Why are some properties worth less than their recent sales price?
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Q: Under Mayor Nutter's Actual Value Initiative, why has the city determined that some properties are worth less (or more) than what they sold for in the last couple of years?
A: Just a couple of months ago, a building at 7th and Bainbridge streets sold for $950,000. The city assessed it for tax purposes at $545,600. Several blocks away, a home on Morris Street sold for $100,000 last September. But guess what the city assessed it at? $202,700.
Why is this happening?
Well, there are a few potential reasons. One possibility is that a property's sales price simply doesn't reflect its actual value.
The goal of Nutter's property- tax overhaul is to assess homes and businesses based on their market value. But Richie McKeithen, the city's chief assessment officer, said that a property's assessment ought to be different from its sales price sometimes.
For instance, he said that it should vary when people have paid less - or more - for a house than it's worth. A home's value also could have changed since it was sold.
A second possibility is that an assessment is just wrong. If a homeowner thinks that his new assessment is off, he can ask the Office of Property Assessment for an informal review.
A third possibility is that the whole reassessment is flawed.
Councilman Mark Squilla said that his office has found hundreds of questionable assessments, including many that are very different from recent sales. He thinks that this may indicate a bigger problem.
He said he's worried "that there's maybe some type of flaw in the process of how this was all done."
At this point, no one has demonstrated through a comprehensive analysis that the new assessments are inaccurate.
- Holly Otterbein, It's Our Money
Q: THE CITY’S Actual Value Initiative is shifting more of the property-tax burden on to homeowners. Why is that and who is to blame?
A: In the past, the city valued most homes at far less than their true market value, while it valued commercial properties, especially large ones, closer to their real value.
Now that AVI has brought all assessments up to market levels, homeowners are seeing bigger increases in their assessments than commercial owners. And homeowners will pay a larger proportion of the city’s overall property taxes than they did under the old assessments. They paid 54 percent of total property taxes in 2013, but will pay about 60 percent in 2014 under AVI.
The lion’s share of the blame goes to the state government.
Many well-run cities tax commercial property at a higher rate than they do residential property. If Philadelphia did that, homeowners wouldn’t be facing this new, increased tax burden: we could always adjust the commercial and residential property-tax rates to ensure neither group was unfairly burdened.
But the Pennsylvania Constitution’s uniformity clause requires that all types of property be taxed at the same single rate.
Leaders in Harrisburg probably won’t support a constitutional amendment aimed at eliminating tax uniformity anytime soon, especially if it’s for the purpose of raising taxes on businesses that own commercial properties.
But local government gets some blame too. If we’d had accurate assessments in the 1990s and ’00s, Philadelphians would’ve been alerted to this problem much sooner, and could have urged past mayors to lobby Harrisburg for the change.
The city also knows that if it values high-value property too highly, owners will take the city to court to lower the assessment. So the city tends to assess large commercial property conservatively
— Matt Ruben
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