Philly tax wars: Will U&O hike shave AVI cut?
A "suspiciously" familiar number evaporates savings under Philly's new system
Philly tax wars: Will U&O hike shave AVI cut?
Joseph N. DiStefano
UPDATE: Justin DiBerardinis, aide to Philadelphia City Councilwoman Maria Quinonez-Sanchez and veteran of the Business Privilege Tax reforms, says his office has been reviewing city Use & Occupancy taxes and comparing the recent increase to the city's Actual Value Initiative reappraisals. He finds:
"The AVI windfall for Commercial and Industrial property owners (the types of property that pay U&O) is currently looking to be about 90 million dollars," even as "thousands of small neighborhood based commercial properties... are in line for big increases.
"In other words, big commercial properties are getting even a bigger break than that $90 million figure indicates.
"U&O brings in a TOTAL of 107 million dollars. thus a 20% increase can hardly be described as 'a wash'," from the city treasury's perspective, compared to the AVI changes. "For some payers it might be a wash, but in the aggregate, there is still a huge break for big commercial interests.
"As it stands now, the smaller neighborhood commercial properties who are about to take it on the chin with AVI will get double slammed on their U&O bills.
"In any event, we are drafting legislation to address this..."
EARLIER: William P. (Bill) Kilrain over at Tactix Real Estate Advisors read with interest last week's item in which busy CBRE broker Robert Fahey, after checking the newly-posted values for downtown office properties reassessed under Mayor Nutter's Actual Value Initiative (AVI), estimated Philadelphia's downtown office landlords are seeing their real estate tax assessments cut an average 20% thanks to the decline in office values in recent years.
20%, really? That's a "suspiciously" familiar number, Kilrain thought. "City Council raised the Business Use and Occupancy (U&O) tax last summer by how much? You got it: 20%," he told me. "How prescient of them, no?"
That would mean the AVI reassessment, for those favored Center City landlords who are watching their assessments go down... is actually just a wash, once you figure in the U&O hike, right?
Right, at least in Center City, says Kilrain -- but it's worse in the outside neighborhoods, "who not only will pay the increased U&O tax," but will likely have to pay the increased real estate tax afflicting rising city neighborhoods under the new AVI. Net: "the city actually stands to profit" from higher tax collections, as AVI critics had warned. Is U&O tax really that high, compared to the real estate tax? They are surprisingly close for many properties, Kilrain affirmed. "I wouldn't call it a scientific study; I just used a few deals I'm familiar with." But, bottom line: Add the U&O hike before you subtract the AVI cut, and owners "may not experience a noticeable savings."
I checked back with Fahey, who says Kilrain is right in general, though actual numbers are still "conjecture" until the city sets new tax rates to go along with the new assessment.
Commercial properties in Northeast Philadelphia will get whacked twice with higher assessments which in turn leads to higher U O taxes.— chrisartur- Keep voting Democrap.— Themonkofmagdalena
- Wrong, property in the Northeast was one of the few area where taxes declined.— Capsulef
- U&O taxes are a tiny fraction of real estate taxes. More thoughtful & stellar reporting from Joe D.— Humanrights
- The bigger message is "Don't trust the city". Especially if you are the common working man who is willing to take care of himself instead of looking for a handout.— Trident252
- Commercial property must be treated differently from residential property to maintain neighborhood stability, with small businesses (often mixed residential/commercial) treated like residential property. Unfortunately, Pennsylvania law requires that all property be taxed at the same rate (almost unique among the states) and our Republican friends in Harrisburg, like their federal counterparts, always put BIG BUSINESS ahead of everything else. There is no way meaningful tax reform to help out homeowners and owners of small businesses will get through the legislature. So the fools blaming the Democrats above are once again, merely spewing talking points. We had to have a reassessment--that has nothing to do with the tax rates favoring big businesses.— Palestra Jon
- Tax classification is not as widespread as you might think. Also, many older poorer cities like Hartford and Buffalo tried that, and voila, it the net effect of driving out businesses that could leave and left small businesses and homeowners left holding the tax bag.
The PA Constitution would have to be changed in any case, and that's not going to happen anytime soon. There IS a Pennsylvania law that permits land and building to be taxed at a different rate. It's called the land value tax. The effect of a land tax with AVI would be to reduce residential and small business taxes including The mixed-use use parcels. This is an economic issue, not a Dem/Rep issue.— Joshua911
