Tax Fairness Coalition Meeting Notes

posted Aug 9, 2012, 2:49 PM by Wash West   [ updated Aug 9, 2012, 3:04 PM ]
WSWCA is a member of the Tax Fairness Coalition along with 14 other Philadelphia civic associations. The purpose of the Coalition is to ensure fair and effective revisions in the property tax assessment process, while supporting the needs of our schools and community services. To read the notes taken at the Coalitions most recent meeting, read below or click here to download.



NOTES ON TAX FAIRNESS COALITION MEETING WITH OFICIALS FROM THE OFFICE OF PROPERTY ASSESSMENT AND MAYOR’S LEGISLATIVE DIRECTOR

AUGUST 1, 2012

Prepared by Jeff Hornstein (Queen Village Neighbors Association) and Jeff Carpineta (East Kensington Neighbors Association) 

Note: WSWCA is a member of the Tax Fairness Coalition along with 14 other Philadelphia civic associations. The purpose of the Coalition is to ensure fair and effective revisions in the property tax assessment process, while supporting the needs of our schools and community services.

BACKGROUND ON MEEETING AND PARTICIPANTS:

On Wednesday August 1, representatives from 12 civic associations met with Mr. Richie McKeithen, head of the City’s Office of Property Assessment.  Accompanying McKeithen were Marisa Waxman, who coordinates logistics and outreach for the OPA, as well as Lewis Rosman, the Mayor’s Director of Legislative Affairs.

The Tax Fairness Coalition called the meeting in response to numerous questions that civic leaders have been fielding from the community about the methods by which Philadelphia's nearly half a million residential properties are being reassessed for the purposes of implementing the Actual Value Initiative in Fiscal Year 2014.  We wanted the opportunity to ask questions of the OPA so that we can, in turn, educate our communities. 

McKeithen began by giving us a brief autobiographical sketch, including his educational credentials as a licensed and certified appraiser and an MBA, and his 25 years of experience doing assessment work around the country, most recently as the chief assessor in Washington, DC.  McKeithen was hired by Mayor Nutter 2 years ago to implement the reassessment program.

He was frank with us, that it is a daunting task but that they have made great progress.  He initially intended to hire 220 staff, but has only managed to find 167 qualified people – he emphasized that he’d rather have experienced talent and qualified people rather than just “warm bodies.”  There are currently 100 assessors, of which 65 work in the residential sector.

McKeithen and his team graciously fielded nearly 1.5 hours of questions from the civic leaders, on both the technical aspects of the assessment process as well as policy issues.  McKeithen pledged that his office would do its best to educate taxpayers about the entire process of assessment, emphasizing that his office’s function was to implement policies, not make them. 

McKeithen was also quick to state that his office is responsible for determining property values in the City of Philadelphia, but is not responsible for determining the property tax rate or tax policy.  He urged the members of the coalition to educate the citizenry that the two are separate matters, and not to fuse discontent about tax rates to the work of his department.

He went on to educate the group about the multi-step process of assessment.

 

ABOUT THE OPA’S USE OF INTEGRATED RECORDS

The first phase of the work consisted of attempting to figure out everything that’s gone on with every property in the city in the past number of years, by integrating records from various city departments including zoning records, building permits, plans, deed recordings, and licenses.  He reported that on his arrival there was a backlog of thousands of records waiting to be reviewed, and that backlog has now been eliminated.

ABOUT THE OPA’S MAPPING – GEOGRAPHICAL MAPPING AREAS (GMAs)

The city has been broken into about 200 Geographical Mapping Areas (GMAs), roughly 6x6-block areas, to allow the evaluators to attempt to compare similar properties in similar geographies and then to compare similar properties in different geographies, all with the goal of “equalization,” or making sure that truly comparable properties are valued similarly. The GMA’s are representative of market-trade areas. McKeithen said that GMA maps would be available for public view in February 2013.  But in response to a Coalition request, he agreed to forward the current GMA map now so that we might understand and prepare. He also stated 2 caveats about the preliminary map:

  1. GMA areas are subject to change as Assessors gather info and learn about the market.
  2. A property may be assessed using data from more than one GMA depending on location or proximity to other areas.

 

Q&A ABOUT OPA’S DATA

Coalition members had numerous questions about OPA’s data, since there has been very little explanation to date of what data the OPA is using in terms of sales, comparable sales analysis, etc. Coalition members asked specific questions and McKeithen answered clearly. 

(A transcript of the Q&A session is found at the end of this document.)

ABOUT OPA FIELD WORK

In August 2011, the OPA launched an aggressive field inspection program. McKeithen reports that   evaluators have pounded the pavement and in some cases have attempted to access houses across the City to ascertain its condition.  Like other cities, many Philadelphians were reluctant to give the assessors access, so they left door hangers requesting basic information at those homes where they could not gain access.  

Coalition members noted that they have heard of few –if any - doorhangers or attempts to visit properties in their areas. No resolution was given to the question. 

McKeithen noted that people are generally resistant to the idea of having the City come into their homes, but that he wished people would welcome them in so they could collect better data.  He also noted that anyone who wants to appeal their assessment will need to let an evaluator into their home if they want to win the appeal.  He suggested that if communities wanted to have assessors enter a huge number of properties, it could be organized.

ABOUT OPA “MODELING” FOR MASS ASSESSMENT

The OPA has finished the field inspection program as of this summer, and is now moving into the next phase, actually building the statistical model that will generate the “actual value” of every property in Philadelphia.  This model will be based not only on the information collected from the field inspection program, but with the data obtained from Licenses & Inspections regarding improvements to properties, and from the Realtors’ sales databases. 

McKeithen made it clear that his methods differ from those used by a “fee appraiser” from a mortgage company, for example.  Mass appraising nearly half a million properties for the purpose of assessing property taxes is a very different exercise than doing a single property for the purposes of determining a mortgage.  His goal is to get “as comparable as possible” taking into account as many factors as possible.  In the end, though, homeowners will have the opportunity to dispute the OPA’s assessment of their individual properties.  

ABOUT THE APPEAL PROCESS

Because this is a new process, McKeithen anticipates 30-40,000 appeals. Coalition members asked if his staff was ready for that kind of activity and if his office needed support from the community level to ensure proper staffing: he says his staff is ready to handle that number.  We let him know we stand ready to make noise if he doesn’t have sufficient staff to handle the appeals.

The appeal process will begin with OPA directly via review by an Assessor.  It will then proceed to the Board of Revision of Taxes (BRT), ending finally in Commonwealth Court if ultimately necessary.

ABOUT TAX POLICY: COMMENTS FROM LEWIS ROSMAN

This led to very substantive policy discussion with Mr. Rosman from the Mayor’s office.  Now that there is time to examine the data before setting a tax rate, there are all sorts of policy decisions still to be made about how best to make the transition to this new system.  How will vulnerable homeowners be protected from massive increases in certain neighborhoods?   Is a $30,000 homestead exemption useful to the majority of Philadelphians?  What will happen to truly transitional neighborhoods like East Kensington, Fishtown, or Newbold if there’s a major tax hike?  Should we be looking at a deferral program whereby a portion of a really significant tax increase might be deferred until the property is sold? 

Mr. Rosman expressed that he felt the homestead exemption was deeply flawed and that the “gentrification bill” was also deeply flawed. He shared that he hoped there would be some consideration of tax deferrals - where major tax increases could be deferred until sale of the property.

In the end, we think those of us in the room took away two conclusions: first, that the OPA seems to be run by capable folks who are implementing a mass appraisal process in a reasonably competent and efficient manner.  This means we can have some confidence that the “actual values” that are produced will be reasonably fair – that is, property values will be based on real, defensible criteria.   It is also important to note that after the first year, there will be an ongoing process of evaluation and reassessment, but that assessments should stay more or less level once the model is built and tweaked – of course unless there are major changes in broad market conditions like the 2008 financial crisis or if values fall precipitously in a particular neighborhood or section of the city.

The second conclusion, though, is that there are still many questions regarding what will be done with this data – how will we be taxed?   What policies will be implemented to protect the vulnerable?  What is being done to shift the burden from residential to commercial property?   Are there other sources of revenue being explored?

In sum, we believe that there is still much work to be done on the policy side, and that we as civic leaders need to remain engaged and vigilant.  We recommend that we all take McKeithen up on his offer to send his Assessors out to community meetings to answer our neighbors’ questions.   We also recommend that we institute a regular monthly meeting to discuss tax policy ideas and make our views known to the Mayor and our members of City Council.

Finally, see attached for everyone’s information the assessment timeline provided by OPA.  It is CRITICAL for residents understand a couple of key things: 

  1.  In December 2012, property owners will get a tax bill for 2013.  This bill will be based on pre-AVI assessments and the tax calculated according to the old formula (value x 0.32 x 9.77%).  AVI does not go into effect until 2014.
  2. In February 2013, property owners will get a notice of their new, “AVI” assessment.  This will be the basis for calculating their 2014 bill, which will arrive much later in the year.  The OPA will set a deadline for filing appeals to dispute the new value that has been assigned to their property.
  3.  From February until June of 2013, as part of the budget process, City Council will use this new AVI assessment data to devise tax POLICY, namely set the tax rate (aka “millage”) and figure out how to protect the vulnerable etc.  It is only then that an individual will be able to actually calculate her or his “AVI” tax bill for 2014.

Q&A REGARDING OPA DATA

RM: Richie McKeithen, head of OPA

MR: Matt Ruben, Northern Liberties Neighbors Association

JC: Jeff Carpinetta, East Kensington Neighbors Association

RG: Rene Goodwin, Pennsport Civic Association

MB: Marsha Bacall, Society Hill Towers

JB: Jill Betters, Fishtown Neighbors Association

JA: Judy Appelbaum, Washington Square West Civic Association

C-MR: It can be argued that the sold-prices of Tax Abated Properties are inflated: Purchasers arrive at a price based on monthly cost, and when the mortgage cost is lower due to low taxes, the difference is captured via higher sale price to the developer. ** Have you considered doing an across the board adjustment to tax abated properties to account for this inflation / consideration that prices of the properties will fall after coming fully back on the tax rolls?

RM: We are trying to take those properties out of the data pool when looking at non-abated properties.

C-JC: Is the OPA using the TREND real estate database the Realtors and certified appraisers use?

RM: Yes- we were not in the past, but we are now.

C-JC: Is the OPA still going to use sales (conveyance) information as recorded directly onto deed records?

RM: Yes, that data is still going to be integrated into the set.

C-JC: Can you tell us what the time window is for looking at sales activity: 6 months? 1 year?

RM: Assessment practice for a city like ours would usually look at 1-3, sometimes up to 5 years. We are looking at 1-3 years, sometimes we go further back.

C-JC: Bank appraisers for mortgage purposes will typically harvest a sampling of the “highest” sales from a study area in order to place value, is this what you are doing?

RM: We are AVERAGING based on similar property characteristics over a time frame.  We are not selecting highest sales as the reference.

C-JC: What is the geographic area that you are using for references on value? Block-by-block? 0.2miles?

RM: We are looking within the GMA area, effectively a trade/market area- not bound by zipcode or neighborhood names.

C-MR: There is such a variety of property in each neighborhood in Philadelphia. How can you determine what the nature and configuration and condition and improvements are for each property without going inside?

RM: This is a mass assessment.  We have to do the best we can with the data we’ve got, deeds, realty records, permits, zoning. Sometimes neighbors give us information about your house as well. It’s an imperfect system- and you’ll have an opportunity to appeal to improve our information.

C-JA:  When you send out the new assessment, will you be telling people exactly what the data and info was that was used to determine their value?

RM: There will be information about the process (generically) speaking but no there won’t be the actual supporting info for the specific value provided.

C-MB: Do you have data available telling us, over the coming years, how much property tax revenue will be coming in from properties which are currently abated and how is this being factored into the equation?

C-JB: Will you be willing to come out to communities and explain your process to residents along side of us, even knowing that many residents will be upset with this process.

RM: Yes.  I can make trips myself or send someone from the office.


UNANSWERED QUESTIONS TO BE PURSUED:

  • How do dollar deeds and family conveyances affect the data set in a GMA?  Are they discarded?  Are they factored into the average?
  • Will there be any data for how many attempted or successful entries or doorhangers were employed in the GMAs? 
  • What is the total value of tax abated property in the City currently or for the year 2014?
  • If the City of Phila stopped issuing tax abatements in 2013 or 2014 - how much annual revenue would be captured that would not have been?
  • How does the total amount of revenue NOT collected from the entire portfolio of tax abated properties translate into an increased tax rate for everyone?
  • Is it time to review whether Tax Abatement might prove disastrous in a way that was never thought of- it allowed a hundred? hundreds? of millions of dollars of residential property to go off the tax rolls during a decade where a major system overhaul and massive tax increase was going to occur.
 
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