And just by the simple math -- and it might be off by a couple -- but I mean, each assessor is essentially responsible for about ten thousand properties?
Okay. And how many would you estimate the assessors actually see?
I don't know. I mean, I will find that out and have it for you by the 1st, but I don't know that today.
Well, tell me a little bit about -- Now, you had a term and it went by me too quick. Computer-assisted... 64 Finance
Should I do it in mind-numbing detail or the quick way for today?
For today you can leave me with a bit on my mind, and next week you can take the rest of it.
The way it works is that... I guess the best way to describe it is that we as an organization divided the City into roughly 647 geographic market areas. We figure -- and the best practices in the U.S. have also stated -- the smallest unit of comparison is the best unit of comparison. So that is, we try to put areas where there are like properties together with other like properties. And within that grouping of 647 geographic market areas, we ask our computer to analyze three years' worth of sales. Those sales for this year were from November of 1998 to November of the year 2001. Roughly 41,000 sales were analyzed. Those sales are then compared with 65 Finance all of the GMAs in our system. And what happens, in a nutshell, is that values are extrapolated for homes that didn't sell from homes that did sell. It is a sales comparison analysis which, again, we believe is the best way to try to value properties. What do like properties sell for? And in a nutshell, that is what we do.
Now, is that in accordance with the Statute that talks about all property within the County now or hereafter made taxable by laws shall be valued by the assessors and assessed by the Board at the actual value thereof? And it talks about three methods, namely, cost, comparable sales, and income approaches?
Excuse me, one minute, Councilman. Let me note, too, that next week is Mr. Glancey's time. We only wanted him to explain for those who are here in this Chamber what 66 Finance assessments generally are. But in terms of detailed questioning, Councilwoman Tasco, a lot of members here have a lot of questions. But we didn't want to get really into deep detail, but to deal with that and that whole issue next Tuesday, so that we can hear testimony on all the resolutions we have today -- or all the bills, excuse me, that we have today.
If I can have just a couple other questions, Madam Chair, and then I'll come back. Let me ask you this question, Mr. Glancey: Who does the Board report to?
Well, we're created by the Commonwealth of Pennsylvania, so I suppose we 67 Finance are accountable to the laws of the Commonwealth of Pennsylvania. I mean, I don't want to be glib, but we certainly are accountable to the people of the City of Philadelphia. But to answer your question specifically and legally, I believe that we are legally accountable to the Commonwealth of Pennsylvania, and we are certainly emotionally accountable to Council, to the Administration, to the people of the citizens of Philadelphia.
I guess my last question in this area, putting aside for a moment the emotion, if there were an organizational chart...
...I mean, from what box would a line be drawn to connect the Board of Revision of Taxes to whom?
Right. I think it depends on what the question is. I mean, for legal authority, I believe it comes from the State Legislature. For funding, it certainly comes from City Council. I mean, those are two examples that I can think of. 68 Finance It isn't that I am an appointee of the Mayor and I'm responsible to the Mayor, because I'm not. I'm independent from the Mayor.
I understand that. But is it also clear that there is no one entity at the moment, the way this system is presently set up...
...that directs or oversees what the Board does and how the board functions; is that correct?
Thank you, councilman Nutter. Councilwoman Tasco.
Yes. I'd just like to ask one question and then make just one comment. The commercial sites are being reassessed this year?
Sure. We must look at them every year, Councilwoman. And actually, I think to answer your question specifically, sometime after October 1st there will probably be four or five thousand commercial and industrial notices being sent out.
I just want to say something about trying to resolve this issue of how we tax, because while we may not have direct jurisdiction I think it is our responsibility to try and find a way to make it fair and have a discussion. Open discussion brings about sometimes an action that we can come up with a fair way. Go back to Jonathan Saidel, the Controller, on the land value tax, because I had my staff pull up a building that is an eyesore in my district. And I looked at their estimated values on $14,000. They're only paying $370, and no increase. My taxes have gone up $15,000.
In value. And it's unfair. You know, my neighbors and I fix up 70 Finance our homes. And we did some work. One of my Committeemen said to me, you did your yard and our taxes went up. But this guy's allowed to -- And we can't get him -- We can't take the property. He won't improve it. It sits there. He doesn't get a tax increase. But people in the neighborhood have to pay increased taxes and contend with the eyesore that sits there every day. (Applause.)
And we can't do anything about it. The City... So, when Mr. Keel says for us to try and do something is stupid, I agree with Councilman DiCicco. I find that disheartening. And to say that to those of us who are charged to try to find a way to relieve a problem that impacts on the people that we represent, as well as the Administration represents, instead of trying to set up a wedge or create a battle where there is no battle, we should all be looking at a way to relieve the problem because it is unfair, and it is our charge 71 Finance to try and do something about it. Well, this whole thing gives me great reason to look at a land value tax proposal because if I can get to this guy and other people in my District who allow their land and their buildings to sit, they don't get a market -- they don't get an increase in taxes. But those of us who pay taxes, improve our properties are penalized for doing that. So I think that the debate is on time. I do think we have a right to do something about it, at least try to do something about it. And I appreciate you're saying you're willing to work with us. We just have to now get the Administration to say that we all have to come to the table and find a solution to this problem. Thank you. (Applause.)
Thank you very much. If it is all right with this Committee, we would like to move forward. Is that okay, Councilman Nutter? 72 Finance I know we have your bill next week on all BRT and everything that entails, but we would like to have the other bills that are on the calendar discussed today.
That's certainly fine with me, Madam Chairman. I assume that the conversation is going to be a fairly fluid one between and among all these issues. But I think any time -- Certainly, Mr. Glancey is here. Not that he's a stranger to us or is reluctant to come. But under the circumstances -- And I don't want to belabor him. So if the Chair would at least allow two other questions, I'd be more than willing to let him go. I know he would joyfully like to go over to the other side and just listen to the rest of the proceedings. But if I could ask him two more questions.
Thank you. Mr. Glancey, back where we were with my last question. Are you aware of any other jurisdictions that have what we call a Board of 73 Finance Revision of Taxes, what other jurisdictions often call a board of property assessment appeals and review in other counties across the Commonwealth? Are you aware of any other circumstance where the board basically doesn't really report to anyone or have an oversight entity?
Or direct involvement by the people who are the elected officials in that particular jurisdiction?
I think the primary model that I have seen, not only in the Commonwealth of Pennsylvania but in other counties throughout the country, is an office of property assessment, whatever it's called. But that's what it really would be, an evaluation department and then a separate appeals office. Evaluation department is usually under the control of the executive, and the appeals is a separate and different function that may or may not have any direct line authority from somebody, because their job is to appeal those 74 Finance assessments. That's the model I have seen mostly. I do think we are -- have somewhat of an anomaly, where it comes to the way that we have been created. The Act that created us was passed in 1939. And in 1939 I believe that the founders, whoever created this Act, probably thought it would be a good idea to set certain boundaries between a tax assessment board and legislative body and an executive branch because of the buffet of political winds. So I there is some, I think, some good reason for that, but there are also... And Councilman, again, not tooting my own horn, I think there were probably -- there could be somebody sitting in this chair who wouldn't want to cooperate with you, who wouldn't want to cooperate with the Administration in some way. Then I think you do run into a problem, if you have those kinds of situations. However, we believe that cooperation in attempting to -- And again, which I believe is a historic moment for us to get to the heart -- to the meat of the coconut, if you will. This is the 75 Finance best way to do it.
I understand. I don't have any qualm with your level of cooperation.
-- more a direct line of accountability. And no, we should not, as elected officials, determine how the assessment process is done. That is set in the Statute and should be done by professionals. But there are operational issues --
-- and governance issues that actually this Government could seek to impose by way of the City/County Consolidation Act, that allows this Council to put together a system that, hopefully, the voters would support at the ballot, and that would be the new system here in Philadelphia. So we are not, unlike what we've read, I think, in some news accounts, we are not 76 Finance completely powerless in this particular area or to sit as lemmings to wait for someone to lead us in a particular direction. We actually have the ability to do certain things, if we choose to take that responsibility and do something with it.
...that what you are saying is a paragraph or kind of indicating -- very similar to a paragraph that I had written in draft testimony which I'll present to you next Tuesday. I believe that where it comes to the assessment function, that is a bailiwick or a line which you cannot cross.
However, there are standards. There are other things that you may even want to legislate or certainly have 77 Finance administrative rules that concern the governance of all of these kinds of institutions. And we're in favor of that.
One last question, which is the second question. There's been reference made to a proposed payment plan under the... in light of all that has come about. I have not seen the document. I've read, I think, in both papers varying accounts of how this would work. But my best understanding is whatever your assessment is for '03, you would pay the 'O2 amount on your due date. And then the rest, I guess whatever the amount of the increase is, you would pay through December. Is that your understanding?
I don't know, Councilman. If I would just suggest that the next witness will be the Revenue Commissioner, and she may better be able to answer that question.
All right. And I will ask her. And I will tell her that you told me to ask her.
Thank you very much, and thank you, Councilman, for deferring your questions.
Thank you very much. We'll look forward to it. Nancy Kammerdeiner, Commissioner, Department of Revenue. Thank you. Do you have any written testimony for us? Thank you. Could we have a Sergeant-at-Arms to collect the testimony? And let me thank you.
Good morning, Chairwoman Blackwell, and Members of the Committee on Finance. My name is Nancy Kammerdeiner. I'm the Revenue Commissioner for the City of Philadelphia. I am here to testify on the various real estate tax bills that you have before you on today's agenda. In addition, although Bill Number 020579 is not scheduled for a hearing until 79 Finance October 1, my testimony will refer briefly to it as well, given its direct relevance to the issues immediately before us today. I expect to be returning on the 1st of October to testify again when that Bill formally comes before this Committee. The Administration recognizes the spirit in which these bills have been drafted, and shares many of the concerns that you have raised about the ability of our poorest citizens and those on fixed incomes to pay the property taxes on their homes, especially if those taxes increase significantly. We also share your concerns regarding homeowners who are facing steep increases in assessments, though they fairly reflect the value of their homes, but they have been unprepared for these steep increases. We have concerns about the bills before you today, but before I address those concerns, I would like to discuss reactions that the administration supports. We support the following: An approach that is consistent with Bill Number 80 Finance 020579, which would authorize the Department of Revenue to grant partial or complete deferrals of annual increases in excess of percent for 5 qualified property owners, with the amounts 6 deferred until ownership of the property changes 7 hand. 8 This Bill would accomplish two 9 goals: Protecting homeowners from sticker shock, 10 and over the long run, ensuring that the City 11 receives tax revenues consistent with the value of 12 the properties. 13 An expansion of the income 14 eligibility requirements for protection of senior 15 citizens against increases in their assessments. And third, the implementation of an installment plan to allow taxpayers to pay their real estate tax over a period of time, to ensure that taxpayers do not have to make large increases in their payments all at one time. Before I convey the Administration's reasoning with respect to each bill, I would like to convey a few points that apply across the board. I'm sorry. I thought I was at the mike. My apologies. 81 Finance First, it is important to emphasize 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 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. Second, 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 82 Finance changes to the City's taxes should be done comprehensively so that those changes can be part of a larger strategy to make the City more competitive. That larger strategy must include an assessment of the appropriate level of services for the world class city and an evaluation of whether any proposed tax measures would be self destructive. Third, these bills come at a time when the City's five year plan faces a great many real and growing threats to a balanced plan.
As you know, the plan contains $178 million in future Government efficiencies, but it did not include funding for the salary increases in the recently announced Police arbitration award or the upcoming Firefighters award. And it continues to be threatened by the sluggish economy. Our pension fund, like similar funds across the nation, has taken a beating because of the downturn in the financial markets. And as a result, we will be forced to increase our annual contributions to the fund in order to ensure that it makes the appropriate payments to retirees. 83 Finance Fourth, we do need to discuss appropriate safeguards for those persons for whom rapidly rising assessments are a true hardship. And we do need to be assured that the assessment process is equitable. At the same time, it needs to be said that rising assessments that reflect higher market values, based on recent arm's length home sales, are a sign of progress for the City and certainly preferable to declining or stagnating assessments. Fifth, many of the strongest advocates for Wage and Business Tax cuts defend that position by pointing to the supply side effects that such cuts will generate. The argument is that the local economy will grow, leading to growth in our tax base, and in turn yielding critically needed additional revenues without having to increase underlying tax rates. As former Councilman Ed Scwartz has put it, one can't have it both ways. We can't rely on the supply side effect to replace lost revenue through higher property values and then 84 Finance negate the supply side revenue increases. Now let me turn to our reasoning in determining what the Administration will support. In looking at what action to support, the Administration wanted to strike a balance between ensuring that taxpayers are not burdened with dramatic increases in their taxes, and ensuring that the City receives an amount of taxes that is consistent with the value of properties. If the City does not receive that level of taxation, it will become more and more difficult to deliver the services that citizens have come to expect. Aside from the financial challenges we face, there are also legal impediments to the implementation of these bills. A September 24, 2002, memorandum from the City Solicitor with regard to these real estate tax bills has been provided to each of you. The Solicitor has stated in part that in his opinion each of the bills that attempts to interfere with the assessment process is unlawful, particularly with respect to the current fiscal year and particularly with respect 85 Finance to the tax authorization of the School District. I direct you to his memorandum for further detail. Representatives of the Law Department are in attendance at this hearing and are available to answer any questions that you might have about this legal opinion. I will now address some of the particulars on the various bills. First, let me take a look at Bills Number 020490 and 020491. They should be viewed together. The Administration opposes both of these bills. They would require both the City and the School District portions of the real estate tax to be levied against the assessed values established by the Board of Revision of taxes in 2001, when calculating the real estate tax for 2003 and beyond. This effectively freezes the real estate tax at 2002 levels for both the City and the School District. The City originally anticipated a growth of approximately two-and-a-half percent for fiscal '03, and the School District uses the City's assumption in developing its budget. A freeze would mean that there would 86 Finance be no benefit from the real increase in property values, no supply side increase to offset the impact of Wage Tax reductions.
In fiscal '03 it would mean approximately $10 million less real estate tax revenue for the City and $14 million less for the School District than was forecast when those budgets were approved, a reduction that the City and the School District can ill afford at this time. In addition, the reduction in the School District millage would violate the spirit of the City's agreement with the State on school funding. One of the points that the City made was that by shifting millage to the School District, we were providing the District with the benefit of growth in real estate assessments. These bills would take away that benefit. It should also be noted that the Use and Occupancy Tax collected for the School District is based on the assessed value of the property. As a result, any freeze on the value of business properties would adversely affect this 87 Finance tax as well. U & O tax collections have been stagnant as a result of the economy, and a freeze on assessments would remove any natural increase from a rise in property values. I should also reiterate that the City Solicitor's opinion is that these bills would not be defensible in Court. Let me move on to Bill Number 020493. This Bill would expand the number of senior citizens who are eligible to participate in the Senior Citizens Low Income Special Tax Provisions Program, generally known as the Senior Citizen Tax Freeze Program. Under this program, the assessed value of the property increases, but any tax increment that would have resulted from this increase is forgiven. At the present time, eligibility for this program is tied to the State's Pharmaceutical Assistance Contract for the Elderly or PACE income guidelines. That's basically an annual income of less than $14,000 for a single person or $17,200 in combined income for married persons. 5 million. Bill Number 020493 would expand the eligibility criteria for the tax freeze program to include income levels designated in the program that the State operates called PACENET. This would include the annual income of not less than $14,001 or no more than $17,000 for a single person, and not less than $17,201 nor more than $20,200 for the combined annual income for married persons. The Department of Revenue was advised by staff that administers the PACE program that approximately 3,100 people who live in Philadelphia County are currently enrolled in PACENET. We don't know how many other senior citizens might be income eligible but haven't enrolled in PACENET. That would be the additional population that this bill would address. However, we understand that the General Assembly may be considering expanding 89 Finance eligibility for the PACE program in order to prevent low income senior citizens from losing prescription benefits. Doing so would automatically qualify these seniors to participate in the City's Senior Citizen Tax Freeze Program, since the criteria are the same. It's essential that Bill 020493, which would not take effect without State enabling legislation, be drafted consistently with the State's approach. And the Administration would welcome the opportunity to work with Council in ensuring that outcome. Along the same lines, it should be noted that the Administration is supportive of measures like House Bill 2442, which the house approved unanimously. It would provide State funded rebates of up to $500 to offset property tax increases for any Pennsylvanian who qualifies for the poverty exemptions in the State's Personal Income Tax. Let me move on now to Bills 020537 and 020538. These Bills should also be viewed together. They would limit the assessment increase in any one year to ten percent by 90 Finance amending the definition of taxable assessed value used in calculating the real estate tax for the City and School District for 2003 and subsequent years.
As proposed, the taxable assessed value would be the lesser of the assessed value as provided by the BRT for that year or 110 percent of the taxable assessed value for the property for the prior tax year. The Bill would give some specific examples on that for fiscal year -- excuse me -- for tax year 2003, where the taxable assessed value would be the lesser of the assessed value returned by the Board in 2002 or 110 percent of the assessed value returned in 2001. For the School District, Bill 020538 specifically states that this definition would apply to any real estate taxes imposed by the Board of Education, whether authorized in the Philadelphia Code or otherwise. And otherwise, I would assume here, means under State legislation. Although these bills would constrain growth in assessments, and therefore in the amount of real estate tax levied, the impact would not be 91 Finance as severe as that produced by the total freeze in assessments at the 2001 level as proposed by bills discussed earlier. The impact would likely be substantial, however, and it would be permanent. These bills would not defer payment, but rather by compelling a phase-in of increases, would permanently remove potential revenues from the City's coffers. The Administration is concerned that the bills, in a good faith effort to help those most in need of help, may also be assisting those who do have the wherewithal to pay the taxes as they fall due. Further, the City Solicitor's opinion with respect to Bill 020537 concludes that it's not lawful with respect to the current fiscal year. And his opinion with regard to 538 is that it is not defensible for any tax year because of Act 46 constraints. With all these concerns in mind, we believe that the appropriate forum for these bills is the Tax Reform Commission, where they can be evaluated in their proper context. 92 Finance Finally, there are a number of programs, including a brand new administrative initiative announced yesterday, that are in place to assist property owners in paying their real estate taxes. And it may be worthwhile to summarize them here. Revenue regularly works with taxpayers who owe delinquent real estate taxes to develop payment agreements that are affordable and can be maintained. Many of these are low income agreements based primarily on the ability of the taxpayer to pay. Low income taxpayers may also enter into agreements to pay their current real estate tax in installments. Applications for this program are included with the current real estate tax bills each year. Income eligibility criteria are based on the number of people in the household. For example, in 2003, a single person with an income of $29,950 or less will qualify for the installment program, while a household of two with an income of $31,200 or less will qualify. 93 Finance Newly approved applicants receive coupon books for eight monthly installment payments beginning in May. In subsequent years, they will receive payment coupon books. If all 6 payments are made, additions that would normally 7 accrue during this period are forgiven. 8 Senior citizens who meet the income 9 guidelines may opt to spread their payments over a 10 longer period of time, up to 20 payments. However 11 it should be noted that if the payments extend 12 into the next calendar year, a lien will be placed on their property for the balance due at year end, and a $20 lien charge would be assessed. As noted earlier, with respect to Bill 493, senior citizens who meet PACE income criteria and who experience an increase in the assessed value of the property that is their primary residence may participate in the Philadelphia Senior Citizen Low Income Special Real Estate Tax Provisions Program. Under this program, the homeowner continues to pay the same amount in real estate tax as they did in the year before, even though the assessed value on their property increased.
94 Finance The tax increment that results from the assessment increase is forgiven and appears as a credit on the current real estate tax bill or is refunded if the full bill has already been paid. Last, we are in the process of developing a new program to address the problems faced by those taxpayers who are not low income but have received steep assessment increases and are unprepared to pay the full amount by March 31, 2003. The details have not been --
Excuse me one moment, Commissioner. May we say, ma'am, and to the public, even though we're in a smaller room, it is our role to listen to testimony before us, and we cannot at the hearing entertain comments from people who want to testify. We can't have that. Excuse me. Excuse me, ma'am. Sergeant-at-arms. Ma'am, excuse me. Excuse me, ma'am. This is not the forum. We cannot -- This is a public hearing. Councilman DiCicco would love to entertain you in his office. He has staff here. We're very, very happy to welcome all of you, but 95 Finance this is not the forum where that is permitted. We welcome you. We're glad to have you. All of us offices and staff who are there. We are very glad to have you contact Councilman DiCicco's office, any of our offices. And we're very glad to talk with you after the hearings. But during the hearing process, it is each Council Member on this Committee's duty to listen to the testimony so that they can properly represent you. This is a formal hearing. We have a stenographer who is taking notes, and the Council Members cannot adequately represent you if they do not hear the testimony. Therefore, even though we're in a small room and we're not in a room where we are gated, where there are gates that separate us, it is our job to listen to the testimony being presented. And we ask that you honor that, so that while in this temporary room -- and it's small and we can reach out and touch one another -- it is our job, nonetheless, to formally listen to all the testimony. And we can't have 96 Finance individual side conversations with everyone who would like to talk with us or who would like to voice their opinion. Thank you very much. We don't mean to be offensive, but we're only trying to do the job that you elect us to do. Commissioner, thank you. Please continue. Thank you.
Thank you. I was describing the new program that we're developing that's intended to address the problems faced by taxpayers who are not low income but have received steep assessment increases and are therefore unprepared to pay the full amount by March 31, 2003. We're still working on putting together the full details on how this will work. But we expect to provide these taxpayers with an opportunity to pay the taxes associated with the assessment increases in installments through December 31, 2003, and to forgive additions to tax that would normally accrue during this period. I should also add that we are also investigating the possibility of implementing an 97 Finance installment payment program for advance payment, something similar to a mortgage escrow plan. And that's in its early stages of development. But that may be something we'll offer in the future. This completes my testimony, and I would be happy to answer any questions.
When you talk about liens, you're getting ready to scare a lot of senior citizens because people don't want liens on their property. (Applause.)
I understand that, but under the law if a tax liability is not paid by the end of the calendar year, we automatically lien. I understand that we may have as much as three years to apply a lien. And one of the things that we will look at is whether or not there's a way to wait and not put the lien on automatically on January 1st. But right now, that is the way that the process and procedure is established in the Philadelphia Code. 98 Finance
Let me agree with the Councilwoman, because when I saw lien, it naturally made me perk up and focus in because if people feel they are making an agreement, that is so there won't be a lien placed on it. Having a lien still placed on it kind of defeats the purpose. So, I agree with the Councilwoman and certainly ask that we consider what we can do in that area, particularly for our seniors.
We are looking at it, and we will continue to at that and would welcome your input. We do have some constraints under State law, in terms of how we can handle that.
And also will they be subjected to the Tax Lien Law, you know, where we sold off all those properties?
That was a one-time event, and so I don't expect that we would be selling liens in the same manner that we did in 1997.
Let me ask you a question. Were you with the Rendell 99 Finance Administration when Councilwoman Fernandez pulled together a tax review or tax committee?
Yes, I was. I was not Revenue Commissioner at the time, but I was familiar with the panel that she co-chaired.
How long would this commission take to be formulated? How would it be formulated? And who would come up with some solution? It could go on for infinitum.
I believe the bill concerning the Tax Reform Commission was approved by the Council. And Councilman Nutter was the sponsor of that, and he might be able to address that more directly than I can.
I'll talk to him about that. I want to ask you this question before I have to go. The question I have is: 100 Finance There are people who pay their taxes along with their mortgage.
How do you address that issue? Because, you know, you have a lot of individuals on a limited income, some fixed income, and then they see a drastic increase in their monthly rate. What happens with them under your plan to forego the taxes, payment of the taxes under that payment plan?
It's my understanding that in most cases with a mortgage, if you've escrowed your real estate taxes, the mortgage company will advance the full payment and then work out a payment arrangement with you to pay that differential. I know I experienced that myself a number of years ago, where the mortgage company established a series of payments to make up for the amount that was advanced. And they also re-computed my escrow payments going forward.
Wouldn't that in effect increase the interest? If the mortgage company is fronting, if you will, the tax 101 Finance payments, obviously, they're going to increase your monthly mortgage payment. But they're laying out money well in advance. I would have to believe that any lender is going to pass that cost on to the consumer by raising the interest that is due. (Applause.)
I mean, it's not really a freeze. Basically, this plan is rubber stamping the inequities of the system now. I did make a note about that.
Miss Kammerdeiner, any questions to which we don't have answers today, could you bring them back on Tuesday?
And certainly, to everyone who is here, we invite you certainly to come back next Tuesday, although I don't know how we'll work out the room, because we have four other bills. But certainly, any answers you don't get today, we will have responses for at 102 Finance our next hearing. Do I have a point of order, Councilman Nutter?
And Councilman DiCicco, then we still have his point of order, and then we have a point of information.
I just have a point of information on the question that the Councilman asked. And there was an audience response. But actually, I did not hear a response from the Revenue Commissioner. And I'd like your opinion on the situation posited by Councilman DiCicco, in terms of the reaction by the bank or the mortgage company to such a plan.
I at this point don't know what their response would be or how they would handle it. From our perspective -- 103 Finance
-- the mortgage company will have paid us in full, so no additions to tax would be accruing. I cannot speak for the mortgage companies, in terms of how they will handle that.
Well, based on your experience. I mean, take a guess. If the bank puts out extra money under that circumstance, who do you think -- I mean, money does cost something. Who do you think they're going to pass that cost onto? Why would they eat the cost for some situation that they have nothing to do with?
If you can suggest how we can handle that within a program, because I can't control how the mortgage companies --
I would suggest we get a new system. (Applause and cheers.)
Not figure out somehow how to survive, under a system that makes no sense. When people asked for freedom, they 104 Finance didn't say: Well, can you just loosen the shackles? They said, I'd like freedom. (Applause and cheers.)
So, I mean, why we would further institutionalize a system that doesn't make any sense is not a response. And to say, well, we'll make it a little less painful, I mean, is that raspberry flavored arsenic? (Applause.)
Since it was my question, I thank you for the comments. And rather than rush to find a solution in response to whatever efforts we are trying to do as being characterized as stupid, I think we ought to take time and look at a way how we better help citizens, because you are going to cost them more money, and it sounds predatory to me. And you know how I am about predatory lending. So I just think that... And then of course, you know, all mortgage companies are not in Philadelphia. How do you communicate to them? How do they know about what you're going to do? And I think that requires some indepth thought about how that 105 Finance works.
That's exactly why I indicated that we're still looking at the details of how this program will work because we know in principle... We know in principle what we want to try to accomplish, but there are issues like this that need more attention before the program is finally designed.
One final question for today. In your statement you said in the five-year plan the City calculated a two percent increased revenue.
What would be the percentage rate generated, based on the raise under the reassessment now? Would it be much more than two percent?
At this point we don't know. As has been indicated, this is with the Board of Revision of Taxes. We have none of those precise values yet. The Board certifies the values on the assessments to the Administration, to the 106 Finance Department of Revenue generally in mid to late November. And so, we don't have any of that detailed information yet.
But it seems with the drastic increase in the assessed values for so many properties, it seems that you would -- could end up with more than a 2.5 percent.
I would expect that it would be more than 2.5 percent in -- that would have to be addressed to Mr. Glancey when you meet with him again next Tuesday. But I think some of the early indications were that the increased amount across all City properties, if you took it against all properties, was something like four percent. But that's not a firm figure, and it's not based on any final numbers because we don't have those yet.
Thank you. Councilman DiCicco, you wanted to finish your questioning. Thank you.
Thank you, Madam Chair. On the same line of questioning as 107 Finance Councilwoman Tasco, in your testimony you testified that the anticipated growth would be 2.5 percent for fiscal year '03. And you state some figures about $10 million less revenue and real estate taxes for the City, $14 million less for the School District. That adds up to $24 million. If I'm correct, the recent reassessment is somewhere in the vicinity -- it would generate revenue somewhere in the vicinity of $35 million to $40 million. So already the reassessments would be reassessing -- would be increasing taxes by well over $10 million. My question is: Based on your testimony, if we were able to come up with a proposal, a bill, what-have-you, that increased the recent reassessments and frozen at 2.5 percent, would that be acceptable to the Revenue Department; and what, if any bearing would that have on the budget?
You have to remember that if you cap a 2.5 percent, that would be on every property. And some of them would have had a much greater and increase; some would have 108 Finance had none. So if you're trying to get an average that's at 2.5, a cap of 2.5 would actually bring you in at a number that's probably significantly lower than that. And so you have to be cognizant of that when you look at it. Really, it depends on how the numbers would come in and what would happen with that. That's the kind of thing that we think needs to be dealt with in a comprehensive way in looking at the full burden and should be with --
The proposed payment plan where people can defer paying their taxes for this year, and subsequently do the installment plans. Thank you.
The Mayor was concerned about the size of the increases, the ability of people to pay. He asked us for ideas of things that we might be able to do to deal with 109 Finance that incremental amount that people weren't prepared for. As we looked at it in Revenue, we thought that people should have been preparing to pay an amount equal to their prior year tax. In most instances, your tax doesn't go down. You should be saving or otherwise preparing to pay for the amount you paid the year before. And so, we were looking at the incremental amount --
So the Mayor's Office, in cooperation with your Department, has basically initiated an installment plan which defers taxes at least for a year, or --
And that's what we were looking at, in a way to keep it within the current year, and have a minimal impact on the budget numbers, and still provide at least a little bit of a safety valve.
And this is legal. I mean, because we're hearing -- 110 Finance
We developed that before the Solicitor's opinion. We need to look at it again ourselves.
We received the Solicitor's late yesterday afternoon. And I'm sure most of us --
-- really haven't had enough time to go through this, but I kind of sense some inequities in all of the statements that are going on. (Applause.)
When we're being -- We're being told on one hand that Council and the Mayor has said that he has no authority to tell the BRT certain things that they can do and can't do. We're asking the Mayor to instruct your Department to send out the tax bills for 2001 and give us time to find some meaningful 111 Finance legislation going forward. And the Mayor's saying, well, he can't do that, but you can initiate an installment plan that kind of defers or delays the payment for this year. And I'm not an attorney, but I'm somewhat confused as to how you can say we can do it on some -- in some instances but we can't do it in the other.
Let me just finish. My question would be to you: If the Mayor were to decide to do as we ask and instruct your Department to send out the tax bills at the 2001 rate, do you believe that is legal?
Based on my reading of the Solicitor's opinion that I -- like you got late yesterday, I think the answer would be no. 21 What the Mayor has asked us to do is to use the assessed value that will be created in 2002 to calculate the bill, and the bill will be for the full amount of tax. What we are proposing to work with 112 Finance taxpayers on is how they pay that amount of tax. The tax calculation is no different, and they will be paying under this proposal the full amount of tax in the tax year, very much like the installment program that was established years ago for low income people who pay during the current year and then we forgive the additions for the tax.
I just, with all due respect, think that this scheme, if you will, in my opinion, of this installment plan is just really going to incrementally bleed the homeowners of this massive, outrageous increase in real estate taxes. (Applause.)
And that is not a solution to the problems of the inequity of the assessment process. All that does is say, well, you don't have to pay me now, but you're going to pay me later. And I have to believe, having been born and raised in a neighborhood where we had a lot of people who used to lend money out -- I know how their interest rates work -- it really is a 113 Finance system based on compounding interest going forward, which adds an additional burden to the taxpayers. It is not a solution. I just think it's an attempt, if you will, to quiet people down a little bit and let them think that they're really going to get something, when in fact they're getting shafted. (Applause and cheers.)
Councilwoman Tasco thought I used another word. It was shafted. Thank you. Thank you.
Thank you very much. Are there any other questions for Ms. Kammerdeiner?
Thank you. I would just like to piggyback on what Councilman DiCicco just said regarding the installments. Aren't these people being hit with a double increase, in that they will have to pay their escrow deficiency with the taxes paid in February, as well as the increase required for their next year's payment? (Applause.)
I'm sorry? Did you say escrow? I'm not sure I understand your question.
Well, you're saying that they can pay a certain amount up front. Isn't that what you said?
Explain the installment plan, because that's precisely what the installment plan would be, that they would have to pay in February; would they not?
February or at least by the March 31st due date on the tax an 115 Finance amount equivalent to their tax in 2002, which is basically the amount of tax that they were paying this year. We would be looking for them to pay that amount by the due date, and then would provide an opportunity for them to extend the payment --
As well as the increase required for the next year.
You're talking about the mortgage companies. I'm talking about the people who pay us directly. And so, we're talking at two different points.
How about the mortgage companies? Aren't the people going to be hit twice?
They are going to have a situation at their mortgage company where the mortgage company would increase their escrow payment for 2004 and then would be seeking a reimbursement for the amount that they advance for 2003. Yes, I would expect that they would have to deal with both of them.
And we keep hearing about how much more people are going 116 Finance to have to pay. I would like to address the people that do not pay. Can you tell us what amounts of delinquent taxes are due for both the schools and the City? I'm sure you know that off the top of your head.
Actually, I don't know it off the top of my head. I was going to say I didn't bring the numbers with me, but I will bring them with me on Tuesday.
And I'm sure the delinquency is exorbitant. And I'd like to know what are you doing about collecting. Perhaps if we were to collect what is due us -- (Applause.)
-- maybe people who always pay, wouldn't be hit so hard.
If I may, I'd like to address that more fully on Tuesday, when I'll have the exact numbers.
I would like to know what the delinquency is for both the School and the City.
Because it seems that the people that pay are always being penalized for staying. (Applause.)
Excuse me. If we are being asked to look into the installment issue, I think that by the time you get here on Tuesday, I think you have to have a little more information on that.
Thank you, Madam Chair. Miss Kammerdeiner, I need to ask you a couple questions about some elements of your testimony. Now, earlier I heard you say that 118 Finance you didn't have the detailed information from the Board of Revision of Taxes with regard to the 2003 proposed assessment figures. Is that what I understood you to say?
That is correct. They do not provide that information to Revenue until early at -- excuse me -- mid to late November.
And that's notwithstanding the fact that they've already sent out the notices to people?
That's correct. Because they go through the hearing process with appeals. And they're required by law to certify those values to us by December 1st. By cooperative agreement, they try to do that a little earlier so that we have a bit more time to actually prepare the bills for mailing in December.
Okay. And is it your anticipation that they will certify something different than what they've already sent out?
If they have had appeal hearings or have received additional 119 Finance information from the owners of properties and have come up with revised assessments from what were on those initial letters, yes, some of what we get in November will be different from what was sent out in those mailings. In fact, I understand because we operate the mail center for the City, that we should expect to get some additional mailings from the Board that will be adjustments on some of the ones that have already been dealt with.
Now, let me ask you this question: In the course of putting the budget together, so the budget is based on what comes over as a certified assessment?
The budget is based on an estimate that is made in December or January, a year ahead of when we get those assessments because, as you know, the budget comes to you in City Council generally in January. So during the late fall and the month of January, the Administration works on developing the revenue estimates. My Department works with the Budget Bureau on putting those numbers together. 120 Finance
And so those numbers, those estimates, are developed far earlier than we get the actual assessments.
Okay. Let me make sure I'm understanding here. Now, the tax year is a calendar year; is that correct?
That's correct. But with real estate tax, because the due date is March 31st, the bulk of the tax that's due for the tax year comes in in the last six months of the fiscal year. And so, basically, fiscal 2002 which ended June 30th, most of the real estate receipts that we had were from calendar 2002 real estate tax.
You lost me a little bit there. My 2002 calendar year taxes --
Right? So I'm paying all along. And then June 30th of 2002 comes, and that's the end of FY 'O2.