I do. I think that what needs to happen is that we open up the books and records to the City of Philadelphia, and all of us that care about the future of Philadelphia. And that's 251 OPERATING BUDGET - BILL NO. 020455 - 5/3/04 every member of Council, and the Mayor's Administration, and all of us. Look and see how we can streamline the government, produce the services that are necessary for this city to move forward, create an economic plan, a blueprint for the entire city, rather than the independent TIFs and KOIZs and other things that are popping up. And I think incorporate those reductions and those changes in the methods of our taxation to further enhance the future of Philadelphia. There may be pain in the beginning. There is always pain in the beginning. But I think that, rather than tinkering around the edges in the Five-Year Plan, just hoping the world doesn't blow up during the years that we are in office, I think is an injustice to the people we serve.
You have been a strong supporter and proponent of one of the recommendations, even before it was a recommendation, which is the -- often known as the land value tax. 252 OPERATING BUDGET - BILL NO. 020455 - 5/3/04 Can you tell us why you think it works well for Philadelphia?
I think it works well for Philadelphia because the majority of the homes in Philadelphia have been tract purchases, most of them -- I grew up in Oxford Circle. It was all built right after the Second World War. You have 1000, 1500 homes that used to be identical, but yet in some cases has a varying degree of real estate taxes. I have always believed that the emphasis should be on encouraging people to fix their homes. Because every time somebody fixes their home, it is less money we need for NTI or any type of program like that. Yet, we raise the real estate tax on somebody just because they are fixing up the home they live in. I have always had a problem with increasing people's taxes when there is no 23 income derived that benefit that we are taxing. So I think that the land tax, if 253 OPERATING BUDGET - BILL NO. 020455 - 5/3/04 done properly -- and, you know, the compromise, which is acceptable to me, from the Tax Reform Commission, which the Mayor has incorporated, is a way of moving forward and one hoping will send a message to those people that land bank. There is a lot of land banking in Philadelphia, where companies come in and buy large tracts of land, allow the buildings to decay, the real estate taxes is reduced because of the decaying of the building, and effectively can destroy a neighborhood and then have an opportunity to buy up additional properties as the value goes down for people that have lived there all their lives. So I think it is a step in the right direction. And our analysis shows that over 87 percent of the people will have a reduction in the real estate taxes. Now, if you own a surface parking lot in Center City, yes, you will probably pay more. So, build a multi-level parking lot. And if you have inherited a home with 5 acres of beautiful landscaping, but you live on one 254 OPERATING BUDGET - BILL NO. 020455 - 5/3/04 quarter of an acre, you know, there is a good chance you will pay more in taxes for the ability to look at a creek and open ground space that the average Philadelphian can't see.
Last question. You have, in accordance with ordinance passed by Council a couple of years ago, a matter that I worked on regarding primarily TIFs. And you have been responsive over the past, I think, two years -- the bill 13 has only been in effect for a little while -- with regard to giving the Controller additional responsibility to review these. Your letter that you send over with them usually has a fairly long -- I don't want to call it a disclaimer, but at least an explanation of what this is and what it is not. And I guess I wanted to query you with regard to, the ordinance requires certain things to be looked at and may not require certain other things. And I get the impression that that's what you are trying to 255 OPERATING BUDGET - BILL NO. 020455 - 5/3/04 lay out with regard to the letter. Is it your view that more of those items that are not necessarily required in that process should become a part of that review process by the Controller's Office?
Well, as you know, Councilman, I had originally sought, when you had, you know, pushed for the additional responsibilities in the office, that I would be able to reach a conclusion whether I would agree or disagree that a TIF should be given at this particular time. That was not part of the legislation. So what I have tried to do is lay out with a disclaimer the fact pattern that can be used by all members of Council to make the ultimate decision of whether a TIF should be granted. You know, what I am concerned about is that, you know, TIFs in theory are good, but their application, with the lack of a citywide economic plan, is bad. That the PIDC and a variety of other agencies that have evolved, which I have 256 OPERATING BUDGET - BILL NO. 020455 - 5/3/04 mentioned a number of times, don't use the call-back provision to see if the expansion of employment is truly happening and what is the real definition of blighted area. I mean, 5th and Walnut is a blighted area now, according to a TIF. You know, I wouldn't want to live at 4th and Walnut and find that out, when I am paying $3,000 a month in rental payments. But all that is not part of the way my office has been told to generate the information. And would I like to see it strengthened? I don't need to be able to say as the Controller whether I think in conclusion whether it is right or wrong. I think I can do that as a political person, I can do that independent of that. I think that's Council's responsibility and the Mayor's responsibility. I never liked to tread on other people's responsibilities and power. But I think that there should be a followup investigation that I would like to 257 OPERATING BUDGET - BILL NO. 020455 - 5/3/04 see happen to make sure that there is a percent increase in employment over the next five years, and things like that. And then reduce -- you can reduce pro rata the amount of the tax forgiveness based upon that company not living up to its responsibilities that they told us in the first place.
If those kinds 10 of provisions or additional provisions were 11 added -- I mean, I think we have dramatically 12 slowed down in the TIF business here recently. 13 So do you think you would be able 14 to -- I mean, given the earlier testimony, I 15 am also reluctant to ask you to take a look at 16 anything else -- but given that the volume has 17 decreased significantly, do you think you 18 could handle those additional data requests 19 within the general confines of your office, or 20 would you need additional funding to be able to?
For that specific item, off the top of my head, I would say I would not need additional funding.
Would or not? 258 OPERATING BUDGET - BILL NO. 020455 - 5/3/04
I don't think I would. Things like NTI, and you can bet on the fact that I am going to be become asking for money and for a lot of things I think we need to get the job done. But because we do the initial work and the compilation of all that information, that within a five-year period, if it was a five-year program, that we would then have the information available just to match and see what the growth is. I don't think that's a difficult oversight. But I think it is something that, hopefully, if it is announced that that's going to happen, it becomes a chilling effect to those people who say, I told them I am going to increase the employment by 20, but they are never going to check on me anyway.
I understand. Thank you. Thank you very much. Thank you, Madam Chair.
You are welcome. The Chair recognizes Councilman Clarke. 259 OPERATING BUDGET - BILL NO. 020455 - 5/3/04
Am I to assume that when a Councilman stands up, he is going to come back and ask me a question?
You shouldn't assume that. Thank you, Madam President. Mr. Saidel, first with respect to one of your responses to Councilman Nutter, and your encouragement for an individual or company who has a surface lot, they should build a garage. The last time we encouraged a person that had a surface lot to build a garage, they came back to us and asked for a TIF, and we ended up funding it. So I am not sure that's a good idea.
I am just using that, Councilman, as an example. You know, it has to do with the availability of the property that's owned, where it is located. I mean, it is going to take some time to work out the numbers. But, effectively, someone with an open surface lot will probably pay more. Now, someone with a 50-story building in Center 260 OPERATING BUDGET - BILL NO. 020455 - 5/3/04 City, within some of the councilmanic districts that overlap into Center City, will probably pay less because it is a better utilization of the limited land that we have in the City of Philadelphia.
Right. The question I wanted to ask you is somewhat related to that. I guess in my first year, in my first term, I had introduced a bill and actually gotten it passed. And it was kind of a replica of Councilman John Anderson's bill, the nonutilization tax. Are you familiar with the bill?
I remember -- I remember Councilman Anderson. I don't remember the specifics of the bill, no. 19
Essentially, the bill, for all intents and purposes, penalized an individual for underutilizing their property. It imposed an additional tax on a person that allowed their property to remain vacant for a certain period of time, similarly on a vacant lot. 261 OPERATING BUDGET - BILL NO. 020455 - 5/3/04 Can you tell me what the difference is between that bill that was passed and signed by the Mayor, or for some reason or another wasn't fully implemented, the difference between that and the difference between your relatively recent proposal, the land value.
I think the Anderson bill and your followup bill, which I think certainly had merit, I think the people that intentionally do not fix up properties that they own in order to reduce their real estate taxes should be penalized. I think one of the things the land tax does, it is a positive influence. In the sense, what I am trying to do is advocate people fixing up their homes, knowing they won't be taxed at the full rate that they were before because we are increasing the percentage that is the tax on land regardless of whether they fix it or not. The bill of the former Councilman, who was, I think, a tremendous leader, certainly when I was a youngster, was to 262 OPERATING BUDGET - BILL NO. 020455 - 5/3/04 effectively -- it was a negative bill, in the sense that you are penalizing those people that do it. What I am trying to do is make it a positive.
I still am doing that. But part of the land tax is to, effectively, say to someone, if you are improving your home, we are not going to tax you as we did before in the full extent of the increase in that market value because we are increasing the value of the land as far as that ratio is concerned.
But you would, in effect, reduce the revenue generated to the city.
I don't believe so. Our numbers show that that's not the case.
If an individual is improving the property, right, and you are not imposing a tax as we currently are based on the improvements to the property, so you are reducing the level of revenue that you 263 OPERATING BUDGET - BILL NO. 020455 - 5/3/04 would traditionally get under the current system, then you are reducing the amount of revenue to the city.
I think the hope is -- and I can give you all the information that you need to look at this for the backup to what my response is. My belief, and after going through this for a number of months and doing a sampling that was done by Drexel University, that effectively we will increase the amount of revenue, but it will be done through the enhancement of people improving the limited amount of land that we have available within Philadelphia County; rather than, you know, if there are areas, parts of Philadelphia that have been allowed to decay almost intentionally by people waiting for the next round of development, they are going to end up having to pay more real estate taxes than they would with the preponderance of it being based on the value of the building.
Wouldn't you do that by imposing the underutilization tax, by 264 OPERATING BUDGET - BILL NO. 020455 - 5/3/04 increasing the tax on the person who is underutilizing their property?
Yes, we do that. I think this bill does both. It effectively penalizes people for not fully utilizing the uses of the land, but doesn't tax you the way we do now for improvements to the land.
I understand that. But my issue is, while you are increasing it on one side, you are reducing on the other. And at the end of the day, my concern is, obviously, the General Fund. You know I want to make sure we have a balanced budget. And I would like to see some limits in terms of what we impose on properties, because some areas of my district were getting killed with respect to that. But I think that you can achieve, one, the ability to encourage by penalizing the individual to fix up their property or build on a vacant lot by implementing the underutilization bill, and, in addition to 265 OPERATING BUDGET - BILL NO. 020455 - 5/3/04 that, create an additional revenue stream. Because we know some of these people are simply not going to do it initially. So if we can impose an additional tax on that underutilized property --
We are, effectively, doing that, plus we are not going to tax people as they did before when they make improvements to their property. So not only is there -- by increasing the land portion, doing what you had originally thought and Councilman Anderson, but we are also saying to a person, fix up your home.
But you are, essentially, balancing out. We are not increasing the level of revenue to the city.
With that specific issue, I wasn't looking as much about revenue today, as long as it was revenue neutral in effect; but how it would increase the opportunities and incentivize a lot of the building of land that is now sitting fallow. I mean, we have, as you know, we 266 OPERATING BUDGET - BILL NO. 020455 - 5/3/04 have more open ground in Chester County, so we have where they have farm land. If we can increase an opportunity for people to build, then I think in the long run the city will be better off than we are.
So that should be in addition to the abatement on new construction? Because that was, in fact, passed.
I believe that -- see, I don't have a specific problem with abatement. I don't even have a specific problems with TIFs. My problem is that we don't have -- and this may be well beyond your question -- we don't have an overall citywide economic development scheme to fit the puzzles in in relationship to tax abatements and TIFs and the KOIZ, which the Governor has put forth and the legislature has approved. All those things can't be looked -- they have to be looked at in isolation. And until we have an overall scheme, I don't think we can -- 267 OPERATING BUDGET - BILL NO. 020455 - 5/3/04
I agree with you. Actually, Council passed a resolution to charge the city's Commerce Department, PIDC, and a couple of the other agencies to look at a broader, more comprehensive initiative.
I think the Mayor wants to have some sort of panel. I think it is well overdue, and I applaud him for doing that. Because you can't figure out where something should go until you have a plan, and then fit those answers to the puzzle within that overall plan.
Okay. Thank you, Madam President. Thank you, Mr. Saidel.
You are welcome. Are there any other questions or comments from members of the committee? The Chair recognizes Councilman Nutter.
A quick comment for the record. 268 OPERATING BUDGET - BILL NO. 020455 - 5/3/04 Councilman Clarke, my recollection -- I was not here at the time, but working with Councilman Anderson -- my recollection is that there was a lawsuit filed almost immediately after that bill was passed. And I think by agreement with the Administration at that time, there was a nonenforcement agreement or consent decree, or whatever. And the bill is, actually, still sitting on the books. And I think the Tax Reform Commission recommended that we repeal it. That's all I can tell you. I wasn't involved in the court case.
Yes, Councilman, thank you. Yes, I am aware of the history on the Anderson bill. As a matter of fact, you and I talked about it at the time of the introduction. And we actually made some changes that the Law Department might pass the mustard in relation to the prior lawsuit. 269 OPERATING BUDGET - BILL NO. 020455 - 5/3/04 And I think the political times and the individuals in question created the environment that allowed it to be put on the table as a result of the settlement. And I thought, given the political environment and the sponsor of the bill and the people in the Administration, that there would be no settlement. But, unfortunately, there were people in the government that didn't feel the need to implement the bill. I look forward to debating with the Tax Reform Commission their need to repeal the bill, and at that time I will ask that question. I haven't bothered to ask them yet. But I will interested to see the basis for it, if it has to do with the merits of the bill or simply their recommendation for the land value tax.
Councilman, you think the different political times and different political players cause different public policies?
I didn't read 270 OPERATING BUDGET - BILL NO. 020455 - 5/3/04 that.
For the record, I would like to note that I am not involved in this conversation.
Are there any other questions of the city Controller, any comments? Thank you very much.
Thank you. We will now hear from the Board of Revision of Taxes. Good afternoon, and welcome. Please identify yourself for the record and proceed with your testimony.
Good afternoon, Madam President and members of City Council. My name is David Glancey, and I am the Chairman of the Philadelphia Board of Revision of Taxes. And with me today is our Executive Director, Rick Foglia; the Secretary of the Board Robert Nix; and Board members Dveral 271 OPERATING BUDGET - BILL NO. 020455 - 5/3/04 Silberstein, Charlesretta Meade, and Harvey Levine. So I don't want to assume that I know what is important to you, but let me try to proceed this way, and maybe it will move the testimony along rather quickly. The first part of our testimony, which really runs from Pages 1 to 3, discusses last year's budget. It also discusses what we are proposing or what we are requesting in this year's budget. It talks about the 2004 taxable assessment, which is roughly 3 percent more than it was in 2003. The second part of our testimony speaks to the service level enhancements that we always like to share with City Council. And thirdly, beginning on , we provide our annual market overview, combined with an analysis of the abatement programs for 2004. If you don't mind -- and I know there will be questions about the funding, our particular budget request -- if we would simply just, if you would take that written 272 OPERATING BUDGET - BILL NO. 020455 - 5/3/04 submission and let it speak for itself. And then, of course, we will be happy to answer any and all detailed questions concerning those particular segments of our testimony. We would, however, like to devote more detailed testimony to our full value project this afternoon. And you find that beginning on of our testimony. If you don't mind, I would like to give you a little context. In October of 2002, in front of the City Council Finance Committee -- and some of you were at that Finance Committee -- the BRT raised the idea with City Council at that point of going to full value. In March of '03, the BRT testified before the Philadelphia Tax Reform Commission. And we suggested to the Tax Reform Commission that this may be a reform that would be interesting. And they, obviously, included that in their final report. In June of '03, both Ms. Meade and I briefed City Council, some of the members who are here, and certainly all of the staff 273 OPERATING BUDGET - BILL NO. 020455 - 5/3/04 members of City Council, about full valuation before we went public with what our Equalization 2000 forms were to be. And this may be a little internal. But in October of '03, we began -- and I say, "we," the Board members and some of the senior staff -- began preparing the details to move from concept to actuality to get to full value. In December of '03, we rolled that out for our entire staff. In January of '04, we rolled it out to the public. And in March of '04, as you know, it became part of the Mayor's budget plan. Full value is the value a property will realize if sold on the open market. The BRT has always attempted to be as transparent as possible in its function and structure when dealing with the public; however, transparency is somewhat thwarted if the public doesn't understand what it is seeing. The best way I can describe this is, we have been -- I have been at many Civic and 274 OPERATING BUDGET - BILL NO. 020455 - 5/3/04 community meetings over the last month or so. And there was a young lady who was a citizen of our city who absolutely thought we were very transparent. She agreed with what I just described. But I think her analogy is absolutely on target. What she said, she said, you know, at the BRT, with your website and everything that you have on it, and all the information you provide, when we call you, we get a lot of information. She said, it is like having this big, big kind of transparent window, picture window that we look into, except what we are seeing on the picture window looks like the floor of the New York Stock Exchange. You see an awful lot of activity taking place, and you know there is a lot of work going on, but we don't quite understand what it is.
Going to full value, we believe, will do away with that misunderstanding. When we say a property is valued at X, and that is the same as your assessed value, and the 275 OPERATING BUDGET - BILL NO. 020455 - 5/3/04 millage rate, whatever it is, multiplied by that, that's your real property tax. Our point is to make it understandable. Our timetable for going live with this project is Calendar Year 2005 for Tax Year 2006. And our goal is to supply you, the Mayor, Finance Director, the Budget Director with revised full value taxable assessments in February or March of 2005 in order for all the policymakers to have enough time to decide what the new millage or tax rates on real property should be. These rates will be predicated upon the new values calculated by the BRT. And while that final decision rests with you and the Administration, the BRT encourages that both of you to make the total property tax yield for '06 revenue neutral. BRT members fully understand that this change is going to affect every citizen in the City of Philadelphia and in every neighborhood. And in order to help everyone understand this change, we are committed to an extensive educational and outreach program. 276 OPERATING BUDGET - BILL NO. 020455 - 5/3/04 We have begun making public appearances at civic and community meetings, as well as meeting with various real estate industry and advocacy groups. We have placed on our website a link to the road to full value Power Point demonstration, which is explains visually and with some detail how we plan to value properties at their full value. We have written news releases, news advisories, given interviews to real estate trade journals and web-based journals about our project. The daily newspapers and some of the electronic media have covered our story, and I am sure there will be more coverage as we get closer to going live. We are committed to a policy of no 20 surprises. When we send notices with real values to real people, we don't want anyone to say, gee, I didn't know this was going to happen. While we are fully confident that we will be able to meet our goal of having full 277 OPERATING BUDGET - BILL NO. 020455 - 5/3/04 values on all properties for Tax Year 2006, we are also cognizant that getting the values right is more important than getting the values fast. We are committed to getting the values right through direct observations, statistical modeling, in-house reviews, and public testing of our values. If we find that our values are not correct and fully defensible, we promise you and all the citizens that no notices will be sent until they are right. Finally, it goes without saying, but I am going to say it anyway, that we wish to work hand in hand with you and the Administration to make this transition as seamless as possible. As always, the BRT is open to any idea, suggestion, or concept that you feel will make our process better for our citizens. Please share your knowledge with us. And, with that, I thank you for your attention, and we are happy to answer any questions you may have. 278 OPERATING BUDGET - BILL NO. 020455 - 5/3/04
Mr. Glancey, if you go to full value, wouldn't everyone's real estate bills increase dramatically?
No. On our Power Point demonstration, we actually show you three samples. There is the possibility -- there will be tax shifting, and there will be some properties that could get raised dramatically. A lot of that, Council President, depends on you. You are in charge of the tax rates. You have you are in charge of the millage rates.
What happens if the state does not amend Act 46? 279 OPERATING BUDGET - BILL NO. 020455 - 5/3/04
We are going to proceed with our plans for full value. There is no question about that. We believe that valuing property now, if the state -- and I don't make that hypothetical jump. I believe that Act 46 will be technically amended to allow the millage rate to be reduced, because we are not really talking about millage. So, that's the language. We are talking about taxes. We are talking about revenue. I think the legislature and the government will very much understand that -- if there is an attempt to amend technically Act 46. However, just say under the hypothetical that you proposed, we should still go to the right value for properties. The question then is, if for some reason the millage rate cannot be reduced, 280 OPERATING BUDGET - BILL NO. 020455 - 5/3/04 then I think we are back to fractional assessments, which I think is wrong, and I think it is confusing. But one of the things we are committed is not -- we are not going to get into a system where we see real property taxes rise 50 percent because there is no relief from the state in allowing you to reduce the millage rate.
That concerns me. That really concerns me. Would you explain how you determine the value of residential properties versus commercial and industrial properties?
How we will. We are meeting in the month of May with about four different software vendors. What has happened across the country and what we would like to join the rest of the kind of advanced jurisdictions in doing, is to have what is known as an automated valuation model. 281 OPERATING BUDGET - BILL NO. 020455 - 5/3/04 Our staff is beginning to gather all property characteristics data. And by that I simply mean, what does a property look like. We are also trying to get information that we can buy about the interior of a property. Does it have three bedrooms, does it have four bedrooms, does it have two baths, et cetera, et cetera. We take all of that data, and -- I am going to make this very simple -- we push it into a model, a piece of software that's going to model properties. And it is not going to take the whole city; it is going to be within GMA's so we have apples and apples and oranges and oranges. Secondly, we also take the information of our sales analysis, which we do now anyway. We have a three-year sales analysis that we currently use in our equalization program. We will take that information. And we will crunch the numbers of the property characteristics data to see what elements actually are causing the value -- 282 OPERATING BUDGET - BILL NO. 020455 - 5/3/04 what is it that says, if a house that sells for $100,000, what four or five elements get you to that $100,000. We will crunch all of those together. And then using that information, extrapolate from that information of homes that sold to homes that didn't sell. Again, it is kind of what we do now, except what we are going to use is the full value. Instead of saying, well, it is -- my property is worth 100,000, but now we use 70,000, because that's the percentage we use, then we multiply that by 32, then we multiply that by the tax rate. Even intelligent people get confused with that. If it is $100,000 property, it will be $100,000 property. That's residential. There are also models that we use for commercial and industrial properties. There will be some sales information in that, but primarily those models will be two ways, actual income data for properties that are spinning off income. See, most of the downtown office building or retail centers or 283 OPERATING BUDGET - BILL NO. 020455 - 5/3/04 shopping centers. And where we don't have actual income -- and, believe me, we have a lot of actual income data already because our folks are doing that manually -- we will find pro forma data, data that says the average in this part of the country and in this part of Pennsylvania, rent at a given shopping center will kick off as X, these are the, you know, the expenses, this is the vacancy. So, again, we will model with that, as well. But that's easier to do because you can kind of always check that. There aren't as many properties. The checking and the rechecking has to be done with 450,000, roughly, residential properties, where we really need, we really need the real estate community, the civic community, the academic community to help us once we show a product, to say if it makes some sense. But, that's how we intend to do it.
I know that they 284 OPERATING BUDGET - BILL NO. 020455 - 5/3/04 had this same system in Pittsburgh and Allentown. For some reason they did away with it. Can you tell me why?
This is entirely different. I will talk about land value tax, if you would like, also.
I would like to know what the difference would be. I mean, do my colleagues know what the difference is? You do? Do you want to hear what the difference is? Do you want to hear what the difference is? No. You are just going to have to call me and tell me what the difference is.
I heard the Controller -- do you really know what difference is?
It is really, I mean, 285 OPERATING BUDGET - BILL NO. 020455 - 5/3/04 if you want me to say a few words about it. Land value taxation is an entirely different concept than that you talking about full value. We are talking about putting market value equals sale price roughly. We don't want to use a hundred percent, which I think is used in the counties around us, or sale price, because full value makes more sense. And if I could just you a short example of that. On a given block of a hundred homes in the Northeast, there could be sales that 15 range between 70,000 and 85,000 dollars. Happens all the time. So, within those parameters, there is full value. The low end is going to be in the 70, 71, 72. The high end is going to be in the 85 area. Again, that's why we need to know the physical property characteristics, which add value to a sale, so that we can figure out, you know, which one should be at the low end and which one should be at the high end. 286 OPERATING BUDGET - BILL NO. 020455 - 5/3/04 As I said, land value taxation -- and Controller Saidel kind of explained that. I mean, we in the process of what we are going to do, we are also going to value land, not just vacant land. Valuing vacant land is easy because you can kind of find sales. It is valuing the land that is under your house that is hard. Nobody knows what that's worth. If I asked you, I am sure, I said, how much is the value of land under your home, you are not going to know the answer to that. What we intend to do, again, is to use some kind of modeling to see if we can get that kind of right number. That will give you, all the Council people, a platform, at least, that if you decide that land value taxation is where you would go, you will have a platform of reasonably valuing property. Today it is merely an allocation. We are about 18 to 20 percent of the total value of a property. The property is $100,000, about 18,000 or 20,000 dollars of 287 OPERATING BUDGET - BILL NO. 020455 - 5/3/04 that is allocated to the land. We didn't value it. There is no need to value it, because one figure is really the basis for the taxation, the combined land and building assessment. Right? Just there is only one number. Your assessed value at 100,000 today is $32,000. You don't care what portion of that is the land, nor do you care what portion of that is the building, because you are paying taxes based on that one number. Under land value taxation, it does make a difference because there are going to be two different tax rates. Land value taxation is, no matter how you cut it, a very radical reform, I think. And I think it is not something that's simple. I am not here to -- as I said, I think that's your purview, to debate fully and fairly land value taxation. One thing I would say, again, if you don't mind me saying this, is that I believe -- just now I am speaking as David 288 OPERATING BUDGET - BILL NO. 020455 - 5/3/04 Glancey, I am not speaking officially and I am not the policymaker -- I believe you have to be very careful about overpromising, you know, what land value tax seems to do. My sense is that there is lots of sloganeering around land value taxation and very little empirical evidence. You mentioned Allentown and Harrisburg and Pittsburgh. I have asked some folks five or six times, why did Pittsburgh get rid of land value taxation. And the answer I always get is, well, it's politics. Well, that doesn't do it for me. I mean, it seems to me that -- and I think you all know, as well -- if it is a good idea, and it works, and the citizens like it, no amount of politics is going to stop that from happening because it is good politics to be for something like that. So when somebody simply says politics and gives me know other reason, I question. I think land value taxation has, at least in what I have studied, land value taxation is supposed to incentivize folks to 289 OPERATING BUDGET - BILL NO. 020455 - 5/3/04 develop land.
I don't think that that is the first tool that is looked upon. Somebody, I guess it was Councilman Clarke, raised the question about the parking lot and then the parking garage.
The parking lot is going to hold 100 cars and a parking garage may hold 500 cars. But if there is no market for 500 cars, why would you build it? Seems to me that the market has to drive development, number one. Secondly, the cost of money drives development, number two. And I don't doubt that taxation plays a role. I am just not sure that taxation plays the major role that some of the advocates of land value taxation says it plays. And, again, I am not here to -- we are not here to, as I said, kind of give it a full and fair debate. I am not saying that that shouldn't be something that this city ought to do. 290 OPERATING BUDGET - BILL NO. 020455 - 5/3/04 But I think we ought to do it knowing full well what we are doing, as opposed to having rallies and having sloganeering and then just doing it because there seems to be a lot of activity around it. That's my sense of it.
All right. I will come back with a few more questions. At this time I would recognize Councilman Rizzo.
Thank you, Madam Chair. And I think you are absolutely right. I don't want to be part of reform just to reform, because lots of reform have turned out to be a disaster. So I think we do have to move slowly when we talk about land value tax, which I don't personally support. The first thing that I would like to point out to you is -- and I want to thank the commissioners -- that if you ever had a process, and I think I have said this to you every year, and I will repeat it again this year, if there was ever a process that works, 291 OPERATING BUDGET - BILL NO. 020455 - 5/3/04 it is what you do. And even when people come from there that haven't necessarily gotten what they want, they still appreciate the fact that they have been treated fairly. And I think that's so important. Because President Verna and other members of this Council personally, staff, have witnessed hundreds and hundreds and hundreds of people that went through the process. And, again, not every one of them got what they wanted, but I didn't get one negative or any insulting or any -- anything that was derogatory as a result of their time there. Because, again, they realized that, in many cases, that their property was more valuable than they believed it was. So I just -- it was when they were both there. Is that politically correct. But it is a good process. I want to thank the commissioners, because they always, members of the Board, for treating people in a very fair and nice way, and a comfortable way. 292 OPERATING BUDGET - BILL NO. 020455 - 5/3/04 And that's all I have, Madam Chair.
Thank you, Madam Chair. Good afternoon, Mr. Glancey and all of the members of the BRT. I want to first certainly echo in a more serious way the comments made by Councilman Rizzo. Councilman Rizzo was serious, then I made a funny, as they say. So now I want to have the serious time, and I will adopt my very serious voice and demeanor. So, seriously, you provide a great service to the citizens. And I think, in many ways, and we have worked on these over the past couple of years, to try to shed some additional light on what the BRT is and what it is not. And you have helped to educate many people. And certainly let me be the first to say you have also helped to educate me 293 OPERATING BUDGET - BILL NO. 020455 - 5/3/04 directly on many of the issues. And, regardless, on some of the individual pieces, whether we agree or not, we always maintain good conversation and a respect for each other's position. I think it is also significant that at least the past few years I have noticed the members of the Board come to the budget hearings as a further indication of the BRT's commitment to the citizens of the city. I wanted to -- I did want to ask you about land value, but I think we have gone through that one pretty extensively. Maybe the last question I would ask about it is, to the extent that you could come across any data on land value, what I've generally been struck by -- not that we should do what other people do just for the sake of doing it. I mean, I think other cities' experiences with things in many instances have proved good for Philadelphia to do them, and the reverse is often true, as well. What I have noticed about this issue 294 OPERATING BUDGET - BILL NO. 020455 - 5/3/04 is that virtually no other major city in the United States of America has so far adopted this particular proposal. A number of smaller cities in Pennsylvania and I guess in other parts of the country. Do you have any perspective on that? And then I have one last question about land value, and then I will move on.
Well, yes. I mean, I think that perspective, as you just raised in your comment and question, should ring a bell for us. You know, if this has been something that is what it says it is, why -- and it has been around since the middle of the 19th century, why hasn't it been used more extensively. Now, in all fairness, it has been used rather extensively in Europe. But in the United States, it doesn't. The empirical evidence that I have seen -- and I can share some of this data with you -- it is not great. I mean, it is academic journals usually. Most of them are 295 OPERATING BUDGET - BILL NO. 020455 - 5/3/04 economically oriented, as opposed to real property oriented. There are two studies. One out of, I believe it is, Northwestern University, where -- and I forget the professor, but I will find it and I will share this. I will give it to the Council President, and she will share it with you. Is that this gentleman who believed in land value taxation, he simply thought, at his conclusion -- and there is a lot of arcane economic mumbo-jumbo in some of it -- but he believed as his conclusion that it is a good system if we are maybe starting the world, starting the beginning of everything, maybe that is a system that could have been instituted. But given what urban America -- and he particularly talked about urban jurisdictions. Given urban jurisdictions today, he thought it might be impossible to really figure out what land value is, you know, in an urban jurisdiction. Secondly, now, this is somewhat old, 296 OPERATING BUDGET - BILL NO. 020455 - 5/3/04 but it does come from Pittsburgh. And it is the Western Pennsylvania -- Pennsylvania Economy League, Western Section. And you may have even been aware of that; I don't know. I know I have some of that data back in my office. Again, I would share that. But this is old, this goes back to the '80s, probably about mid '80s. And, really, the conclusion of that particular study was that it was hard to tell whether land value taxation was in fact causing the kind of development that took place because there was a significant amount of public investment also taking place at the same time that could also have been causing this. So it was kind of up in the air. And, again, I really want to emphasize, I don't sit here today slamming land value taxation. That's not my point.
But my point is, again, I think just -- it is a major reform. And lots of information about it doesn't -- is very thin; very long, but very thin. There is 297 OPERATING BUDGET - BILL NO. 020455 - 5/3/04 not a lot of depth to some of the information. And we should be looking at that, if we can.
Last question in this area. Given the large number of nonprofit institutions in Philadelphia, any perspective on the impact of having a land value tax in this city, given the size of the nonprofit community and any budgetary impacts at all?
Well, theoretically it shouldn't have any. Because right now there is no taxation on those -- on the land or the buildings.
You know, land value taxation really is one large tax abatement. I mean, if you think about it that way, that's the easiest way for me to comprehend it. A tax abatement says you pay taxes on the land and you pay nothing on the building for a limited period of time. Land value taxation, in its truest sense from Henry George, says the same thing. But we are now looking at split rate, as opposed to a 298 OPERATING BUDGET - BILL NO. 020455 - 5/3/04 completely no rate on building. So I think the best answer to your question, I guess, Councilman Nutter, is that I don't think, at least to the best of my knowledge I don't think, it would have any impact on the budget. If I could just elaborate one further second. And it was kind of, I think, what Councilman Clarke and the Controller were talking about. There will be shifting. If there is going to be a 70 percent reduction, or 70 percent of the residences will have a decrease in value -- and, again, that information is only based on what the values are today and what the land allocations are today. If the Council changes rates, if the values go up, all of that has to be recalculated. And that's going to happen in the next couple of years, it seems to me. In any respect, if 70 percent of the residences will see a decrease, and it is revenue neutral, there is going to be an increase somewhere. 299 OPERATING BUDGET - BILL NO. 020455 - 5/3/04 And it seems to me that it would be -- and, again, it would be those either property owners if they are individual residences, or they will be businesses that don't use land in an intensive fashion. If you are using land in an intensive fashion, you may see a tax decrease. If you are not using land in an intensive fashion, you will more than likely see an increase. But it can be revenue neutral. It doesn't have to be. It may not affect the budget; it will affect those who are paying taxes to fund the budget.
A hundred percent value, I know you talked about that in your testimony and possibly with the Council President asking questions. What I was concerned about in that regard, I thought I read in your testimony somewhere and made a note to myself, which I now can't find -- yes. Here it is. . You anticipate trying to, in your words, go live in Calendar Year 2005 for Tax 300 OPERATING BUDGET - BILL NO. 020455 - 5/3/04 Year '06. And then later you say, these rates will be predicated upon the new values calculated by the BRT. Has there been any discussion -- and, again, if you went over this already, just tell me -- do you think the BRT is in a position to really do a complete and exhaustive reevaluation of the true value of properties throughout the city, or should we hire someone to assist us? And are we talking about full-fledged appraisals or -- I mean, just how will you arrive -- I mean, given how you do it today and what the numbers are and what you think they are and what anyone sees on their notice, which is absolutely at the moment incorrect, how would we get to the right point?
We intend to do it in a hybrid fashion. And I think by "hybrid" I mean, we have a good professional staff that will be able to do the data collection that is necessary in order to get to the point of 301 OPERATING BUDGET - BILL NO. 020455 - 5/3/04 attempting to fully value a property, property characteristics data and sales data. And I am simplifying, but, really, that's what it takes. In conjunction with that, here comes the hybrid part. We are interviewing throughout the month of May at least four vendors who will be consulting and selling software. Now, we are committed to try and do this. I don't know if anybody -- the successful vendor is not there yet. But what we would like to do, I guess, in the ideal world, the successful vendor will have a software program that is flexible enough for us to use to value all the various property types that we have in the City of Philadelphia, and be willing to stay with us for a year or two, consult with us down the line, to make sure that not only are we doing it right, but they are doing their job right. So, to that degree, it is a hybrid. Let me give you some numbers that 302 OPERATING BUDGET - BILL NO. 020455 - 5/3/04 may be helpful. Part of the show I take on the road, it shows that Allegheny County, with CLT and Saber, when they did this, it cost them $26 million over and above what it cost them to fund their assessment office. $10 million, I believe, for Montgomery County, $8 million for Chester County. Lancaster County, I believe, was another significant 10 or 15 million dollars. To get somewhat to our budget, we are requesting -- and we may request more at some point -- we are requesting about four and a half million dollars in Class 200 and 300 and 400 money, total of $5 million, because we are requesting a recurring Class 100 $500,000 allocation.
That is for adding new employees that we think we are going to need in order to continue not only doing this process, but to maintain this process. Another part of that, Councilman -- 303 OPERATING BUDGET - BILL NO. 020455 - 5/3/04
In '07 we have a significant amount of DROP taking place. We had a severe DROP in '04, '05 and '06 looks pretty good. But '07, significant amount of DROP. So these employees today will be filling in in '07.
The 500,000 will cover how many new employees? And is that for the '05 budget?
It is in the '05 budget, yes. If I could just get that. 18. Anyway, so it is that hybrid situation. Yes, I think the professional staff that we have to do what I just described is exquisite, and they will do that.
The $5 million in total, is that a General Fund request or is that something that, given the intensity of the work, as well as what we would expect as the pay-back, is that something that is possibly better funded out of productivity? 304 OPERATING BUDGET - BILL NO. 020455 - 5/3/04
We absolutely will work hand in hand with Council to get a productivity loan application for this. It currently is in the operating fund.
We have no objection to having it come from a productivity loan application. However -- and I really want to put this on the record -- there are two caveats. If it were in the Operating Budget, we would be able to use that money July 1, roughly. Assuming everything goes well, we would be able to use it July 1. And, also, the money that is in the Operating Budget, which is, as I described, 4 and a half million for 200, 300, and 400, and half a million for 100, is there. The productivity loan, we have to keep applying as we go through the process; getting information, figuring out what it is going to cost us, get it before the productivity loan committee, and then, 305 OPERATING BUDGET - BILL NO. 020455 - 5/3/04 finally, an Ordinance back from City Council. The caveats I am raising are, one, we need to have the money as if we would be getting it from Operating Budget. And that's up to us to get that information to the loan committee. I understand. And, two, the amount of the loan should match the amount that is in the operating fund budget today. Those are the two things I would raise.
Obviously I don't make many applications to the productivity bank. Not that I am not productive, but I don't need a loan. You can't get the dollars from productivity up front, or make some arrangement where --
There is a process that we have to follow. And, again, part of that process we have to make sure that we do correctly. But, yes, I can't say to the -- in the productivity loan, the way the scheme is today, and I think 306 OPERATING BUDGET - BILL NO. 020455 - 5/3/04 it is correct, we can't say, just give us the money and then we will give you the information thereafter. That would work for somebody like me, as you know, but it may not work for the rest of city government.
I understand. Lastly, on a hundred percent value, are you prepared to articulate a firm position with regard to -- I mean, obviously, Council and the BRT need to work very closely together about going to a hundred percent of value. I know there was the earlier discussion about Act 46, changing rates. And let's, for this discussion, say that there are no issues about our ability to change rates up and down. You would not -- or, would you agree, that you would not go to a hundred percent value until we have discussion here in Council about what the new rates should be based ongoing to a hundred percent?
Absolutely agree to that. 307 OPERATING BUDGET - BILL NO. 020455 - 5/3/04 Can I just say one thing, which really answers your first question. Part of getting to full value and using the time frame that I suggested here, we are committed to getting to that deadline.
However, if we don't have the right numbers, we will go -- we will not send out a product that is not a good product. I just want you to know. Because that may bring us into '07, as opposed to '06.
I think it is an issue where it really is more important to do it right --
-- than to adhere to a self-imposed deadline. I mean, I don't think the universe is going to fall apart.
One thing I also might add is that, we do not intend to do an equalization program this year because our staff, as you imagine, is fully involved in attempting to do the new program. 308 OPERATING BUDGET - BILL NO. 020455 - 5/3/04 There will be valuation changes, new construction, obvious, undervaluations, those kinds of things. They will be done manually; we will not be using the automated function this year. Breathe a sigh of relief.
It should be a relatively quiet summer. Thank you. Thank you, Madam Chair. Thank you, Mr. Glancey.
Thank you. Mr. Glancey, am I correct in assuming that increasing the current real estate taxes dramatically will eliminate the value that the ten-year tax abatement was put into place for? We put that into place to spur development, and I think that has been extremely successful. Aren't we going to be -- are we going to be eventually eliminating that because of the --
That's a terrific question, and it really goes to those properties that are currently under abatement. 309 OPERATING BUDGET - BILL NO. 020455 - 5/3/04 Once we started full valuation, and then somebody files thereafter, the process will be the same as it is today. It is those properties that are currently under abatement that we have to be careful for. And one possible solution -- and we have been talking about this, and it seems to me this possible solution makes the most sense, although we are willing to hear other ideas -- everyone that currently has a ten-year tax abatement, you have, the city has, I guess all of us have, made an arrangement with them, an agreement, that for ten years you would be paying the same amount of taxes that you started in Year 1. What I would suggest that we do as a transition for those kinds of properties is, yes, increase the market value, but make the increase on the abated side of the value. In other words, exempt the increase until that abatement term has ended. So, for instance, if it is a $100,000 property today, and you are paying -- your real property tax is based on $10,000, 310 OPERATING BUDGET - BILL NO. 020455 - 5/3/04 the value of the land. And let's say that property really is a $150,000 property. I would suggest we take the $50,000 and put it on the exempt portion of the market value, as opposed to putting it on the taxable portion of the market value. And then after the abatement period is over, then that person will know full well -- and we will notice them during that period -- they will no full well that at full value, just like they do today, their basis is no longer that abated value.
Well, I can see that people like the people who are at the auto malls, the parking lots, Sunoco in my district, for instance, what is it going to cost them to stay in business?
Once again, I think that's the land value taxation that you are referring to.
I don't know. I mean, that's -- that is not something that -- that's not what we are doing. 311 OPERATING BUDGET - BILL NO. 020455 - 5/3/04 I mean, we are going to value everything. But then if there is a -- if there is more tax on land -- I mean, listen, if you want me to guess as a citizen, sure, it is going to be significantly more money for those land owners that do not intensively use the land. In the case of Sunoco, they can't. They have to have lots of land around their refinery. The same thing, I would assume, for construction firms, where they need large parcels of land to park heavy equipment. You know, at the end of the day, that equipment goes somewhere, and it ends up usually on some large lot. So that will also be part of that. But, again, what we see our role in this -- and, again, I am speaking -- when I speak as the Chairman of the Board and for our Board members, I think what we are saying is, we are just going to do the value. You are the policymakers, so you make that decision. As a citizen who has had some contact with this, I mean, I think my analysis 312 OPERATING BUDGET - BILL NO. 020455 - 5/3/04 at first kind of leads you to where I am. And, secondly, sure, I think that, as we talked with Councilman Clarke, that tax shifting is going to adversely affect those properties that do not use land intensively, and you mentioned a few.
Who really produce a great deal of revenue for the city. The Chair recognizes Councilman Clarke, unless you want to yield to Councilman O'Neill.
I may be as strong an opponent of the land value tax as there is. And I have been looking at it for years. And it comes down to the same 18 thing. You have got a problem. This isn't 19 the solution. 20 Don't use a shotgun, when a rifle is 21 called for, and when you are going to hit a 22 whole lot of people who are innocent with the 23 shotgun and they are going to get hurt for no 24 good reason. 25 But I also think in terms of timing, 313 OPERATING BUDGET - BILL NO. 020455 - 5/3/04 from a policy standpoint, even if we all agreed that land value is as good as Jim Tayoun and Jonathan Saidel think it is, the timing is terrible. You have the equivalent of a revolution going on at the Board of Revision of Taxes, going from the way we have been doing business and the way we have been assessing and sending out notices, to something totally different and more advanced and difficult to explain to people. It sounds like an easy explanation until you hear Mr. Glancey give the explanation very clearly, with a Power Point, over a period of an hour or more, to some pretty intelligent people. And it is very hard to explain. It is going to be -- these are the people that are really interested to come out to a meeting to hear about it. So I think trying to do two things at once, even if they were both good things -- and I think going to a hundred percent, as long as we are revenue neutral, is the way to 314 OPERATING BUDGET - BILL NO. 020455 - 5/3/04 go. It is the way other jurisdictions do it, and it is really clear and fair to -- more fair to people. So I hope we don't do land value tax, because that's our choice. And I don't think it has -- it is a big part of tax reform at all. I think it is the one piece of tax reform that isn't tax reform; it is just a change, it is another way of doing it. Show me one large city anywhere that has done it. I am only aware of one medium-sized city, and that's Pittsburgh. And no one will accuse Pittsburgh of being a large city anymore. I think it is about 375,000 people. And they did away with it, I understand. It is mostly small communities that have tried it. And I don't know to what extent they have really done it. But I can assure you that if your house is valued at a hundred thousand, and you have got a side yard and a backyard in some neighborhood, and somebody in a similar house but positioned on a half million dollar lot in 315 OPERATING BUDGET - BILL NO. 020455 - 5/3/04 Center City has a house that's worth 600,000, they are going to win. You are going to start paying their taxes in part, because that's just the human nature of this. Is that if you are on a small piece of ground, you get your taxes lowered. If you are on a larger piece of ground, larger than you need to have the house in a row home situation, then you are going to pay. And I think it is going to be tough enough to sell a hundred percent. That is good. I don't think anybody can argue against a hundred percent, as long as we are revenue neutral in doing it. But the land value tax, there is a good reason we haven't done it up to now. And all due respect to the Tax Reform Commission, I think they went way beyond their scope on that one. But, so, I hope we are not going to rush to judgment on that, because there is a tax reform recommendation in that area. That is nontax policy, really. And if the state would give us the clear authority 316 OPERATING BUDGET - BILL NO. 020455 - 5/3/04 to impose the tax we have had on the books since the '80s, the underutilization, or underutilization tax, or something to that, then we would be using the rifle. And we would be using it with legal authority, and not just to make good politics out of it; but it would, also, be good government policy. So I hope we don't get lost in that quest. Thing you.
Thank you, Madam President. Thank you, Councilman, for your endorsement of the nonutilization tax. Mr. Glancey, real quick, a couple of questions. One, can your department determine vacant properties and vacant land using your computer systems?
No; whether or 317 OPERATING BUDGET - BILL NO. 020455 - 5/3/04 not the property is vacant, whether or not it is occupied.
I don't believe we can at this point. Can you hold one second, and maybe I can get a better answer for you. Yes, Councilman Clark, as Mr. Davey, our Director of Assessments, just informed me, we have coding that will identify vacant land, but the coding will not identify vacant buildings. Because there could be a building today that is occupied, and next month is not. So there is really not a code that we use. But vacant land, we can identify for you.
All right. And if you had the ability to interface with utilities, particularly Water, I guess Gas to some effect, Licenses And inspections, your ability to determine vacant properties would be enhanced considerably, if not definitely?
So utilizing the 318 OPERATING BUDGET - BILL NO. 020455 - 5/3/04 current methods within all of the various departments -- and, actually, throw Revenue in there, since they were the ones who couldn't figure out a way to implement the nonutilization -- if in fact there was an order given by the various parties, the pertinent parties, to have their staff work on a strategy utilizing computer systems that would expedite that process, we can pretty much determine, actually using NTI, what properties were vacant, what land is vacant and not being utilized, no utility bills, no 14 tax bills being paid. We can determine that in relatively short order.
I think that is a system that the city should be working towards pulling together all of those elements. We agree. We are ready and willing, I think, platformwise to be able. Clearly, we can pass on what we have. We are also ready and willing now to get back from those agencies you mentioned. Again, the Director of Assessments 319 OPERATING BUDGET - BILL NO. 020455 - 5/3/04 told me he believes that if you go to the neighborhood information system, if you are familiar with that from University of Pennsylvania --
Yes. We have it in our office now. We send a person to class. And you can pull up a property, get all of the records, tax records, recent sale, utility bills, all that.
All of that information is given to them by us. You know, so, it seems to me, if our systems were talking to each other better, we could also do the very same thing. But right now, I guess, I know in my office, probably the same as yours, I have one, maybe three licenses, I guess, that we can use that. And we have, you know, 180 people who are on PCs all day. And only having three that has that information is not real helpful. But we should be able to pull that all together
Okay. Good. 320 OPERATING BUDGET - BILL NO. 020455 - 5/3/04 That will be very helpful to me in the foreseeable future. One other question, more of a personal district-related issue. And I just want to get on the record we had a community meeting about one of the developments that hopefully at some point will take place in the Brewerytown section, the western development. And I want to get it on the record as many times as possible and documenting the response. There has been some concerns raised by the existing community, which is, you know, essentially, a moderate-income neighborhood, row-home community, seen better times, frankly speaking, but people are still taking care of their homes, relatively stable. And there is a proposal to develop between 400 and 600 market-rate houses just adjacent to that particular community. And the first concern that was raised at the community meeting, what impact would that have on the local real estate taxes. 321 OPERATING BUDGET - BILL NO. 020455 - 5/3/04 Right now the properties are valued around 25, 30 thousand dollars, so the real estate taxes reflect that value. The developer is talking about building homes -- it started out, actually, at 159. It is now up to 225. And I expect by the time they build, it will be at least 250. What impact will that development have on the existing residents' real estate tax?
To get it on the record, that should have no impact on those properties that are what we will call the older properties. The older properties are a market unto themselves, as the newer properties are a market unto themselves. Comparable sales of those homes that are 159 to 250 really should have no impact on the homes that are currently valued at 25,000.
Won't have any? 322 OPERATING BUDGET - BILL NO. 020455 - 5/3/04 It would be better if you say, "won't have."
Won't have. They will not have any. Because, really, Councilman, they are simply not comparable properties one to one. Sales of properties, sales of the older properties, will be compared to the older properties that haven't sold. And that's where the values will be extrapolated from. Sales of the newer properties will be compared to sales of the newer properties, and their values will be extrapolated from that. It seems to me they are two separate markets.
So, as proposed, if we develop -- because what we don't want to do is develop new market-rate housing in the adjacent community, and don't touch the community that needs some help. If the proposal is to renovate or construct new homes in the existing community and keep it at a moderate level market sales 323 OPERATING BUDGET - BILL NO. 020455 - 5/3/04 price, then it will not have the negative impact in terms of rising real estate value for those people in those communities; right?
Again, as long as they are completely different types of housing, two different markets, then the sales will have no 8 impact one to the other.
All right. I just wanted to get that on the record again. Thank you.
Thank you, Madam Chair. Just for a minute, equalization. Some jurisdictions, when they do equalization, really do look at the property. I mean, they put a notice on the door and say, would you call, we would like to set up an inspection. I assume they don't do that at every home, but they do it where there may be a question. It is very difficult, Mr. Glancey, 324 OPERATING BUDGET - BILL NO. 020455 - 5/3/04 for us to explain to people how their taxes go up, when no one really made a personal visit. Or, you know, we hear your plea to people to make sure they have photographs, they talk about the discrepancies. If we move forward to something different that's better -- and I underline "better" -- will we ever get to the point when we do equalization, come up with a more formal -- and I assume you would need more money -- to physically inspect our inventory to be able to determine with a professional opinion the value of a property? Because, again, it is all I hear. How do they know what my property is worth, they never were in it. Then I tell them somebody rode by or walked by. It really doesn't cut it.
That's a really good question. Let me start by going to the beginning of it. Probably not. It will cost over $26 million to send individuals into everybody's house in the City of Philadelphia. That's what was spent in Year 2002 325 OPERATING BUDGET - BILL NO. 020455 - 5/3/04 in Allegheny County just to have people -- I mean, they did the whole process, don't get me wrong. But that was going into every property. Now, let me give you some comfort, having said no about that. The comfort level is that there are probably four data elements that will give you 90 to 95 percent of the value of a property. One is location. You don't need to go into a house to see the location. I mean, you are there, you are outside. Two is the square footage. We can get that swear footage on a house that's sold and look at properties that are very similar. And let me add -- and this is a terrific new tool that we have not yet utilized, we will utilize it in the summer, but we now have it. I have it on my PC. It is called pictometry. Pictometry has the entire City of Philadelphia photographed for us. All of our evaluators will have that. You can zoom in to -- I don't know 326 OPERATING BUDGET - BILL NO. 020455 - 5/3/04 what the angle is, but I have done it on my machine. You can zoom in and see your property, Councilman. I can then take the mouse and outline your property, and it will tell me the size of the lot that your property is on. And it will also, if I do it properly and use another tool, it will tell me the square footage of your property to within 6 inches. So we will have the square footage and the location. That's two elements. The third element is the condition of the property. Condition of the property, at least exteriorly, we can do. And here is where we fall a little bit. We are never going to be appraisers. I mean. Our folks have -- are appraisers, but we can't appraise every property. We are assessors/evaluators. So that means we have to do it in a mass fashion. So those three elements, coupled with, what did I say, the size, the location, the condition, and -- I forget what the fourth element is. But that will get us about 90 327 OPERATING BUDGET - BILL NO. 020455 - 5/3/04 percent. And we don't need to go inside usually to get that kind of information.
You have to come up with a new name for that technology. Say it again.
No. We are a licensee, along with, I believe, the police department, maybe L & I, the GIS of the City of Philadelphia. And we have paid into this fund. We are all sharing it. All these departments are sharing it. So it is not something that will be on mine that you can get.
So the Fire Department, if there was a fire in a particular address, they could actually, at command headquarters, get a feel for what they are dealing with.
These pictures were taken in December. So if the fire takes place between this December and next December, you 328 OPERATING BUDGET - BILL NO. 020455 - 5/3/04 will see what the building was. I don't know. The fire departments should be part of this. The Streets Department should be part of it, as well.
The Fire Department should be. There is nothing more important to see something, especially --
And that's a separate tool, over and above what we are talking about doing with our other vendors. But it is a terrific tool for our people. Because what it does is, save our folks from having to go out, take the tape measure or the little walking stick that you see appraisers use, and do that. They can do it in the office.
No; they were taken by airplane that made north-south east-west grids. The angles are all oblique angles, so you can do a 360 in all of these buildings. In playing with it myself, it is extraordinary. You can find decks that you 329 OPERATING BUDGET - BILL NO. 020455 - 5/3/04 wouldn't be able to see from the street and you wouldn't want to trespass on somebody's property. You can see other structures that might be in somebody's backyard that you may never know of. One thing about privacy that I think is good about this, nobody is interested in anybody's window. Once you get to, like, 200 percent, the pixels break up. So that you can never really -- it is very difficult to see a human being. You can see cars, you can see dumpsters, you can see air conditioners, and big air conditioners, and fireplaces, that add value to properties.
Why, yes, Madam 330 OPERATING BUDGET - BILL NO. 020455 - 5/3/04 Chair. Thank you. First I would like to, again -- I don't know how many years I have got left with Mr. Glancey, one of us or the other -- but I want to just say publicly any chance I guess that no one will ever go before a public body, a tribunal, and have a better experience, whether they win or lose, because of the way they are treated, and the way they are treated by Mr. Glancey and his Board.
But I hope that when the day does come -- and I hope it is not DROP oriented, because I think Mr. Glancey is a good example of the exception why we should keep somebody after DROP, if they are in a special situation, particularly with all this going on, with the changes at the Board -- but that it comes from -- the person that's appointed to replace him, when it does happen, is someone on the Board. Because I would hate to see an outsider, not knowing the rich history of the fine treatment citizens receive, to try to duplicate it. 331 OPERATING BUDGET - BILL NO. 020455 - 5/3/04 So, secondly, for one -- so, first I am hoping you stay. And, secondly, for one of your team to replace you. But having said that, I will disagree with you on the example that Councilman Clarke asked for and put a pitch in for caps, at some fairly low level, maybe or percent. I think 4 is too high. It must have been election euphoria or something last year. I don't know. But I know 10 percent is the Center City number, and 3 or 4 percent is the neighborhood number. But, let me give this scenario. I can protect Councilman Clarke's situation with caps. I can tell you that unless Brewerytown is different than all the other areas that have been redeveloped, not just in Philadelphia, but around the country, that the prices won't match the 250's or whatever the prices are across the street, but they are going to go up astronomically the closer you are to the Brewerytown project. And once that block is done, it is going to go back. And that's a good thing for 332 OPERATING BUDGET - BILL NO. 020455 - 5/3/04 anybody who is selling. It is a bad thing for anybody who is staying there. And I believe that caps are the way you protect and serve long-term homeowners who have invested and continue to invest in the community. Because they are sitting on an asset that is yielding nothing, that is not related to their income. And, yes, we wish everyone the success. These people would not be hammering Councilman Clarke if they had a cap, because they would know that 3 or 4 percent is something that they don't have to worry about, like they have to worry about some other incremental increase, 10 percent being the lowest anybody has mentioned in a buffering situation. And I can tell you, if those houses go up the way I think they will, based on these numbers, 25,000 across the street from 250,000, buffering is going to be the same as a cap. Because these people are never going to get out of the buffer. The 10 percent, which is what a lot 333 OPERATING BUDGET - BILL NO. 020455 - 5/3/04 of people are still talking about now as a buffer, the same people that wanted the 4 percent cap and thought it was fine are going to have a forever buffer. If they can't go up more than 10 percent in a year, it is going to be all the time. And percent is a lot in a given 9 year for somebody who is going to die in their 10 house, or who doesn't have a lot of income, who is not working, a fixed income. So this may be a good reason to look at our -- revisit our cap situation. And we are not the only place. We wouldn't be the only place in the country that has it. A whole lot of jurisdictions have these. They don't call them caps, there are other fancier names for them, but amounts to the same thing. Can't go up more than a certain percentage a year. And it makes the person still vote for Councilman Clarke and not be mad at him because their house is going up in value, which is a good thing normally. So I think with some modest caps we 334 OPERATING BUDGET - BILL NO. 020455 - 5/3/04 can help that person, we can help Councilman Clarke, and still give the city some increased revenue from a very unfair tax. Thank you.
Thank you. Any other questions or comments from members of the committee? Seeing none, thank you. Thank you very much. This committee will stand in recess until tomorrow, May 4, at 9:30. Thank you. 4:30 p.m. (Public Hearing adjourned at 4:30 p.m.) - - - 335 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 Monday, May 3, 2004, were reported fully and accurately by me, and that this is a correct transcript of same. RE: COMMITTEE OF THE WHOLE _________________________ DEBRA A. WHITEHEAD