Saturday, August 1, 2015

Butkovitz Report: AVI Inaccurate and Unfair

A report commissioned by Controller Alan Butkovitz’s office has found the reassessment key to Mayor Nutter’s property tax reform effort, the Actual Value Initiative (AVI), to be vastly inaccurate and unfair – even more so than the broken system it was meant to replace.

Butkovitz Report: AVI Inaccurate and Unfair

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A report commissioned by Controller Alan Butkovitz’s office has found the reassessment key to Mayor Nutter’s property tax reform effort, the Actual Value Initiative (AVI), to be vastly inaccurate and unfair – even more so than the broken system it was meant to replace.

“AVI was supposed to do just the opposite – bring property values closer to their market values,” Butkovitz said Wednesday.

The report, which was commissioned for $27,500, was written by Robert Strauss, an economics and public policy professor at Carnegie Mellon University in Pittsburgh, and was based on publicly-available data from the city’s Office of Property Assessment (OPA).

Strauss said he would have given the reassessment a failing grade – his study found the average difference between sale prices of homes and the new assessments to be 112 percent. The industry standard is a 15 percent difference, and OPA has said the reassessment came under that mark at 13.9 percent.

There are several differences in how Strauss and OPA calculated the results. OPA judged the reassessment by comparing values to about 20,000 sales over the past five years deemed to be good indicators of the market. Strauss used about a third more sales, all of which OPA had described as arm’s length transactions between unrelated parties but scrubbed from the data for other reasons.

OPA also weighted those sales based on changes in the market over the five years; Strauss adjusted for inflation.

Strauss’s property role also was missing about 20,000 properties that hadn’t been assessed in March, when he collected the publicly-available data. There are about 579,000 parcels in the city.

Strauss said he couldn’t account for OPA’s process, but suggested the city might have been “filtering the data to get to a desired result.”

“If you keep reducing the sample because you want to stay within 14 percent, you chase the data, then you’re not doing everybody else a service,” he said. “We fooled around with the data … and the numbers don’t change.”

Strauss also noted that OPA’s data often is missing crucial property characteristics – for example, 30 percent of residential properties don't list the number of stories and 26 percent don't list the total number of total rooms.

“This is what I found and I stand by it,” he said, adding later, “This can’t be swept under the rug.”

Mark McDonald, a spokesman for Mayor Nutter, said Strauss never contacted OPA “to learn how OPA conducted the assessment process.”

“I think that would raise questions about the validity of the conclusions,” he said.

Butkovitz, who is facing reelection later this month, long has been one of the most vocal critics of AVI.

He said the city either could use the old data or the new data, but either way Nutter should “invest heavily in getting the assessment right.”

“Number three is to do nothing and wait for the appeals to wash over us,” he said. “I would be inclined not to certify the new data, to proceed in the next tax year using last year’s numbers.”

He also predicted that AVI would be the subject of a lawsuit.

 The full report can be read here.

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The Philadelphia Inquirer's Chris Hepp, Tricia Nadolny, Julia Terruso, and Claudia Vargas take you inside Philadelphia's City Hall.

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