Thursday, September 3, 2015

Don't tie school funding to property-tax reform

Funding the education of Philadelphia’s children should not be tied to Mayor Nutter’s sweeping property-tax reforms. Putting both in the same pot is like mixing milk with lemon juice. Each has merits of its own, but when mixed together, one ruins the flavor of the other.

Don't tie school funding to property-tax reform

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Mayor Nutter
Mayor Nutter

Funding the education of Philadelphia’s children should not be tied to Mayor Nutter’s sweeping property-tax reforms. Putting both in the same pot is like mixing milk with lemon juice. Each has merits of its own, but when mixed together, one ruins the flavor of the other.

The case for the schools is being made ably by the new School Reform Commission and Chief Recovery Officer Thomas Knudsen, as it should be. The case for property-tax reform was made long ago.

The reassessment will cause property owners to pay their fair share of taxes based on accurate property values. Neighborhoods where taxes have been too low because property values were underestimated will pay higher tax bills. In neighborhoods where properties were overvalued, tax bills will go down. Although property values overall have gone up, the city could make its overhaul revenue-neutral, but rather than go that route, Nutter wants to generate more money for schools.

Nutter deserves credit for having the courage to take on the most comprehensive city tax reform in recent history. There has been a lot of tinkering around the edges of business and wage taxes, but nothing as dramatic and promising as his Actual Value Initiative.

Prior administrations ignored the obvious fact that the property-tax assessment system was bogus. They avoided fixing it because property taxes are the third rail of local politics. Reform is almost always messy, and it is painful for some. Nutter avoided it at first, too. So the heavy lifting is happening now, after he has been safely reelected.

To unwind the decrepit bureaucracy behind the faulty assessment system, the Nutter administration needed a charter change and negotiated with City Council to put it on the ballot in 2010. The chief assessor arrived last summer. But this should have been a day-one job in 2008, when Nutter first took office. He had enough goodwill and political capital to take on this unpleasant task.

City Hall can argue that the rising murder rate and recession were a double punch to a fledgling administration, but governments are expected to multitask — even in the most dire situations.

Now, on the eve of reform, the city is in a jam. The new property assessment figures won’t be available until well after the June 30 deadline to pass the budget. If the city budget relies on new assessments from the future, residents won’t know until the fall just how much they’ll be paying in taxes. They won’t be able to estimate taxes based on the budget.

Here’s another problem. The State Tax Equalization Board has made it clear that it thinks the city’s property values are out of whack. That’s important because it means those appealing their taxes are likely to win if the new values aren’t applied, potentially costing the city millions of dollars.

That leaves the city with few good options, but it should take the one that is most fair to taxpayers: Separate the need for more revenue for schools from the need to fix a bad tax system.

Taxpayers should know what their property taxes are going to be and not have to wait until months after the budget is set.

To do this will take some courage on City Council, which must appropriate enough funds to run the city and the schools. It may have to increase taxes to accomplish both tasks. But if that’s done in a clear and open way, with taxpayers having full knowledge of the impacts, Council may get the job done.

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