Philadelphia must justify property-tax projections, Katz says

The Nutter administration will have to justify how it plans to keep raking in taxes at a higher rate even after a 9.9 percent tax increase expires next year, according to a prominent fiscal watchdog.

Sam Katz, new chairman of the Pennsylvania Intergovernmental Cooperation Authority, wrote to Mayor Nutter and City Council President Anna C. Verna on Wednesday, noting that four years' worth of increased property-tax revenue - more than $350 million - is not based on "current or proposed tax rates, historical collection patterns, or recognized econometric models," quoting the law that created PICA.

"The city has lots of options, but one of them is not pretending that there's not a problem," Katz, appointed by Gov. Corbett on March 1 to lead PICA, said in an interview. The five-member PICA board has the power to approve or reject a five-year budget plan from the mayor.

Katz questioned how the city could plan as if the extra cash brought in by a 9.9 percent, two-year property-tax hike - which is projected to bring in an additional $86 million a year in 2010-11 and 2011-12 - would continue through 2016.

One solution would be to make the tax hike permanent in law, or to make cuts elsewhere in the five-year plan.

The Nutter administration has argued that it will fold that increase into its Actual Value Initiative in 2013 - when a full reassessment of properties is to be complete and all properties are to be assessed based on their real market value.

Finance Director Rob Dubow has said the city will account for a 20 percent rise in real estate values over the last decade.

But Dubow has not presented evidence to document the rise in property values, although it is readily available. Kevin Gillen, an economist at the University of Pennsylvania's Wharton School, wrote in February that housing prices in Philadelphia had gone up 63 percent between 2000 and 2010.

Dubow said the city would provide PICA with documentation to back up its projections.

"We understand that we need to show PICA our assumptions and how we to got to our projections, and we plan to do that," Dubow said.

But in criticizing the Nutter administration, Katz was also taking aim at the previous PICA board, which approved a five-year-plan in August with essentially the same numbers.

"Going forward, I will always try to get PICA to apply the test of reasonableness of assumptions, or actual knowledge of facts, before exercising its responsibilities to approve, or not, a five-year plan," Katz said. "I want to make sure the administration and City Council understand - our obligation is to call things straight. We're not players."


Contact staff writer Jeff Shields at 215-854-4565 or jshields@phillynews.com.