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Actual Value Initiative: Homeowners Be Prepared and Ask Questions

I am sure at this point you have heard about the city’s Actual Value Initiative (AVI), especially if you are a property owner in Philadelphia. These past few months, I have heard these acronyms thrown around: AVI, BRT, OPA, etc. To be honest, examining the financial hole of this city is dizzying.

As you may know, Philadelphia’s School District is in big trouble. For example, there was no district-wise summer school program due to budget constraints. Mayor Nutter was hoping to pass the new AVI system this year to generate $94 million dollars for the school district. However, local representatives believe the new system needs to be studied more thoroughly before passage. Accountability of the school district has come into question, especially since if they did receive the $94 million, they would still need more than $200 million to close their deficit. Many representatives are worried that the district has squandered funds in the past and may do so again.

Previously, the Board of Revision of Taxes (BRT) was in charge of property assessment in the city. However, they rarely did a full and proper reassessment of how property taxes should be gauged. 55% of the money that comes in from these taxes goes towards the School District and 45% goes to the City. As it stands, many Philadelphia homeowners are being taxed way too much while others are paying far too little. To give an example in layman’s terms, at one point in time, properties in Mayfair were worth more than properties in Fishtown. With the tidal wave of gentrification that has engulfed Fishtown in recent years, this is clearly not the case anymore. In spite of this, Mayfair property owners still pay a higher real estate tax on average than Fishtown property owners. From what I have been told, there is even disparity from block to block. How does this make sense?

In short, the system is broken. Both property owners and a State board have challenged the current assessment system. Many believe this system puts Philadelphia and its schools in significant financial jeopardy. The purpose of AVI is to produce property values that are more accurate and understandable, to bring accuracy to the system. The AVI system as it was originally proposed by Mayor Nutter and Finance Direct Rob Dubow, called for a lower tax rate (millage) that is not “revenue-neutral.”

But how is the value of a home determined? The Office of Property Assessment (OPA) is the City agency that establishes real property values which serve as the basis for real estate taxes levied by the City of Philadelphia. Representatives from the OPA have been looking at the exterior of homes and leaving tags on doorknobs inquiring about the interior features. An added complication to this system is that many people do not send the questionnaires in, as it is not required by law.

I sat down with State Representative Mike O’Brien to get some clarity on this whole debacle. Days before we met, Mike attended the meeting in early June where Council members, by split votes, approved four bills, including one that moves the city to the Mayor’s new AVI system. However, the assessment will not be ready for review until August. It seems like the Mayor’s AVI system asks our representatives to make an uninformed choice regarding Philadelphia’s property taxes.

“I can’t vote for a tax on you and not know what it’s going to be,” O’Brien explained. He also stated, “We want to wait until the numbers are in until we establish the millage.”

Since City Council would not know the numbers until August, they opted to not vote on the final passage of AVI until next year. First District Councilman Mark Squilla introduced a bill at the local level that would delay the shift to AVI for a year. O’Brien said that he was impressed by how Squilla was adamant that the Council take their time before passing anything, saying, “Mark Squilla came in as a freshman, and put taking care of the people first.”

Since AVI will not be passed until next year, instead of the originally requested $94 million, City Council agreed they are willing to provide an extra $40 million for schools in the meantime. This would include a $20 million property tax hike and another $20 million from a “Use and Occupancy” tax on local commercial businesses. It seems to be a necessary evil and modest in comparison to what could happen in AVI were passed without being revenue-neutral.

“We are committed to making this a revenue-neutral budget,” O’Brien said.

If and when AVI is passed, its effect will be hard on many citizens, especially those who have owned their homes for many years. A measure put into place to protect these homeowners is the Homestead Exemption that would provide some relief to those who could be hit hard under the new AVI system. All 66 counties in Pennsylvania – except Philadelphia – offer this exemption. However, state lawmakers are considering the legislation needed to provide Philadelphia a Homestead exemption. Earlier this month, Mayor Nutter stated in a City Hall press conference that although Philadelphia was excluded from the law when passed in 1997, he is hopeful state lawmakers will approve it. This would provide property tax relief to all homeowners, including new and longtime residents in gentrifying areas.

So what do you need to do? If you own your home, apply for a Homestead Exemption. To be eligible, you must own your home and live in it, and complete the Homestead Exemption application by JULY 31, 2012. You can stop by the Spirit Offices at Susquehanna and Gaul in Fishtown to pick up an application, or you can download it by going to the following web address: http://www.phila.gov/pdfs/homestead_application.pdf

The Philadelphia Public Interest Information Network posted an app with an interactive map to give a sense of the likely impact of AVI. To view, go to the following website: http://ppiin.org/avi-impact-map/

I asked Mike O’Brien what else residents of the Riverward neighborhoods can do over the next year to brace for whatever is coming. He basically told me that everyone needs to pay close attention and ask questions, because we are all affected by this.

Stay tuned, Riverwards…

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