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WAYS & MEANS: Assess Yourself

This isn’t the first time that the specter of property tax reform has provoked a math mob in the City of Brotherly Love.

Philadelphia is seeking to reform a byzantine property tax assessment system that critics say benefits a few at the expense of the general public. Credit: Matt Bevilacqua

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Ways & Means is a weekly column by Mark Alan Hughes on economics, politics and sustainability in Philadelphia.

Exactly 10 years ago, the newspapers were full of coverage about the effects of pending property reassessments in the City of Brotherly Love and, in particular, about the complexities of moving from fractional property assessments to full-value assessments — and in effect, equalizing the accuracy of assessments across neighborhoods. The pending reform provoked a public frenzy of mass arithmetic, practically a math mob.

The reform never happened and here we are a decade later, getting into the same math mob. Yes, some of the terms have changed, like “Actual Value Initiative”, and yes, most of the coverage now happens in way hipper venues that didn’t exist back then. But there’s not a single issue being discussed today that wasn’t discussed in 2002 or 2005. In fact, property assessment is, like many of our legacy city problems, a slow-burning fire that over time has been allowed too grow to large for any one set of hoses.

You see, it’s exactly backwards to think we need to kick our lousy city government in the ass to do what any local government is capable of doing. It’s easy to maintain a functioning system, but our problem is different and the commissioners in suburban Lower Merion would suck at it even worse than our own politicians. In fact, it’s a measure of how useful the property tax is in pooling local resources that our system continues to lumber along, raising a billion dollars a year despite fantasy assessments and delinquency rates that make the Greek economy look like a Swiss bank.

The problem here is not something easily mended by even the most skilled public employees. Rather what is needed is a complete reestablishment of the basic means by which we pool our resources, and by doing that, we will be taking money away from people who benefit from the current broken system. Because, as we say in Philadelphia, nothing is so eff-ed up that someone doesn’t benefit.

There are many people acting like this is a puzzle we haven’t solved. It’s not. It’s a decision we haven’t made.

Owning a property carries obligations in proportion to value. Credit: Matt Bevilacqua

There is lots of great work being done to improve our puzzle-solving skills. A major Nutter-era reform has been the new Office of Property Assessment, which has finally built the capacity to provide meaningful assessments to inform the politics. OPA is an example of Nutter’s personnel practices as their best: Attract national experts into leadership who also have the skills to recognize the existing strengths buried in City agencies, and these strengths are enormous if properly leveraged. That new public capacity creates in turn the basis for effective civic partnership, such as that illustrated by the AVI impact mapping tool created by the Philadelphia Public Interest Information Network and the independent analysis generated by the tool.

But more information is going to generate more politics, not less. As the knowledge of who wins and who loses gets more and more accurate, we are going to need something other than arithmetic to get us to a decision. We need principles almost all of us can agree on, regardless of their consequences.

Let me offer a few for starters — and debate.

First, in a functioning system, owning a property carries obligations in proportion to value. A more valuable property should pay more to sustain the things that help create that value. This principle applies as much to rich people who live in mansions as to young people who invest in houses in appreciating neighborhoods, and as much to older people who see their houses rise in value as their long-time neighborhood gentrifies. There should be a high bar for exemption to this principle, and I believe there should be no exemptions.

Second, in a functioning system, owning a valuable property carries obligations that can’t always be met by virtue of that value itself. The difficulty is that, unlike a tax on income or on capital gains, a property tax falls on unrealized gains and your ability to pay your property tax doesn’t rise with your house value. There are many ways of dealing with this so that no one need ever lose their home to rising property tax obligations and almost all of these ways are being discussed by the mayor and City Council. (There was no welfare queen, there is no voter fraud, and there will be no grandmother who loses her house to taxes.)

But all of these remedies should address the problem of staying in your home without violating the first principle: You can use your new wealth to slow or postpone increased tax payments in order to stay in your house, but you still owe those payments when you leave.

Will Philadelphians step up and pool resources in principled ways that benefit all? Credit: George Smyth on Flickr

And finally, because three is the magic number for lists such as this, let me jump down to a principle that is much more specific than these first two. We know, because of the good work of PPIIN and others, that wealthier neighborhoods are significantly under-assessed in property values and that middle and working-class neighborhoods are significantly over-assessed.

So when you estimate your new tax bill with PPIIN’s or Councilman Bill Green’s handy AVI calculator and get sticker shock over the possible increase in your tax bill, remember this: That number is the amount of money you are taking from some Philadelphian who is paying part of your share.

It doesn’t matter if you think city services are worth it or not. Until we fix assessments, you’re not paying your share even if we cut the city budget in half. You are riding on the back of somebody who lives in a less valuable house in a less valuable neighborhood. And freeloading on the backs of people with less than you is probably not a principle you live by.

So the real question is whether we are willing to step up and support a decision to pool our resources in principled ways that make us all better off. We will get the decision we deserve.

Mark Alan Hughes is a Distinguished Senior Fellow at PennDesign and a Faculty Fellow of the Penn Institute for Urban Research.

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Mark Alan Hughes is a Distinguished Senior Fellow at PennDesign and an Investigator at the US Department Of Energy’s Energy Efficient Buildings Hub at the Philadelphia Navy Yard. He is a Faculty Fellow of the Penn Institute for Urban Research, a Senior Fellow of the Wharton School’s Initiative for Global Environmental Leadership, and a Distinguished Scholar in Residence at Penn’s Fox Leadership Program. He has been a senior fellow at the Brookings Institution, the Urban Institute, and a senior adviser at the Ford Foundation. He was the Chief Policy Adviser to Mayor Michael Nutter and the founding Director of Sustainability for the City of Philadelphia, where he led the creation of the Greenworks plan. Hughes holds a B.A. from Swarthmore and a Ph.D. from Penn, joined the Princeton faculty in 1986 at the age of 25, has taught at Penn since 1999, and is widely published in the leading academic journals of several disciplines, including Economic Geography, Urban Economics, Policy Analysis and Management, and the Journal of the American Planning Association, for which he won the National Planning Award in 1992.

Tags: philadelphiareal estatetaxesmichael nutter

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