Philadelphia’s chief real estate assessor says that large-scale annual reassessments will become the norm in years to come now that the Actual Value Initiative for property taxes is fully implemented.
Speaking exclusively to the Northeast Times last week, Michael Piper, the chief assessment officer with the city’s Office of Property Assessment, said that folks should not be alarmed that 131,000 city property owners have received or will soon receive reassessment notices for Tax Year 2016. And they shouldn’t presume that OPA erred on a grand scale when it re-assessed all 579,000 city parcels two years ago in launching AVI.
“Typically, moving forward, we’re going to do reassessments every year. But it doesn’t mean everything is going to change (every year),” Piper said.
“The variations from year to year should be respective of sales activity. In the past, we were not updating our assessments with what the market told us what was happening. As long as taxpayers pay taxes on an annual basis, it’s only fair that we do assessments on an annual basis.”
The objective of AVI was to bring all of the city’s property assessments into line with their real dollar values as determined by market factors. Before AVI, properties were assessed for only a fraction of their real values while the tax rate was set artificially high.
Within that framework, if the administration sought to generate more income from property taxes, it could raise assessments in selected sections of the city without getting City Council to pass a citywide tax rate increase. With AVI, Council reduced the tax rate to about 9.4 percent, a level that when combined with the new real-value assessments created an essentially revenue-neutral transition from the old system. The new assessments and rate took effect for Tax Year 2014.
OPA spent last year sorting out thousands of appeals from landowners who argued that their individual AVI assessments were not correct. Many of those people won reductions. As a result, OPA did not conduct a reassessment.
For 2016, however, OPA revisited the assessment issue on a citywide level, employing its computer-based formula to review the accuracy of the 2014 numbers based on the latest sales data.
According to Piper, of the 131,000 re-assessed properties, about 6,500 accounted for new construction, demolitions, substantial renovations, catastrophic loss (such as fires), land subdivisions and land consolidations. About 126,000 reassessments occurred as a result of changing market factors.
About 67,000 properties declined in value, according to new assessments, while about 58,000 increased. The city is unlikely to realize a significant change in property tax income as a result of the reassessments. The aggregate value of the re-assessed properties for 2016 is almost $250 million more than the 2014 and 2015 values.
“That is miniscule relative to what we did with AVI, looking at total value,” Piper said.
Based solely on the tax rate, that difference in value would translate to about $23.5 million in additional tax revenue. However, not all assessments translate to collectible taxes. Many properties with new construction are not subject to taxation due to the city’s 10-year tax abatement policy. And those tend to be the properties with the highest increases in real value.
Conversely, properties with the largest decreases in real value generally are those where demolition occurred, in which case most had relatively low values even before demolition, according to Piper, who noted that OPA does not create tax policy or collect taxes.
However, OPA does determine which properties are to be reassessed. According to Piper, the agency works from a map that divides the city into more than 600 sub-neighborhoods called Geographical Market Areas. The boundaries may fluctuate from year to year and are determined largely by the characteristics of properties. Similar properties are grouped together.
OPA’s formula assigns a number to each area, a coefficient that measures the deviation of the assessed values from what the OPA computer-generated model says the true market values are. A 15-percent variation is considered “acceptable,” Piper said. After AVI, the variation for the city as a whole was 13.9 percent.
For the purposes of the latest reassessments, OPA identified the areas of the city with the highest coefficients — in other words, the areas where assessments deviated the most from real market values. OPA re-assessed properties in 185 of the 600 Geographical Market Areas for 2016.
There were affected areas in each of the city’s 10 Council districts. According to the office of at-large Councilman Dennis O’Brien, the 10th district in the Far Northeast has the fewest changes with 76, followed by the 6th district in the Northeast and River Wards with 2,508. The 9th district, which includes parts of Northeast and Northwest Philly, has 2,706 changes.
To determine the new assessments, the OPA system considers numerous property characteristics, each figuring into a complex formula. Major factors include size and location, along with age, condition, use and features of the buildings. OPA can use aerial photographs, licensing or permit records and on-site inspections to gather information. Sales prices involving similar properties dating to 2009 are used to determine the real market value. ••
