Alert: AVI Delayed, and a Philadelphia Real Estate Tax Recap

Despite Mayor Nutter’s efforts to advance his proposed real estate reassessment program, known as the Actual Value Initiative (AVI), City Council delayed the legislation necessary for its implementation for tax year 2013. City Council voted instead to maintain the current property assessment system for one year, and to provide $40 million to the School District – half to come from increased property tax revenues and half from raising the Business Use and Occupancy Tax (U&O).

AVI was designed to correct the current lack of equalization in real estate assessments throughout the City. This lack of equalization created a dispute between the City’s Office of Property Assessments (OPA), which attempted to maintain its pre-determined common level ratio (CLR) in 2012 of 32% of fair market value, and the State Tax Equalization Board (STEB) which originally issued an 18.1% CLR, and, after challenge by the City, ultimately upheld a CLR of 25.2%. Property owners appealing their 2012 assessments were able to use the 25.2% by order the Board of Revision of Taxes (BRT), resulting in a corresponding decrease in real estate taxes.

The School District, however, is attempting to recover some of the lost tax revenue by cross-appealing the cases where the lower 25.2% CLR was applied, and asking that the fair market values be increased from those set by OPA. Since the School District cannot challenge the CLR set by STEB, it asserts taxpayers opened the door to a fight over the fair market value of their property by appealing the original assessments. 

In the middle of the dispute between the City’s OPA and STEB, and in the face of a significant number of tax appeals for 2012, the School District requested additional tax revenues from the City. In addition to putting off AVI for at least another year, City Council’s decision increased both the real estate taxes and U&O for 2013, pledging $40 million to the School District. This short-term fix will invite more tax appeals in 2013 as commercial property owners and tenants realize their assessments are not only inequitable, but are now subject to two higher tax rate hits. 

We will continue to release updates as these issues play out. Please feel free to call us with questions on this complex and ever-changing situation.

Finally, please keep in mind that real estate tax appeals for tax year 2013 in Philadelphia must be filed with the BRT by October 1 of this year. If your assessment values are not revised, the first time you receive notice of an increase in taxes will be when you receive your actual tax bill for 2013 from the City’s Revenue Department. By then, the time period for challenging your assessment will be over.

For more information regarding property tax matters, please contact Carl S. Primavera 215.569.1663 cprimavera@klehr.com or Julie Beddingfield 215.569.1639 jbeddingfield@klehr.com.