Does state law require AVI to be revenue neutral?

UPDATED: This post has been updated to reflect additional comment from the Nutter administration.

This property tax debate just keeps getting stickier and stickier.

State Rep. Mike O'Brien today tried to throw another wrench in the complex debate over Mayor Nutter's proposal to move to a property tax system based on market values and to collect an additional $94 million for schools.

During a hearing held in Philadelphia on an alternative proposal to raise funds for schools, O'Brien questioned whether the adminstration had the authority to raise extra revenue with the property tax plan -- known as the Actual Value Initiative. He cited a provision in state law, under the "Taxpayer Relief Act of 2006," saying the his read of the law was that any change in property reassessments would have to be revenue neutral in the first year.

"Quite honestly, gentlemen, Houston we have a problem," O'Brien said to Finance Director Rob Dubow.

After his testimony, Dubow declined to comment on O'Brien's statement, saying he had to check into the law. Dubow later said that the city law department's interpretation of the law was that it does not apply to Philadelphia.

O'Brien and State. Rep. Rosita Youngblood held the hearing on their proposal that wage-tax relief that comes to the city from state taxes on Pennsylvania casino profits be diverted to the Philadelphia School District to help close a budget deficit. The duo have proposed the strategy, which would bring in roughly $86 million for schools, as an alternative to the Nutter administration's plan.

Dubow said the proposal would force the city to raise the wage tax or cut the budget elsewhere to maintain the current tax rates of 3.93 percent for city residents and 3.5 percent for nonresidents.