COUNCIL OF THE CITY OF PHILADELPHIA CONTINUED PUBLIC HEARING COMMITTEE ON FINANCE - - - Room 696, City Hall Philadelphia, Pennsylvania Wednesday, September 25, 2002 10:10 a.m. - - - BILL 020490 - An Ordinance amending Section 10 19-1301 of The Philadelphia Code, entitled "Real Estate Taxes," by providing that real estate taxes imposed under that Section shall be based upon the assessed value of real estate as returned by the Board of Revision of Taxes in 2001, thereby freezing such real estate taxes at the level imposed for tax year 2002, under certain terms and conditions. BILL 020491 - An Ordinance amending Chapter 15 19-1900 of The Philadelphia Code, entitled "School Tax Authorization," by providing that real estate taxes imposed by the Board of Education of the School District of Philadelphia for tax year 2002 and thereafter shall be based upon the assessed value of real estate as certified by the Board of Revision of Taxes in 2001, thereby freezing such taxes at the level imposed for tax year 2002, and by requiring that any other real estate taxes imposed by the Board of Education be based upon such assessed values, all under certain terms and conditions. BILL 020492 - An Ordinance amending Section 22 19-2900 of Title 19 of The Philadelphia Code, entitled "Senior Citizen Low Income Special Tax Provisions," by expanding the coverage of this Chapter to include senior citizens who are eligible to participate in the Commonwealth's Pharmaceutical Assistance Contract for the Elderly Needs Enhancement Tier ("PACENET") program. 2 Bill 020537 - An Ordinance amending Section 19-1301 of The Philadelphia Code, entitled "Real Estate Taxes," by providing that the taxes levied on a property under that section shall not increase in any one year by more than a specified percentage as the result of an increase in the assessed value of the property as returned by the Board of Revision of Taxes, under certain terms and conditions. BILL 020538 - An Ordinance amending Chapter 19-1800 of The Philadelphia Code, entitled "School Tax Authorization," by providing that real estate taxes imposed by the Board of Education of the School District of Philadelphia on a property shall not increase in any one year by more than a specified percentage as the result of an increase in the assessed value of the property as returned by the Board of Revision of Taxes, under certain terms and conditions. - - - PRESENT: COUNCILWOMAN JANNIE BLACKWELL, Chair COUNCILWOMAN MARIAN B. TASCO, Vice Chair COUNCIL PRESIDENT ANNA C. VERNA COUNCILMAN MICHAEL A. NUTTER COUNCILMAN FRANK. J. DI CICCO COUNCILMAN FRANK RIZZO COUNCILMAN BRIAN J. O'NEILL COUNCILMAN JAMES KENNEY COUNCILMAN W. WILSON GOODE, JR. - - - VINCENT VARALLO ASSOCIATES, INC. Registered Professional Reporters 1835 Market Street, Suite 600 Philadelphia, PA 19103 (215) 561-2220 3 I N D E X BILL 020490, 020491 HARRY APPEL, Resident ....................... 188 ANN RUBIN, Assoc. of Realtors ............... 190 ED SCHWARTZ, Institute of Civic Values ...... 193 COLLEEN PUCKETT, Queen Village Neighbors .... 211 WALTER LOWTHIAN, Queen Village Neighbors .... 214 SANDRA ROSENFELD, Resident .................. 229 JUDITH APPLEBAUM, Washington Square West .... 231 WILLIAM WHITING, Resident ................... 237 ALEXANDER DEVORE, Resident .................. 243 SAM SILVER .................................. 248 DIANE SHOWERS ............................... 255 EBONY DUGAN ................................. 261 4 Finance
We will have a hearing today on Bills Number 020490, 020491, 020493, 020537 and 020538. The other bills and resolution will be heard next Tuesday at the same time and same place. We thank Mr. Connelly for coming from STEB, State Tax Equalization Board. We will hear detailed testimony next week, and we welcome it and welcome you. We're always glad to have you today, of course. But you'll have plenty of opportunity to testify next week. We will ask Mr. Glancey one question today so the people understand what assessments are. And then we will hear in detail his testimony also, and next Tuesday. So all of you are interested in hearing about those bills which will be read shortly are welcome to be here, and you're welcome to stay if you just want to be a part of those hearings. But we wanted you to understand which bills are being heard today and which are being heard next week so that you can gauge your 5 Finance time accordingly. Having said that, we formally call this hearing into session. The Chair notes that we have a quorum. I'm Jannie Blackwell, the Chair of the Finance Committee. To my right is the Vice Chair, Councilwoman, Marian Tasco; to her right our T.V. personality Frank DiCicco; and... Sorry. I couldn't resist that, Frank. I said "our T.V. personality Frank DiCicco." And to his right the President of the City Council, Anna C. Verna. We will now ask the clerk to read the bills.
Bill 020490, an Ordinance amending Section 19-1301 of The Philadelphia Code, entitled "Real Estate Taxes," by providing that real estate taxes --
Can you hear? (Chorus of "no" from the audience.)
Darwin, would you come forward? Maybe these microphones are a little louder down here, for some reason.
Can I be heard now? 6 Finance (Chorus of "yes" from the audience.)
Bill No. 02049, an Ordinance amending Section 19-1301 of The Philadelphia Code --
Bill 020490, an Ordinance amending Section 19-1301 of The Philadelphia Code, entitled "Real Estate Taxes," by providing that real estate taxes imposed under that Section shall be based upon the assessed value of real estate as returned by the Board of Revision of Taxes in 2001, thereby freezing such real estate taxes at the level imposed for tax year 2002, under certain terms and conditions. Bill 020491, an Ordinance amending Chapter 19-1900 of The Philadelphia Code, entitled "School Tax Authorization," by providing that real estate taxes imposed by the Board of Education of 7 Finance the School District of Philadelphia for tax year 2002 and thereafter shall be based upon the assessed value of real estate as certified by the Board of Revision of Taxes in 2001, thereby freezing such taxes at the level imposed for tax year 2002, and by requiring that any other real estate taxes imposed by the Board of Education be based upon such assessed values, all under certain terms and conditions. Bill 020492, an Ordinance amending Section 19-2900 of Title of The Philadelphia 13 Code, entitled "Senior Citizen Low Income Special 14 Tax Provisions," by expanding the coverage of this 15 Chapter to include senior citizens who are 16 eligible to participate in the Commonwealth's 17 Pharmaceutical Assistance Contract for the Elderly 18 Needs Enhancement Tier ("PACENET") program. 19 Bill 020537 - An Ordinance amending Section 20 19-1301 of The Philadelphia Code, entitled "Real Estate Taxes," by providing that the taxes levied on a property under that section shall not increase in any one year by more than a specified percentage as the result of an increase in the assessed value of the property as returned by the 8 Finance Board of Revision of Taxes, under certain terms and conditions. Bill 020538, an Ordinance amending Chapter 19-1800 of The Philadelphia Code, entitled "School Tax Authorization," by providing that real estate taxes imposed by the Board of Education of the School District of Philadelphia on a property shall not increase in any one year by more than a specified percentage as the result of an increase in the assessed value of the property as returned by the Board of Revision of Taxes, under certain terms and conditions.
Thank you very much. The Chair thanks the Clerk. We will now hear an opening statement from Councilman Frank DiCicco.
Thank you. Thank you; and good morning, everyone. Thank you, Madam Chair.
One month ago approximately 240,000 homeowners citywide received notices that their property taxes were being 9 Finance increased. In my District alone, 31,000 homeowners received property tax increases, some as much as three hundred percent. I have repeatedly said that these increases are outrageous, unwise, and totally counterproductive. On September the 12th, I introduced a resolution co-sponsored by Council Members Nutter, Kenney, Verna, Tasco, Ortiz and Cohen that called on the Mayor to suspend the implementation of the recent property tax increases until this Council had time to look over and come up with something in a more comprehensive reform for Philadelphia's Real Estate Tax System. I also introduced corresponding legislation, Bills Number 490 and 491, that would freeze the assessments at last year's rates so that we can begin deliberating and debating real property tax reform in the City of Philadelphia. Today we will begin this historic debate. I would like to thank the Chair of the Finance Committee, Councilwoman Blackwell, for agreeing to schedule Bills 491 and 490 as well as the other real estate tax assessment bills. 10 Finance Today we will hear testimony from the Administration, the Board of Revision of Taxes, community leaders, and most importantly the homeowners hit hardest by these unconscionable increases. I look forward to hearing this testimony. Yesterday I received a City Solicitor's Opinion on Bill 490 and 491, as well as the other real estate assessment bills that had been scheduled for this hearing. Unfortunately, I do not agree with most of the conclusions in this memorandum. The Solicitor argues that Bills 490 and 491, the freeze bills, and Bills 537 and 538, the cap bills, interfere with the assessment process and are unlawful and unenforceable. With all due respect, Mr. Solicitor, frankly, I would like nothing more than to interfere with this reassessment process because thousands of homeowners... (Applause.)
...because thousands of homeowners will accept nothing less than what we have proposed in our legislation. 11 Finance Our property tax reform legislation seeks a positive solution to a potentially disastrous situation that could lead to unprecedented flight of our city's homeowners. Bills 490 and 491 are not a panacea; rather, they are vehicles for further debate and discussion of our flawed assessment system. They're merely the first step towards creating a fair and equitable property tax system in the City of Philadelphia. I also co-sponsored and support Bills 537 and 538 that seek to minimize the impact of the reassessments by capping increases at ten percent this year and into the future. I support the intent of this legislation and believe offers a positive solution to the current reassessment problems. In the end, we must find a solution to this tax problem, and I believe that our legislation is the key to that solution. I strongly urge the Administration to support our efforts and to rethink their confusing installment plan. I am totally confused as to what that represents. 12 Finance (Applause.)
Clearly, the homeowners in this City expect nothing less from the Mayor and their representatives in City Council. I want to thank you again, Madam Chair, for having these hearings. And I thank all the witnesses who are here today.
You're welcome. To my left is a member of the Finance Committee as well, the Honorable Michael A. Nutter. To my right we are happy to have Councilman Frank Rizzo join us this morning. We will now ask to come to the witness table our Controller, Jonathan Saidel; Mr. David Glancey, Board of Revision of Taxes. And as I said, we will hear in detail his testimony next week, but he is here for informational purposes. And Miss Nancy Kammerdeiner, Commissioner of the Department Revenue.
For the record, Jonathan Saidel, S-a-i-d-e-l, City Controller. 13 Finance
Thank you. Let me note that we do have your testimony. I think it's about the only testimony we do have. However, we thank you.
Thank you. Madam Chairwoman, I come here before you today to offer testimony on Bill 020490 and 020491 which would freeze real estate taxes by basing next year's tax bills on this year's assessments. Bill 020537 and 020538 which would cap tax bills increases at ten percent per year, and Bill 020493, which would move to expand the income requirements for senior citizen tax freeze. I applaud Councilman DiCicco, Councilman Nutter, Councilman Clarke and all of City Council for focusing attention on issues surrounding the city system of real estate taxation with this legislation. As you know, this summer homeowners across Philadelphia received notices that their real estate taxes would increase because of a change in the market value of their homes. I am upset to see so many neighbors 14 Finance and seniors angrily complaining that their taxes have increased by more than one hundred or even two hundred percent. These outrageous increases are not due to the fact that property values increased dramatically in the past year. They result from the fact that City determined property values have lagged behind true property values for many years. Thus, while the legislation before us today would allow residents to avoid onerous tax increases for the coming year, it would not fix the system or address questions of fairness, transparency, and certainty in the system in general. All the bills under discussion today contain certain elements that can be considered to address the outrage over assessment increases, but we must focus attention on the larger problems associated with real estate taxation of Philadelphia if we are to avoid shocking increases in the future. We need systemic change to create a real estate taxation system that is equitable, sure, and easily understand. The City's 15 Finance administration of real estate taxation system is regressive, valuing the homes of low income residents at a much higher percentage of true value than the homes of high income residents. The system is also difficult for most residents to understand, with its series of formulas and obscure rules, and gives residents little ability to budget for the future with its seemingly arbitrary increases. A property may receive no increase in a given year but a significant increase in the following year, with no indication of what the next year will bring. Additionally, the system currently punishes those who improve their properties with tax increases, white it decreases taxes for those who allow their property to decay. (Applause.)
One essential element of fairness in any system is that likes should be treated alike. Any system valuing real estate will naturally lag changes in property values, but if some properties that should be equally valued are effectively taxed at different rates the 16 Finance system may be unfair. Recent analysis shows the average City determined market value for city homes was much lower than actual sale prices. More troubling is the fact that the variance is significantly different from neighborhood to neighborhood and often from block to block and house to house. For example, for properties sold in arm's length transactions in 1999, the difference between the following year's City determined market value and the actual sales price was 23.5 percent in Kensington and 80.9 percent in Center City. One reason that real estate taxes are important to consider is how they affect housing prices. High taxes tend to hold down house prices, while lower taxes tend to increase prices. Therefore, when assessments are lower than they should be, housing values are inflated, which makes it more difficult for low income families to find affordable housing and enriches those selling city homes at the expense 17 Finance of those moving in. As one way to reduce real estate tax burdens for Philadelphia homeowners, we can change how we tax property. As I recommended in my November 2002 Tax Structure Analysis Report, I advocate for a system that will tax buildings less and tax land more, to encourage individuals to maintain and improve their properties, while discouraging speculation and blight by decreasing incentives to allow buildings to decay. Based upon my analysis, such a system would reduce real estate taxes on nearly 80 percent of residential property owners. Similar systems in Harrisburg and Allentown have reduced abandonment, encouraged development, and generated popular approval. In recent years Philadelphia has made strides to address the general undervaluation of properties and disparities among tax bases and has for the first time made some real estate tax data available on the City's web site. Still, we have much to do. As I had advocated in the Tax Structure Analysis Report, 18 Finance the City should seek to remedy the unfairness that has developed in its real estate tax system through a full citywide real estate tax assessment or increased efforts to equalize all Philadelphia properties so that similar properties have similar City determined market values and equal real estate tax bills. This effort should be performed in a revenue-neutral way. Tax rates should be reduced to offset assessed increases so that reassessment equalization and focus on making the system work and not on generating extra revenues for the City. To improve the accessibility of the system, the City should greatly expand the overall transparency of property taxation in Philadelphia. Jurisdictions like Allegheny County, Pennsylvania, have made all tax data available on the internet, searchable by address and name, and even include images of properties and floor plans so that citizens can have ready access to all public information about real estate taxation at their fingertips. Nobody likes receiving an increased tax bill, but taxes are a necessary evil in our 19 Finance society. While residents fume over the amount of their tax increases, we should focus our attention on fixing this system as a whole. Until we ensure that our system treats people equally and equally in a fair and open manner, Philadelphians will spend many more years wondering if their real estate taxation system is treating them justly and if they can afford to remain City residents at all. However, by appropriately valuing property and shifting taxes from buildings to land, we can create a fair system that encourages development, discourages blight, and provides certainty for Philadelphia's City taxpayers. Thank you. (Applause.)
Thank you for your testimony. I asked my staff but I'm not sure they did it. You know, you've been to many meetings in my area, University City, where they support a land tax. I got a letter from one of my constituents who lives around 46th and Osage 20 Finance supporting a land tax. But my question is, in her letter she says how will taxing the land, since if there's a deteriorated property that assessment could be low, but the land tax is also lowered as well, isn't it? Won't a land tax suffer from the same problems that property taxes suffer from?
Personally let me thank you, Madam Chairwoman for sponsoring the resolution which was endorsed by everyone on the front row and unanimously endorsed. And we're going to have hearings --
Actually, not. What I'm concerned about is is that people from outside the City come in and buy large tracts of land, allow the buildings on the land to decay. They effectively land-bank, destroying neighborhoods, force people to leave. Then they buy up all the land and they try to rebuild the neighborhood. We've got to keep people in their homes. 21 Finance What's important to me, and I think important to those that advocate land tax valuation as a higher percentage is, why should we tax people when they are fixing their own homes? Every resident of Philadelphia that fixes their own home is a champion against the blight in the City of Philadelphia. (Applause.)
And those people that buy land and buy those buildings and allow those buildings to deteriorate are the enemies of the people of Philadelphia and the enemy of this Government. (Applause.)
Therefore, the value of the land will not be judged on the property that's located on the land, but should be judged about what the best possible usage would be of that particular land. We may not be able to take the land away from them because it's a violation of the Constitution, these people that come in from the outside, but we can force them to pay the piper as much as possible if they're going to try to 22 Finance destroy our neighborhoods. And you take money out of somebody's pocket, maybe they'll think twice about destroying our neighborhoods in Philadelphia. (Applause.)
Thank you very much. I have one final question, and then I'll turn it over to my colleagues. How will these bills affect the School District? With an assessment on BRT made, could this jeopardize school finances? How are they related?
Well, you know, it's a complicated question because, you know, for years, the School District has been almost an appendage of City Government. Now, because it's being run by a state-created authority, for lack of a better term, it's very difficult to understand our relationship. When you change the ratables, about 58 percent of any real estate tax assessment that's paid, 58 percent of that total payment goes to the School District. 23 Finance So by freezing, effectively freezing... If you froze all assessments at what they were the past year, whatever normal increase that is in their school budget this particular year, that money will not come into the School District. Also, with the City's five-year plan, I believe that the City put down a nominal increase, about 2 percent on their 42 percent of whatever the real estate taxes that are collected, which comes to about $16 million. And I believe that if these new bills were all paid on time, it would bring in an additional $17 million to the City. So effectively, if you froze all increases, then that 2 percent, about $6 million in a $2.9 billion budget, would effectively have to be changed in the five-year plan. So, it does affect it. But I think what's more important is that, yeah, it does affect the revenue stream. But the fact that it is unjust and the fact that there are major discrepancies between block to block and neighborhood to neighborhood, you know, 24 Finance that we can afford to lose the money until we put up a system that is fair and equitable and that people understand.
Thank you, Mr. Saidel. Let me see. Councilwoman Tasco, and Councilman DiCicco, and then Councilman Nutter. Thank you.
I know we'll come back to the land value tax when we have the hearing. But you mentioned other cities and the state that have the land value tax. Do you know when they implemented these land value tax programs and how they did it?
Well, you know, we are the largest City in the State, obviously. And the cities that I had mentioned put them in a number of years ago, and it did encourage development throughout their cities, and I think gave people an opportunity, an incentive, to build. But one of the problems is is there is an impediment to fixing up structures in Philadelphia in relation to fixing up structures 25 Finance in the suburban counties because the moment that you start spending your own money, you're going to be hit with a real estate tax assessment that in many cases... I mean, right now is just obscene, as was mentioned before, when you go three hundred, four hundred percent increases over the last two years. I think it's something that we're going to look at. We have set up a program with Drexel's School of Business. The Ph.D.s over there are doing a sampling that we're working with. Mr. Glancey is involved with it, from the BRT, to see that if the numbers work, why, that the representative sample would then represent to every District in the City of Philadelphia how it will affect; and then we'll have the hearings and I think have a wonderful process. But it has fixed our downtown. But what is more important in Philadelphia is that we need to spend less money downtown and put that money back in the neighborhoods and get back to neighborhood by neighborhood improvement. Finance
Would it have an impact on those buildings that are presently sitting vacant in our communities and there's nothing being done, they're just being allowed to deteriorate?
Well, I think one of the most important things about land value tax, it has a direct relationship. And that relationship is that, you know, you have someone living on a block, and they're trying to fix their homes, and their taxes go up, while someone is allowing the building to decay because they're waiting for the neighbors to all move out so they can buy the entire block. This will force the City of Philadelphia and the BRT, if we go to a land value tax, to charge them not just on the land but what would be the best usage of that land, in relationship to just having a vacant piece of property. So those people that are sitting there and land-banking are waiting to buy large tracts of land will then have to pay three, four, five times more the amount than they are paying 27 Finance presently. And right now it pays that if you're an investor in Philadelphia and you want to just acquire large tracts of land, why fix it up? As long as you pay a hundred, $150 a year in real estate taxes on the vacant properties that you own, the City can't go after you. But if we charge them $1500, $2500 for trying to destroy our neighborhoods, maybe they'll sell to it somebody that wants to fix it or at least they'll fix it themselves. (Applause.)
Good morning, Mr. Saidel. I support the -- I signed on to the Bill that was introduced by Council President 28 Finance Verna and Councilman Nutter last week which basically will call for the ten percent cap in any given year. While I welcome the opportunity to hear testimony on that, I personally think that maybe -- and I expressed this to Councilman Nutter -- that I might like to see that even lower. So my question is, in your opinion as the City Controller, if we were to enact legislation that would take, basically, part of Bill 490, of the bill that says to the Mayor to instruct the Revenue Department to send out tax bills at the 2001 rate, and we included in that package, in that Bill or amended the Bill for a two percent increase, something that would reflect the five-year plan, what's your opinion on that? Because what I'm looking at is, basically, sort of like a revenue neutral type of legislation, where in any given year we won't just be reassessing properties at an arbitrary percentage, notwithstanding whatever the BRT believes that the property should be assessed at; but overall, that it's more uniform across the 29 Finance City if we were to do something that says, like I just mentioned, for this year do a bill that freezes it at 2001 for the current year, but add in a two percent increase, if that's what we anticipate the revenue increases to be in the five-year plan going forward. What is your opinion on that?
No; I would support that. I think that that... You know, the two percent is in the five-year plan, and we wouldn't have to go back and change the five-year plan and submit it to PICA and all the other regulatory authorities. But I think what's important is that if Council sees fit to do that, and either the Mayor signs or you do it through an override, there must also equally be a commitment to change the underlying problems that we face. If we don't face the underlying problems of the large discrepancies on assessments and the large discrepancies on market value, and I think help the people in this room and the one-and-a-half million people that we all collectively represent, then all we're doing is 30 Finance we'll stalling the inevitable where people will leave. I mean, there was a lot of courage in Council in the beginning of your session last year in which you reduced the wage taxes, you reduced the gross receipts tax, you effectively began a process to change how we tax people. Well, if you think about it, you reduce the wage taxes, and then you hit somebody with a real estate tax that is onerous and outrageous, then where are we going? So until we change the underlying proposition of how these assessments are made and to make sure that they're equitable and transparent, and people understand where it comes from, I think that it would be for naught. But if you couple that with the bill 19 that you had just mentioned, with a marginal increase that people can understand -- everyone knows inflation went up two percent -- then I think that that's a good process and a good beginning point.
Thank you. I just want to make a comment. Either in your 31 Finance statement or in your off-the-statement comment, you referenced about how we penalize people for reinvesting in their home and making improvements. As you know, we introduced legislation several years ago. I actually introduced it, and it was co-sponsored. And it ultimately passed unanimously in Council, where it is now possible for people to add an addition, make an improvement, reinvest in their home which basically is a reinvestment in the community, and the entire Philadelphia community benefits; whereby those folks would not be reassessed for the value of the improvements for ten years. And it was our way of basically thanking people for not leaving, and giving them a reason to stay by not penalizing for making those investments. And what we're faced with today -- and this is really just a comment on my part -- by way of these more recent reassessments, is it dismissed everything that we were attempting to do. And I'm quite embarrassed now when I go to community groups to have to explain now why 32 Finance all of a sudden as a result of what people have done in their respective neighborhoods, with little if any Government intervention, because they have made their neighborhoods a better place we are now penalizing them for doing those improvements. And we had nothing to do with Government, for the most part. So I agree with you that this is not a fair way of doing it, and we have to find a better solution to the problem. And that's what these hearings are all about. And all we're getting from the Administration, and as recent as yesterday from the Mayor's mouthpiece, Mr. Keel, who I have never had a conversation with, is that our theories are stupid and absurd. And I take offense to that, especially coming from a man who's the highest paid City official -- City employee, who doesn't even live in the City of Philadelphia and doesn't have to pay real estate taxes. (Applause and cheers.)
For him to tell us, the elected officials who are elected by the 33 Finance people in this room and the rest of the people in the City of Philadelphia, that our coming forward with proposed legislation that may ultimately find a solution that is acceptable to the people we represent, and consider that and label that stupid and absurd is a disgrace. And I find that to be offensive, coming from a spokesperson for the Mayor of the City of Philadelphia, and I'll repeat, who doesn't even live in the City of Philadelphia. (Applause.)
Good question. Councilwoman Tasco said, does he have a Business Privilege Tax? We'd like to investigate that as well. Because he's actually doing consulting work on the side. And I like when people from outside the City come in and tell us what we should be doing, when they don't want to live with us. Something's wrong with this picture. Thank you. (Applause.)
Thank you very much. Councilman Nutter. 34 Finance
Tell me how you really feel, Frank. That's all I want to know.
Mr. Controller, let me ask one question with regard to the land tax issue that was raised earlier. Has any analysis been done or have you taken the City... the full City tax file and applied the land value tax concept to the entire City tax file, and made a determination as to what the result of that would be, any comparison between a real live taxpayer's bill as anticipated by the 2003 proposed assessments, as compared to what the land tax would do for that same taxpayer? Do we have any information that would show --
We have a comparison that was done last year. And I'm very proud that you, Councilman Nutter, were there at the 35 Finance announcement at the Chamber of Commerce last year, when we put out our taxpayer analysis. That was based upon last year's, in which we found that the comparison and the sampling that was done, that 80 percent of the residential homeowners in Philadelphia received a tax reduction. We have not done any additional analysis based upon these massive increases, but obviously if 80 percent -- based upon last year's assessments would have had a reduction of a hundred dollars or more. I can't imagine it being any less than 80 percent, which is why we're moving forward to do that sampling, using Drexel and a variety of other analysis, along with the BRT that are involved in it, to do a sampling that's representative of the City of Philadelphia, and to show how the different percentages of homes and their relationship to our neighborhoods will be affected by a change in the evaluation of taxes with an increase on land taxes and a diminishing on the capital improvements that are made on that land. 36 Finance
All right. Well, I'm going to admit that I heard what you said. I'm not exactly sure -- and it may be my lack of understanding -- that I completely understand what that means. So, let me ask a question a different way.
We have an analysis based upon last year but not the new increases.
No; I know that. If I gave you an address, and last year's market value and the proposed market value for this year, you could tell me what that person's tax bill 14 would be on an individual basis?
Okay. And is that computation available somewhere, that people would be able to do it for themselves?
Certainly. And I'll have my office supply that with you today. It's also on our web site.
It's on your web site. So people can just plug in the information and they would see what the difference would be?
And for last year, now, what -- whatever last year's -- I guess when we talk about last year, we're really talking about 2002?
Do you know what the increases from 2001 to 2002 generated, in terms of revenue for the City?
Do you have any idea, if we had gone to the land tax in 2001, what the revenue generated would have been for the City in 2002?
If I remember correctly, it was almost revenue neutral. It was a difference in the manner in which we tax, not in the total revenue stream.
Can you give us a sense of, from your perspective, why this hasn't either been implemented before or kind of caught on like wildfire in the past?
Well, we've all been in Government for a long period of time. And it has 38 Finance been brought up a number of times in past history. But unfortunately, many times it takes an emergency situation for there to be a dramatic change in the way Government functions.
And what would changing to the land value tax do with regard to where properties would be valued at? Presently apparently the system is a goal of, I believe, 71 percent of value. What would that do, with regard to the actual value of the property in the City system? Would they go to a hundred percent? Would we keep doing it at 71 percent? Does that not matter any more? What's the difference?
What we had proposed changing was, where the City values the capital asset on the land at 75 percent of land, to 19 percent; that we go to a 50/50 split; and then 20 move forward from there, which would mean that the 21 land would be valued at 50 percent, based upon its 22 best usage, and begin to diminish or accenting the 23 increase in value on the residents or the 24 commercial property that sits on top of that land. 25
Thank you. Mr. Saidel, I know that we're focusing on a long-term solution to this problem. In your opinion, what do we do to address the short-term? Because people that are sitting here I'm sure are here because their taxes have increased exorbitantly. In your opinion, what do we do in the short time?
I think that the initial bills that have been brought before you that there have been hearings for today and next week is a beginning step. Either freezing it and not having made a judgment call on if you want to increase the percentage or not. But certainly freezing what we had before would be a good step, as we all get together as meaningful people to change the method upon which assessments are made. Now, the biggest problem is that there is discrepancies between neighborhood to 40 Finance neighborhood, block to block, house to house. And the only way that the authority of Government is listened to is if people believe that Government is open and honest and consistent. As you and I both know, when I first got married and had children, I bought a house. I worried about what that monthly payment would be, more than whether I had a mortgage within 30 years or 40 years. When you increase by four hundred, five hundred percent someone's real estate taxes, that does not necessarily mean that they're going to make more money to pay that real estate tax. It's not like an income tax. (Applause.)
And I think it would be insane for Government to allow real estate taxes to dramatically increase, force people to sell their homes because they can't afford to live in the house that they fixed up to make it more valuable in the first place. We need to help our neighborhood. (Applause.)
So, I think what you're 41 Finance doing now, Council President, is a beginning, as long as we all get together as right-thinking people and fix the system that is equitable for all throughout the City of Philadelphia, and then we can move forward and run the Government as efficiently as we possibly can.
Thank you very much. The Chair notes that we saw Representative Babette Josephs in the room, and we certainly wanted to acknowledge her presence and thank her for being here. 42 Finance
Thank you, Madam Chair. Councilman Kenney called a few minutes ago. As you know, he co-sponsored these bills. He's not able to be here this morning. He's en route back. He may get here by the end of the day. But he wanted everyone to know that he supports these bills, and he will be at the two hearings next week on the 1st, and I think it's the...
At this point we have them scheduled for the 1st, four today and four next week.
Thank you. The Chair would like to call Mr. Glancey forward. And as we said, we will have a thorough discussion next week with him next 43 Finance week. But we wanted to just ask him to give a brief description of how the assessment process works. I know we're scheduled to have our hearing next week examining the whole process, but for the purposes of today we just wanted kind of an overview.
And we'd be very satisfied with that. And then we'll ask Miss Kammerdeiner to come forward.
Thank you, Madam Chairman. I really appreciate the opportunity to make a few comments today. And as you indicated, I'm going to have substantial written testimony for this Panel on Tuesday, October 1st. First of all, I'm 58 years old. I've lived in the City for 57 of those years, so just get that on the record. And secondly, what I'd like to do --
Councilman Nutter says, where were you for the first year of your life? (Laughter.) 44 Finance
If you don't mind, Madam Chairman, what I'd like to do is to take a very short brief statement that I am extracting from the testimony we're preparing for Tuesday, October 1st.
And make that part of the record this morning. And I would also note that in the room is Harvey Levin, who is a Member of the Board of Revision of Taxes. I don't know if Charlesretta Meade is here. She may be. And Robert Nix is probably on his way. He is the Secretary of the Board of Revision of Taxes.
Thank you. Ladies and gentlemen, recently many residents have expressed concerns about the fairness of the recent reevaluation. The problem, as we see it, is that in any assessment system, regardless of how much fairness is built in, it seems inherently unfair when your own property in a desirable area and the 45 Finance market value of your property skyrockets. Our current real estate market has had dramatic and volatile increases during the last five to seven years in the locations in our City that are the most desirable. If the BRT does not adjust market values to keep pace with this market, equity, fairness, and uniformity are diminished. Inequities in valuation ultimately become inequities in the real estate tax system. Under the laws of the Commonwealth of Pennsylvania that govern the operation of the assessment boards, if we were to ignore the market, and freeze assessments at last year's level, we would in my opinion, by definition, institutionalize all the inequities that we attempted to cure with the proposed 2003 equalized values. Having said all that, I ask each of you: How fair to the citizens would it be if this Board ignored the rising market in the face of its own sworn responsibilities under state law? Not very fair. And I think you would agree. Our goal is to make sure that the market value of any given 46 Finance property is determined strictly by the sales of other similar properties. We believe the removal of subjective judgments, to be replaced by objective standards, brings fairness to all property owners. Now, this is very important. In truth, the fairness of our assessment system is in conflict with what many people in the City want out of any system that results in a tax bill. People are looking for predictability. The problem is that there is nothing very predictable about real estate values. The real estate market, like all markets, is subject to volatile swings in value from time to time. Under current law, the BRT is mandated to follow that movement of the market. And this, of course, builds volatility into the process. There is no certainty that the next hot neighborhood won't be the one that you live in. The one thing that is predictable is that values rise and fall, different rates, 47 Finance different neighborhoods, different streets, and even as the Controller indicated, street by street, block by block, house by house, because that's what real estate markets do. The other thing that is certain is that the BRT must set that value wherever it takes place and whatever are the market conditions. So the question is, where do we go from here? And with all due respect, I'd like to make a suggestion concerning the bills that are before us today. I believe we must re-define the relationship between property values and assessments and revenue raising. My duty is to value all the real estate property in the City. Your duty, and the duty of the Administration, among a host of other things, is to create and fund a budget for the City and School District. I don't want your duties and you don't want mine. I think the bills introduced by Councilman Nutter, Council President Verna, and as I understand today from Councilman DiCicco who's looking at that type of bill, I think they are all 48 Finance responsible attempts to separate, to unbundle, to unbind, if you will, the valuation function from the revenue raising function. The BRT is in the business of real estate valuations. We should not be in the revenue business. That's your responsibility, along with the Executive Branch. Let's work cooperatively to see if we can't unband those two functions. And let me just finish by saying that I too think we are at an historic moment, where if people of good will, the Council, the Administration, the BRT, can get together and work on this specific problem in a way that I think all of us can win, but most particularly the winners would be the folks in this room who are not part of the Administration or Council.
The citizens win. Because if we can somehow make it possible, as I said, to unwind or unbind the valuations from the revenue raising, I think we would have gone a long way in solving the present crisis that we seem to be facing today. Thank you very much, Madam Chairman. 49 Finance I'll be happy to answer any questions.
Thank you, Madam Chair, and good morning Mr. Glancey.
I've said this repeatedly in the press. I have announced it at the town meetings --
-- that I've been conducting. You and I get along really well.
Your office has always been very responsive to the needs of my office. And I suspect and have to believe that going forward, when we file the appeals, that we'll get the same level of cooperation that we have in the past. And I particularly want to thank you for your comments which you've just basically 50 Finance repeated, that were in the paper today, where you do believe, as a representative of the BRT, that what we're proposing, although we may not -- they may not be the final end result of what these hearings will produce, you do believe that this is responsible -- a responsible way of addressing this problem. And as a member of the BRT, I want to -- I think that it's important that we hear that from you. That's the kind of rhetoric we'd like to be hearing from the second floor, instead of the absurd and stupid things that we're hearing. And I'll probably repeat that a million times before these hearings are over, because I do find that very offensive. But I want to thank you for those comments, and look forward to working with you in the future. I just did have one or two brief questions. I think in your statement, or your testimony, you mentioned the fact about reassessments. Does the BRT, in fact, reassess every property on an annual basis?
Would it not have been -- and this, again, is not meant to be critical. Would it not have been a more reasonable way, if you will, over the last several years -- and I understand that in certain sections of the City market values have increased. Resales have increased dramatically. But when a homeowner receives in the mail an increase in excess of a hundred percent, and as high as three hundred percent in one year, we wonder, we question: Why had there not been a gradual increase in the reassessments during the period in time when the market values were going up? For all intents and purposes, a neighborhood doesn't go up three hundred percent in one year. I don't think so. Although, it gradually may get to that point. And there are some exceptions. There are some exceptions. But the sticker shock, if you will, to open up the envelope -- and in many cases in my district -- which I believe you live in my District as well.
Where people had received increases last year. Example: A couple moved in from Manhattan. And they stopped me as I was doing some political things in their neighborhood. And they said to me, you know, Councilman, we're from New York, Manhattan. We understand the high cost of living. New York has probably some of the highest taxes in the world, if not the nation. And we moved to Philadelphia because we thought it was really a neat place to live, a more affordable place to live, a much more convenient, and all of the great things that we try to promote Philadelphia to people who are thinking of moving, and tell them why they should stay, and also to come in who have not lived here. She said, in the last year our bill 20 was about $7500. Almost immediately after we moved in, our taxes went to $9500. She said, we accepted that. That's the price of doing business. This year, her taxes were increased to the tune of about $11,000, which makes her real 53 Finance estate taxes $20,500 from $9,500. And there is where, I think, the crux of the problem is. The one fell swoop, you know, without any warning from -- And it's not your job to warn us, obviously. But I think the Administration, although they deny it, had to know what was happening. We did get warnings that increases were coming up, which we do just about every year, but no one anticipated, you know, the hugeness, the massiveness of these increases. So, going forward with these hearings -- and again, I want to thank you for your comments -- that those are the things I think we need to figure out.
You know, gradual increases, you can budget. You can anticipate what it will be the next year, the following year, five years out. But a $10,000 increase in one year, regardless of what your income level is, I think is counterproductive and doesn't help us in any way. Thank you. 54 Finance
If I could just respond very briefly, Councilman, I think to answer your question, of course it's sticker shock when something like that happens. And as you know, there were 270,000, roughly, notices that were sent out this year. Of that 270, I would hazard a guess that approximately 230 or 240 did, in fact, have a gradual increase. There are maybe -- I'm guessing, roughly because I don't have it in front of me today -- roughly about 25,000 to 30,000 properties -- And that's a lot, that's a lot of properties -- that in the last three years, because these are the three years' analysis that we used, the sale prices of those homes in areas that are very desirable, there may have been sales that have been two and three hundred percent more than what they were in '98 to 2001. What happened was, is that we put no 25 caps on our own process, our own computer-assisted 55 Finance process. We have in the past. But the market was so very hot I did not want to run afoul -- and I'm not going to get mind-numbing about this -- I did not want to run afoul of what we must do under the laws of the Commonwealth of Pennsylvania. So, I know this may sound silly and it may not be acceptable, but this is really the answer. In those areas where you saw those incredibly high market value increases, one hundred percent and more, in a sense, if you compared that to what the sales were, they were gradual. Now I know that's a lot of money, but they were gradual.
I understand that. And most of the folks that I've talked to --
-- that things have to change. And that in a lot of cases their houses were undervalued. They understood that.
You know, I understand that real estate taxes, like all other taxes, is the fuel that drives the Government.
I understand that. They're not going to go away. But again, the theory is -- and you'll understand that it's not stupid and absurd -- is that we need to figure out a better and more equitable and uniform way of doing that. And I look forward to working with you.
And I think that's why we talk about unbundling what we have here, in sharing responsibility.
Thank you. Councilman Nutter. And then Councilwoman Tasco.
Thank you, Madam Chair. Mr. Glancey, Let me just ask a couple preliminary questions. Now, the Board... There's seven members on the Board.
They're staggered. And the appointment process is through the Board of Judges?
Yes. If you want, I think I might even have the information. The first seat that would come up would be on January of 2004.
And I assume or make the assumption that unless a member retires or otherwise leaves, members only leave for cause or can only be discharged for cause?
We have 133 Civil Service employees; and of that, professional evaluation staff is approximately 43.
Yes. I'm sorry. I'm 59 Finance speaking just about the residential areas. About 43 in the residential areas.
So there are 43 assessors for residential. And how many for the -- Is the other category commercial and industrial?
Yes, the other category is commercial and industrial. We have 11. We have a GIS Department, and they are evaluation as well. We have five. And...
I got the acronym. What do they do? They do evaluations also?
Councilman, it wouldn't be fair if I didn't also mention that there are some supervisors who supervise these folks, but also have...
Well, they do, because they also do evaluation work. And there are of 13 those.
Okay. Now, so let me go back and make sure I have these other pieces of information. I'm merely trying to understand. I'm at a very base level of information here. And you've been at the Board since...
Okay. I'm going to ask that you not use your years of 5 experience in a disadvantaged way against me. 6
Okay. Now, you 9 have 43 assessors for residential. Now, is it my 10 understanding that there are 485,000 residential 11 properties? 12
There are 13 approximately 450,000 residential properties. 14
Well, they switch. 17 People demolish homes. People build homes. 18
Well, the rest, we have a total universe of approximately 567,000. So the balance would be commercial/industrial, vacant land, et cetera.
Now, the State Statute seems to indicate that the assessment is supposed to be annual; is that correct?
Yes, sir. It doesn't mean everyone's changed. Everyone is looked at.
I understand. Now, how do the 43 people assess 450,00 properties?
It is mostly done through a computer-assisted mass appraisal process. And they are also out in the field looking specifically in their areas of responsibility to the exterior conditions of properties. We do not go inside properties, obviously.
I understand that. 63 Finance Now, the City is broken up into Assessment Districts?
We have Assessment Districts, and then we also have what we call -- and I've shared with you before -- geographic market areas within those Assessment Districts.