property with that kind of tax bill. Now, the Board of Revision of Taxes has postponed this residential full-valuation reassessment for two years, but they are in full flower on their reassessment of commercial 67 2/12/07 LAW & GOV'T-BILL 060576, RES. 060590 properties; we've dealt with that in our office this year.
And people think that I'm making things up when I say that areas like Center City and Chestnut Hill could experience as much as a tripling of real-estate tax values. Well, we've had that direct experience several times in our office with commercial properties. Most recently, a property that was assessed -- or was taxed at $1100 and had it increase to $4400 based on assumptions by the Board of Revision of Taxes that just didn't turn out to be accurate in terms of what they thought that particular facility would be generating in revenue. Our office actually went over to the Board hearing, fought it the, and end result was that the tax went up to 1400 instead of $4400. We can't take that kind of shock. We have real-estates in Center 68 2/12/07 LAW & GOV'T-BILL 060576, RES. 060590 City of maybe $2500. If it goes to or $6,000 in one year, there's a lot of development that will stop in mid-development. A lot of developers have made a bet on Philadelphia. Why do we want to be unreliable partners to bet on? We have recently upheld the voters of Philadelphia. The voters of Philadelphia have very -- they are not ignorant on tax policy, they are not stupid, they are not people who don't know what's good for them. They, in fact -- I mean, we're all committed to the idea that they are the ultimate wisdom in our business. And what they say is, the real-estate tax is the tax that they hate the most. That doesn't mean that they're just against every tax willy-nilly and they won't be re -- I mean, they have -- in some of these questions, they've said that they would pay higher taxes on certain issues. 69 2/12/07 LAW & GOV'T-BILL 060576, RES. 060590 For example, this whole question of whether City workers should continue to have traditional pensions. "So they're not people that just don't want to pay their share. And they also say, by a large margin, that they would vote for an increase in the state sales tax, which is one of the issues under consideration in Harrisburg right now, that they would go from a percent Philadelphia sales tax to an percent sales tax if that would keep them from experiencing a big increase in their real-estate taxes. And then, finally, they say if there's got to be an increase, 48 percent say let it be in the business taxes, and something like percent say they would take a wage-tax increase before a real-estate tax increase. Only 10 percent of the people prefer a 70 2/12/07 LAW & GOV'T-BILL 060576, RES. 060590 real-estate tax increase. Now, my question is: When and how do they get to be a part of this conversation? It's admitted that the ballot question would only be advisory, right? It's not mandatory. The Board of Revision of Taxes will go to court or they'll keep ding what they're going to do. Why are people afraid to let that question on the ballot? Because when the question's on the ballot, people on every block in Philadelphia will have recorded their opinion, and instead of people being able to come in here and say, I think this and I think that, you're going to know exactly to the last digit what people in your neighborhood think of this. And it will add a powerful weapon to those who say that big real-estate tax increases are bad. Right now, there's a push on the part of business community that if 71 2/12/07 LAW & GOV'T-BILL 060576, RES. 060590 real-estate tax assessments go up, that provides the opportunity for a downward push on business taxes. 2 billion in tax cuts in his time in office, and those are mostly business-tax cuts, but there have been substantial-wage tax cuts. When we had the debate in Harrisburg over the casinos, Philadelphia was the only place in the state where the casino revenues were not earmarked for real-estate tax relief for a good reason: 'Cause we didn't have a real real-estate tax problem. Our revenue was earmarked to wage-tax cuts. You have already achieved a cut in the wage tax from 5 percent to 4 percent, and you're likely to get it into the 3s.
This Council has an admirable record on wage taxes. People are counting on you to not let that be 72 2/12/07 LAW & GOV'T-BILL 060576, RES. 060590 flipped over into an unsustainable tax burden in the real-estate tax category. All we want is a chance for people to express their opinion. How -- say 95 percent of the people in Philadelphia were to vote yes, and I don't think it would be that high. But whatever the opinion is, if they say, We don't want full valuation implemented, it doesn't stop the implementation, but it -- how else do you get one-and-a-half million Philadelphians to participate in this discussion. Why is it that Philadelphia Forward is allowed to conduct numerous forums and be considered as an educated and a legitimate spokesman on this. Why is it that the Greater Philadelphia Chamber of Commerce is allowed to be a legitimate spokesman, saying, Give us a break on our special taxes? How come Comcast is able to 73 2/12/07 LAW & GOV'T-BILL 060576, RES. 060590 come in here and say, Give us a break. We would like to have a place where we don't have to pay any taxes. )
But these people here aren't allowed to have a question that they can translate and understand and give their opinion on. Who are they going to get a hearing from, if not from you guys. This is not -- there is -- this is not anti-City Council thing by any stretch of the imagination. I know that people are feeling stressed because even the Council is experiencing this anxiety about what happens with the real-estate tax increases, and people are going to be upset about it, and they're going to blame us. I don't think anybody does blame this Council, but it's going to be a big problem, and it's going to be a big problem for all of us if it goes through without being vetted, and we 74 2/12/07 LAW & GOV'T-BILL 060576, RES. 060590 start to experience the negative effects I'm talking about. Back in 1990 -- you know, Center City has had a very varied history from a time when it was basically the skid row of the city to the time during the Dilworth administration when Society Hill started. And then, in the early '90s, it saw a tremendous plummeting in real-estate taxes values and the idea that Philadelphia may have seen its day. And to the credit of Governor Rendell when he was the mayor and Mayor Street when he was the Council President and to this city government, very concrete steps were taken to provide an investment in Center City and a magnet that provided excitement and positivity about Philadelphia, and that's working. And it takes -- you need to have focus and you need to have discipline, and you got to keep your eye on the ball and the things that are 75 2/12/07 LAW & GOV'T-BILL 060576, RES. 060590 working. So I very passionately urge this committee and the Council to please approve this ballot question for May in a form that we can understand, that after years of -- I guess I had 8 years of school, including law school, 9 and I just looked at the question as it 10 came back from the City Solicitor, and I 11 can't really tell whether it's supposed 12 to be a yes or a no. 13 And that's not what democracy 14 is about, right? Let's give these 15 people a question that they can 16 understand so that we can come back next 17 year, when we know there's going to 18 be -- the City's only going to have a 19 $4 million surplus at the end of this year. We know there's going to be problems over how do we pay for all the cops that we need and what taxes are going to go up and how much. This council should have the benefit of the people's wisdom on that. 76 2/12/07 LAW & GOV'T-BILL 060576, RES. 060590 There are promises being made that can't possibly be delivered. There are discussions about, Well, if we just change the procedure here, it's not going to result in a tax increase. And yet, I think it was -- was it Councilman Rizzo or Councilman -- that pointed out the -- and Councilwoman Blackwell, I think, pointed out in Allegheny County two specific experiences -- because the situation will have changed. What looks like a balanced budget this year is going to be a deficit budget next year. And you will have had the mechanism of the reassessments that will provide a momentum for the burden to fall on real-estate taxes, particularly in a city where all of the energy on tax policy is devoted to lowering the business tax to as close to zero as you can get and lowering the wage tax. There's only one other place 77 2/12/07 LAW & GOV'T-BILL 060576, RES. 060590 for the money to come from. And if the people who are real-estate taxpayers don't get a chance to vent and to put their opinion on the record and to push back, they're going have -- you're going to knock their socks off. And I know that's not what this Council wants to have happen.
Thank you for your testimony, Mr. Butkovitz. Any questions from the committee? Councilman DiCicco had his light on. Councilman DiCicco?
Thank you, Mr. Chairman. And thank you again for allowing me to speak, even though I'm not a member of this committee. When I came up here this morning, I was not -- I didn't come up here with the intention of attacking the resolution that Councilwoman Blackwell had put forward; I was trying to continue to engage in the debate about 78 2/12/07 LAW & GOV'T-BILL 060576, RES. 060590 where we need to go in terms of how we reassess properties in the City of Philadelphia. Thanks to the City Controller, I think I'm more convinced now that I would be in support of the resolution 8 because -- not because I don't think that we need to continue to have the debate, as I said earlier, but I think there's a question of trust among the people of the City of Philadelphia. Despite the best efforts of the BRT and their pledge that they would not move forward with full-value reassessment for at least two years or until 2008, I think the City Controller raised a good point that the only way we're going to get to have a true understanding of how the people of this city people about this issue is to give them the opportunity to voice their opinion in the May primary. And because of that -- although, again, I'm not a member of 79 2/12/07 LAW & GOV'T-BILL 060576, RES. 060590 your community -- when this bill comes to City Council for our vote, I would be voting in support of the resolution 5 because, again, I think it's a question of trust, and I think it's one of the ways we can reinforce our dedication to the citizens of this city, by giving them that opportunity to be hoard on May 15th in the primary election. And I just wanted to add that. Thank you. (Applause.)
Thank you very much. Thank you, Councilman DiCicco. I want to thank the Controller. Obviously, I agree with his statements, and you will see in his testimony the language that we initially agreed to, which was... and that we thought made it clearer. 80 2/12/07 LAW & GOV'T-BILL 060576, RES. 060590 However, we were trying to agree -- we've been trying to compromise with the Administration in finding some middle ground, although I'm not sure we did it. And so we will -- but you already have in your packet...
Councilwoman, if I could just ask. I'm getting an amendment from the Controller's staff there. Is this the amendment you're talking about? Just so I'm on -- we're all on the --
I don't think -- I think you have a more current version, Mr. Chairman.
"Do you hereby urge the stopping of real-estate tax increases on the homes and real 81 2/12/07 LAW & GOV'T-BILL 060576, RES. 060590 estate of Philadelphia by the Philadelphia Board of Revision of Taxes' use of a new method for figuring taxes called full valuation?"
Okay. We can -- we're happy. If the board's happy, then we're fine. Thank you.
This is what you would propose when we get to the meeting to change, okay, the question. Okay? 82 2/12/07 LAW & GOV'T-BILL 060576, RES. 060590 All right. Any other questions by members of the committee? (No further questions.)
Thank you, Mr. Butkovitz. Thank you very much. Are there any -- is there anyone here from the Administration that wishes to testify? Please come -- state your name for the record and proceed, please. ) MR. McNEELEY: Good morning, Councilman Greenlee and members of the committee. I'm Sean McNeeley, Director of Policy in the Mayor's Office for the City of Philadelphia. I appear before you today to offer testimony on Bill 060576 and Resolution No. 060590, which would place a question on the ballot asking voters whether the Board of Revision of Taxes 83 2/12/07 LAW & GOV'T-BILL 060576, RES. 060590 should implements it's long-contemplated plan to assess properties at their full value. The Administration asks that the bill and resolution be held in committee. First, let me say that the Administration supports the Full Valuation Initiative. Implementing the system of full valuation as proposed by the BRT and recommended by the City's Tax Reform Commission in 2003 would improve the accuracy, timeliness, fairness, and equity of our real-estate tax system. Analysis has shown that the existing system of assessments is arbitrary and, particularly following the recent multi-year surge in sales and values, highly in accurate. In fact, the Tax Reform Commission concluded that based on 2002 data, Philadelphia had one of the highest levels of assessments error and the most regressive assessments among the big cities that it 84 2/12/07 LAW & GOV'T-BILL 060576, RES. 060590 analyzed. That is, poorer homeowners were paying taxes based on more of their home's full value than wealthier homeowners. This condition can only have gotten worse as values have skyrocketed while most residential homeowners have received minimal or no 10 assessment increases. We would not think of asking a worker making minimum wage to pay the wage tax on all of their wages while allowing workers making over $100,000 to pay the wage tax on only half of their wages. Yet that can essentially be the effect of our existing real-estate assessment system. This regressive, arbitrary, and unfair condition best be addressed by a complete reassessment and consistent annual reassessments thereafter, as planned in the Full Valuation Initiative. Second, I will reiterate the 85 2/12/07 LAW & GOV'T-BILL 060576, RES. 060590 Administration's position that full valuation should not provide the City or School District a tax windfall and that policies should be implemented to alleviate the tax impact of full valuation on individual taxpayers and protect the most vulnerable taxpayers. I've attached our testimony from the October 25, 2005, hearing on full valuation, which Councilman DiCicco referenced earlier. That testimony outlines those positions and suggests alternatives. Let me be clear. If the real-estate tax millage is reduced so that the amount of tax collected is roughly the same, many homeowners would receive tax reductions as a result of full valuation. In fact, analysis by the Reinvestment Fund estimates that a majority of homeowners would see no 23 market change or even tax reductions as a result of full valuation based on a strict reassessment and with a new 86 2/12/07 LAW & GOV'T-BILL 060576, RES. 060590 revenue-neutral tax millage rate. The Administration has worked consistently with Chairman Glancey and the BRT, State House legislators and staff, and City Council technical staff on possible protection and remedies for the impact of full valuation on taxpayers. And until we know the actual reassessments and the data, it's difficult to identify the best remedy. If we're given a preview of the new assessments later this year, there will be abundant time to implement any necessary remedies at the state and local level before the proposed implementation of full valuation for tax year 2009, which would be the bills due in February and March of 2009.
We pledge to continue to work with you on City Council as well as other stakeholders to implement appropriate remedies as we get more complete information. Third, you should understand 87 2/12/07 LAW & GOV'T-BILL 060576, RES. 060590 the consequences of not going to full valuation before asking the voters to choose. Of major consequence is that by not updating residential assessments in a significant way since 2003, we've slipped further away from both our stated assessment ratio for state tax equalization purposes as well as from an assessment ratio that is applied equally to all homeowners. The State Tax Equalization Board (STEB) has been patient in waiting for the City to implement full valuation, but if we were to abandon the project and instead implement some marginal arbitrary assessment changes, using the existing assessment ratio, we could run into one or more significant problems. One is that the real estate assessment system could be found to fail to comply with the state's uniformity clause in taxation, which would force us 88 2/12/07 LAW & GOV'T-BILL 060576, RES. 060590 to undergo a major reassessment under court order, provide tax refunds, or undergo some other drastic remedy not of our choosing. Another very real possibility is that the City could be forced to comply with a lower assessment ratio determined by STEB requiring either that City Council raise the real-estate tax millage rate in order to provide the same amount of revenue or stripping the City and School District of tens of millions of dollars of real-estate tax revenue, and creating an immediate financial crisis for both. We understand the ballot question contained in Bill No. 060576 is not binding on the BRT. Nevertheless, given our support for the project and the belief that appropriate remedies for individual taxpayers can and will be developed in the next year, we do not believe that a ballot question is necessary at this time, particularly 89 2/12/07 LAW & GOV'T-BILL 060576, RES. 060590 given the large number of elections, candidates, and ballot questions already scheduled for the May primary. This concludes my testimony. I'd be happy to answer any questions you may have at this time. And I would like to first comment on the proposed amendment to the question. I haven't seen it; I'm only commenting on what I've heard. But if the question addresses real-estate taxes, the BRT doesn't impose the taxes; the City Council and the Mayor control the tax rate, so the question doesn't seem to be exact. It's kind of mixing things.
Well, in all due respect, it says "by the Board of Revision of Taxes' use of a new method for figuring taxes." And in the opinion of the question, that would increase the taxes. Now -- MR. McNEELEY: But -- 90 2/12/07 LAW & GOV'T-BILL 060576, RES. 060590
You know, you can say -- hold on. You can disagree with that, I understand, but it does -- it says that this method would increase taxes. That's what it basically says. MR. McNEELEY: The method would assessments. The amount of taxes collected are up to you. You change the rate, and the amount of taxes would be the same.
Mm-hmm. Okay. I understand. MR. McNEELEY: Okay. Councilman Kelly?
Yes. Thank you, Mr. Chairman. Mr. McNeeley, I see your testimony, and I have no problem with you supporting, of course, the full assessment for all properties in Philadelphia. I understand that's where you're coming from. But what is the harm of 91 2/12/07 LAW & GOV'T-BILL 060576, RES. 060590 allowing people to express their opinion of whether we need full value or not? MR. McNEELEY: Well, I think that the question doesn't really provide all the information that's necessary to understand the issue. You know, I just commented --
Yeah, this is not a binding -- this doesn't bind either the Administration or the BRT or City Council itself for any action. MR. McNEELEY: Mm-hmm.
It just -- it's merely to get a poll or a pulse of the residents of Philadelphia to see whether they go to -- MR. McNEELEY: I understand that. I understand that.
Well, what is your objection to that? MR. McNEELEY: Well, for one thing, we have testified previously on other measures that we feel like this is going to be a very crowded ballot and 92 2/12/07 LAW & GOV'T-BILL 060576, RES. 060590 that that's going to create long delays and long lines for people being able to vote.
I don't think -- from listening to Dave Glancey this morning, I don't think that's so because I don't think any action's going to be taken on this until at least mid-2008, and it won't be effective until 2009. MR. McNEELEY: Right.
So therefore -- MR. McNEELEY: Then why ask people on the May ballot about something that's not going to take effect for two years from now?
Why not? MR. McNEELEY: Because, as I mentioned, we're going to have all of the judicial elections and --
I mean, we just have to get their opinion of it, that's all. I think it just helps us at 93 2/12/07 LAW & GOV'T-BILL 060576, RES. 060590 City Council to get -- to really -- to see where the people are and some of their concerns. That's all. MR. McNEELEY: The question doesn't really -- the question gets people's opinion about a part of the process, but it doesn't explain to people that you might be paying on a lot higher proportion of your home's value than someone down the street. You might -- you might be paying a lot higher proportion of your home's value than somebody with significantly more income that lives in a different neighborhood that lives in a more valuable home. It's basically an unfair system. And so -- it also doesn't tell people that the assessment, again, the doesn't have a relationship, a direct relationship to the tax until the City Council or the Mayor --
Well, in many people's opinion or minds, that no 94 2/12/07 LAW & GOV'T-BILL 060576, RES. 060590 matter what we do, some people, it's going to feel like it's a -- you know, it's an unfair situation, and that will happen regardless of what -- which way we go and whatever we go. MR. McNEELEY: That's true, and I think that we need to communicate better all of the aspects of the issue.
Well, I think we have -- at least we have almost two years to communicate with the people of Philadelphia, and I think that's what we have to do -- MR. McNEELEY: Right.
-- and what we will do. MR. McNEELEY: Yeah. And I think we can continue to work along those lines, and I don't know that asking people a question that only involves a piece of the whole picture really provides a road map for what the best policy is. I think that what it does is, 95 2/12/07 LAW & GOV'T-BILL 060576, RES. 060590 it inflames people and it causes them concern, when, as we've said, the overall level of taxes collected will be the same. We have analysis from the Reinvestment Fund who's looked at sales data for the last few years, looked at the BRT's data, and found that the majority of people would either have no 11 change or a reduction as a result. So, you know, those are what the data tells us, but the question doesn't tell people that, the questions doesn't inform anyone; the question just continues to play into the concerns that people have without --
And people will have concerns, and I have a concern right now, feeling that all of this assessment will be revenue-neutral, as it's supposed to be. I mean, we hear that constantly, revenue-neutral. MR. McNEELEY: Mm-hmm. 96 2/12/07 LAW & GOV'T-BILL 060576, RES. 060590
But in reality, I don't know if that's going to be so. I really don't. MR. McNEELEY: Well, again, it --
I mean, the property values went up in the City so, therefore, people will probably be paying more in many cases than less, and that's what we have to watch. One of the things that I would like to do -- ask you is, what do you feel about a capping? MR. McNEELEY: I think that --
Of any increase? MR. McNEELEY: Yeah. I think that we have been more interested in policies like phasing in increases and policies like the homestead exemption and policies like a gentrification deferral targeted to age and income level. We've been more interested in 97 2/12/07 LAW & GOV'T-BILL 060576, RES. 060590 that than in a hard, cap because with a hard cap, if -- depending on what level the cap is at, you still don't get at a more fair --
Well, one of the things that I have, and I think the Controller mentioned it pretty well, that he gave an example of somebody who received an increase of about $3,000 for one increase, one jump like that. MR. McNEELEY: Mm-hmm.
And it would probably force you to start thinking about moving out of Philadelphia, and that's what we don't want. MR. McNEELEY: Right.
We want -- and now, any increase should be capped, I think, for whether it be 5 percent of what you paid for the previous year or the previous years. I think that's one 98 2/12/07 LAW & GOV'T-BILL 060576, RES. 060590 of the things that I think we should look at in Council, to protect the people that they would know beforehand there would never be any -- any huge increases. MR. McNEELEY: A phase-in or buffering system can accomplish that same effect without the -- the problem or the drawback to a cap is that you don't get to a place where everyone is paying the right amount based on their home's value. You still would have some distortions. Some people would still be paying too much, some people would still be paying too little, depending on, again, the size of the cap and any other remedies you adopted. But a phase-in, eventually everyone would --
Well, we do have safeguards in those cases because they can appear before the Board and ask for some relief. MR. McNEELEY: Right. 99 2/12/07 LAW & GOV'T-BILL 060576, RES. 060590
And they would be granted the relief anyway. MR. McNEELEY: Right. You can be.
But I just wanted to get your opinion on why you feel that asking the people who live in Philadelphia their opinions on whether we should remain the same or whether we should go to the new system. MR. McNEELEY: It's not that it -- it's not --
It's not binding anyway. We're going to continue because I think that state law requires it, and we're going to probably do it. MR. McNEELEY: Right. And it's not binding, but it is valuable to get --
But I think, as the Controller mentioned, I think he said something on a head, and that's -- that's sort of -- people want to have a save say. 100 2/12/07 LAW & GOV'T-BILL 060576, RES. 060590 MR. McNEELEY: Mm-hmm.
And I think that we, you know, should give them that say. Simple. (Applause.)
Thank you, Councilman Kelly. Before I recognize Councilwoman Blackwell, I would just like the record to reflect another member of the committee, Councilwoman Campbell, is here. Councilwoman Blackwell?
Thank you very much. I think that Mr. McNeeley is saying conflicting things. You say you did a survey and you found that there would be no change or reduction, and yet you haven't talked about really what a millage rate would be because you mentioned phasing in and buffering, which means that, obviously, you support 101 2/12/07 LAW & GOV'T-BILL 060576, RES. 060590 an increase in taxes. And on of your testimony, quote, I read. It says: "Analysis has shown that the existing system of assessments is arbitrary and particularly following the recent multi-year surge in sales and values is highly inaccurate." Now, you say it's highly inaccurate, and yet how do you compare that to what the Controller said about reverse migration? How can we be assured that people in Center City and in other areas, even in my university areas, won't experience reverse migration when it's obvious, from that statement, that you assume that taxes will go up because we know that the recent surge in sales has increased the price of real estate in the City, not kept it level or not decreased it. (Applause.) MR. McNEELEY: The statement -- the statement was that the Reinvestment 102 2/12/07 LAW & GOV'T-BILL 060576, RES. 060590 Fund estimates the majority of homeowners would see no market change or even tax reductions based on a strict reassessment and new revenue-neutral tax millage real estate. If you have -- if you collect roughly the same --
Yeah. I'm lost there, too. What are you quoting now? I'm sorry. MR. McNEELEY: I'm --
I was quoting you. MR. McNEELEY: Yeah, so am I, at the bottom of .
And what the analysis that -- that sentence that says "analysis" -- MR. McNEELEY: Mm-hmm.
-- which absolutely means that you're looking for a tax increase. 103 2/12/07 LAW & GOV'T-BILL 060576, RES. 060590 MR. McNEELEY: No. It means that we're looking to assess properties fairly. The amount of taxes that are collected would be about the same.
How could there be -- you mentioned here that there's a surge in sales. MR. McNEELEY: Mm-hmm.
And we all know -- there's a surge in sales and values. Those are your words. So if a surge in values means that the cost of real estate, which we all know, has gone up in the city. MR. McNEELEY: Yeah.
So how can it -- so you state in your own sentence that to make it -- to make it right would be an increase in taxes. That's what you're saying in your own sentence. MR. McNEELEY: No. 24
And then you talk about phasing in and 104 2/12/07 LAW & GOV'T-BILL 060576, RES. 060590 buffering. Those are phasing in additional costs and buffering all of -- you're talking about phasing in an additional cost in taxes for people. MR. McNEELEY: The amount of taxes collected is the product of assessments multiplied by the tax rate, so if we lower the tax to match the increase in assessments, then the amount of taxes collected is the same.