Tax Analysts Blog

A Transparency Win in Philadelphia

Posted on May 29, 2013

The City of Philadelphia has long been criticized for having an unfair and antiquated property tax system. Taxpayers frequently questioned whether property tax assessments had any relation to the actual value of the property and whether similarly situated property received a similar assessment. To alleviate these concerns, in 2013, the city undertook the Actual Value Initiative (AVI), which is a program for assessing all real property at its current market value.

AVI was intended to fundamentally change the property tax system in Philadelphia by revaluing all property in the city to its market value. This means that nearly 600,000 pieces of real estate are being reassessed. To establish this value, certain factors are considered, including the size and age of the property, the property’s location and condition, and the property’s use. The characteristics of the property are gleaned from field inspections, aerial photography, data from other city departments (i.e. building permits), and commercial sources (i.e. property listings).

It is a huge undertaking, given that some of these properties have not been reassessed in more than 20 years. Despite the fact that some of the factors that go into the AVI were disclosed, questions were raised almost immediately about the mechanics of the AVI process. It was inevitable, I suppose, given the amount of change that was about to occur. No matter how scientific the methodology sounds, the reality is that residential property that was once assessed based on a value of $45,000 may now be assessed based on a value of more than $450,000. A lot can change in 20 years.

On March 5, 2013, Michael Lurie, an intern with Reed Smith LLP, submitted a request to the City of Philadelphia pursuant to the Right-to-Know Law seeking 1) specifications for the AVI calculator and 2) “manuals, reports, memoranda, presentations, and other documents regarding the procedures and methods for calculating ‘actual market value.’” Although the city granted access to the specifications for the AVI calculator, it asserted that the items in the second request were insufficiently specific or were exempt from the Right-to-Know Law under the internal, predecisional deliberation exemption. Lurie appealed the denial of the second request to the Office of Open Records (OOR).

The OOR ordered the city to provide all requested records within 30 days. In so doing, the OOR determined the second request was sufficiently specific in that it was limited in scope. The request sought only certain records and it named the specific types of records being sought.

The OOR also determined the city did not meet its burden of proof that the requested records are exempt from disclosure under the internal, predecisional deliberation exemption. Although the city made the conclusive statement that the requested records are “internal memoranda in which OPA employees deliberate over what proper market values should be prior to reaching a final decision as to those market values,” the city provides no additional support for that statement.

This is a win in the world of state tax transparency. Given the amount of properties in the city that had not been reassessed in many, many years, something needed to happen. But, tax administration is better when taxpayers are aware of and understand the method by which they are taxed.

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