I appreciate that. Mr. Glancey, let me ask you a question. Let's say that there was a four square-block area that -- anywhere in the City -- that there was significant demolition activity, the land was cleared, sites 64 9/18/02 - FINANCE - BILL 020438 were assembled, they were land banked. Someone came along and said, this looks like a great site for a hundred, $200,000 houses. Say, more on the reasonable side as opposed to the half-million dollar homes. Tell me from the BRT perspective, not only in theory but hopefully in reality, what happens at the site where the hundred to $200,000 houses are built and what, from your experience, whether in theory or in practice, happens to the residents in the peripheral area who stayed, didn't leave, may, in fact, be low-income or whatever their income status may be? What does the board do first with the new houses? I assume they all qualify for the 10 year tax abatement. Does the board even at that point make a determination as to both the market value and the assessed value of the new property notwithstanding its 10-year tax abatement?
Yes, Councilman. And I'll try to answer all of your questions as a practitioner rather than trying to be theoretical, because I think that really does help you decide about this legislation. Initially for new construction, we will put on the new construction. Abated or not, but 65 9/18/02 - FINANCE - BILL 020438 obviously all new construction, new residential construction abated now. We will put on a value that is probably within 70 or 75 percent of what those homes are selling for. That's all the new construction. Now, we have other homes surrounding the new construction -- do you want me to go forward with that? We have other homes surrounding the new construction. And let's say it is a development of 35 homes and then there are three other blocks that have the already existing homes there.
Which we assume are of slightly different size, type, style and, naturally, age.
Absolutely. They're different styles. We will never use the comparables of the new construction. We will never use the new construction values as comparables for those other properties that surround that. Now, what might happen, and I think what gentrification means in some way, is that two, three, four, five years down the road if that development is so successful, other sales will take place in those houses surrounding that development. And if those other sales take 66 9/18/02 - FINANCE - BILL 020438 place that increase the values of those other homes, well, of course we're going to use the comparables of those other homes, and there may be an increase in value. It won't happen right away because we don't know what the values are.
When you say, those other homes, are we talking those other homes as in the existing homes that have been there prior to the development, or are we talking about those other homes which are the new houses?
I'm sorry. I'm not being clear. Those other homes in my example are those existing -- the preexisting properties prior to the new construction.
Okay. But there's an assumption that the existing homes close to the new construction make that general neighborhood more valuable and the -- maybe within a block or two of that newly developed site some people say, well, maybe I can't live in the new houses, but maybe I want to live in the existing houses nearby. Doesn't that start to increase the value of --
The values only change when sales take place. I will give you an example, 67 9/18/02 - FINANCE - BILL 020438 and maybe there's a stigma attached to this example, but I will tell you. On Osage Avenue when all those new homes were built, there was no increase in value of the homes surrounding Osage Avenue. They were brand-new homes. Now, of course, that's a different situation because of what brought it on. However, I think is analogous. There are certain neighborhoods where you're not going to see the preexisting properties gain in value. And if they do, we will only react when there are sales of those preexisting properties, not the sales of the new construction.
You heard the very long and, at times I'm sure Mr. Masters felt, torturous question about the two different low-income homeowners who were in wildly different, faraway sections the City away from each other. What happens under -- I'm sure you read and analyzed the legislation. Under the legislation, for the Homeowner A who is in the potentially gentrified area, they make their argument, they've got more than 5 percent increase. You happen to know or you send your investigators out and find out, yeah, there's personnel and heavy equipment and a whole bunch of activity either out there or they just 68 9/18/02 - FINANCE - BILL 020438 built the last house and those places selling for whatever they're selling for. My property went up 4 percent, 8 percent, whatever the case may be. I 5 haven't done anything to it. I haven't painted it in 20 years and it's the same old house that it ever was pretty much from the time I got here. They make their argument.
Example A probably wins their argument based on your hypothetical. The same argument is made by B, correct?
Right. Well, B says, I haven't done anything to my house and I don't see anybody else doing anything around our house. There are no new houses to be built around here because there's no area to build anything around here. And my market value went up or my bill 18 went up 8 percent. I think I'm subject to gentrification. What do you say?
Well, in your hypothetical, it doesn't sound as if they would win that argument because you're not telling me it's gentrified. You're telling me what happened is that market values have just gone up 8 percent, 10 percent, whatever it might be. I think to be clear, 69 9/18/02 - FINANCE - BILL 020438 gentrification might have more than one definition. The definition of gentrification that I think Councilman Clarke -- and I'm not trying to put words in Councilman Clarke's mouth or in his legislation. I think what he's talking about is what we call revitalization. We've knocked properties down, possibly, you've cleared some land and you have new construction. Gentrification could also mean -- and you we're referring to that in, I think -- and Councilman Kenney was also referring to it, that took place years ago in some instances and today 13 in areas like Fishtown and Northern Liberties and 14 Port Richmond and Pennsport where -- 15
And Manayunk. Where folks 17 who generally are younger and generally more wealthy 18 come into neighborhood, find it to be a delightful 19 neighborhood to live, they buy homes at higher 20 prices than they're normally being sold for, refurbish those homes. And when there are sales that take place, sometimes those sales, as we have seen over the last three years, are double, triple, quadruple sometimes what those folks paid for them. That's another definition. Okay. If that existed 70 9/18/02 - FINANCE - BILL 020438 in your Example B, which I do not believe it did, that would be an argument, it seems to me, that could be made under this bill. Clearly the example A that you used, that argument would be a successful argument under this bill.
Now, I walked out of the room. This will be my last question. The Chair has been tremendously generous. What was the number on 50 percent of median income? And I'm assuming, is that for the single person or for the typical family of four? What is median income these days in our SMSA?
Councilman, I didn't have the exact number, but someone in the room reported it to be 14,000. That would be for a single person. It would be the same number as the PACE eligibility for a single elderly person, which is at $14,000 now.
I did not have the statistics. I don't have the documentation. Someone else in the audience referred to a number.
He asked you median. 71 9/18/02 - FINANCE - BILL 020438
No. My question was what was -- does anybody know what median income is in Philadelphia at the 2000 census rate?
I have the 2000 census profile here. The median household income which is more than single is $30,746. The median family income is $37,036 per capita.
Let me put you out of your misery. Why don't we just get that information later.
Thank you very much. Let me note -- the Chair notes that Councilman Angel Ortiz is also here at our hearing. Councilman Kenney, you had another question?
Are there any further questions by members of the committee? (No response.)
Thank you. 72 9/18/02 - FINANCE - BILL 020438 Then we will proceed with our testimony from the witnesses.
Good afternoon, Chairwoman Blackwell and members of the Committee on Finance. My name is Nancy Kammerdeiner, and I'm the Revenue Commissioner for the City of Philadelphia. I'm here today to testify in Bill 020438 which would provide a program of real property tax deferrals to qualified low-income, longtime owner-occupants in order to address the problem of gentrification in their neighborhoods. You've already heard considerable discussion regarding the details of the legislation, so I'll skip some of my testimony that would have described the bill. The Administration supports the spirit in which this legislation was drafted and is eager to work with Councilman Clarke, who introduced the legislation, and every member of Council in creating policies that will address the very real possibility of rising real estate assessments resulting from the Neighborhood Transformation Initiative. However, the Administration does not support this bill in its present form for several reasons that I'll discuss. 73 9/18/02 - FINANCE - BILL 020438 The Administration's first concern is that the legislation is vague with regard to the universe of individuals who may or may not qualify for the benefits and, therefore, it's been especially difficult to develop cost estimates for the legislation. For example, the legislation essentially makes the entire City of Philadelphia eligible. Since we cannot determine how many people would be eligible, it is almost impossible to determine how much the bill would cost. In addition, even if we would be able to determine who was eligible, we don't know how many of their homes would grow in value by at least 5 percent. With so much uncertainty about the bill's cost, the Administration is reluctant to recommend its passage, particularly at a time when the City's five-year plan faces so many threats. As you know, the plan --
Excuse me, Madam Commissioner, you had copies of your testimony?
As I mentioned earlier in a question from Councilman Nutter, it has a lot of handwritten notes on it. I'll get a final 74 9/18/02 - FINANCE - BILL 020438 and distribute it afterwards. I apologize for not having copies right now.
Thank you. MS KAMMERDEINER: With so much uncertainty about the bill's cost, the Administration is reluctant to recommend its passage, particularly at a time when the City's five-year plan faces so many threats. As you know, the plans contained $178 million in future government efficiencies does not include funding for the salary increases and the recently announced police arbitration award or the upcoming fire fighters' award and continues to be threatened by the sluggish economy. Second, the bill has additional technical difficulties with regard to some of the definitions. For example, the legislation states that a longtime owner-occupant may have owned or occupied the dwelling for five years instead of 10 years if that person received assistance in the acquisition of the property as part of government or non-profit housing program. Under this definition, it is not clear what is included in the term, "government assistance." For example, would 75 9/18/02 - FINANCE - BILL 020438 city-granted tax abatements be considered as government assistance? Further, as a practical matter, it's very difficult to determine whether a certain property is an individual's primary residence. In addition, there are significant administrative issues that will need to be resolved in implementing this program and cost will be incurred in establishing and maintaining the program. David Glancey, Chairman of the Board of Revision of Taxes, will talk a little further about some of the legislation's technical problems in a moment. These technical problems do call into question whether this legislation could be effectively implemented; and if it is implemented, whether it would serve the purpose that this Council intends. It's important to emphasize, however, that the Administration does support tax reform. The Street Administration supports reasonable reform of state, City and School District taxes so that Pennsylvania, Philadelphia, and the entire region can continue to be desirable places to live and work. This is why the Mayor strategically 76 9/18/02 - FINANCE - BILL 020438 accelerated reductions in the business privilege tax and will implement continuing annual wage tax reductions. Meaningful tax reform at the state level should address school funding inadequacy and inequity while ensuring that the City is able to preserve basic City and county services. This Administration welcomes tax reform that is affordable for the City and that improves education for the students of the School District of Philadelphia. In addition, the City fully supports the creation of a tax reform commission to study Philadelphia's tax structure and recommend ways that it can be improved. The Administration believes that changes to the City's taxes should be done comprehensively so that changes can be part of a larger strategy to make the City more competitive. As I stated at the beginning of my testimony, this Administration supports the intent of the legislation and would like to work with Councilman Clarke and the rest of Council in determining strategies that will address the issues of rising real estate taxes without damaging the City's budget. Therefore, I respectfully request 77 9/18/02 - FINANCE - BILL 020438 that the sponsor hold this measure in committee while alternative strategies to address this vitally important issue are refined. Thank you for the opportunity to appear here today. I will be happy to answer any questions that you may have.
Thank you, Madam Chair. Good afternoon. Understanding the fact that there are some issues with respect to information, such as the census data, some of the technical issues, which we actually talked to Mr. Glancey before and we had anticipated some potential amendments, I have a concern that some of the things that need to be worked out, with you as an example, Ms. Kammerdeiner, may not be as forthcoming in a timely way as I would like. As you recall, about a year ago -- maybe a year and a half ago, I did a bill, a non-utilization tax. And at that time there was a commitment to work with us and hopefully be able to implement that bill. And I'm a little concerned 78 9/18/02 - FINANCE - BILL 020438 because I don't think that was done yet. We heard some of the same testimony that the ability to implement such a program will be costly and was not within the parameters of the technology at that particular time, but I believe that we've upgraded the technology considerably since then. And I would like to see -- although this is unrelated to some degree to this particular bill -- some movement on that. I'm concerned that if I can't get my colleagues to move this out of committee, that I won't get the level of commitment and the subsequent follow-up to put this in a position that at a minimum will be referred to State Senator Kitchen, as I said earlier. It's clearly not my intent to ask for a final vote on this bill until I'm sure that on a state level the appropriate enabling legislation can be put in place and I've gotten a commitment from State Senator Kitchen. But I would like to have this particular bill moved to a degree when it can then be referred to her for the appropriate adjustments in Harrisburg. And understanding some of the questions that my colleagues have had, we can do whatever is necessary on the municipal level to 79 9/18/02 - FINANCE - BILL 020438 make whatever adjustments in the bill to accommodate some of their concerns. So for that reason I'm going to asking my colleagues to move it. They will obviously make a decision as to whether or not to move it out of committee. I'm not a member of this particular committee, so I will not have a vote, but I just wanted to let you know that I will be asking them to move it out of committee with the understanding that I will not in the foreseeable future be attempting to get a vote by the full Council.
Thank you again, Madam Chair and members of the committees. I'm going to try to be very brief. I don't have written testimony either. Councilman Clarke and I have discussed many of the things. I'd just would like to spread on the record so that we have that for the 80 9/18/02 - FINANCE - BILL 020438 committee. Again, as I said, I'll try to be very brief. One of the major things I'd like to put on the record is that I believe, obviously, that the Board of Revision of Taxes will be very much involved should this become law in the valuation of properties and in the process of trying to figure out what's gentrified and what is not. However, the actual administration of this program, I believe, rests -- would rest truly in the Department of Revenue. And I'm not trying to shuffle it off on my friends sitting next to me. However, I do believe since they administer the Senior Citizens Special Real Estate Tax Special Provisions, that I think it's somewhat similar, and it would probably be more efficient for revenue to administer it. Secondly, we may have some problem figuring out what a residential lot is if it's not connected to a property. Again, small things that we can work out, I think, you and I. I also believe -- and I know this is in the state statute. There is reference to commercial properties in this particular bill. I think it's commercial or three or less apartments, one of which would have to be a 81 9/18/02 - FINANCE - BILL 020438 principle residence. I'm not so sure that that would be a good idea in the final passage of this legislation. With Councilman Nutter, we talked about basically what is market value in whole and part. That is a very difficult for us, for any appraiser to figure out, so I think we would have to discuss what you mean by "in whole or in part." And I think we can do that. The 5 percent presumption is, again, something that I think we're going to have to take the measure of the City and see if 5 percent is reasonable. I understand that came from Pittsburgh's legislation. And although it's in Pennsylvania, it's a completely different City and we don't know what our gentrification percentage is or whether we can figure it out. But we'll work with you on that, Councilman, to try to get anything we can. Also, at the very end of the bill it looks like there is an appeal from what decision the BRT makes to the Tax Review Board. All of our appeals, any appeals from the BRT now currently go to the Court of Common Pleas. And I'm not so sure that the Tax Review Board would have jurisdiction 82 9/18/02 - FINANCE - BILL 020438 over the BRT any decision that the BRT make. I have no objection to it if that's the will of Council, but I think that that should be looked at and maybe brought into compliance with the other appeals that folks can take from the BRT, and that generally goes to the Court of Common Pleas. Most of the other comments that I was going to make have been made either by Councilmembers themselves or by Ms. Kammerdeiner. And as I said, I don't want to waste anybody's time, so therefore, I will end my testimony and be happy to answer any questions you might have.
Thank you very much. Any questions for Mr. Glancey? (No response.)
Ms. Kammerdeiner, Nora Lichtash is next, then Lenora Berson, then Ali Kronley and Harvey Petty. And I think that is our witness list. Thank you for your patience. Please identify yourself and begin your testimony. MS. LICHTASH. My name is Nora Lichtash. And I work with the Women's Community Revitalization 83 9/18/02 - FINANCE - BILL 020438 Project. I come here to speak in support of the spirit of this bill. A lot of the details that people have raised are questions for us, too; but in general, we want to support anything that makes fairer -- gives an opportunity for people to remain in their communities. I work for an organization that's been in eastern North Philly for about years. And 10 what we hear from people -- we work with both 11 renters and homeowners. And the homeowners we work 12 with, generally around crime and safety issues, 13 around beautification of the neighborhood. And 14 we've been hearing a lot about Neighborhood 15 Transformation Initiative. Primarily what we hear, we here some good things, but we also hear that people are scared about it. They're scared that their taxes are going to go up and that they won't be able to stay in the neighborhood. They're scared that they're going to be relocated and they won't be able to stay in the neighborhood. They're scared that a lot of demolition is going to happen and there won't be development afterwards. That's primarily what they're feeling. 84 9/18/02 - FINANCE - BILL 020438 I guess, really, that's the majority of my testimony. We fell that we're in support of it. Thanks.
Thank you very much. Any questions for Ms. Lichtash? (No response.)
My name is Lenora Berson. I'm the Chairman of the Legislative Committee of the Center City Residents Association on whose behalf I appear. Let me begin by expressing CCRA's appreciation for the opportunity to appear before the Finance Committee today to express our grave concerns over the City's tax policy. In particular, we wish to express our rage, and I fear it can be best described at rage, at the precipitous and arbitrary rise in residential real estate assessments in Center City. Many assessments were increased over 100 percent this year alone on top of more reasonable assessment increases many received 85 9/18/02 - FINANCE - BILL 020438 last year. We know that our outrage is shared by Council which last week voted to express its unanimous belief that the new 2002 assessments be rolled back to 2001 rates. We urge Council not to rest on its laurels with that vote but to actively pursue this rollback. Such action is not without precedent and was successfully pursued by Council under the leadership of John street, now our Mayor, I think in 1981. Further, CCRA believes that the time has come for a complete overhaul of all City taxes. There is a widespread perception, dangerous in a democracy, that our patchwork of taxes and tax abatements are not only unduly burdensome to homeowners, businesses, and wage earners, but are arbitrary, unfair, and politically motivated. There is no doubt that our Jerry-built tax structure has played a significant role in the downward spiral of the City's overall economy and dwindling population. There are two opportunities for Council and its Finance Committee to address this great need. The state legislature, which has ultimate taxing authority over the City, is holding 86 9/18/02 - FINANCE - BILL 020438 a special session to deal with statewide real estate taxes. We urge Council to prepare a plan for the legislature in regard to revamping, modernizing, and professionilzing our current real estate tax assessment process. The archaic and ultimately political and non-representative Board of Revision of Taxes, whose origins go back to colonial times, is no longer up to the job. As a historical footnote, I would like to point out that Mayor James Tate, 1962 to '71, a former tax assessor and President of City Council decried the board and considered himself a reformer because he tried to abolish it, although he didn't succeed. Hopefully, a second opportunity to create a new and fair tax structure will exist if the amendment to the City Charter creating a tax Reform Commission is passed at the next general election. Center City Residents Association has no 22 position on Council Bill No. 020438, which is the subject of this present hearing. Its provisions do not relate to long-term resident owners of Center City who find themselves caught in a real estate 87 9/18/02 - FINANCE - BILL 020438 bubble that has provided the pretext for vastly boosted tax assessments. We also do not believe that tax reform should be addressed in a piecemeal fashion, which this bill does. In furtherance of the belief that all our taxes should be part of a unified and thoughtful tax program, CCRA has created a tax committee to educate itself and to formulate specific recommendations which we hope to have the opportunity to present to Council to the hoped-for reform tax commission and, if it's timely, to the state legislature. We believe the very worthy concern for very low income homeowners of longstanding addressed in the bill before this committee today should be answered in a new, fair overhaul of our taxing instruments and tax legislation. Thank you.
Thank you. Are there any questions for Ms. Berson? (No response.)
Thank you, Ms. Berson. Ali Kronley and Harvey Petty, ACORN. Is there anyone else here to testify? 88 9/18/02 - FINANCE - BILL 020438 Please go to the table and identify yourself. Glad to have you. For all listening in their chambers, this is our last witness and we ask that you return to Council for a vote. Thank you. Please identify yourself for the record and begin.
Good afternoon to Councilmembers. My name is Maxine Stubbs. I am a member of ACORN, a grass-roots organization of low-income people throughout Philadelphia working to improve our communities. As a resident of North Philadelphia, I understand the dramatic impact of rising property taxes on our neighborhoods. Last year, my mother who lives at the heart of Strawberry Mansion and has for over 40 years saw her taxes rise about $200. My mother is on a fixed income, along with many, many other residents, longtime residents of Strawberry Mansion and cannot afford such dramatic increases especially as she struggles to maintain her home. We believe that a real property tax deferral program is critical to saving our neighborhoods, housing stock, and support this 89 9/18/02 - FINANCE - BILL 020438 ordinance for that reason. Low-income homeowners cannot stay in their homes if taxes increase dramatically. Even the slightest increase is a bit much more many. However, real commitment to current homeowners needs to be more than simple tax deferment. Right now, thousands of Philadelphia's homes are in danger of falling apart. I know because I live there. Homeowners need real resources to preserve their homes. Preserve their homes, fix leaky roofs, repair plumbing problems, and meet basic structural repairs. Current home repair programs are inadequate. We have members who have been waiting on Basic Systems Repair list for years. Preserving our housing stock and therefore our neighborhoods will require more home repair programs and resources. ACORN will continue to fight for home repair programs, and we ask Councilmembers to join us in this fight. Thank you very much.
Thank you very much. Any questions? (No response.) 90 9/18/02 - FINANCE - BILL 020438
Is there anyone else to testify on behalf of this bill? (No response.)
Thank you very much. This hearing will be recessed until tomorrow morning at 9:15. Thank you. (Council recessed at 4 o'clock p.m.) - - - 91 9/18/02 - FINANCE - BILL 020438 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 September 18, 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