COUNCIL OF THE CITY OF PHILADELPHIA PUBLIC HEARING COMMITTEE ON FINANCE - - - Room 696, City Hall Philadelphia, Pennsylvania Wednesday, October 9, 2002 9:50 a.m. - - - BILL 020601 - An ordinance amending Chapter 19-1800 of the Philadelphia Code, entitled "School Tax Authorization, by adding a new Section 19-1801.1 providing for a cap on tax increases, under certain terms and conditions. - - - PRESENT: COUNCILWOMAN JANNIE BLACKWELL, Chair COUNCILMAN FRANK DICICCO COUNCILMAN JAMES KENNEY COUNCILMAN MICHAEL NUTTER COUNCILWOMAN MARIAN B. TASCO - - - VINCENT VARALLO ASSOCIATES, INC. Registered Professional Reporters Eleven Penn Center 1835 Market Street, Suite 600 Philadelphia, Pennsylvania 19103 (215) 561-2220 I N D E X BILL 020601 PAGE AARON FINESTONE, Republican Tech. Staff ...... NANCY KAMMERDEINER, Commissioner, Dept. of Revenue ........................ 3 10/9/02 - FINANCE - BILL 020577
Good morning. Thank you all for your patience and your attendance at our Finance hearing. We will now call our hearing formally into session. This is the hearing for Bill 020601 which is a companion bill to Bill 7 020577 reported out last week and sponsored by Councilman Brian O'Neill. For the record, we have a quorum. To my right is Vice Chair Councilwoman Tasco; to her right, Councilman James Kenney; and to his right, Councilman Michael A. Nutter. We will ask the Clerk to read the bill.
Bill No. 020601, an ordinance amending Chapter 19-1800 of the Philadelphia Code, entitled "School Tax Authorization," by adding a new Section 19-1801.1, providing for a cap on tax increases, under certain terms and conditions.
Thank you very much. We will now have a statement from Aaron Finestone, Tech Staff. After his statement, we ask Nancy Kammerdeiner, Commissioner, and that will be it unless there is someone else here who would like 4 10/9/02 - FINANCE - BILL 020577 to testify. Good morning.
Good morning, Madam Chair, members of the Committee. I'm Aaron Finestone. I'm on technical staff. Councilman O'Neill sends his apologies for not being here. He's in Washington on City-related business. Bill 020601 is a companion bill to 020577. Bill 020601 addresses school real estate tax. Bill 020577 addresses City real estate tax. Bill 020601 places a cap on increases in the real estate tax assessments. Under Bill 020601 a property owner's real estate tax cannot increase 104 percent of the previous year's assessment. The cap only applies where the same person owned the house in the present and the previous year. Upon sale of the property, the property would be assessed at its full level, the cap not applying. Bill 020601 is subject to authorization by state legislation. Upon passage of bills 020601 and 020577, Councilman O'Neill will introduce a resolution memorializing the General Assembly to pass authorizing legislation. Bill 020601 and 020577 are needed to 5 10/9/02 - FINANCE - BILL 020577 stop the unconscionable reassessment of homes. We have heard protests from every section of the City, from low-income people, from senior citizens, from people with growing families, from empty-nesters and young professionals, from people who have improved their own homes. Councilman O'Neill has reviewed the City Solicitor's objections to limit real estate assessments. As to Bill 020601 and 020577, the City Solicitor's objections can be addressed by state legislation authorizing the caps and by setting appropriate dates from which the caps can take effect. Bills 020601 and 020577 are matters of justice and equity. On behalf of all the citizens of Philadelphia, Councilman O'Neill asks that Bill 18 020601 receive a favorable recommendation. Thank you.
Thank you, Mr. Finestone. Question from Councilwoman Tasco.
Excuse me one 6 10/9/02 - FINANCE - BILL 020577 moment. We also note that Councilman Frank DiCicco is here. Thank you.
Now, if we cap the tax at no more than percent a year -- 6
4 percent a year, 8 no property tax can go beyond 4 percent a year? 9
So I sell my house, and the new person coming in, the house is assessed at what, the full market value?
That's right. So for the next year, it -- it goes up upon purchase to the full value and then each successive year it can be no more than 4 percent higher.
Is there any point -- well, I guess you can't figure out -- have you done any analysis to see at the time of sale what the increase would be? 7 10/9/02 - FINANCE - BILL 020577
Some examples of what an increase would be? You know, if a person sells his house, would it make it impossible for somebody to buy it?
I understand. You'd have to do a projection on what tax should be upon sale. That's not accounted for in here.
Thank you. Ms. Kammerdeiner. Thank you, Commissioner.
Good morning, Councilwoman Blackwell and members of the Finance Committee. I don't have prepared written testimony this morning. I would really primarily refer you to my testimony from the 25th of September and October 1st and, basically, would just like to point out that the particular bill before us, as has been 8 10/9/02 - FINANCE - BILL 020577 described, will affect the collection of taxes for the School District and place a cap on that collection. And I would like to reference a section 5 from the City Solicitor's opinion that was presented to you on September 24th where he indicated that he did not believe Council had the power to enact any kind of tax freeze or assessment cap bills to the extent that they materially affect City or School District revenues. And he went on to further state that Council could not revoke an authorization from the School District once the District had acted and relied upon that authorization. And he also read Act 46 as prohibiting any tax freeze or assessment cap with respect to the School District as we're required to maintain our tax effort for the District at current levels. And for those primary reasons, we from the Administration cannot support this bill, just as we found it difficult or impossible to support the other bills that were introduced and heard before you that affected the School District taxes.
Well, we assumed that you would feel that this bill would be better than another since this is 4 percent cap in 9 10/9/02 - FINANCE - BILL 020577 terms of your department's revenues as opposed to the percent cap that we've heard earlier. 4
Actually, I would say 5 it would be the reverse because a 4 percent cap 6 would permit less of an increase in revenue than a 7 10 percent cap would. Our main concern here in 8 terms of the amount of any cap, even if it would be 9 authorized in some way through state legislation, as 10 was indicated by the previous witness, is that it would be against the spirit of the Coleman-Green settlement which provided for a six-year time period for the equalization to take place. And if you have a very large increase in assessment that would come naturally as a result of increase in market value on a property and you constrained your increases to 4 percent, possibly even a constraint to 10 percent, it would take years, perhaps decades to actually get to the equalization and would be very much counter to the spirit of that settlement in court.
Thank you very much. Are there any questions? Councilwoman Tasco and then Councilman Nutter. 10 10/9/02 - FINANCE - BILL 020577
I just read in today's paper that there's a move in -- well, my little community paper, that the leader -- they're moving on enabling legislation in Harrisburg. What I would like to see from the Administration is not, "Well, you don't have the power to do it." What I'd like to see is an analysis of each of these bills so that we can act in an informed way, those of us on Council. You know, I signed this bill for the sake of having the discussion. I don't know whether I'm going to vote for it or not or any of those bills. But I'd like to see from the Administration a cooperative effort to try and resolve the issue of high tax increases for our citizens and what is it that the Administration can offer in a way to be helpful to say that, you know, this is what we see as the best approach rather than create this war, which is unnecessary. And I think that -- and you don't have to respond; this is just my comment, okay? We often -- I'm very frustrated whenever we in Council act and then it's portrayed as anti-Mayor or anti-Administration. It's just that 11 10/9/02 - FINANCE - BILL 020577 we have a difference of opinion on issues. The best way to serve the people of Philadelphia is to find a cooperative spirit where we can work together because, in the end, it's the people in Philadelphia we need to help and to satisfy. And so it would have been helpful for me if I get some information -- as I just asked the gentleman, what is the downside of this bill? It sounds good. You cap it at 4 percent, but I come along and I have to pay a high rate of tax and I might not be able to afford the property. What does it do to future sales? That's the kind of analysis that we need. I don't have the capability on my staff to do that. We need some experts to kind of give us some help. And so rather than us having a Battle Royal, I think the best thing for us to do is try to figure out how do we help the people of Philadelphia. And we have four or five bills around and we're going to be fighting over whose going to vote for which bill. And in the end, it may not help anybody when we have a responsibility to come up with a legislation in some way to resolve this issue and not let it just go away and then two or three years we're back here with the same problem. 12 10/9/02 - FINANCE - BILL 020577 So I'd like to know from the Administration side, I'd like to have some statistical analysis of all of these bills or something or whatever you call it. I want to know what each bill would do. I'd like to have some examples that I could look at to see what the impact the bill would have on us, not just us, but in the future. What does it do to the housing market? Because as you look now, we have a lot of housing policies in place that have been passed over the years hurting our communities. We can't take properties. They sit and they go vacant. People are not paying taxes on abandoned buildings. I mean, all kinds of housing policies that helped on one side but hurt on another side. So that's what I'd like to see.
I appreciate and understand your concerns. And we are trying to get as much information as we can from the Board of Revision of Taxes about the assessment proposals that are out there and try to see what we can do to analyze it for our own information and certainly to share with you as we try to find our way through that information. 13 10/9/02 - FINANCE - BILL 020577 In many cases it will be hypothetical because we really won't know what the impacts will be. But we're struggling with that as well, and we'll share any information we have because I understand your concern.
Well, maybe if we referred back, to use examples if you had and pick a year chosen to cap the tax maybe in 1999, what would the impact would have been in 2002 because you have some economic figures and the economy change and all of that. From that, we might be able to see what might happen in the future if you have an example of what might have happened had we capped it based on those numbers at that time. It wouldn't be the actual numbers, but the scenario would be the same.
That's a good idea. We'll take a look and see whether we can do something like that that would help you.
Thank you, Madam Chair. Commissioner, something you said 14 10/9/02 - FINANCE - BILL 020577 compelled me to ask at least one question. In response to a question either by the Chair or Councilwoman Tasco, you started talking about, I guess, this particular bill and then you went on to say further any other bills that might provide for percentage cap amount, your concern was that it might violate the spirit of the Coleman-Green consent decree and would result in a much longer period of time before you had -- now, did you say uniformity?
No, I didn't use the word "uniformity." I think I said "equity."
Equity, okay. Now, let me make sure I'm understanding and I'm clear for the record. Are we presently bound by the Coleman-Green consent decree? Isn't that decree over?
Yes, it is. I don't believe we're bound by it. That's why I used the phrase "the spirit of" because that's the only -- as was brought out in testimony before, that is the only guide we have to go by since there hasn't been a direct court decision on that matter.
Now, let me ask from 15 10/9/02 - FINANCE - BILL 020577 your perspective or from the Administration's perspective, is there a particular time period if some legislative action were to take place, either by the City or even by the State, is there a range of time that the Administration believes is in the spirit of the Coleman-Green consent decree in terms of equity?
I don't know that we've discussed it quite in that perspective, but we've looked at the six years of Coleman-Green as being a standard that we can look at. That doesn't mean that it would have to be a hard and fast six, but something that would be in that vein. A situation where you would take decades to reach equalization would not be in the spirit of something that was within the scope of a few years.
But could you see something where, again, in the realm of six to eight years or even six to ten -- I mean, I understand 10 is a decade. I'm speaking of decade in the singular, not the plural.
I think we would have to look at it and see what would be involved in any other proposal other than to try to replicate what 16 10/9/02 - FINANCE - BILL 020577 was done under court supervision back in the '80s.
Okay. And, I guess, lastly, are you in a position today -- we've possibly in an unprecedented fashion, I think we've seen you three times in the past three weeks or somewhere in the last three- or four-week period. And we always love having you over, but it's not typical that we have the Revenue Commissioner over so often. Can you give us any possible update or insight into any current plans that the Administration may have with regard to this larger dilemma and what Councilwoman Tasco was laying out or any other thoughts or information that may be available with regard to the current property assessment situation?
I can really only say that we're still talking about options and gathering information, trying to do analysis along the lines that the Councilwoman has just suggested. That's yet another one that we can and should take a look at. We had not gone back retrospectively and tried to recreate what would have happened with a cap. And that's an interesting concept. We'll see if we can do that to add to the body of knowledge to help 17 10/9/02 - FINANCE - BILL 020577 guide on a proposal.
And I think this question was asked last week, but you reminded me in your response to Councilwoman Tasco, I think the other thing that we're not fully taking into consideration here and may help with some perspective is to better understand -- BRT Chairman Glancey gave us a bar chart last week that showed this year's proposed distribution of how many people received increases. My recollection is about 117,000 people received increases of 10 percent or more; 149,000 received increases somewhere between 0 and 10 percent. One of the complaints that we're getting a fair amount this year is not just what this year's increases are or are proposed to be, but I think possibly we're also losing sight of the fact that some individuals who are receiving or are proposed to receive an increase this year have also received increases over the last two years or three years. And I think I asked for a five-year perspective, although I think Mr. Glancey indicated that between technology and 3-by-5 cards, they may only be able to create the last three years. I think that would be quite instructive. And if we 18 10/9/02 - FINANCE - BILL 020577 could figure, out not only for the people who are receiving any amount of increase this year, but to seek to, quote/unquote, chart those people on a different graph that shows how many people who are receiving an increase this year have also received one or more increases over the last three years, I think that perspective will be instructive to all of us in terms of why there is such a large negative reaction this year. Not only because of the volume of people who are receiving increases, the amount of the increases, but as you don't budget in isolation year to year -- I mean, we now have this thing called the five-year plan and that drives everything that we do. The citizens, whether formally or informally, you know, they have their own budgeting and two-year plans or five-year plans or five-day plans, if you will, and I think it might help us to understand how many people are in a category of multiple increases over some period of time. We're hitting them and hitting them and hitting them, and now they've decided they've had enough.
That information will have to come from the Board of Revision of Taxes, and I'll talk with David Glancey about that ask him 19 10/9/02 - FINANCE - BILL 020577 to add that to the other things he's working on for you.
Thank you very much. Are there any other questions for this witness, for our Commissioner? (No response.)
Thank you very much. If all minds are clear, the Chair notes that Councilman O'Neill also called me this morning, told me he was, in fact, very close to Washington and requested a suspension of the rules. Having said that, this will end the hearing part of this committee. - - - 20 COUNCIL OF THE CITY OF PHILADELPHIA PUBLIC MEETING COMMITTEE ON FINANCE - - - Wednesday, October 9, 2002 - - - Public Meeting conducted by the Committee on Finance, held in Room 696, City Hall, Philadelphia, Pennsylvania, on the above date, to consider action on the following: BILL 020601. - - - PRESENT: COUNCILWOMAN JANNIE BLACKWELL, Chair COUNCILMAN FRANK DICICCO COUNCILMAN JAMES KENNEY COUNCILMAN MICHAEL NUTTER COUNCILWOMAN MARIAN B. TASCO - - - 21 10/9/02 - FINANCE - BILL 020577
And we'll enter into our stated meeting. I would like to entertain a motion with a suspension for Bill 020601.
Madam Chair, I move that bill 020601 be reported out of committee with a favorable recommendation and a suspension of the rules. (Duly seconded.)
Thank you very much. It's been moved and seconded that bill 12 0202601 be reported out of committee with a suspension of the rules and also with a favorable recommendation so it may be heard at our next Session of Council. All in favor? (Aye.)
The ayes have it, so this bill is passed out of committee. And I thank everyone for coming. And thank you all for being here and getting this done swiftly. Thank you. (Council adjourned at 10:10 a.m.) 22 C E R T I F I C A T I O N I HEREBY CERTIFY that the foregoing proceedings of the Council of the City of Philadelphia of October 9, 2002, were reported fully and accurately by me, and that this is a correct transcript of the same. RE: COMMITTEE ON FINANCE ___________________________ Lisa C. Bradley, RPR and Notary Public