Right? Now, when the payments come in in March, are you paying for the previous year or are you paying for the upcoming year, for the year you're in?
You're paying for the year you are in. Your tax for 2002 was due on March 31st of 2002. If you paid by the end of February, you got a one percent discount on your payment.
Okay. And then if you're in the mortgage situation, on March 122 Finance whatever, or if the mortgage company takes advantage of the discount, they pay your tax, say, end of February.
And then as a part of your on-going mortgage payments in most of that situation, they include your tax payment where you're basically paying them back. They already put the money out.
That is how I understand most mortgage companies would handle an increase that was not accommodated within the escrow account.
Okay. All right. Now, your testimony on about two of the Bills, 020490 and 020491, these are basically the bills that would propose to freeze the assessment; is that correct?
Okay. And the testimony is that the Administration opposes both of these bills.
Okay. What I'd like to do -- and there's a little bit of discussion here. But what I'd like to do is, I guess, to kind of juxtapose the present situation to the last time this kind of situation came up here in City Council. There was a bill back in the 1980s, Bill 482, which was a bill that proposed to freeze the real estate tax rates at the 1980 level.
Now, that bill 13 was co-sponsored by Council Members Pearlman, Coleman, Rafferty, Genuardi, Verna, Blackwell -- not our esteemed Majority Leader but Councilman Blackwell, Tayune, Anderson, O'Neill, Krajewski, Spector, Clarke -- not present Councilman Clarke but Councilman Clarke -- and Councilwoman Chernock. And that bill went through the normal process, and there were public hearings. And what I'd like to read to you is some of the discussion on the day of the vote of that particular bill. There had been a speech by 124 Finance Councilman Pearlman. And the second speech is by then Councilman Street responding to the President pro tempore, which was Councilman Coleman. Thank you Mr. President. First of all...
Yes, this would be Councilman Street. Thursday, January 8, 1981, at the Council Stated Meeting. This is debate on the record on the day of the vote. First of all, I'd like to join in the remarks that were already made by my colleague, Councilman Pearlman, and indicate that something has to be done about assessments. And I think that the whole question of a freeze is simply the first step. And I think that, for the record, we need to make it clear and abundantly clear what we are talking about when we're talking about the assessment problem, because simply freezing the assessment is not an answer. It's simply a very, very, very small beginning. 125 Finance Because if we don't freeze the assessments, if we don't at some point in time say, hey, stop, and let's take a look at what we're doing, then the situation will never be corrected. Now it's not enough to say freeze the assessments and then let's bring everybody up to where we think everybody ought to be because that may create more problems for the people that we would like to help than the situation is now. For example, there are some people in my District -- and I don't know whether or not this is -- a District -- probably isn't a District problem. But there are people that I represent in the 15th Ward who, if their assessments today were raised so that they were on par with the assessments of other neighborhoods, they would be gone immediately. So I'm telling you now that my vote of support of this ordinance does not mean that one year from now I will be in favor of raising the assessment, raising the actual taxes on the properties of some of the people that I represent so that those people are taxed in the same manner 126 Finance that other people are presently being taxed. Now, that is a problem. And I understand when I vote for this ordinance that at some point in time down the road, and it probably won't be very long, we're going to have to deal with the question of what you do with the senior citizens' properties. Assessment is now percent of market value. But 10 when they assess the whole City and the person's 11 assessment goes up to 50 percent of the fair 12 market value of the property, when that person's 13 taxes would triple, how are we going to handle 14 that. 15 So then I want us to know that while we say freeze the taxes, that I agree, while we say freeze the taxes, what we're simply doing is saying that we are going to start a process that is going to be long, arduous, and is going to take us all over the State so that we can provide the kind of tax help and relief that people need. The fastest way I know to recycle these neighborhoods is to implement a freeze. To assess across the board, bring everybody up to 50 percent of market value, and tell those that 127 Finance you've got to pay now. It's the fastest way I know of recycling a lot of these neighborhoods. So I want us to understand that we have a lot of work to do or else what we tried -- or else that when we try to help people, we're going to end up hurting a lot of other people. Now, there are a lot of people who say that this ordinance is unconstitutional, it's void, it violates state law, we have no business passing it. Well, I don't know anybody in the City of Philadelphia who is violating more state laws than the Board of Revision of taxes right now because every year... (Applause.)
...because every year every assessment that goes out, of the 75,000 that are going out now, is in technical and actual violation of the state laws. And I have a lot of problems with people who tell us we should not pass a law because that law would be in violation of a state law, when they do not do anything or say anything that all the other agencies that are hurting 128 Finance people by violating those same laws. And I have to be very skeptical of a City Solicitor's opinion and of a City Solicitor who comes in and tells us on the floor of this Council at public hearings that it's wrong for us to say that they shouldn't tax, raise anyone's assessment, but it's all right for them to raise some people's assessments, when they raise some people's assessments is in clear violation of state law. And I am not influenced by those opinions. And I think that at some point in time this Council has to do what it has to do with regard to the laws that we think we're entitled to make. I was outraged when I sat here and I heard the City Solicitor say that he would advise the Board of Revision of Taxes that they could ignore the law. They could ignore it. We could pass the ordinance and he said that he could tell them they may ignore it, that what the Council of the City of Philadelphia says. Because it seems to me that when the City Council of Philadelphia makes a law and 129 Finance unless and until some authority, some Court somewhere, says that it's unconstitutional, illegal and void, then it's the law. And it's a law, insofar as the Board of Revision of Taxes are concerned. And the City Solicitor doesn't have the right, nor do they have a right to say we're going to ipso factor avoid and just ignore what the City Council of Philadelphia says is law in this jurisdiction. It seems to me that when we have -- what we have here goes a little deeper than simply even the whole tax situation, the question of assessments. Now, we need a fair system. We need a uniform system. But we need a system that's capable of responding to the needs of different categories of people, which means that while we vote aye on a freeze, at some point in time we're going to have to go to Harrisburg, maybe all of us, and we're going to have to deal with uniformity clauses so that those senior citizens out there who need help, so that those poor people out there who need help can get some help without 130 Finance the problems that we have right now. This goes on further and concludes with: So that when we vote to freeze the assessments, we are going to -- we have to understand that this is simply a beginning, and that what we are going to have to do is take a unified approach to changing the state law, to changing the practices in the Collection Department, to changing the practices of the Board of Revision of Taxes, so that we can get a system that's fair and equitable to everyone. (Applause.)
Councilman, I find that to be stupid and absurd. (Applause.)
Well, Councilman, I appreciate that. But I did need to ask the commissioner: Based on those comments about a proposed freeze -- and we probably know that the 131 Finance Council did vote to support that bill -- do you think that at that point in time, that that was stupid or absurd?
No, I don't think it was stupid or absurd. But I do know that after that there was a Court challenge and there was a Court settlement known as the Coleman Green settlement, that did indicate some of the things that the City Solicitor has used as a basis for his opinion about the inappropriateness of using a freeze or a cap in the --
Commissioner, there was a Court challenge, because the Council passed a law, the Mayor vetoed the law, the Council overrode the Mayor's veto, the City Solicitor told the Board not to implement it, and Council went to Court. That was the result of that situation. And there was a difference made. And so your response, while I do respect it, misses the point. This is a start. We have many roads to travel. All of these issues are made by lawmakers. We will 132 Finance take whatever action we think is necessary as a part of our oath and our responsibility. But it is not the final word of the City Solicitor, with every due respect to the current Solicitor and Solicitors who have gone past and Solicitors to come, to come and say: Well, we can't do anything; we are locked in; the system is what it is; we are helpless; just accept it; be glad for it; and we'll try to make it a little softer for you, and we'll give you a payment plan. It's the same process years ago. 13 (Applause.) 14
That's where we 15 are today. 16 I also had some questions about the 17 proposed payment plan. Now, what impact would the 18 carrying over of the balance, the increment, as 19 you call it... What impact would that have on 20 that particular year's budget? 21 Because I have to assume that you're making the assumption that whatever ends up being certified, that you're actually going to collect in the February/March time period of what will then be February/March of '03 which will be the 133 Finance tail end of FY '03. What will these deferrals do? Because if you allow people to pay in December of '03, that's actually in the first half of fiscal year '04. What impact will that have on the budget?
We would expect that, first off, not everyone would be taking advantage of the installments.
Why would you expect that? Why would someone not take advantage of an extended payment plan for what they believe to be an onerous, egregious, and outrageous increase?
Some people may not have what you're describing as an onerous and egregious increase. Some people had small increases and can handle that. Some people who had large increases can financially and responsibly handle it. Not everyone is going to make the decision to enter into an installment agreement. But if everyone did, it would be the growth amount that would be delayed. Some of it would be paid 134 Finance during the fiscal year by June 30th because some people would go ahead and pay it along the way. They wouldn't wait until December 31st. So, we will have some of that money coming in. That's the part we're looking at, in terms of what the actual impact would be.
Commissioner, let me ask you this question: What's the Administration's proposal to reform the City's tax assessment system? Do you have one?
We would like to work with you on developing that. And that's one reason that we have indicated that we need to take a comprehensive look at the City's tax structure and applauded the idea of having a tax reform commission that would look comprehensively at the obligations and the tax burdens.
Now, Commissioner, with every respect -- And, yes, I did work on that matter with a number of other Council members. I mean, why don't we just kind 135 Finance of go through the time lines? There will be a ballot question in November to create the Philadelphia Tax Reform Commission. My hope, certainly out of any of this discussion, is that the voters will support the creation of such an entity. By agreement, that entity will not return a report to us for a year. Tax bills are due February/March. They will not have a new proposed tax assessment system for a reform of the present system by the time that people's bills come. What are they supposed to do in the interim?
It is for that reason that we wanted to provide some relief for people, in terms of giving them an opportunity to pay over a longer period of time. And also we want to be sure that those who are low income, who have a major burden because of fixed income or low income situations, that they have an opportunity to avail themselves of the programs that have been there. We want to make sure that everyone who is eligible does take advantage of the 136 Finance programs that are currently offered. I think there are a lot of people who fall into those categories who don't currently take advantage of those programs, and we want to make sure that they have every opportunity to do so.
Is there a general assumption that -- And I certainly support all of the programs we have, and if we're going to create additional ones to help people either who have low income, no income, fixed income, to deal with this. But I am starting to get the impression that there's a bit of a theme running here, that unless you're in one of those categories, there's an automatic assumption that if you have one of these homes, if you're fortunate enough to have on the one hand significantly increased property values, you're not in one of the two or three or possibly four categories that we've talked about, that there's an automatic assumption that basically those other people don't have a problem with a $1,000, $2,000, $3,000 -- 137 Finance (Applause.)
-- tax increase, and that they should just kind of, as we say in sports terminology, I mean, they should just suck it up and pay?
It is that group of people who we thought we would be addressing by giving them an opportunity to pay that additional tax over a number of months, instead of having to pay it all at once in February or March.
But, Commissioner, that does not go to the fundamental issue here. We have a system that has flaws. Why would we seek to put a mandate on something that is not working, give people two aspirins, and tell them to send us a check in the morning? Why would we do that? As opposed to spending our time trying to figure out between now and tax time what the system should be. All that does is institutionalize the inequity, the unfairness, the complete wackiness of a system that either has people getting regular increases where we nickel and dime them to death and then give them a big 138 Finance increase, or -- I'll speak personally -- get no 3 increase for a series of years, and then get a big increase. Neither of those scenarios make any sense. (Applause.)
The properties on my block didn't just recently become valuable. They've probably become valuable over some period of time. If you gave me a 41 percent increase over the last seven years, I probably wouldn't have noticed that much. But now you want it all at one time. And I'm not just speaking for myself. I mean, I'm on the low end, compared to some of my constituents. (Applause.)
So you cannot say: Oh, the system is fine; be happy that the values are going up, because you only benefit from that if you decide to sell your house. I'm really not planning to go anywhere. (Applause and cheers.)
I mean, if I had money, which I don't -- but if I had money -- not 139 Finance in this stock market environment but a couple years ago -- the stock runs up, tremendous increased value on paper, but I don't pay anything until I cash in. (Chorus of "all right.")
So if I buy the stock and it runs to a hundred, I've got an incredible paper gain. I sell the stock. I got capital gains tax, and all the other things. You got all kinds of brand new forms. I've never had to worry about any of them. This is a system that says: Be happy that your values are going up, and while they're going up I'm going to continue to take and take and take and take. I'm not going anywhere. (Applause.)
And when I die, maybe then I'll have something to turn over to someone. This system is broken. (Applause.)
So payment 140 Finance plans, freezes, deferrals, caps, all of them are very interesting. I'm a co-sponsor on just about every bill floating through here. But they come after reform because you have to have a system that is fair. People probably should be at a hundred percent. We probably need to lower the tax rate to make it comparable. Then you start talking about, as the market starts to run, how you deal with those things going forward. So we have some solutions that are Phase II. We don't have Phase I yet. And that's what we need, and that's what we need to be working on. Thank you. (Applause.)
Thank you very much. Are there further questions for the Revenue Commissioner? Thank you very much. We will now ask... Is Mr. Thomas Connelly still here? We welcome you forward, sir. Is the Honorable Babette Joseph here? All right. We will hear Mr. Connelly. After Mr. Connelly we will begin 141 Finance our community testimony. Is Barbara Capozzi here? We'll have you next. Lenora Berson thereafter. Terry Gillen thereafter. Okay. So we'll call you up and try not to hold you too long. And thank you for your patience. Thank you so much, Mr. Connelly. You represent a very important Board. We welcome you here, and thank you for your patience. Would you please identify yourself for the record.
My name is Thomas Connelly. I am the Executive Director of the Pennsylvania State Tax Equalization Board. As such, we review... In order to fill out our legislative mandates, which are two: Number one is to create a market value of taxable real property that is an instrument of measure that the Department of Education uses in helping to arrive at the basic school aide ratio that affects the 501 School Districts. It affects them, in that it plays a role in the amount of money that they receive from the State. 142 Finance The other thing that we do is that for each county, for each of the 67 counties, we certify a common level ratio. That ratio is the legal instrument of measure in a real estate assessment appeal. Now, in order for us to fulfill our legislative mandates, the counties, all 67 counties, are obligated to submit certain data to us. One of them is the taxable real estate of the county. And we get that certification once a year. The other item that we get from the counties is that they submit to us a copy of all of the real estate transfers that occur during the year. Now, what we do is, we basically carry out a statistical sales analysis by looking at the property in each county. Actually, we break it down to the municipality within the county. We look at how much taxable assessment, what the property breakdown that comprises their tax base, how much residential, residential lots, industrial commercial, 143 Finance et cetera. We create an inventory of that. And then reviewing the real estate sales, we look at the corresponding property-type sales for those municipalities within the county. I believe the purpose of my being here today is to possibly highlight the fact that we probably, more than any other State agency, have a heavy exposure -- I was going to say involvement but exposure is a better word -- in the assessment offices of all 67 counties, and conversely, the assessment practices that take place within those counties. I've sat here and I've heard many interesting things. I would imagine that people who have been here as long as I have would like to see this wrap up. So at this time I will let Councilman Nutter, whose guest I am today, ask me specific questions, or anybody if they're interested.
I appreciate that, but it's at the Chair's discretion. 144 Finance
Thank you. And certainly we thank Councilman Nutter for making the invitation, and absolutely welcome you. Let me again say to members and our guests here that this is a forum for Council Members to question witnesses. And unfortunately, this is not a forum where the public can interact with the folks who are here at our witness table. A public hearing will permit anyone who would like to testify to testify, but it doesn't allow you to question the witnesses who are here. We can add your name to the list and we will welcome you. We are very glad to have you. And you can testify. But we have no forum for an exchange between you and us or you and those who testify. That's just the way it is. But we thank you and we welcome you. Councilman Nutter.
Thank you, Madam Chair. Mr. Connelly, thank you again for making yourself available on such short notice. But in the course of doing what you 145 Finance do and dealing with the 67 counties, could you give us, I guess, a capsulized version of your impressions as an outside entity into the policies and practices, the process that exists here in Philadelphia, and make some comments relative to comparisons to other counties around us.
Well, with all due respect to the BRT, there is no other valuation function in the Commonwealth of Pennsylvania that operates the way that they do.
Because it's my understanding -- Because I am familiar with valuation practices. I hold a CPE which is a Certified Pennsylvania Property Evaluator. I am licensed to be an assessor in 65 states with the -- I'm sorry -- counties, with the exception of Philadelphia and Allegheny County, which are not covered by that law. There are set procedures. There are chains of accountability. There are numerical equations. There is, for lack of a better word, 146 Finance sanity in what occurs in the 66 counties outside of Philadelphia. I understand Philadelphia has special problems, they have special needs. I am a transplanted Philadelphian. I spent the first 26, 27 years in Philadelphia. I'm a graduate of St. Joseph's Prep. I'm a graduate of St. Joseph's College. Now it's a university. I love what has happened to the City. I am looking forward to my retirement to move back here because Philadelphia offers more opportunities than just about any other place in the Commonwealth. One of the things that attracts me to Philadelphia is that apparently the market value of my property will only be valued at 71 percent. And out where I live, and in the other 65 counties, outside of Dauphin County, you establish a market value that is representative of the market, that indicates current market value. That does not appear to be the case here.
What is the significance of the 70 or 71 percent figure? And 147 Finance what from your perspective or knowledge or experience is the reason that the Board of Revision of Taxes here seeks to pursue this goal of 70 or 71 percent, as compared to other counties apparently seeking to value at 100 percent?
I really don't know. That question needs to be addressed to them. I'm aware of the 71 percent. I was aware of it before today. And then I believe I heard Chairman Glancey allude to that today. I would assume... I would assume that they do not want to disrupt even more the property valuations that are currently in place.
Can't you take people the 71 percent, try to figure out as best as possible, again, in an environment where no 18 matter what you do with tax rates... I think we do have to be honest and say that when you make a change in one part of the equation, it changes other parts of the equation. There will be winners and losers in any of this.
But if you took a person to a hundred percent and figured out some 148 Finance number that makes sense, you would correspondingly lower the tax rate from the present .08264 to some other number. Now, that will still affect some people in a certain way. And it may still result in an increase for some people, as opposed to keeping them at the rate that they are. But you would at least then be at the market and not playing a continual, what seems to be, about a 20-year effort at least of catch up. Is that fair?
Well, yes. One of the words that I have learned in my occupation is the word obfuscation. And obfuscation is not unique to what goes on if Philadelphia. But in many counties across the Commonwealth people have no idea what their taxable assessment is. And I would be confused when I'm talking -- when someone explains to me that the market value, it's really 71 percent of the market value, and then I guess if they're applying 32 percent. Your suggestion is what we have been 149 Finance echoing, and what all of the counties contiguous to Philadelphia, with the exception of Bucks County has done, and that is, that they have reassessed and they have gone to a hundred percent of market value.
Now, where does the .32 number come from? Does that come from STEB?
No. That is the Philadelphia County ratio of assessment to market value.
What's the basis for that? I mean, where does that number come from?
Well, this is established by the BRT. It had been 35 percent.
But I'm assuming there's a formula, there's a statute, there's something that governs what that number should be?
Well, there's something. I don't know what it is. Again, the situation in Philadelphia, although they're all 150 Finance good people and everyone has their best interests at heart, there appears to be a fuzzy, I guess, accountability chart. In the other 66 counties, the assessment process is subjected to voter approval or dissatisfaction, through either the County Commissioners or in the Home Rule counties probably through the Councilmen. In Philadelphia, the BRT -- and I have to be honest with you. I don't know if this a good thing or a bad thing. What I do know is that it exists nowhere else in the Commonwealth. The BRT is basically --
When you say doesn't exist anywhere else in the Commonwealth, what is this? What is it that doesn't exist?
-- people vote for people and then say we want you to --
-- make sure our trash gets picked up, have our rec centers open, do whatever. I mean, again, not interfering with the assessment process and the formulation which we -- I would believe should not and cannot be involved in that aspect of it. Correct?
That is correct. Anywhere -- We talk about this when we get together with other assessors and with people that come in from other states to view how we operate in Pennsylvania. It's difficult to explain to outsiders who's in charge in Philadelphia.
Well, does that lead to... I guess maybe my last question would be: I mean, in that scenario, does that lead to an environment where -- I mean, our tax rate, at least for as long as I've been in City Council -- and I don't know when it was last changed, but it has not changed in the last ten years, nine months, has been .08264. So, the elected officials here can honestly say that we have never 152 Finance raised people's property taxes, on the one hand. But now this other group of people, who are not elected and are appointed by a third branch of Government, have the authority to deal with the assessment issue. And in doing their job, the assessments go up, money does come out additional from the person's pocket. And you can call it an assessment, a reassessment, or some other name, but in effect it's a tax increase.
That's what my father used to say. My mother and father lived at 5937 North 11th Street. And back during the Rizzo Administration, Mayor Rizzo would somehow announce every year that he had held the line on taxes. And yet, my father's tax bills went up every year. And he said, I would like to have Mayor Rizzo explain that to my checkbook, why my taxes have not gone up but I'm sending more money, so...
And then the final part of that is naturally, technically at the moment at least, we have no authority or control over this entity. 153 Finance So you have a group of people who have the ability to raise money for the City through assessments, but the average person, citizen, and voter, cannot access either them directly, other than through an appeal or any elected body or individual, to make a direction as to what they should do or how they should conduct their business presently.
But in other counties in the Commonwealth, that's not the case.
Excuse me one moment. The Chair notes that Councilman Darrell Clarke is here. He's in the middle of a job fair from people from all over the country. But we thank him for coming. So, he's stepping in and out. Thank you.
Maybe this will be my last question. Based on your -- the breadth of your experience and, again, the 67-county view, are there best practices in the industry that we 154 Finance could read, review, or examine, or understand as to how these systems should function and operate? And that's the first part of the question. And secondly, do you have any reaction to the number of people that we have performing these particular functions? I mean, 43 people doing a job could be a lot of people. 43 people could be minuscule. I mean, I have no way of determining the relevance of that number of people, compared to a certain number of properties. And again, what else goes on around us?
The answer to the first part of the question is, I'm not aware of any set packages. I think if you want to look at how the other counties, you don't have to go far. You can go to Norristown, whatever the... Media. And what's the other one? Montgomery/Chester. I guess West Chester. But it's not rocket science what they did. They basically went to a hundred percent valuation. When you go to a hundred percent valuation, you have -- I believe in Philadelphia you have approximately 565,000 155 Finance parcels. You have about 565,000 property experts. They not only know the value of their property, but they know the value of what their neighbor's property is. And what drives people to distraction, it's been our experience, because we get calls every day from all over the Commonwealth. Again, I want to reiterate: To a certain extent the situation that you have in Philadelphia is not unique. The operation of the valuation process is unique. But what upsets people is when they find out that their neighbor is more underassessed than what they are. One of the things you have to do is, you have to ask yourself do you want to -- do you want to go to a new system. You've already mentioned winners and losers. What will that bring? I don't know. You're absolutely correct that if you have this -- if you go to a new system and you raise the assessment so that they reflect current market value, you're going to have a corresponding decrease in the millage. Again the shakeout on 156 Finance the winners and losers, I don't know what will happen. Your other question -- What was the second part of that about the -- I forget the second part of your question. Number of assessors.
Yes. Okay. The number of assessors. In Philadelphia, they have -- their personnel are extremely professional. They're extremely capable. I don't know that more of these people are going to do a better job. Quite frankly, their hands are tied. And -- You know. And, of course, another thing, which you have not asked me, but the law is set up in that the Board of Revision of Taxes has the sole jurisdiction to do what it is -- what it is they're doing.
Right. And is different in all the other counties in the 157 Finance Commonwealth.
We are the State Tax Equalization Board. We are on the web site www.steb, s-t-e-b, dot state dot Pa. We have all sorts of interesting statistics. We have a thing on there for a question and answer, and we have our telephone number. So if anybody on this side of the room 20 (Indicating) wishes to contact us, please do. And we respond to everybody, because we don't know if the Governor is trying to trick us to see how we react to citizen input or whatever. So I thank you for your time, and I wish you well. 158 Finance
That you very much, Mr. Connelly. We appreciate your coming in. Councilman Nutter.
Madam Chair, the thought occurs to me that one of the things we are faced with -- and it was highlighted in the newspaper today -- is the fairly lengthy opinion that we received from the Law Department just yesterday. And without getting into a long discussion with them, knowing that there are representatives here. I know the Solicitor was here a little while ago and may have had to leave. But I think, to have a complete record, I would at least like the Law Department to put on the record what their position is formally for the record, with regard to the efforts of Council to deal with these particular issues.
All right. 159 Finance Could we make that brief? Because we really want to begin the community. They've been waiting all day.
And that's always my problem with our hearings. We would like to bring them forward. So as soon as they are gone. Will Ms. Capozzi come right up. All right, Law Department. Thank you.
Richie Fader, Chief Deputy City Solicitor for Appeals and Legislation. The Solicitor was here earlier. He had to step out.
Yes. We note that the Solicitor was here, and we thank him and thank you for your attendance.
Yes. We would be happy, Mr. Fader, if you would just give an overview of the Solicitor's Opinion with regard to these bills.
Just a couple -- I'm sorry. Did you have something you wanted to say?
I'd prefer to hear specific questions, but however you want to handle it, Madam Chair, Councilman.
Councilman Nutter, would you like to ask specific questions?
We'd certainly like to keep it brief so we can bring the community on, or they'll go against everything. Thank you.
Mr. Fader, you heard, I'm sure, the discussion between myself and Commissioner Kammerdeiner with regard to the previous attempt to put in force what at least a couple of these bills would do, with regard to the freeze. And then naturally they are bills that cap, and defer, and the like. 161 Finance Now, it's the Law Department's opinion that we have no ability to legislate in this particular area? Is that...
No, Councilman. The Solicitor's Opinion, which was delivered yesterday, says that with respect to this fiscal year your power is probably very limited. But with respect to future fiscal years, there are certainly arguments that could be made to defend something like the gradual increase bills that you introduced. We think they're probably not within the letter of what the First Class County Assessment Law would allow, but we think there are equitable arguments along the lines of the settlement that the Revenue Commissioner referenced, that might be defensible in Court.
I was intrigued that... And you always know, at least as a legislator, it's never good news generally if you get an eight- or nine-page opinion from the Law Department. They usually don't take up that much paper to tell you something that you want to hear. I was intrigued in that opinion that 162 Finance there was no citation of a case to back up the opinions that were laid out by the Law Department. Can you expound on that?
Certainly, Councilman. With respect to the Home Rule Charter we think, although it's never been litigated, we think the Charter is quite clear; and once the budget has been balanced in a fiscal year, that Council can't imbalance the budget. And with respect to Council's power over assessments, we think, as several of the witnesses before me have alluded to, the First Class County Assessment Law is really quite clear, that taxes are supposed to be based on the current assessments as returned by the Board, pursuant to the complex process that Mr. Glancey and Mr. Connelly discussed. And although there may not be any case that says it, the Statute is really quite clear.
Statute's quite clear that the assessments are supposed to be on current value. They're obviously not doing that, right?
My understanding is 163 Finance they're doing the best that they possibly can.
I didn't ask you that. I mean, I try to tell the bank that I -- you know, I'd like to do the best that I possibly can to send that mortgage payment in. They find that very interesting, but they still want the money. So let's try to establish here for the fact. They are not following the State Statute with regard to valuing the properties at actual value; is that correct?
I am not an expert on assessment law. My understanding is they are in full compliance with the Statute, Councilman.
Mr. Fader, the Chairman of the Board testified that the policy of the BRT is to be at 71 percent of value. The State Statute says actual value. I think there's a difference there.
My understanding is that, as a practical matter, as long as everybody's at the same percentage level and if it's 71 percent it doesn't -- there is no 24 uniformity issue, there's no statutory problem. Everybody's getting taxed at the same rate, based 164 Finance on their actual current values, as best assessed by the Board of Revision.
Can you cite provision in the local taxation assessment for the First Class Cities Act that allows for that?
Councilman, I'll be happy to look into it, and we'll get you an opinion on the processes by the Board of Revision.
Okay. And lastly, for the record, it is your understanding that Council does have some authority with regard to establishing new processes and procedures for the operation of the Board of Revision of Taxes. Is that your understanding?
Yes. What you alluded to earlier, Councilman, is correct with respect to the powers and duties of the Board of Revision. And I'm not sure where the line can be drawn, but Council has the power to pass ordinances, subject to approval by the voters.
That's not with respect to the details of the assessment process, but with respect to the powers and duties of the board. 165 Finance
But again, to make sure that people understand what we can do and what we can't do, if we did in fact believe everything we read in the newspaper, some would be left with the impression that there is nothing that we can do about any of this. And the fact of the matter is that there are some powers and duties that this Council, with voter approval, can exercise.
Can we move forward. Request Barbara Capozzi, Packer Park Civic Association, and Ms. Lenora Berson, Center City Resident's Association, come forward and occupy the two seats that are available. We thank you for your patience and we certainly invite you to identify yourself for the record and to begin your testimony. Thank you so much. 166 Finance
My name is Barbara Capozzi. I'm a small business owner in Philadelphia, lifelong resident, realtor, attorney, and president of the civic association in my neighborhood. I'm also a very practical person. And this is very painful to me, to sit and listen to all this discussion. I really don't know how you all do it. To me, the most work gets done in the smallest group. So I guess you get ideas from us, and you need to know where everybody is, but I'm sure the real work gets done behind the scenes. I don't know how you do it all, sit and listen to this. I have not seen the Solicitor's Opinion, but even if it is true that technically the bills that you have proposed are technically illegal, in the sense that they're not binding on the Board of Revision of Taxes because they are an independent agency, the public can't get to the Board of Revision of Taxes. And obviously, the only way we can is through us pressuring you and us pressuring the 167 Finance Mayor to do that for us. So... And that's how I sum up why the public's here. And I'm very sorry to say that isn't more people here. VOICES FROM AUDIENCE: (Inaudible.)
Well, I understand. Even if the bills are technically illegal, it doesn't mean that City Council doesn't have power, and the real power, to pressure the board to do what's right. Now, unlike 1981, it seems to me that the Board is a little more willing, and maybe with a little bit more pressure they'll be a lot more willing, to work towards a solution. I can't believe that if City Council streamlined their bills, passed from to zero, I 17 can't believe that the public could not get behind that, pressure the Board of Revision of Taxes to find the right solution. As much as I have studied this issue, I don't know what the right solution is myself. But I do know, from my own experience as a business owner, that the tax structure in this city is like a dinosaur, and it really has to change. 168 Finance Between the -- real estate taxes is not even the worst. We have the Wage Tax, the Net Profits Tax, the Business Privilege Tax. It just goes on and on. The tax structure needs to be streamlined and overhauled. I'm sure it's been the same tax structure and the same process for so many years. It needs to be re-thought in a comprehensive and intelligent manner and revamped for the new century that we hope to say that we are in. And that does take a lot of comprehensive work. I urge everyone to support and publicize Councilman Nutter's November 2nd ballot question. I tell everyone about this and not one person knows what I'm talking about. So, there's an excellent ballot question on November 2nd, and we need to get out and tell people about that. Here's the problems that I here from people that I talk to every day. Obviously, you know that the system for the evaluations is so confusing that the more you hear it, the worse it seems to be. It's overly complicated, even for those of us who know something about real estate. 169 Finance Now, that leads to the appearance of impropriety. Now... And we all know that even if you don't do something wrong, if people think that you're doing something wrong, you might as well be doing something wrong, because that's the way it is. It's the appearance of impropriety that's the most important. And with this ambiguous very, very subjective system that we have, the little guy, who are the people that I talk to every day, feels like the big guy is getting over on him; and that if he knows the right people, that big guy can somehow get that very subjective system to work for him. And the little people, which is the average taxpayer in the City doesn't know how to do that. The other problem is that because the Board of Revision of Taxes is not elected, we have no way to pressure them or get to them, so that's why we have to use you. But it also seems that everyone passes the buck. No matter how many times you tell people it is not the Mayor, it is not City Council that did this... It shouldn't be that 170 Finance way. So people do not find that a satisfying answer. It's not clear to most people exactly what their taxes are being used for. To the average person it doesn't -- it does not appear -- it does appear -- excuse me -- that the City Government is bloated. And that's not just this Administration, it's every Administration, Federal, State and local. The average guy feels that government is bloated. We hear about tax waste, et cetera, and that the services are not provided as effectively and efficiently as possible. So, taxpayers feel -- They would feel much better about tax hikes if they really had confidence that the money that they were paying every year was being used in a way that they could actually see. I support the Council President's efforts to put a cap on the annual hikes because while taxpayers need the budget, I'm sure that the City also needs the budget. And the ten percent cap certainly -- I cannot see how the Board of Revision could argue with that. I mean, that's 171 Finance certainly generous. So, that is -- that's the least that should be done.
There also should be some measure to prevent a hike year, after year, after year. To the average guy who lives in a wonderful neighborhood or a good neighborhood, we feel like we're paying for the rest of the City, et cetera, et cetera, and you're paying for the stadiums, and the convention center, and you hear that. There needs to be a better way -- and maybe that is on line -- for us to know where our tax dollars go. And now that the assessments are available on line, I wonder if the Board of Revision of Taxes is going to set up a hot line, because I have people turning in their neighbors. Well, he has a third bathroom. I mean, I don't know that we really want to get into a system that's that subjective. In a City that appears to be on its surface vibrant and modern, in many ways it's -- Philadelphia is not. We have a very aging population. We're glad they're all still with us, but they do need special relief, especially people on fixed incomes. And whether that's a method of 172 Finance deferral of tax due until -- and re-captured upon sale above, you know, after freezing the tax at a certain rate. Certainly the PACE program needs to be expanded, if those are the guidelines that are going to be used, or at least it actually needs to be made clearer because there might be more people that are eligible, but it certainly isn't clear to me who those people might be. Any piecemeal approach will take us right back to 1981 when there was a piecemeal approach but nothing happened after that. Government often has no choice but to work piecemeal because the responsibility is split between three branches of Government and then also three levels, City, State and federal. But there will never be any real tax relief unless the people in this room that we look to for leadership say that this is it. We have the same tax structure for 50 years. We really do have to do something about it. So I hope everybody here does push that November 2nd ballot question. I would like to believe that if the 173 Finance Council adopted and streamlined some bills, which would be only obviously a short-term solution, I would really like to believe that the Board of Revision of Taxes would take that advice. The one question that wasn't asked Mr. Glancey was that if Council did that and passed two bills unanimously, would he and the Board take that advice. Now, it may be that legally he does not have to, but would he take that public mandate and work with it? And that would be my question for Mr. Glancey. I might come back next week and ask him myself. Thank you.
Ms. Berson, we welcome you. Please identify yourself for the record and begin your testimony. And thank you very much.
My name is Lenora Berson, and I am the Chairperson of the Legislative Committee of the Center City Residents Association. 174 Finance I know you've heard a lot. I won't read what I have. I'll make it short and sweet. We are absolutely behind you for Council Bills 020490 and Council Bills 020491 which roll back the taxes and put it back to where it was. We support you in that. We also support you in your efforts to do an overall tax assessment. We don't believe in piecemeal. We think now we have to do it right. And we sure have to look at the Board of Revision of Taxes because that's from another century, maybe even another country like England. So thank you very much. Thank you.
Thank you so much. Terry Gillen, would you come forward. Welcome. And also Mr. Harry Appel, would you come forward please. Thank you very much. Thank you again for your patience, and we welcome you. Please identify yourself for the record and begin your testimony.
Sergeant-at-arms, we have copies, please, to be 175 Finance distributed.
My name is Terry Gillen, and I'm testifying on behalf of the Coalition For Fair Taxes. We are a group of taxpayers and civic associations working to reform the property tax system in Philadelphia. I organized the coalition this year after I began to get calls from my neighbors about their tax bills this fall. What alarmed me was that many people assumed that the assessment process was corrupt and that I as a Ward Leader could fix their assessments. When I tried to explain that the system was secretive and incomprehensible but not corrupt, they didn't believe me. A few said they would rather move out of the City than pay the higher tax. The BRT tells people to go through the appeals process, but I did that two years ago on behalf of my neighbors. We did what they tell you to do. We went as a group with our little local civic association and our City Council representative. 176 Finance We brought photographs and made arguments based on water in the basement and drug houses down the block. But after it was all over, almost no one got their assessment reduced by the BRT. So this year when the whole thing began again, it started to feel like that scene in the Wizard of Oz, the one where they finally get in to see the Wizard, except that the dog notices somebody standing over to the side behind a screen. The Wizard shouts: Pay no attention to the man behind the curtain. Eventually, of course, they figure out that the man behind the curtain is the real wizard, and what they thought was the wizard was just a distraction. So my testimony is that the appeal process is just a distraction from the real problem. And the real problem is that the property tax system in Philadelphia is broken and in need of fundamental reform, and that Council and the Mayor need to fix it. That's what the Coalition Of Fair Taxes is trying to do. 177 Finance City residents need four things from the property tax system: Transparency, fairness, certainty, and value. Transparency means that people understand how the system works and who is in charge. Right now the BRT is appointed in a secret ballot by the Judges of the Common Pleas Court, who are not accountable to the voters. So voters don't know to whom they can complain because no one takes responsibility for the problem. If the system isn't transparent, then people don't feel they can have input, and this is a necessary ingredient for democracy. Fairness means that taxes are based on realistic property values and that all properties are valued at the same assessment levels. In the current system this doesn't happen. And now that taxpayers can go on line and compare their assessments with their neighbors, everybody knows that it's unfair. This is what makes people believe that the system is 178 Finance fixed. Certainty means that people are entitled to know that their tax bill will not rise beyond a given level in any one year. Many of my neighbors are being hit with an increase for the third year in a row, and some have had their bills doubled and even tripled. I hope some that some of these taxpayers will tell their stories today because they are entitled to be heard. And value means that taxpayers are entitled to get their money's worth for their taxes. I have been at four neighborhood meetings recently, and at every one people questioned why the City is spending money on things like stadiums, convention centers, and City Hall staffers who make over $100,000 while working from home. (Applause.)
If you raise people's taxes, you have to allow them to have input into the spending side of the equation. So we need to have that debate as well. Until we can achieve these four 179 Finance things, we need an immediate moratorium on tax hikes. We understand that this is a complicated problem. That is why we urge Council members and the Mayor to approve the bills that would impose an immediate freeze on the 2003 assessments. This would allow a tax reform commission and others to take some time to develop realistic solutions, perhaps with help from our legislators in Harrisburg. Please do not vote for any quick fixes. Do not approve a simple cap, an installment plan, or a deferral and think that you have fixed the problem. We urge you to be thoughtful and responsible in your approach to this complicated problem. That is why an immediate freeze, combined with broader reform, is the best approach. Thank you. (Applause.)
Thank you. We thank you for your comments. We do note that even judges come before us, not very often, but at some point they have to come before us. Thank you, Ms. Gillen. 180 Finance Let me note that Councilman W. Wilson Goode, Jr. is here. We welcome him, and he has a question.
Good afternoon, Miss Gillen. When was the Coalition For Fair Taxes formed?
So it's a responsible organization. It's reacting to...
So, it's not a coalition that was formed to deal with the reassessment process before the actual reassessments came out.
Are you familiar with the bill before City Council establishing a 181 Finance Neighborhood Improvement District on Passyunk Avenue?
That is a bill 6 that actually would raise property tax assessments. Would your coalition be against that?
I don't know. I'd be happy to look at it and give you an answer.
Are you against raising property tax assessments in parts of the City or in all the City?
No. We're not against raising property assessments at all. What we're trying to do is make sure that it's done in a fair and equal and clear way so that the voters can understand it.
My understanding of this bill is that it's actually a property tax assessment imposed by legislators that was not necessarily initiated by the business association or residents but by legislators, and I would assume that you would oppose that bill as well.
Again, I'm not 182 Finance familiar with it, Councilman, but I'd be happy to take a look at it and give you an answer.
Madam Chair, thank you very much. My question basically is, is Councilman Goode asked a question about the East Passyunk Avenue Business District, which is in my District. That is the creation of a Special Services District that is basically created by the shopowners, the property owners on that Avenue, not unlike Manayunk and other parts of the City, Center City, that have Special Services Districts. The folks there have basically made a decision and are asking Council to improve the legislation that will allow them the authority to tax themselves. And the reason for that is, the taxes that they're paying now and the money that the City is generating in revenues isn't giving them the level of services that they need, so they 183 Finance have no other choice but to tax themselves. So that's really a self-imposed tax, if you will. And this -- and again, it's been generated by the people who own properties there. This is something that -- It's commercial properties. It's not residential properties. And I just don't understand the line of questioning as it relates to the Tax Reform Commission.
Councilman DiCicco, I understand it is your bill. But it is, in fact, a Business Improvement District, not a Business Services District. Does not follow the same model. And in fact, because of the amendment offered to Business Improvement District, legislation in Harrisburg by Senator Fumo, it can be a legislatively imposed property tax.
It is. It's similar to the Special Services District, insofar as it -- the individual property owners as an organization came to City Council and said they 184 Finance want to become a Neighborhood Improvement District. And as a result of that, they will decide on what percentage of increase in real estate taxes they want to pay that will go back to them so that they can have the level of services that they think they're entitled to now and should be entitled to, but we're not giving them the services.
So the purpose of the increase in tax assessment is provide more services.
And you would agree that if a majority of whatever population, whatever neighborhood, decided they wanted to vote for higher property tax assessments for more services, that would be appropriate.
Yeah, because I think that really goes to the heart of taxation with representation. I think right now what we're having is taxation without representation. And it's forcing some of our commercial districts and 185 Finance other neighborhoods. (Applause.)
To go out and create these districts. And I just don't understand why that question would be imposed to Miss Gillen, because she has no ability or information. This is a little piece of a very big City of a business community commercial corridor, if you will, that's deciding that they want to have a district so they can raise additional revenues to do the things that they think are appropriate for their salvation.
They decided to raise their own property tax assessments for better services. And I think that's completely appropriate to ask a witness who has formed a coalition in response to property taxes.
But she has no 21 control over whether or not they -- I think you asked her the question would she be in favor of that. Whether she's in favor of that or not, she really has no authority.
I was also asking 186 Finance if she's familiar with the legislation. Thank you, Councilman DiCicco. Thank you, Miss Gillen.