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Maybe it was the name. The Actual Value Initiative, or “AVI” does have the vague, euphemistic sound of a disease. Or maybe it’s that the debate around this citywide initiative has been so heated on the one hand, and complex on the other. Either way, the city’s mass-reassessment of properties seems to have been wrapped in a stubborn cloud of misperceptions – just as the city prepares to enact this large-scale change.
Here are a few:
AVI is a tax.
AVI has occasionally been described as a “tax.” It isn’t a tax; it’s a policy for citywide property assessment.
Philadelphia’s property assessments, according to several reports as well as an investigative series by the Philadelphia Inquirer, have been widely inaccurate for years. Some residents’ houses are valued above their actual market value, and many — particularly those in neighborhoods that have seen new gentrification — are currently valued at much less than they are actually worth.
AVI is a three-part process to fix that problem.
First, it involves reassessing every property in the city according to what its assessors deem to be “actual” or market value.
Second, it involves changing the complicated mathematical formula assessors now use to come up with individual tax bills to a simpler equation for taxing the newly assessed value.
Third, it involves lowering the tax rate to compensate for higher values, so that the overall amount of taxes collected remains the same.
AVI is a tax hike.
It’s certainly true that many residents will see their taxes go up — but that doesn’t make AVI a “tax hike.”
Philadelphia’s City Council has the power to adjust the city’s tax rate, currently about 13%. Because the latest citywide reassessment meant that the total value of property citywide is suddennly much higher than it used to be, Council is expected to lower that rate. The mayor has proposed that Council adjust the rate so as to raise exactly the same amount of revenue from property taxes as was raised this year, without AVI.
Council, of course, could choose to raise more or less money from whatever new rate it sets — but Nutter’s plan means that while individuals’ taxes might go up or down, the transition to AVI itself would be revenue-neutral.
AVI is meant to address the Philadelphia School District’s financial troubles.
City property taxes and public schools are inextricably linked: the city is required by law to hand over roughly 60% of the proceeds it raises from property taxes to the District. It’s also true that in his previous effort to implement AVI one year ago, the mayor proposed using the measure to raise extra revenue for the city and school district.
But AVI itself doesn’t change the percentage of revenue that the school district gets from property taxes, and just as the mayor’s proposal includes no extra revenue for the city this year, it includes no extra revenue for the district either.
Council could decide to raise extra revenue this year, for either the city’s financial needs or School District’s. But that decision is separate and distinct from the city’s decision to implement AVI.
AVI might not pass Council.
A persistent theme in the conversation around AVI is whether Philadelphia’s City Council will “muster the political will” to “pass” AVI.
AVI, for all intents and purposes, has already passed. Council already passed various measures required to implement AVI last year. The question now is how its implementation will be handled and what additional measures (like relief for resident-homeowners and those living in rapidly gentrifying neighborhoods) might be added, and of course what the final tax rate will be.
The administration can proceed and has proceeded with citywide reassessments, with or without Council’s support. Those reassessments, unless successfully challenged by appeal or in court, are binding. Should Council chose not to act to lower the city’s tax rate, property taxes citywide would skyrocket, making such a decision all but inconceivable.