VOLUME III COUNCIL OF THE CITY OF PHILADELPHIA COMMITTEE OF THE WHOLE - - - Room 400, City Hall Philadelphia, Pennsylvania Monday, October 31, 2005 10:50 a.m. - - - PRESENT: COUNCIL PRESIDENT ANNA C. VERNA COUNCILWOMAN JANNIE BLACKWELL COUNCILMAN DARRELL L. CLARKE COUNCILMAN FRANK DiCICCO COUNCILMAN JAMES F. KENNEY COUNCILWOMAN JOAN L. KRAJEWSKI COUNCILWOMAN DONNA REED MILLER COUNCILMAN BRIAN J. O'NEILL COUNCILMAN JUAN RAMOS COUNCILWOMAN BLONDELL REYNOLDS BROWN COUNCILMAN FRANK RIZZO RESOLUTION 050844 - Resolution authorizing Philadelphia City Council's Committee of the Whole to hold public hearings on the Board of Revision of Taxes's proposed change in property tax assessment, known as "full valuation," the policy's need and fairness, its effect on taxpayers, and possibilities of mitigating large tax increases. - - - V A R A L L O Incorporated Litigation Support Services Eleven Penn Center 1835 Market Street, Suite 600 Philadelphia, Pennsylvania 19103 215.561.2220 215.567.2670 306
Good morning, everyone. This is the continued public hearing of the Committee of the Whole regarding Resolution No. 050844, and at this time, I would ask Mr. McPherson to please read the title of the resolution. MR. McPHERSON: Resolution 10 authorizing Philadelphia City Council's Committee of the Whole to hold public hearings on the Board of Revision of Taxes's proposed change in property tax assessment, known as "full valuation," the policy's need and fairness, its effect on taxpayers, and possibilities of mitigating large tax increases.
Thank you. Our first witness is Controller Jonathan Saidel. You've changed a little.
I know. Good morning. My name is Marissa Waxman. I am the Director of Financial and Policy 307 10/31/05 - WHOLE - RES. 050844 Analysis in the City Controller's office.
Good morning. Controller Saidel couldn't be here with you this morning and he asked me to testify on his behalf and convey any questions you may have for him, so I'd like to read his testimony now.
Thank you. Good afternoon, Council President Verna and honorable members of City Council. I am Jonathan Saidel, City Controller, and I come before you today to offer comments on the Board of Revision of Taxes's proposed change in property tax assessment, known as "full valuation," the policy's need and fairness, its effect on taxpayers, and possibilities of 308 10/31/05 - WHOLE - RES. 050844 mitigating large tax increases. I applaud the Board of Revision of Taxes for undertaking this effort to make taxation of real estate in Philadelphia simpler and more fair. I have long advocated for equalization of full valuation to improve our tax structure. My 2001 Tax Structure Analysis Report examined BRT assessed fair market values and actual sales and found that there was a variance in excess of 35 percent. The International Association of Assessing Officers recommends no more than 15 percent variance. Across the City's neighborhoods, there was a wide range of variance, indicating that equals may not be paying the real estate tax equally. Anecdotal evidence suggests that Philadelphia's real estate taxes are highly regressive at present, with owners of expensive properties paying less than their fair share, while owners of less 309 10/31/05 - WHOLE - RES. 050844 expensive property are paying more than their fair share. Philadelphia's assessment practices are also a threat to affordable housing in the City. The low assessments are capitalized into sales prices, which can lead to an artificial inflation of housing costs. This inflation makes it more difficult for low- and moderate-income families to secure affordable housing. Full valuation should not be about raising taxes. If I believed that this was the intent, I would urge the honorable members of City Council to halt the move to full valuation. Full valuation is about making government more transparent and accountable, and I wholeheartedly support it. It is within the power of Council to set new tax rates, and I doubt that full valuation would be embraced without a proportional reduction in the tax rate. I am confident that the necessary changes to 310 10/31/05 - WHOLE - RES. 050844 Act 46 can be secured. The fact is that many Philadelphians will not be negatively impacted and will benefit from a simpler and fairer property tax system. The move to full valuation presents other opportunities to improve Philadelphia's tax structure and fiscal management. The City should shift to a quarterly payment schedule for real estate taxes. This would make financial planning easier for our homeowners and, after an initial adjustment period, could improve the timing of the City's cash flow and reduce the need for short-term borrowing and thus decrease the amount of tax dollars spent each year on interest. As the move to full valuation will significantly increase the City's debt-incurring capacity, this change should precipitate an open discussion about the City's debt management policies. A plan should be crafted and implemented to ensure that the City is not overburdening the next generation of 311 10/31/05 - WHOLE - RES. 050844 Philadelphians. While the City and most property owners stand to benefit from full valuation, we cannot overlook that some firms and families may face rising tax bills as a result of growth in the values of their properties and correction for prior underassessments. The Tax Reform Commission and others have recommended that buffering be used to smooth the initial impact, and I believe that this can ease the transition to full valuation. Going forward, we have an obligation to ensure that the real estate tax bills are not responsible for forcing any Philadelphians to lose their homes. There are numerous mechanisms for property tax relief, such as tax deferrals, freezes and homestead exemptions. I do not believe, however, that caps on either revenues or assessments would be in the best interest of taxpayers or the City government. 312 10/31/05 - WHOLE - RES.
050844 These programs would further distort the assessment and taxation process and jeopardize the economic vitality and fiscal stability of the City. While I believe that it is premature to select the appropriate mechanism for Philadelphia, I'm happy to direct my staff to work with both Council and the Administration in evaluating the impacts of the change to full valuation, once the BRT provides the assessment figures in early 2006. Until that time, it is difficult to determine the nature of any negative impacts and the best approach for mitigating them. With the move to full valuation, we have the opportunity to make Philadelphia's property tax system easier to understand and more equitable. I believe that this is a change that Philadelphia's taxpayers need and deserve. Thank you.
Since 313 10/31/05 - WHOLE - RES. 050844 he's not here, I don't know whether you would be able to answer, but can you tell me why Mr. Saidel feels that caps would not be in the best interest?
Thank you. Just a moment. Are there any questions or comments of this witness? (No response.)
Thank you very much. Our next witness -- just a moment, dear. Councilman Clarke.
Thank you, Madam President. Just one question, and you may not be able to answer this, but I'm assuming, given the seriousness of this issue, we will have some additional 314 10/31/05 - WHOLE - RES. 050844 discussions, probably some other hearings, and can you convey to Mr. Saidel that he be present at any future deliberation on this issue? Because there are a number of questions that I'm sure were he here Councilmembers would like to ask.
Thank you again. Our next witness? MR. McPHERSON: Mark Alan Hughes.
It's a pleasure to be here. Pardon the frog in my throat. It's a little embarrassing, but last night my family and I went to the Haunted House Exhibit at the Academy of Natural Sciences. I would recommend it to anyone 315 10/31/05 - WHOLE - RES. 050844 who doesn't mind being scared. I actually screamed about a half a dozen times and half lost my voice, so I'm going to sound a little awkward. Thank you very much for inviting me to give testimony on this very important topic. I have written testimony, which also has some attachments, and I believe it has been distributed. Let me very briefly stake out four areas that I'd like to talk about. A professor is someone who speaks in other people's sleep and so I'm going to try to be as brief as possible here. Along the way, I'd like to comment on some of the testimony that I heard on Thursday and go over some of that ground again very briefly. I was unable to hear Tuesday's, but I heard most of Thursday's. So my first quick point is that the story of Pittsburgh and Allegheny County I think is very instructive on 316 10/31/05 - WHOLE - RES. 050844 some of the risks of reassessing and doing some of the ambitious things that are being attempted here. In fact, it's partially at least a story of politicians who lost their jobs over an ambitious reassessment, and so it's something of a trick or treat present from me to Council, and it's attached in these remarks. Secondly, this issue is complicated enough that people are often speaking past one another, and I believe I heard that several times on Thursday. And my instinct when people are speaking past each other is to try to simplify the conversation so that we really keep our eye on the ball, and I would respectfully suggest two kinds of conversational simplifications that I think might help us do that. First, not all the evils of the Philadelphia Tax Code are related to reassessment. And the ten-year tax abatements on conversions, new 317 10/31/05 - WHOLE - RES. 050844 construction and improvements came up several times on Thursday, and I suspect it will probably come up again today. And whereas I actually probably share some evaluation of some of the problems that arise because of those tax abatements with people who testified last week and are likely to testify later this morning, it's really a separate issue. So I would encourage us to talk about them separately. And if the sentiment is that tax abatements are more important than reassessments, then maybe we should have those hearings first, but we shouldn't have them at the same time, because that's going to continue to confuse the conversation, I think. So that's my first suggestion. My second one is that -- and this is one really more, I think, probably -- it's at least as much applicable to members as to citizens, that I wish we could agree from now on to never say again that assessments will be 318 10/31/05 - WHOLE - RES. 050844 increasing taxes. That's really not correct. In fact, it's something like saying that when an employer increases a salary, say, from $50,000 to $60,000 and your federal income tax goes from, say, $10,000 to $12,000, that employers have raised your taxes. It's not quite the point. And where citizens may well blame the IRS for raising their taxes, that's not quite right either. Congress and the President are responsible for the federal income tax. City Council and the Mayor are responsible for the property tax rate. And the rate and the taxes that properties yield is really importantly a government and Council function. It's not really the assessments that are raising the taxes. I suspect we may want to come back to that. My third kind of point that I'd like to just put a stake down into and return in questions, if there are any, is that it seems to me the real problem here 319 10/31/05 - WHOLE - RES. 050844 is fear of the unknown. It's that people will prefer a broken system to an unknown system, the devil they know rather than the devil they don't.
And that means we need to focus as much as we can in this forum and in this conversation on what the problem is. Now, everyone who has come before you so far, I believe just about, has done the same thing about rising assessments and lowering rates, and it's kind of familiar, but it's also kind of complicated. And I'm happy to do my own version of that dance, but I'm going to leave that for a question, if anyone would like to go over that ground, but I think it's important to get over the lights that the system is broken, has bad impacts on lots of Philadelphians. And although I just promised not to do this song and dance here, let me just quickly say that part of what the BRT is trying to do in its ambition is to solve three separable problems: 320 10/31/05 - WHOLE - RES. 050844 Reassessment, full valuation and equalization. And one consequence of trying to solve three problems at once is that each one affects different people and creates different kinds of winners and losers, and people don't always know which change, equalization or full valuation or reassessment, is hurting them. So it can be complicated, but before anyone misunderstands me to be saying that we should break them apart and deal with them separately, the solution to all three of those problems, as far as the BRT is concerned, is the same thing. It's market-rate valuation. There's not really an argument for doing the three separately, but part of the complication here is that we're trying to do three things at once, and to the extent that we could keep that in our head, it might help us understand people's complaints better. Now, fourthly is that if we can 321 10/31/05 - WHOLE - RES. 050844 get to an understanding of what the problem is and what's fair, then we can have, which I just skipped, then we can have a conversation about how to fix that problem. And, again, I'm happy to return to an evaluation of any of the things that have been put on the table and talk about them individually. It seems to me, though, the first question we want to keep in our heads is, are we going to have a real estate tax based on the idea that owners of more valuable property should pay more taxes. If we answer yes to that question, and sometimes part of the conversation sounds like we really don't want to have such a tax, and that's certainly one way to go, but if we say yes, we are going to have a tax on real estate where people pay more if they have more valuable property, then we're committing to figuring two things out: One, what's the value of that property, and, two, how are we going to bill people 322 10/31/05 - WHOLE - RES. 050844 for what is called unrealized gains. Now, this latter challenge is the world of buffering, as we've called it here the last week or so, and there's lots of options that have been put on the table for how to buffer. You can do things like a homestead exemption. Again, Pittsburgh may well be instructive on this. Pittsburgh has a homestead exemption. I don't really like homestead exemptions, though, because they help rich people as well as poor people, and I'd rather narrow our help on people who need it. Secondly, we can talk about different kinds of freezes on assessments. Again, I don't really prefer that, even if there are freezes on assessments and values that are for defined groups, like the poor or the elderly or long-time residents. I still would argue against such freezes or caps, because for some technical reasons that include -- I'm willing to subsidize 323 10/31/05 - WHOLE - RES. 050844 people, poor people, elderly, even long-time residents, but not necessarily their heirs. We can talk more about that, but that's what freezes can do. And then, third, we have a set of things that we call deferrals on large increases.
Those are things like the phased increases in assessed value for tax purposes only, not assessments but their tax bill, or through caps on single-year increases that eventually catch up, or on the deferral of the payment of your taxes owed until sale, leaving perhaps a lien against the property. These, I think, are technically the most preferred approach to these things. They are expensive, but I'm certainly willing to pay for fairness. So, again, thank you for the invitation, and I'm happy to take any questions.
Thank you very much, Mr. Hughes. 324 10/31/05 - WHOLE - RES. 050844 Are there any questions or comments from members of the Committee? The Chair recognizes Councilman DiCicco. COUNCILMAN DiCICCO: Thank you, Madam President. Good morning, Mr. Hughes. Your last comment about deferrals being expensive, could you explain that, what you mean by "expensive"?
Well, it varies depending on which kind of deferral that you're talking about. Let's take the one where the expense is probably easiest to calculate. If one were to, for example, defer until sale the taxes owed on a property -- say you have a $100,000 house, it gets reassessed, it's now worth $500,000. So there's a large increase in taxes due. We don't adjust rates. So we have a tax increase. But one form of a deferral would, say, beyond some certain percentage that Council decides is a reasonable increase in a given year, 325 10/31/05 - WHOLE - RES. 050844 we might defer the taxes owed in every year until that owner sells his or her house, which might be five or ten or 5 years. And it's only at that point -- 6 and, again, we can do this in several 7 ways, but as an example -- it's only at 8 that point that it's reassessed for tax 9 purposes up to that full $500,000 amount. 10 COUNCILMAN DiCICCO: So the 11 expense is to the owner, the person who 12 is selling? 13
You could set it 14 up so that the -- but the City is also 15 not getting revenue during that period 16 until sale. 17 COUNCILMAN DiCICCO: We're not 18 getting the full revenue. We're getting 19 a portion of it. 20
That's right. And that's the expense, that difference in that example. So the things that we're often talking about in terms of some of the buffering are going to have revenue 326 10/31/05 - WHOLE - RES. 050844 effects, and, in general, I tend to think the ones I've heard are worth it, because we're talking about revenue effects in the service of the elderly or low-income owners, but they're expensive, or they're not without expense. COUNCILMAN DiCICCO: Well, I appreciate what you're saying, and I think my concern may be shared by the rest of my colleagues, is that what these increases, whether it's full valuation, whether it's deferral or some combination of the techniques, depending on what at the end of the day that increase may represent to a large portion of homeowners, property owners in the City, the expense could be at our expense, the City's expense, because, A, people may not be able to afford those taxes. Sell it. Sure, we'll get the transfer tax, if we can sell it, because the buyer coming in may not want to be buying a property and paying all those taxes. I have friends who fled South 327 10/31/05 - WHOLE - RES. 050844 Philadelphia many years ago to go to South Jersey. The grass was greener. They're coming back. Many of them are empty-nesters coming back for a couple of reasons. It's too much to keep, and real estate taxes are well beyond their means. And some of them are buying new homes and taking advantage of the tax break. But the expense of marketing our City could be more dramatic for the City as a whole as opposed to just one or two individuals or several individuals who may get an increase. That's my concern. I don't know about the rest of Council, but that's the concern I have. A number of developers have called me recently, and they're either in the ground developing or they're planning to do development. Keep the ten-year abatement off to the side, and I appreciate that, and my colleague, Councilman Clarke, and I had a conversation about that just this morning. That's a conversation for 328 10/31/05 - WHOLE - RES. 050844 another day. But developers are having a concern that these real estate taxes even though there are going to be abatements on new stuff, people are still looking ten years down the road and saying, Well, I don't mind paying 8,000 ten years down the road, but 20,000 or more -- because over the course of ten years, that's going to escalate even more. Philadelphia is a great place, but it's not that great, and I'm going to look to go somewhere else. So I'm not disputing what you're saying. That's the concern, I think, that most people have in here, is that it could be a disincentive. The boom is on. No one has a crystal ball. It could go on for another five years, it could go on for another 15 years. My guess is it's at least ten based on the people I've talked to, but who knows. But this could take the wind out of our sails, as they say, if we're not careful 329 10/31/05 - WHOLE - RES. 050844 all the way around, all the way around. And, yes, it should be more transparent. Yes, it should be more equal, but we need to find that formula that doesn't really kick somebody in the teeth saying, welcome, thanks for sticking around. And that was the argument in '03, and the Board of Revision, that's not their fault. They did assessments as they're mandated to do. 35,000 people in my district, homeowners, property owners, got notices. Granted, a lot of them were minuscule, but there were a significant number that had these huge, in one fell swoop, as I referred to, increases, and to a person -- I don't know if you were listening Thursday. To a person, once they went through the appeal process and were given their due process and you came away rather satisfied with that process, they all said, We know taxes go up like everything else goes up, but these dramatic increases are -- we just either 330 10/31/05 - WHOLE - RES. 050844 can't afford it or we're not going to afford them, we're going to move.
And that, again, is the gut-wrenching thing for me. We're on such a roll right now in this City and I don't see it stopping, but something like this could put the brakes on us, in my opinion. So I'm sure we'll all be talking to you and other folks over the next few months. I have some ideas, nothing ready in draft form, and before I do it and anyone in the Council does it, we're go to share it among ourselves obviously before we do any bills in legislation and talk to the Administration about it. But we need to find out how to make this more fair and equitable, but we also need to figure out how to make it as painless as possible for the overwhelming majority. There will only be a few people, I'm sure, we'll never make happy, but we got to figure that out. It's too 331 10/31/05 - WHOLE - RES. 050844 important to the City's future, in my opinion, not to do that. Thank you, Madam President. Thank you, Mr. Hughes.
Mr. Hughes, listening to Councilman DiCicco, do you have any comments?
Well, I certainly agree with the concern that we could have an effect on the housing market. I think one of the things we think we know is that taxes get capitalized into housing prices, and when taxes go up, prices can go down. There's one little point, though, that I'd like to pick up on, which is that it's important -- in some ways, the most important work of Council on this issue is to ensure that not the technical aspects of evaluations but, instead, that there is a process that people believe in that gives them redress when they think they've been treated unfairly. I mean, designing a process 332 10/31/05 - WHOLE - RES. 050844 that includes hearings, but, in general, absorbs people's discontent when they think they've been wronged is the great role. If someone receives a market valuation of their home for a level for which they could not sell it in the market, which is one of the kind of concerns you raised, that is absolutely -- that's the best possible basis for an appeal. I'm not saying that people need to sell their houses to pay their taxes, but if anybody gets a tax bill based on a valuation that represents a price that they could never sell their house for, then they've been wronged, and that needs to be changed.
Thank you very much. The Chair recognizes Councilman Clarke.
Thank you, Madam President. 333 10/31/05 - WHOLE - RES. 050844 Good morning.
In your testimony, you indicated that you felt the ten-year tax abatement issue should be pushed off into another date and time. Is that because you didn't want to confuse this particular discussion or because you didn't think it was relevant to our tax system or relevant to our budget? Can you kind of clarify that a little bit?
Completely for the first reason about the confusion, especially on Thursday. I probably wouldn't have made this point if I hadn't dropped in on Thursday and listened to some of the other testimony. And a lot of the reaction, kind of the outrage and the concern that I heard, people were using arguments about the ten-year tax abatement. My neighbor moves in, new house, not paying any taxes, not fair, I 334 10/31/05 - WHOLE - RES. 050844 do. A lot of the language was about the ten-year tax abatement, not about the reassessment process. And so I think they're separate in terms of processes. They're both important and they both affect some of the same things, like how much revenue Council receives and so on, but they're separable in terms of how you think about them and how you fix them. So that is only that first point.
So you're talking about confusion among the general public or confusion among Councilmembers?
So you believe that Councilmembers can have deliberation and discussion about the ten-year tax abatement and talk about the reassessment issue at the same time?
Without getting confused. 335 10/31/05 - WHOLE - RES. 050844
So that's what I'm trying to understand. Are you suggesting that we as a body don't talk about that now?
Not in terms of figuring out what to do about the reassessment, but I don't think a discussion about ten-year tax abatements is going to add to decisions that face you all about the reassessment process.
Well, don't you think it's important, particularly given the fact that there's some discussion about the ultimate implementation of millage by Council requires that we be revenue-neutral, given the fact that in some people's estimation the ten-year tax abatement has either contributed to or taken away from our ability to get certain revenues in the City, that we have that discussion when we talk about --
You can also have 336 10/31/05 - WHOLE - RES. 050844 a discussion about raising the wage tax, too.
It's not separate. If you want to talk about a situation where we're being asked as a Council to implement a millage bill that will be revenue-neutral to the City, I don't understand how you can't talk about a program that, as I said earlier, could impact it one way or another. I think that discussion should be had at the same time.
You can have a long complicated discussion about lots of things that affect millage and valuations. School quality affects property valuation.
We're talking about real estate. We're talking about revenue to the City. 337 10/31/05 - WHOLE - RES. 050844
If we were not asked to do a revenue-neutral millage bill, then maybe you're right, but we're being asked to talk about revenue-neutral in the first year, because I believe all differently it will change, in the first year. Then how can you say we cannot talk about a tax that one way or another impacts our revenue in a considerable way?
Excuse me, Councilman. I'm not saying you can't talk about it. You're welcome to talk about it. I'm saying that there are many things that affect the value of property in Philadelphia and the millage rates. And the School District is not a far off example, because millage rate is tied to yours under Act 46. So there's lots of things --
We don't believe we're going to be able to impact the School District component. 338 10/31/05 - WHOLE - RES. 050844
I'm saying there's lots of things you could talk about in addition to reassessment. There's probably an infinite number of things you can add to the conversation. I'm simply counseling you, for what it's worth, to stay focused just on the reassessment process, because I think it's probably complicated enough.
I agree in some respects, but I do believe we should have that discussion about the abatement.
Oh, I do, too. Excuse me. I think you should have that conversation, too, just at different hearings.
Now. I think that should be now. Okay. Thank you, sir.
Are there any other questions or comments from members of the Committee? (No response.) 339 10/31/05 - WHOLE - RES. 050844
Seeing none, Mr. Hughes, thank you again for coming in. We appreciate your testimony. MR. McPHERSON: The next witness is Kevin Gillen.
Good morning, Mr. Gillen. Please identify yourself for the record and proceed with your testimony.
Good morning, Madam President, members of Council. My name is Kevin Gillen. I'm a Ph.D. Research Fellow at the University of Pennsylvania's Institute for Urban Research and I'm also a former consultant to the Tax Reform Commission on the issue of the real estate tax in Philadelphia. But in light of how good and how thorough Professor Hughes's testimony was, I may as well just say ditto and move to questions. But when I was a consultant to the Commission, we found that the 340 10/31/05 - WHOLE - RES. 050844 thorough and diligent work of the Commission discovered that the system of real property taxation in Philadelphia is one of the most inaccurate, inequitable and confusing taxes in Philadelphia's Tax Code. We found that property taxes, as they are currently administered, exhibit high degrees of error, of regressivity and of bewilderment. By "error," I mean that the estimated values of City properties frequently exhibit substantial deviations from their true market values. By "regressivity," I mean that lower-income households occupying relatively lower-priced properties suffer significantly higher de facto tax rates than higher-income households occupying relatively higher-priced properties. And by "bewilderment," I mean that the unnecessarily complicated way in which the tax is administered inhibits households from understanding how their tax bill is determined, who is 341 10/31/05 - WHOLE - RES. 050844 accountable for any errors or inequities that result, and how to challenge it. While the recommendations of the Commission were designed to improve this system, recent developments of the past two years since our report was released have complicated attempts at implementing these reforms. These recent developments include a robust and active housing market, which has exacerbated the disparity between market values and assessed values; disproportionate house price appreciation rates across Philadelphia neighborhoods, which has exacerbated the unfairness and regressivity of the property tax across these neighborhoods; and the proliferation of so-called creatively financed mortgages, such as zero down payment, interest only and adjustable rate mortgages, which has exacerbated the risk that a large and sudden increase in property tax bills would adversely affect 342 10/31/05 - WHOLE - RES. 050844 the housing market. In light of an outlook that points to a cooler housing market and higher interest rates, a series of countermeasures to mitigate against any adverse outcomes would seem prudent. Primary among these countermeasures would be a policy agenda that ensures an incremental phase-in of increased tax bills. Other options include deferring a portion of increased taxes until sale of the property; creating homestead exemptions for a fixed amount of a property's value; and taking fuller advantage of any Commonwealth property tax relief initiatives; and, finally, undertaking a public education campaign to improve people's awareness of the existence of reverse mortgages and what qualified good-faith lenders offer them. However, whatever set of solutions is eventually chosen, I believe it is imperative that the worst option is to do nothing and remain with the current 343 10/31/05 - WHOLE - RES. 050844 system. This will ensure a system that not only perpetuates the current inaccuracy, unfairness and confusion, but will continue to act as yet another deterrent for current residents to remain and future residents to relocate here. Towards this end, I would be happy to continue to offer my assistance to BRT and other City agencies in improving assessment accuracy and equity, as well as to examine the various costs and benefits of the various policy options under consideration to lessen the shock of transitioning to this new system of taxation. That said, I'd be happy to take any questions.
Thank you very much. The Chair recognizes Councilman DiCicco. COUNCILMAN DiCICCO: Thank you. Thank you again. Good morning. Reverse 344 10/31/05 - WHOLE - RES. 050844 mortgages, I'm familiar with how they work for the homeowner. Could you explain how do you think it would be beneficial to us with this matter in terms of the tax increase?
Well, insofar as your tax bill becomes prohibitively high because of the increased value of your property due to revitalization, gentrification of your neighborhood and you want to stay in that house but you can't afford to service the bill, you can essentially sell some of the equity in your house to a lender, which will give you the money to pay your tax bills. COUNCILMAN DiCICCO: And not pay that mortgage off until the time you either sell or --
The typical occupant I'm thinking of is someone who has paid off their mortgage and perhaps they're elderly and they're on a fixed income and they don't have a steady income that would be sufficient to 345 10/31/05 - WHOLE - RES. 050844 service the tax bill that they have. COUNCILMAN DiCICCO: Well, I haven't paid off my mortgage and I can possibly face a significant increase. So for a person of my position, I'm employed and I make a fairly decent salary -- although I think I'm underpaid, but that's beside the point -- I would then go out and do a reverse mortgage. It just sounds too simple right now, but maybe that's what we need. But they're not responsible for the increase in any -- they don't have to pay the mortgage payments because it gets deferred, right, under reverse mortgage? There's no mortgage payment until you either sell the home -- let's assume there's no mortgage, own a home, I'm on fixed income, whatever, and the tax increase is going to be more than I could afford on my annual income, and I go out and I take a home equity loan, which really is what it is on my property --
Well, a home 346 10/31/05 - WHOLE - RES. 050844 equity loan is borrowing against the value of your property. A reverse mortgage you're actually selling a chunk of your home. COUNCILMAN DiCICCO: Well, you're selling that portion. How do you know how much to sell it for?
Well -- COUNCILMAN DiCICCO: Because I may live another ten years, years, 12 from an elderly person, as an example, on 13 fixed income. 14
That's an 15 excellent question, and I think a public education campaign that actually educates people on these issues, perhaps creating a valuation calculator on the BRT's website or on other City agency websites, you understand how much value your house is worth. You don't want to certainly take too much out of it and place yourself at risk in the event of a downturn. There are many tools in the 347 10/31/05 - WHOLE - RES. 050844 toolbox available to make this transition hopefully as painless as possible. A reverse mortgage is and a public education campaign about them is just one of them. COUNCILMAN DiCICCO: Interesting scenario. I just think politically it's going to be a very tough pill to swallow to sell someone who has worked their entire life -- I'm not criticizing your suggestion, because I think that's good that we get all these, but I just can't imagine someone saying, I worked my entire lifetime to buy this little brick rowhouse in Port Richmond and now you're telling me that I need to go and do a reverse mortgage just to pay my taxes as opposed to maybe borrowing that money or something and a reverse mortgage, as an example, and giving it to my sons or my children to go have a better life-style or help them pay their children's, my grandchildren's, tuition. I just don't know how you educate people 348 10/31/05 - WHOLE - RES. 050844 that that's in their best interest.
Well, there's a lot of -- COUNCILMAN DiCICCO: Again, I'm not criticizing you.
Again, I'm not saying -- I would never presume to tell anyone to go get a reverse mortgage. COUNCILMAN DiCICCO: Well, that's the only alternative. Either that or they're going to have to sell their house if they can't afford to pay that huge increase in real estate tax.
Well, like I said, there's many tools in the toolbox. Professor Hughes mentioned several of them and so has Brett Mandel, as well as other people. But one of the reasons there's so much skepticism concerning reverse mortgages is that -- I mentioned perhaps the City department with a quality, good-faith, established lender, because there are lenders out there who have 349 10/31/05 - WHOLE - RES. 050844 dubious motives. They often go by the name of predatory lenders. More formally they're known as subprime lenders. They often target the elderly and the poor who don't have the educational background to really understand the documents that they're signing, and they can end up in a situation where this firm ends up foreclosing on their home. That's why I think a thorough public education campaign about this and identifying those lenders who are reputable and would do this in good faith is a critical component of this. COUNCILMAN DiCICCO: Okay. Thank you. Thank you, Madam President.
Thank you very much. Are there any other questions or comments of this witness? (No response.)
Thank you very much. 350 10/31/05 - WHOLE - RES. 050844 MR. McPHERSON: The next witness is Josh Vincent.
Good morning. Kindly identify yourself for the record and proceed with your testimony.
Good morning and good morning to Council. My name is Joshua Vincent. I'm the Director for the Center for the Study of Economics based here in Philadelphia. I'm also a resident of Philadelphia. I am here today to speak to Resolution 050844, and I am speaking in favor of the practice of 100 percent valuation, and I applaud the BRT for its sensible decision. Also known as full valuation, this reform of the assessment process provides clarity, fairness and openness to the property tax valuation system. Keeping in mind that this will be enacted with a full reassessment of Philadelphia County, full valuation will finally let 351 10/31/05 - WHOLE - RES. 050844 citizens see, without smoke and mirrors, what the government thinks their properties are actually worth. They will finally be able to rationally compare their property values to their neighbors' values. Citizens will finally be able to determine their valuations are fair and based in reality. The current fractional system does not serve citizens or their government. Indeed, there is an old axion in the assessment world: Fractional assessment is the graveyard where assessors bury their mistakes. This conscious obfuscation of the property assessment system is being abandoned all over the United States. Mr. Glancey and his staff should be supported in their effort to bring Philadelphia County into modern, accepted practice. Full valuation will mean a house that's, quote/unquote, worth $24,000 under the current fractional 352 10/31/05 - WHOLE - RES. 050844 system will be at its 100 percent value of 75,000. If the neighboring houses sell for 100,000, then the homeowner can immediately spot what the truth is about how fair his valuation is. Now, until 2000, our Center was based in the State of Maryland. In 1999, we testified in favor of a state law that eliminated the fractional valuation of all properties from 40 percent to 100 percent. This shift for the entire State of Maryland was made effective one year from date of enactment. During that period, every jurisdiction in the state figured out how to reduce the tax rate. 38 mills. There were nearly no sustainable serious objections. Quite simply, full valuation means that to avoid a windfall for government, government must reduce its tax rates. It's not the correct function of assessment offices to provide more or 353 10/31/05 - WHOLE - RES. 050844 less revenue to government coffers. It is rightly and legally the function of the executive and legislative sectors. I have worked in towns ranging in size from large to small, from Dubois to Allentown to Pittsburgh, and they annually lower and raise property tax rates routinely. Yet, there is understandable concern about tax bills increasing because values, at whatever fraction, will change under a reassessment, which is also on the horizon. Again, the BRT is to be applauded and supported for trying to get ahead of what is an inevitability. Given the current system, it is certainly just a matter of time before the courts, either from the bench or a class-action lawsuit, order an across-the-board reassessment. As the attached table shows, the last time that we at the Center looked at the numbers, residential 354 10/31/05 - WHOLE - RES. 050844 properties in the poorest areas of Philadelphia were valued at far above the actual sales prices. Conversely, in-demand areas were valued far below the sales prices of residential properties. The BRT and the City have been aware of this, and their proffered solution should be accepted. There are many ways for full value reassessment to not be a burden for those that cannot or should not shoulder that burden. Some may require state legislative action, many do not. Here are just a few of the tools. As many might guess, from my previous appearances here, I believe Philadelphia would be well served by enacting land-value taxation to mitigate or reduce property tax bills, especially for homeowners and productive businesses.
By de-emphasizing the building component of the tax system, questions of building value that take up the lion's share of assessment questions and appeals are 355 10/31/05 - WHOLE - RES. 050844 diminished. It is no coincidence that land-value taxation would reduce tax bills the most in working and poor areas, the same areas now so egregiously overassessed. With proper valuation of vacant land, parking lots and development-in-waiting industrial land, effective tax rates may be lowered. Another strategy that works, and as has lessened hostility of taxpayers at least in the states and jurisdictions that I've worked, are phase-ins of value. Every parcel in the State of Maryland is assessed every three years. The new value is then phased in over a three-year period. This modifies possible spikes in value. Phase-ins have been employed most recently in most Connecticut cities in the face of court-ordered annual valuations in Montana, cities in the Canadian Province of Ontario, the District of Columbia and many more. Many more tools are available, 356 10/31/05 - WHOLE - RES. 050844 as previous speakers have said, to complement the phase-in. And I've attached on my testimony a lot of the information the Maryland Department of Assessment provides to taxpayers about the many programs available. Maryland employs a circuit-breaker, known as the Homeowners' Property Tax Credit Program. Credits are based on the income of a homeowner and the home's value. Another Maryland circuit-breaker permits a property tax credit to homeowners whose value rises by ten percent or more in a year. Many states, including Idaho, just as an example, simply exempt a dollar amount of a homestead's value. Philadelphia should adopt 100 percent valuation as a best practice, with Council and the Mayor reducing the tax rate correspondingly. Philadelphia should reassess to attain values that are fair, consistent 357 10/31/05 - WHOLE - RES. 050844 and uniform. Philadelphia should employ methods of assessment mitigation that affect the smallest number of properties. And this would be my emphasis that might be a little different: Philadelphia should adopt a system of assessment adjustments which keep the process going rather than grind it to a halt. Freezes and permanent caps maintain our current system of errors and underassessment for those that can pay and overassessment for those that can't pay. Allegheny County's latest assessment mishaps are the result of freezes and caps turning taxpayers into political pawns for inter-party fights. The freezes of Prop 13 and its spawn have led to reduced government and school spending, less new growth and heavier reliance on the kind of taxation of labor and capital that have caused Philadelphia to struggle. Finally, again, I would urge 358 10/31/05 - WHOLE - RES. 050844 that Philadelphia should use land-value taxation to remove the most contentious aspect of a property's assessment, buildings, from the mix. Land taxation is a universal tax abatement that removes much of what makes property taxation a headache for both citizen and government. Thank you very much.
Thank you. Are there any questions or comments from members of the Committee for this witness? (No response.)
Thank you very much, sir. MR. McPHERSON: Our next witness is Pedro Rodriguez.
Is Mr. Rodriguez here? MR. McPHERSON: I don't see him. Lucartha Kohler? (No response.) 359 10/31/05 - WHOLE - RES. 050844 MR. McPHERSON: Ms. Harriston? (No response.) MR. McPHERSON: Tiffany Green? (No response.) MR. McPHERSON: Yingzhand Lin? (No response.) MR. McPHERSON: Louise Simpson? SPEAKER 1: She is here.
Who is here? SPEAKER 1: Ms. Lin. SPEAKER 2: And also Dr. Mahan is here, but he's in the restroom.
Madam President, members of City Council, thank you very much for allowing me to come today. My name is Louise Simpson. The only information that I can give you is personal, and perhaps that may have some impact on the way the members of this Committee react. I am a senior citizen and I'm living on a fixed income. I've been living in my house for 35 years. It's a 360 10/31/05 - WHOLE - RES. 050844 16-foot-by-30 rowhouse. When I bought it, I paid 13,500 for it. Last year, one of the neighbors across the street sold their house, same size, with no backyard, for $575,000. I am in one of those streets that has become, quote/unquote, hot, and I am, to be perfectly frank with you, scared. I pay in excess of $4,000 a year in taxes now. I have no idea what my taxes will be. I don't want to leave a house where I raised and buried a son and husband and have a great deal invested in it. One of the most stressful things that can happen to an individual in their life is to have to leave their home, and I know an awful lot of senior citizens that are very, very concerned about this particular part of what this Committee is reviewing. I attend senior meetings, and there are people there who say, If my taxes double, I'm going to have to leave 361 10/31/05 - WHOLE - RES. 050844 my home. And I don't think that's fair. Once upon a time, there was talk of doing something for senior citizens who had lived in houses for a certain amount of years, et cetera, et cetera. In my situation, I'm between a rock and a hard place. Between my Social Security and my City pension, I make too much money to be eligible for anything and too little money to really do anything. And what I have done so that I can pay my taxes is to make sure that a certain amount of money is deducted automatically from my checking account so when that bill comes, I can pay it. I drive a 15-year-old car and don't have any intention whatsoever of buying a new one. I can't do anything to my house other than simple maintenance. I don't go on fancy cruises or vacations, and periodically I try to make a little bit of money on the side, but usually end up not having to pay taxes because my income is so little. 362 10/31/05 - WHOLE - RES. 050844 I do think that this ten-year tax abatement is something that should be considered by this Committee. In the neighborhood where I live, there are properties that are going up left and right where people are paying in excess of $500,000 and they're paying no taxes for ten years, and people like me are the ones who are going to have to pick up the slack. And I'm scared, and I'm scared as hell, because I just don't know what's going to happen. I don't know what the millage is going to be. I don't know what's going to happen to elderly and long-term residents who live on my street. There's one lady that's 85 years old. She was living on the street before I was. And she's so proud, she won't even put in for the real estate tax rebate from the state. She's just too proud. And I know that she doesn't want to leave her home. We have lots of people who are 363 10/31/05 - WHOLE - RES. 050844 moving into the street who have two incomes, are doing lots and lots to fix up their properties, and the properties are selling for enormous amounts of money. Now, if I had to live in my house today, I couldn't afford it. I bought that house when Ed Bacon was the Planner and a friend and saw to it that people could buy into houses. I lived in Society Hill at the time, and houses were being sold for $50, but you had to restore the exterior to historic specifications and the interior to minimum codes. Well, for a lady with a new baby, that was far too expensive, plus there were no stores. So I decided to move to the west side of Broad Street, where at least I could walk to things, and I bought a house that was considered, quote/unquote, a slum, because it was below Pine Street, and Center City ended at Pine Street. But I didn't care. I loved the 364 10/31/05 - WHOLE - RES.
050844 neighborhood, I loved my neighbors, and I loved the fact that I was able to walk to everything and could do things. I was alone for years and 6 paid off the mortgage. To take on 7 another mortgage today would be a 8 tremendous hardship for me. And I am 9 asking this Committee to look at 10 individuals. I am not a person who has 11 come from a large office in the City or 12 has a big job with a research 13 organization. I'm just an individual, 14 and that's the reason why I decided to 15 come today. 16 I am also, as I said, a senior 17 citizen. I have a permanent disability 18 which causes me to have certain problems, 19 and it does not allow me a lot of money. 20 Now, if anybody has any 21 questions about anything that I go 22 through or some of my neighbors do, I would appreciate answering anything that I can.
Thank 365 10/31/05 - WHOLE - RES. 050844 you very much, Louise. The Chair recognizes Councilman DiCicco. COUNCILMAN DiCICCO: Thank you, Madam President. Good morning, Ms. Simpson. I'm going to try not to get into the tax abatement issue entirely, but I do need to ask you a question. How many years have you been living in your home?
35. COUNCILMAN DiCICCO: When did you notice the value of your home or the sales of the value of the homes around you going up? How many years ago?
It was probably -- they really started to go up, I guess, about five years ago. COUNCILMAN DiCICCO: Where these homes are being built, what was there before these homes were being built? Were these vacant lots or empty buildings?
No, no. My house 366 10/31/05 - WHOLE - RES. 050844 was assessed -- COUNCILMAN DiCICCO: No, not yours. The new homes that are going up. You said there's construction going on all around you. What was there prior to the construction?
One of them was a gas station that's got a high-rise going onto it, but all over the place there are buildings on Spruce Street that were originally apartments and now they're turning them into condos and doing total rehabs and getting the ten-year tax abatement. COUNCILMAN DiCICCO: The people who are moving into these new condos and/or single homes, are they newcomers to Philadelphia, for the most part? Do you have any knowledge of who they are?
Some of them that I know are people who have lived in the City and are just taking advantage of the ten-year tax abatement. COUNCILMAN DiCICCO: The reason 367 10/31/05 - WHOLE - RES. 050844 I ask, and, again, I'm going to try not to get too deep into the ten-year abatement, is, you had a gas station which is now a high-rise?
Yes. It's turning into a high-rise. COUNCILMAN DiCICCO: Going to be a high-rise. Are you aware of the fact that now even though the residents -- I'm assuming it's a condo.
Yes, it will be a condo. COUNCILMAN DiCICCO: Even the residents who are moving in will not be paying the full real estate tax of the value of their condo, they were going to be paying something? It's not totally for free. I don't know what the number is. I'm moving into a condo, I think, in March -- they keep pushing the date back -- that I would be taking advantage of a ten-year abatement. 368 10/31/05 - WHOLE - RES. 050844 That's not my reason for moving. My reason is, my mom is 86 and I live in a townhouse and it's just getting to be too much, two blocks from where I live now. But I will be paying somewhere in the neighborhood of $1,000, $1,200 a year in real estate taxes based on the land value, paying 400-plus thousand for the house. But many of the people I know who are moving in there are either Philadelphians who are relocating, as you're suggesting, and people from other areas who are not Philadelphians. 68 percent of the people statistically, based on a recent report, who have moved into the City were people who moved into the City from the suburbs. So I just want for your knowledge and whoever is listening, because I have this speech -- and I'll give you the short version when I go into the communities and people attack the ten-year abatement -- you have new 369 10/31/05 - WHOLE - RES. 050844 Philadelphia residents, many of whom were never employed in Philadelphia that are now paying a Philadelphia wage tax. We are, in many cases, taking either abandoned or vacant lots and putting those lots and abandoned buildings to use. We are repopulating neighborhoods, which has a ripple effect in the neighborhood, because the demand for services goes up, restaurants, delis, the dry cleaner, the shoe repair person, whatever, because there's more business because there's more people. We get taxes, the City, out of that. We get the sales taxes. We employ more people if the demand goes up, which translates into more wage taxes, because there's more services that are required. We also get the transfer tax, the full value of the transfer tax, based on whatever the value of that condo or home is. $500,000 home, we get the full value of a transfer tax, which we never would have gotten had not the property or 370 10/31/05 - WHOLE - RES. 050844 the buildings been erected in the first place. If everything stayed the way it was five years ago, which was just about the time that the abatement began, I would venture to say that the value of your home -- and it may not make a difference to you, because the value of your home is only worth anything if you sell it -- would not be anywhere near the value that it is today, which translates into if you decide to sell, and I'm not suggesting you want to, but maybe you would decide to sell, you're going to make a hefty profit on your home because of all the development that occurred in and around your neighborhood as a result, in my opinion, of the tax abatement. And there are other things, the mortgage rates are down, but it's one of the major factors, in my opinion, that cause this explosion, if you will, in the interest of moving and living in the City of Philadelphia. 371 10/31/05 - WHOLE - RES. 050844 And you and I know each other for a long time, and I'm not arguing with you, as you know that. It's got to be clear. And that debate will come up, because I understand Councilman Clarke is going to do a resolution on the tax abatement on Thursday. Originally he was going to do a bill and I asked him to do a resolution to get into this, and I'll probably repeat this same conversation many, many times over again. But we've benefited. The flipside of that is that because of the development, your property values went up and you may have to pay more taxes. So it's one of those no-win situations. You don't develop, you have empty lots, vacant buildings, the value of your home is depressed. No one wants to live in a neighborhood where property values are low.
Everyone wants to live in a neighborhood where property values are high, but no one wants to pay the tax to get there. 372 10/31/05 - WHOLE - RES. 050844 And I'm not an advocate for higher taxes. I think you know that. But when we talk about this abatement, and I understand there are people who think it's a bad idea, where the late Councilman Cohen used to turn his chair around and say to me, You know, you're still a republican, years ago I was a 10 republican, you only care about the rich, 11 this is welfare for the rich. 12 I don't see it that way. I see 13 it as an economic tool to help develop 14 the City, and I think that the benefits, 15 in my opinion, and, again, this debate 16 will go on, certainly outweigh the 17 negatives. 18 But I want you as a homeowner 19 and a life-long resident, as someone who 20 loves this City -- and I know the things that you do. Your side job was tours on 9th Street or the Italian Market. I'll give you a plug today -- it is important that we were able to do this bill, and beyond my expectations, well beyond my 373 10/31/05 - WHOLE - RES. 050844 expectations, that the development that has occurred. But, remember, everybody who works on building these units, the construction workers, a majority of them don't live in the City, but they do pay wage tax. So those are taxes we never would have received were it not for the development boom that is occurring in the City today, and I believe that the abatement had much to do with that.
One of the statistics that I would like to know, which I'm certainly sure nobody has done anything on, is, how many of these people who are moving into the City in these properties where there are ten-year tax abatements are retirees and they are not being wage-taxed? COUNCILMAN DiCICCO: I don't have the number off the top of my head. 374 10/31/05 - WHOLE - RES. 050844
Because I know a lot of them who are. COUNCILMAN DiCICCO: But the study that was done about two months ago -- I'm waiting for a copy, it should be delivered today -- suggests that about -- there was a percentage of people, and you'll be surprised the number of people who are between the ages of and 35. Very significant number in 12 that age category, in addition to the 13 retirees or empty-nesters. A lot of 14 these folks aren't retired yet. They 15 lived in the burbs, they had the big 16 house, the pool, the garage and all that 17 stuff to take care of. They want to live 18 in a convenient environment. They want 19 to enjoy the things that you and I and 20 most everyone in this room has enjoyed 21 all their life, be able to walk to go buy 22 a quart of milk and not drive 15 miles to 23 go get a quart of milk. I mean, that's 24 what they enjoy. And by doing that and 25 enjoying that, it helps support all the 375 10/31/05 - WHOLE - RES. 050844 businesses, which, in turn, employ people in our neighborhoods. We got it. Thank you. How quick was that. 69.3 percent -- and correct me, Brian, if I'm reading this wrong -- of the people who have moved in in the last five years work full time; 6.1 percent work part time; 8.3 percent are retired, and then it goes on unemployed, which is low, and students, et cetera. Married with children, 33.7; single, committed relationship, whatever that means, 14 percent. And there's many other statistics as well in there, but those are the -- and when they were asked, Why did you move to Philadelphia, 43 percent said it was a better neighborhood to live in than wherever they lived before, and the next closest was no answer to the question, was 25, and the rest is broken down into single digits. I'm not taking full credit for the ten-year abatement. I was the author 376 10/31/05 - WHOLE - RES. 050844 of the bill, and I'm not saying it was the magic wand, but I think it was one of many things that occurred that helped this development and every developer that I've talked to, and I got a lot of development going on in my district --
Yes, there is. There is also something else that I'd like to point out. COUNCILMAN DiCICCO: I have said that -- let me finish, if I may. I have said that without the abatement, they wouldn't be doing any development. Now, I don't know if they wouldn't be doing any. I think they would be doing a lot less.
I think you're right. I think you're right about that, but I think one of the things you ought to recall is when the City of Philadelphia was giving a three-year tax abatement to businesses, I can remember some businesses in the Northeast that once the three-year tax abatement was up, 377 10/31/05 - WHOLE - RES. 050844 they just moved across the river to Jersey where they were getting another three-year tax abatement. COUNCILMAN DiCICCO: Well, that three-year tax abatement also applied to residential. I bought a home. I built a home in -- started in '97, I think, or 9 '96. By the time I finished, it was like 10 2000 or whatever, but I finished it 11 before the ten-year abatement. I was 12 entitled to three years. And that's a 13 good point, because when I used to ask 14 developers, Why aren't you doing all this 15 development, the City is starting to come 16 around, they talked about the margin of 17 profit based on the development cost, we 18 need some incentive. 19 They didn't ask me to do ten years. I looked at another city that did it and I realized it was a boom, and I said, Let's try it here. Council supported it. Mayor Street and Rendell both supported the bill. We always had a three-year 378 10/31/05 - WHOLE - RES. 050844 before the ten-year, and there was little, if any, new housing construction going on, market-rate housing or higher-value housing going on. We always had the fully subsidized housing, but we didn't have market-rate housing or any housing in that category prior to the ten-year abatement. Very little, if any. Very little.
Thank you for your response. COUNCILMAN DiCICCO: Thank you. Thank you for coming in. So much so for my not getting into the ten-year tax abatement.
I'm just an individual that's here talking about my individual situation. COUNCILMAN DiCICCO: And I understand that, but your comments are very much repeated to me throughout my district when I go to community groups and people say, I'm paying so much and the guy down the street just moved in and 379 10/31/05 - WHOLE - RES. 050844 he's only paying a third of what I'm paying, and that's not fair.
I don't think it's a case of what's fair. I like to use the word "reasonable" as a barometer in my life. If something is reasonable, I'll try to go along with it. COUNCILMAN DiCICCO: And I agree, and my trusty Legislative Assistant reminded me that we're all committed, I think this Council as a body and the Administration, are committed to figure out what we can do to protect long-time residents from any significant increases that will cause you to either have to sell or go in debt to pay your taxes. I mean, it could be that bad. We understand that, but we're committed to that. Thank you.
Thank you. COUNCILMAN DiCICCO: Thank you, Madam President. Are there any other questions or comments of this witness? 380 10/31/05 - WHOLE - RES. 050844 (No response.)
Seeing none, thank you very much for coming in to testify.
I'm proud to be here as a guest speaker today. After I heard a few of the guest speakers --
Excuse me. Can you simply pull the microphone closer to you, please.
As I've heard a few of the speakers already spoke, I have come up to some summaries. I don't know if I'm the youngest in this room, but I 381 10/31/05 - WHOLE - RES. 050844 do have few comments to make. I believe the ultimate goal for this tax reduction is to provide more income to the City of Philadelphia. However, there are a lot of reasons that to be add into this tax debate. I have a few comments to make for the age groups of people. All people who got out of school shortly who pursued to purchase a house around the age of 12 or 35, how are they going to support 13 themselves in buying a new home after a 14 long time saving to purchase a new house? 15 All the sudden, the tax has been 16 increased to a high amount, which may 17 also be a reason for them to stop and 18 think about do they want to buy a house 19 in Philadelphia or do they want to buy a 20 house elsewhere. For the age of 35 to 50, these people are more established families. As we know, that there are a lot of people living longer, they have parents to take care of, as Social Security is not for 382 10/31/05 - WHOLE - RES. 050844 everyone. So they have to take care of their parents, and yet they also have children to take care also. So the established family already has a lot of financial responsibilities, yet another one is coming. And for the people who are from 50 or older, it's even a harder problem, as one of the speaker has already mentioned. First of all, health is a problem. Their health is not as good as they were before, so are they able to work and to have this part of money to take out for the City? And also the productability. Are they able to make this money to afford for the house they already live in? Do they have to get a remortgage or should they have a reverse mortgage? Is that the ultimate goal for every senior citizen who already live in a house, but because of the increase of tax, that they have to get a reverse mortgage? And, also, the assumption 383 10/31/05 - WHOLE - RES. 050844 should not be made according to other properties or based on other properties that were sold around your neighborhood, because that may not be reasonable for every house, because every house is unique, they are different. And, also, considering fair, I have heard somebody said that is it fair for the richer people to pay for a higher tax and for the medium-high people to pay a lower tax, but what exactly is fair? I believe that there is a speaker who already proposed what exactly is fair. Aren't we supposed to supposedly find out what exactly the word "fair" is before we actually pursue and put a formula in there? And for newcomers, I myself, I just come out from school and I'm thinking to purchase a property better for my parents to live in. My father is kidney failure, so he have to be on dialysis. And now that the house that we live in ourselves is presently at a 384 10/31/05 - WHOLE - RES. 050844 condition where we can't really sell for a high price, but yet, we're trying to buy a house that's more accommodating for disabled people. And if the tax is going to be even higher, even we sell this house that we live in right now or we still able to afford for another house. So I just have these few questions for age people. Like single family we already have mentioned and established generation, that's way too much responsibility. Aren't people in debt really badly already? So that's my comments.
Thank you. Are there any questions or comments from members of the Committee of this witness? (No response.)
Thank you very much for coming in to testify. Our next witness? MR. McPHERSON: Is Ellen 385 10/31/05 - WHOLE - RES. 050844 Somekawa here?
Councilwoman Miller, your light is on. Did you want to be recognized?
Yes. Thank you, Madam President. Last week when Mr. Glancey was testifying, one of the questions that I asked and that I believe one of the statements he made -- and this is just in regards to the issues that the young lady that just testified brought up and the one prior about a $500,000 house on her block where she's lived for many, many years. I thought he commented that this valuation, full valuation, would be house by house, not -- because if someone has a $500,000 home on a particular block that has all these extras and amenities; however, your house doesn't have all that, then it seems to me what his answer was that they would not be taxed at the same rate because the values are 386 10/31/05 - WHOLE - RES. 050844 different, not just the neighborhood. I mean, I'm just a little bit confused and that's why I wanted to get the information from him, written information, about the Block Index and the neighborhood. Because it seems to me the answer last week was that that lady that testified earlier would not be paying the same amount of taxes as the $500,000 house would.
Councilwoman, Mr. Glancey is here. He's standing, and he looks very eager to respond. So if you would approach the witness table.
Good morning, Council President, members of Council. My name is David Glancey and I'm the Chairman of the Board of Revision of Taxes. Councilwoman Miller, I did hear 387 10/31/05 - WHOLE - RES. 050844 your question. I wasn't so anxious to come up here, but I thought I sort of would make myself available.
You're right. What we were talking about the other day again was grouping like properties with like properties. The young lady suggests that there is one property on a block that stands out from the others, with the amenities they may have and a sale price that it has that's entirely different from homes on the rest of the block or in that general area, of course that house would not be a comparable property to the rest of the properties. We do group comparables to comparables. When you and I discussed this, I think we even talked about a $5 million property.
Absolutely that would not be part of the process that we 388 10/31/05 - WHOLE - RES. 050844 would value all the other properties on the block.
Well, that's good, because when the -- I'm sorry. I just don't have the name of the person that was testifying ahead of this young lady that said her block is a so-called considered hot block. People have hot blocks now that's beyond their control, particularly in Councilman DiCicco's area, and so I understood her concern.
And it's something that we see today. As long as I've been associated with the Board of Revision, we've seen those kinds of problems and we've tried to handle them in the way I just described.
The Chair recognizes Councilman Rizzo. Councilman Rizzo, did you want 389 10/31/05 - WHOLE - RES. 050844 to address something to Mr. Glancey?
Well, I just want to restate for this record, since this is a recessed hearing, that of all the things that I heard during our past hearings is that there's the potential of a negative effect, meaning higher taxes, for approximately 50,000 people. I'll be clear that I couldn't be supportive of going to a 100 percent value unless I'm assured that those 50,000 taxpayers are somehow legislatively protected. The last thing I think we need to do is have people forced out of their homes or become sick because they are just thinking 24/7 about how are they going to pay higher real estate taxes. So I think it's important that the people hear that there are 50,000 people that potentially their properties are undervalued that really seriously need to be considered.
Councilman Rizzo, thank you for asking that question. 390 10/31/05 - WHOLE - RES. 050844 COUNCILMAN DiCICCO: Point of order.
Mr. Glancey, one moment, please. I believe Councilman DiCicco has a point of order. COUNCILMAN DiCICCO: Yes; just to comment on my colleague, Councilman Rizzo's, comment. You're absolutely right, and that's going to be our job. That's the reason we're having these hearings. It's not really the BRT. They did their job, and now we have the job, the task, of figuring that out. The BRT is not about setting millage rates or anything. They had a job, and full valuation on the surface is probably the right way to go, and we have to figure out how to protect those other 50,000. That's why we asked for this hearing, to flush out as much information 391 10/31/05 - WHOLE - RES. 050844 and get some ideas so that when we move forward, hopefully we'll be able, "we," the Council, will be able to put a package together that gives as much protection to those folks as possible.
I appreciate that. We're on the same page there, and I understand, as you do, that the Board of Revision of Taxes, and Mr. Glancey was very clear last week, that that piece of it isn't what he does. He values properties and administers the process. But, again, even moving forward, we need to figure out a way to make sure that the 100 percent value does not have a negative consequence on people, and that's why I suggested that we look at other jurisdictions, other places that have already been through this to learn by their mistakes and their successes.
Thank you, Madam President. 392 10/31/05 - WHOLE - RES. 050844
You're welcome. The Chair recognizes Councilman O'Neill.
Thank you, Madam President. Mr. Glancey, while I have you here, what's the earliest possible time that we will have an idea of the increase in the City-wide valuations for the following year?
What our time line now reflects, the earliest possible time would be sometime in January of '06. If that changes, you're going to be the first to know. We are not going, as I said last week -- and I just want to reiterate it -- we are not going to do this until we get it right. We're going to do it right before we get it fast. So we want to make sure that the numbers we supply you folks are the correct numbers. If there's any delays, not 393 10/31/05 - WHOLE - RES. 050844 because anybody wants to delay, but if there's any delay in that process, we're going to let you know right away, and then we'll start to relook at all the time lines as we go through this. But our deadline right now is January of '06.
Will the notices go out in the same traditional time frame as they have in the past, August, with appeals being filed by October, early in October?
The time line for appeals, actually, we would like to do it a little bit earlier, if we could. We would like to be able to -- I'm sorry; for notices. We'd like to send notices out a little bit earlier, if we could. Instead of end of July, early August, if we could do it in June, I think that would be doable, simply because we think we will get a significant amount of appeals next year. So the earlier the notice, the more time we can have the 394 10/31/05 - WHOLE - RES. 050844 appeals prior to the actual cut-off of certification of money. But the appeal process itself, Councilman, we intend to have that the same way it's always been.
Okay. The current year we're in with the notices -- we had this discussion, the condos and the small apartment buildings and the businesses. Were any notices sent out just recently in large numbers?
The only notices that would have been sent out just recently were e-mails where we had sent notices before and then came back to us for an address correction.
So nothing was done different in that sense than the actual August --
There would also be if there was some new construction that was coming off of an abatement, that could --
But it 395 10/31/05 - WHOLE - RES. 050844 wasn't just an independent --
Okay. I've been hearing something about that the other day and I just wanted to make sure. See, I have two issues here. One is the mega or the macro City-wide numbers that are going to come in and say, This is what we expect the valuation to be, so as we're making our decision on millage reduction, this is a good thing to take into effect, but there are areas of the City that are all over the place in terms of the percentage of value that they're assessed at now as opposed to the, theoretically, 72 or whatever it is. I'm worried that -- let me give you an example. I've got a subdivision that has about 3,000 homes. It goes back to 1960, Parkwood Manor. All pretty much alike, except that some people have done radical things, improvement, and other people have done nothing. But they're 396 10/31/05 - WHOLE - RES. 050844 all paying within a very close range of taxes no matter whether they've got the souped-up all new windows, new kitchen and all or whether they've got the basic Parkwood house, it's all brick, it's 20-foot wide. I would like to have some idea of whatever we might do macro affects a very large area of people that fit all the indicators, lots of seniors, 40 years in the house, some 45, I guess, almost, and people have stuck with us, many City workers who are retired, and just get an idea. So if I know before the big number comes out or, at the same time, if I can sort of extrapolate a very large number of homes like Parkwood, and I'm sure there's other areas that are not maybe as many, but fit the same description -- Packer Park, the whole area of Packer Park -- that we can get an idea of whether -- because that's going to be an influencer, too. If you know 397 10/31/05 - WHOLE - RES. 050844 that if you do X, which maybe is what the computer tells you to do, but you're going to affect 3,000 homes this way, maybe there's some adjustments that need to be made to the other models. There's sort of a micro and a macro look at this that I think we have to -- January I think is good, if we can get that kind of information in January.
Just a very short answer, we absolutely agree that there should be this kind of micro look. We commit to you and every member of City Council not only will we give you the macro number, we will also give you your Councilmanic district, number one, as the first kind of cut that you can see, and then within your Councilmanic district, all the various neighborhoods, at least as we've described them through our geographic market areas, and the ones where we believe we are measuring apples to apples and oranges to oranges, we can slice that to a report down to that 398 10/31/05 - WHOLE - RES. 050844 level. And then if you have any further requests that you might necessarily need from us, we're always willing to accommodate you with all of the back-up and the assets and the data that we have. If you recall, in the year 2003, we did that very same thing with a little bit less sophistication, but we did have some computer models that we could use. We expect to have much more sophistication with that, and we'll be able to supply that to everybody.
Now, I know that caps are one of the possible scenarios where we could help people, but you as an agency, I think it was in '03, put an internal ten percent cap on the assessments for that year. This year I understand at least for condos there might have been a 15 percent cap. Ten is a little closer to my four percent number, so I'm trying to use that one. Is there any thought being given at this point to an internal cap 399 10/31/05 - WHOLE - RES. 050844 such as 2003?
For valuation purposes for this year -- I'm sorry; for 2007, we don't think that's a good idea. And if you just let me say it a little further, we believe that the valuation is such a separate entity and to get that right so that all the citizens can know what the City believes their house is worth is just a very important thing to do for understanding and for transparency. However, along with all of the other possible policy considerations that can be made -- and, in fact, if I'm not mistaken, you had a bill similar to this in 2003. With the assistance of the state legislature and City Council and the Administration working together, there clearly could be, because that's part of the property tax relief measures, there clearly could be a cap on the amount of taxes, not on the valuation. The valuation will go and on the notice 400 10/31/05 - WHOLE - RES. 050844 it will say this is what the value is. But there can be a cap on the amount of taxation from year to year to year. Now, I'm not here suggesting one over the other, and I will supply, hopefully tomorrow, everyone in this Chambers with the research that we have done on property tax relief measures, and some of the Councilmembers already have it. At least it's a start. But it gives you a panoply anyway of various possibilities, and within that, tax caps are part of that panoply.
How much are your people looking at the scenario which is out there right now and is very real -- and I'm just talking about the far Northeast, because I can't speak for other districts. And it's true whether I talk to people trying to sell homes, have neighbors trying to sell homes, realtors in the market -- that sometime after June 1st through sometime in mid August of this year, the market has gone cold. I 401 10/31/05 - WHOLE - RES. 050844 mean, ice cold. You could put a kerosene heater under it and it's not going to help. For instance, a Parkwood Manor house that may have been, with all the bells and whistles, approaching $200,000, they can't sell them for 175 today. They're sitting on the market. People aren't coming to open houses where there's four open houses right near each other. This is two, three days things were selling in the spring in this area. How do your people that do this work by January capture that? Because there are going to be some sales. They are going to be markedly lower than what they thought the trend was, because whatever it is, in this area there apparently was a bubble and apparently it has burst. Could you address that?
Sure. First of all, I'm not so sure I agree with the realtor who spoke to you, because City-wide, we don't necessarily see that. 402 10/31/05 - WHOLE - RES. 050844
I'll give you some real examples after we leave here.
Sure. Secondly, we and the Department of Records have really worked very closely together so that the information that we get is as timely as possible where we're looking at all the transactions in the City. We get a dump overnight from the Department of Records of all the transactions that they have recorded at least during that day. Now, I'm not going to tell you it is realtime. It might be a couple of weeks later. However, the way we've done it in the past and the way we will build this model is not just to use the most current sales. We need to use an average of the most current sales. We've always used the three-year kind of rolling model with that. I think we'll continue to do that, because we believe that trending is as 403 10/31/05 - WHOLE - RES. 050844 important. To see what the trends are are very important as opposed to looking at what today's sales are just for today. I think the trend is important to see. And we include in that trend, because we are fairly current with the Department of Records, we will include in that trend significant number of sales that will have taken place in '05 for the beginning of the '06 valuation. And, if necessary -- because, as I said, we're in fairly close contact with them -- we will get '06 dumps as we're beginning to -- '06 product that's coming through the pipeline as we continue to build the models for '07. And not only that, and I think this is important to tell you as well, we also have some consultants on our staff who are appraisers. We have an MAI and some other appraisers. We intend to put them to work in '06 to do desk appraisals, if you will. We will get numbers from our evaluators from our new 404 10/31/05 - WHOLE - RES. 050844 system, and we will say, in Parkwood -- we'll take that as an example -- these are what the system is saying homes of this model and this model and this model at Parkwood ought to be valued at. Please tell us, Mr. Appraiser, is that what you see in the real world today? So they will be looking at all the sales that they can gather from those areas without looking at our machine, kind of being a quality control, if you will, in order to see that those values make some sense.
But what's the lag time? Let's say settlement occurs December 15th, and let's assume it reflects the trend that I'm seeing, not just hearing about but seeing, with sharply reduced numbers in a very short period of time, meaning the end of the summer to now and late October. What's the lag time between your Department of Records' dump and that settlement? How long does it take from 405 10/31/05 - WHOLE - RES. 050844 the settlement occurring on December 15th to get to the Department of Records to get to you?
Well, it depends on when that deed gets to the Department. As soon as that deed gets to the Department -- and is Mr. Davey here? (No response.)
I would guess that it's about a month and a half, but if that is different, Councilman, I will get back to you and give you the exact time. It's not a matter of settlement. It's when that deed gets recorded.
But in this process, it might as well be a year if it misses our time of discussion and deliberation. These consultants you have, as I look at realtors in the far Northeast at least, it seems like, for the most part, there's two or three mega agencies that have a whole lot of names, different names, on the sale signs, but it's 406 10/31/05 - WHOLE - RES. 050844 basically ReMax or Century or a few others. It wouldn't take a whole lot for somebody to kind of be getting run sheets from them to be asking them -- because it helps them as well, these agencies, to let your people know, even if it's your hired consultants, what's happening. I mean, we're having this conversation. It seems to me your people, these consultants, could easily be telling you what the trends are in the last two months. I mean, I can tell you, my wife and her siblings are selling a home. It's just like all the homes I told you. It's not just this home. On a Sunday three weeks ago, there are within -- you can throw a ball to each of three homes. Three different agencies have an open house. They're all priced right. They've all come down in price since they were listed. Not one soul showed up. Not one person came to -- that means your market is dead. It is dead. You're 407 10/31/05 - WHOLE - RES. 050844 begging people to buy homes, after the hottest market. Now, that doesn't mean that Center City is changing. It's a different buyer. We got a move-up buyer from the lower Northeast. They get a little nervous. This happens, that happens. They're not able to move. Or this year's group already moved and there's no demand out there. I don't know what it is, but I would hope that your people could earn their money in addition to being technical whizzes, just pick up the old-fashioned phone and say, Could you tell me what's going on up there, and do the same thing in Northwest Philadelphia and South Philadelphia as these trends -- there's hot-hot. These were just hot neighborhoods. But they were hitting all the numbers, you know, the hot real estate market. In some places it's the problems with rentals. You get this hot 408 10/31/05 - WHOLE - RES. 050844 rental market with people from New York buying homes to rent in the lower Northeast, and then people scattering out of there. They don't want to be in a neighborhood that's got all these rentals, so they're running up to the far Northeast. We may have run out of that demand right now. I just hope we can catch it, because what we're doing no 12 government should ever do, in my opinion, go to 100 percent and then have a massive, much more accurate probably, valuation or valuation at the same time. It's not just a one-two punch. It's a sucker punch, followed by a donkey punch if we don't do it right. And I'm sure we can do it right without the state legislature's help. So I hope we do everything within our power.
I couldn't agree with you more. I didn't explain it well enough, I guess. That is exactly what we want to have our human being expert 409 10/31/05 - WHOLE - RES. 050844 appraisers do, is to check with -- if you're going to do a desk appraisal, you need to get those lists from the local brokers and local appraisers in any given area. That's what we expect our folks to do.
Thank you very much. Any other questions or comments of Mr. Glancey? (No response.)
Good afternoon. Please identify yourself for the record.
My name is Ellen Somekawa. I'm the Executive Director of 410 10/31/05 - WHOLE - RES. 050844 Asian-Americans United.
Ellen, would you spell your last name for the stenographer, please.
If we were talking about these changes in property tax assessment five or six years ago, I probably would have supported them. I might have agreed that they are a move towards increased fairness, but not today. Not today when owners of modest rowhomes find themselves all the sudden living across the street from $300,000 and $400,000 townhomes; not today when new owners of half a million dollar housing units are receiving ten-year tax abatements, while driving up the property values on their working-class neighbors who do have to pay taxes; not today when fewer and fewer working-class immigrants 411 10/31/05 - WHOLE - RES. 050844 are able to stay in vital immigrant neighborhoods like Chinatown. These neighborhoods make Philadelphia attractive for new immigrants, one of the few growing sectors of Philadelphia's population base. Today these changes in property assessment sound like a mechanism to drive certain classes of Philadelphians out of their homes if they are living in neighborhoods desirable to higher-income people. I have appreciated the members of City Council who have expressed their concern about the impact of these changes on Philadelphia residents and on our neighborhoods. There's been a particular concern for the impact on senior citizens and people on fixed incomes, and rightly so, but when you think about it, aren't really most working people on a fixed income of sorts? You have a job. You get paid a certain income. How much 412 10/31/05 - WHOLE - RES. 050844 control over that do most working-class people have, unless you're asking people to take second, third or fourth jobs? We ran the Philadelphia Forward's tax simulator, one of our staff people, to find out the probable impact of some of these changes on her property tax bill. It was sort of like what the woman before was talking about, South Philadelphia, a modest rowhome, and we found that, at a minimum, the tax simulator estimated that she would be paying between three times up to 2,000 percent more than her current property tax bill. These changes have nothing to do with her increased ability to pay, but only to do with the fact that she happens to live in a neighborhood that's a hot real estate market. People in these hearings are discussing a number of policies that would ease the extreme pain that the property tax increases could cause on tens of thousands of Philadelphians, 413 10/31/05 - WHOLE - RES. 050844 implementing a revenue-neutral policy, spreading the tax increase over a number of years, the homestead exemption or asking people to rely on the appeals process, but none of these policies would help the working people in gentrifying neighborhoods who are certainly faced with a sudden and dramatic leap in the property taxes. Only a cap in the size of property tax increases could begin to address the upheaval and uncertainty that this new assessment promises to bring. Few things impact people's sense of well-being as much as their homes. The policies being discussed will impact all Philadelphians, yet these discussions come across as though it's the job of policy wonks to figure this out and it's the job of the public to trust them. Even though this is complicated stuff, the broad public needs to know about what's going on, and I urge Council 414 10/31/05 - WHOLE - RES. 050844 to find ways of making this conversation more open to the broad public. Thank you.
Thank you very much. Are there any questions of this witness? (No response.)
Thank you again. MR. McPHERSON: The next witness is Julie Wong.
Good afternoon. Kindly identify yourself for the record.
My name is Julie Wong. I just have dentist work, so I don't speak too clear. I'm a real estate broker in Philadelphia almost years, and I 22 really opposed to the tax increase. In 23 Philadelphia we have lots of people moving to Philadelphia because New Jersey, their tax very high. So they 415 10/31/05 - WHOLE - RES. 050844 sell their property in New Jersey and they're moving to Philadelphia. And another thing, I'm aware in Councilman DiCicco's district in Chinatown, and if you really raise large taxes and the tax going to pass on the business people, the business really cannot afford that high tax. If they cannot afford a high tax, they're going to close down their business. When they close down the business, they go to lay off all their employees. These people going to go to unemployment and they're going to really cost the City more money and increase the tax. So that's number two. And, also, right now you have lots of people coming from New York to buy the property in Northeast, like the Councilman just talking about. Right now really the market is flat and really they stop and the people are not coming here to buy it anymore. If we increase the tax more, I think that train is going to 416 10/31/05 - WHOLE - RES. 050844 be not only -- not only to buying, I think most people going to selling and they're going to really fluctuate a negative impact for the real estate market. And, also, another thing is, I agree with Councilman Frank DiCicco about the ten-year abatement. And because the ten-year abatement, Philadelphia is really booming. And another thing really, talking about not only retiree coming to buy the condos in the City, more than likely it's young professional people moving to the City, and they take advantage of the City and they don't need to drive. The taxis are too high. And so they coming into Philadelphia. I think 100 percent -- I agree with Councilman Frank DiCicco as the ten-year abatement. I think that's the reason Philadelphia can survive. I think that's very important to the City. I think that's all. Thank you. 417 10/31/05 - WHOLE - RES. 050844
Thank you very much. Do we have any questions of this witness? (No response.)
Thank you. MR. McPHERSON: Our next witness is Kathy Cushing.
Good afternoon. Please identify yourself for the record.
I'm Kathy Cushing. I'm a CPA and Certified Fraud Expert. I moved here in 1972 after leaving Newark, New Jersey. If you understand Newark, New Jersey, you'll understand why anybody left in the early '70s after what transpired there. I came here. I fell in love with this City. In 1972, I went to work, we thought, for three years while my husband was in law school. At the end of 418 10/31/05 - WHOLE - RES. 050844 those three years, I was more in love with this City than the day I arrived, and we decided to stay. I purchased one home at 13th and Pine, which in 1976 was lawless territory next to Dirty Frank's, if you know Dirty Frank's. COUNCILMAN DiCICCO: Nothing to do with me.
It's not Dirty Frank DiCicco. Dirty Frank's is a saw-dust-on-the-floor bar at the corner of 13th and Pine, better known to every college student within 30 miles of Philadelphia. You had to be brave to do that. I did it with my husband. We renovated that property. We stuck it out for three years at that corner, until neither of us could sleep at night because of that corner. We then moved to what at the time was the only house I could find that we could afford, which was October 23rd, 419 10/31/05 - WHOLE - RES. 5 percent. I purchased a home with that husband that is in the 900 block of Clinton Street, which is a National Historic District that was registered with the Federal Government in 1972. And if you want to refer to streets in the City as hot blocks, then Clinton Street is boiling, way over the point of boiling as to what's been going on in the last five years. It started when we discovered a fraternity house that the City lost track of and had not collected taxes for eight years. We brought it to the Mayor's office. We asked for something to be done, and the day that house went on the market at a sheriff's sale in December 24th, December 24th, the day before Christmas 2001, there were bidders in 22 that room. I was one of them. I lost 23 out to a derelict house across the street 24 that was so far gone, somebody paid 25 $450,000 for it. A year later when that 420 10/31/05 - WHOLE - RES. 4 million. 2 million. Next to that house, it sparked the Episcopal Church, which has owned Cole's House, which was a women's support house since the 1860s when women could not live in Philadelphia alone if they did not have family here. 8 million. We, as a street, fought the developer tooth and nail every single night for two weeks when he told us how many condos he wished to put into those four buildings, and because Clinton Street is an incredibly tough block, we have our own block association. We met night after night with the developer until we got him to the point of reason, which was 11 units in four houses. 421 10/31/05 - WHOLE - RES. 050844 When they were finished, they were sold between $500,000 and a million point one. This is property that four years ago was in your non-profit status under the real estate tax laws. That's the block I live on. I have been there now since 1980, when I had the courage to sign a mortgage at 10 and a half percent to buy a house that 11 was going to be converted to condos 12 because the family that owned it dates 13 back to the 1600s and did not want that 14 house destroyed by condo developers. 15 They turned down $70,000 to $80,000 more 16 than I could afford to pay for it in 1980 17 to keep it intact as a single-family 18 home. I have a written agreement with 19 that family that my home will never be 20 converted to anything but a single-family 21 home. 22 In the years since 1980, I have restored that home with two hands, a lot of ladders, a lot of heat guns, more screw drivers than I can keep track of, 422 10/31/05 - WHOLE - RES. 050844 but I've done it myself. I have survived in the last 4 years two major car accidents. I am now 5 adjudicated handicapped, according to the 6 Social Security Administration, but I 7 have refused to take the benefits because 8 I do not want to be handicapped. 9 If you put these through and 10 change the way our City is assessing our 11 taxes, you are going to force people like 12 me out of the City that we have fought 13 for for close to 30 years. m. train and returned every night so that I did not live in New York, I lived here. I don't know what your Board of Revision needs to understand, but people who came and homestead at this community 423 10/31/05 - WHOLE - RES. 050844 in the 1970s and '80s, when nobody would look at Washington Square West -- because in the '70s, we were the dumping ground for every institution that needed to be put into the City of Philadelphia. We had drug rehab centers. We had hospitals. We had more drug rehab centers.
We had halfway houses. We have the Sister's of Mercy with their homeless shelters and their abused women shelters. We have taken an incredible amount of things within Wash West, but through it all, those of us who love the City have paid the price and lived next to things that we really didn't want but we got them. And now that I'm 58 years old and I am asking to go into retirement, now you're going to turn around and change the tax structure of our City such that you're going to force someone like me and comparable people to me to leave the City that we have fought for for so long. 424 10/31/05 - WHOLE - RES. 050844 What you need to understand is that it's not just the taxes that are a problem in the City. And, Frank, I apologize because I didn't give you a heads-up, but here's what I want you to understand: We pay taxes, but Clinton Street, which is a two-block-long street, does not get snow removal. We pay, the homeowners on Clinton Street, for our own snow removal. We had to vote it in in our last association meeting because we don't get snow removal on Clinton Street, despite the fact that we're the alternate route to Pennsylvania Hospital's ambulance entrance. We pay to clean our streets after trash, because we don't want to go there in the conversation about what trash collection is like in the City. So as a homeowner, I pay association dues to Clinton Street at $250 a year and we pay to have the streets cleaned, $130 a quarter. Then 425 10/31/05 - WHOLE - RES. 050844 there's the fact that I live on a street that we sacrifice parking on the north side of the street because we were getting the entrance to the ambulance services, the ER, at Pennsylvania Hospital. We gave up parking on the north side of the street almost years 9 ago. Then Pennsylvania Hospital expanded 10 their neurological center and we lost 11 parking on 9th Street. 12 So as a person who is 13 handicapped under the law and parks with 14 a placard, the only times I can park are 15 sometimes in zones that I'm not allowed 16 to park at living in a Zone 4. One year 17 alone I paid $4,552 in tickets to the 18 City of Philadelphia, which is the cost 19 to live here. 20 And, lastly, we contribute as homeowners within Wash West to Kahn Park. We maintain a park that was once City property, is now private. We maintain it. I made contributions to putting 426 10/31/05 - WHOLE - RES. 050844 the street lamps up on Clinton Street when the City didn't have money to do it. We raised money on Clinton Street in the 1980s when you were redoing the City. We paid for our own street lamps. So it's not just the taxes. It's what we are paying for in addition to the taxes because we don't always get what we believe we deserve for the taxes we are already paying. Okay. I started out by explaining to you the condo conversions, but one of the things I think you need to understand is the speculation that has driven this market. And it is not New Yorkers just coming from New York. It is people buying these condos as second homes. I have talked to people who are buying the condos in Cole's House. They have big properties in Bucks County. They're buying these little $500 condos as what we used to call in New York "pit tares," where you can stay overnight and 427 10/31/05 - WHOLE - RES. 050844 not have to commute. Two of the people in those condos have homes in Bucks County and are using them as an inner-City place to come to for two days a week because they are not paying any taxes on these condos. I don't know how much more I can explain to you, other than the fact that I'm from Belfast, Northern Ireland and I will fight to whatever it takes to make sure that we do not do what you're proposing you do to us.
Our next witness? MR. McPHERSON: Tanya Parachin. COUNCILMAN DiCICCO: Madam President.
Yes, Councilman. COUNCILMAN DiCICCO: I have a letter from Judy Applebaum, who is the 428 10/31/05 - WHOLE - RES. 050844 President of the Washington Square West Civic Association. I'd just like to enter it into the record. I won't read it at this time. Thank you.
Good afternoon. Please identify yourself for the record.
My name is Tanya Parachin. I'm sort of, I guess, representing those of us that are on 4th Street, Fabric Row. There were a few of us that were supposed to be here, but due to, unfortunately, a breakdown of car, they didn't come. The people who spoke before me have said everything that I would be saying and said it much better than I would say it. I think in the beginning of the hearings, the people that were speaking were all experts and they were discussing everything in general terms, it seemed to me, and then it wasn't until the last few speakers that I think you got to hear 429 10/31/05 - WHOLE - RES. 050844 from the people themselves. I mean, we are the people. We're the citizens. We're the ones that are here. We're the ones that are going to be paying these taxes. I just got hit with a reassessment tax first, and due to that, my property -- and I have a business there also on 4th Street. We're going to have to probably be selling the property because we really can't afford the assessment of the taxes, yet alone what is being proposed or, I guess, proposed today. One of the other things that we don't want to talk about is the tax abatement, which I won't go into, but that's the first thing that comes to everybody's mind, is the tax abatement. They are not paying and we're paying. And we that are paying don't feel that there's a fairness to this. However, I do realize tax abatements are growth to the City, but there has to be -- I mean, 430 10/31/05 - WHOLE - RES. 050844 there has to be something else. I think that what is being -- I think I'm using the right terms, that it's being proposed, the tax increase, is going to affect the Philadelphians, and I think Kathy and the speaker before her spoke where there's almost two Philadelphians. There's those that can afford and will not be hurt by these increases and then those that are going to be greatly affected by the increase, and two of them are my sons, who have just bought properties in the City, one in South Philly and one in Mayfair. I don't know what they're going to do. I'm here speaking for them also. They are young. They want to stay in the City. I want them to stay in the City, but I don't know if they're going to be able to afford that, and they're just one out of hundreds and thousands and thousands. So I hope that the Council will consider the little people, the middle class, the lower class. They're going to 431 10/31/05 - WHOLE - RES. 050844 be affected. And as far as what their buildings are -- we keep saying that their buildings are worth far more than what they paid for. That's fine, but they want to stay there. They want to be the fabric of their block, of their community, of this City. If they go sell their property, where are they going to go? They have all this money. What are they going to do with it? They're going to go where? To another place where they have to pay more money? They've now broken the fibers of the fabric. South Philly, I mean, my business is in South Philly, and it's a wonderful community. All the communities are wonderful communities. They're going to be affected. And I'm very saddened by fact that there's only a few people here, and I think it's due to the fact that maybe they didn't -- I found out through our little association on 4th Street. I think once these notices go out, all hell 432 10/31/05 - WHOLE - RES. 050844 is going to break loose.
I'm sure we'll be having other hearings. You have indicated, and I was distracted at the time, that you recently received a reassessment notice?
What was your reassessment? What was the increase?
The percentage, it was like 80 percent. It was up to -- it was $3,300. COUNCILMAN DiCICCO: Point of information. From?
So you were paying -- COUNCILMAN DiCICCO: Madam President, point of information, if I may. That is a mixed-use property, 433 10/31/05 - WHOLE - RES. 050844 it's commercial and residential?
Yes. COUNCILMAN DiCICCO: It's not a single-family. Not that it makes it right. I'm just trying to give you a sense. Fabric Row along 4th Street, the lady has a business on 4th Street.
Very well. Councilman Rizzo has a point of information.
Good afternoon. When you say you recently received a reassessment, what do you mean by "recently"?