Question is how to target tax relief

Now that predictions for a new tax rate under Mayor Nutter's property-tax reform have dropped to a more politically palatable level, the debate over the effort has shifted.

No longer is the question whether to implement the Actual Value Initiative (AVI), but how.

Should Nutter and Council provide tax relief for homeowners and, if so, what kind and which homeowners?

Should Council set caps on how much a tax bill can go up in a year?

Should the elderly qualify for tax deferrals, having tax hikes delayed until they, or their estates, sell their homes?

"I'm willing to look at everything," Councilman Mark Squilla said.

"There's a lot of different options being thrown out there," Squilla said, and no idea has been received as bad.

The crux of the debate is this: The city has to collect a certain amount in property taxes, so giving someone a break means someone else has to pay.

Some Council members already are arguing for no tax breaks in order to keep the overall rate as low as possible - perhaps as low as 1.2 percent of a property's worth, or $1,200 per $100,000 of assessed value.

With the relief measures most commonly discussed, the rate would be about 1.4 percent. That's the difference between a $3,600 bill on a $300,000 house at 1.2 percent and a $4,200 bill at 1.4 percent.

The primary tax break under discussion is the homestead exemption, which allows homeowners to deduct $30,000 from the value of their primary residences before the tax rate is applied. Thus, a $200,000 house would be taxed on a value of only $170,000, for example.

Councilmen Bill Green and James F. Kenney introduced a bill Thursday to eliminate the exemption with an eye to keeping the tax rate lower.

The homestead debate could be particularly stark because it breaks along economic and class lines. The exemption actually costs money for people with homes valued at more than $280,000, under current estimates, as well for owners of commercial properties, industrial sites, hotels, rental properties, and vacant land.

But the exemption would give a tax break to the greatest number of people and would be the most beneficial for lower-income homeowners, who typically have been overtaxed under the current system.

Councilman Wilson Goode Jr. also noted that giving a break to homeowners is the only way to charge them less than commercial property owners.

Many Northeastern cities tax commercial property at a higher rate, but Pennsylvania's "uniformity clause" forbids it.

The Philadelphia delegation in Harrisburg is pushing a constitutional amendment to overturn the uniformity clause, but that effort, if successful, could take years.

Squilla, whose First District includes some of the city's wealthier areas, said he was exploring a homestead exemption based on a percentage - for example, giving everyone a break on 5 percent of their home's value.

"That would be the most fair way to do it," he said. "Everyone would get a break and it wouldn't increase the [tax] rate as much."

For District Council members, who have to take into account the impact on individual neighborhoods, the discussion is academic until they see the results of a citywide reassessment that is crucial to AVI.

The idea behind AVI is to tax properties based on their actual market value, though there surely will be unintended consequences.

City Controller Alan Butkovitz, who has advocated for the lowest possible rate across the board, talked Friday about Grays Ferry, where overall property values have gone up thanks to developments like Naval Square, but where there are still pockets of poverty.

He envisioned a low-income family there seeing a tax bill going from $200 to $2,000.

"What could be done for that particular family? And how many like them are out there?" Butkovitz asked. "That's what's really frustrating about having this debate without the numbers."

The Nutter administration doesn't plan to release data from the reassessment until after the results are mailed to individual property owners this week.

It's not clear at this point what AVI package would have the nine votes necessary to pass Council, and Nutter has not staked out a position.

Mark McDonald, a spokesman for the mayor, said Nutter would "talk about a recommended tax rate and related issues in the context of the budget address in March."

But, the administration did brief Council members last week on some preliminary AVI numbers, showing them a breakdown of tax bills with a 1.25 rate and no relief.

Under that scenario, more than three quarters of the city's homeowners would see their taxes go down or rise by less than $400.

Several Council members left those meetings in a bright mood - a far cry from last budget season, when AVI briefings led to wails of anguish.

But Butkovitz, whose office is crunching the reassessment data under an embargo, cautioned that the full picture isn't yet known.

"Until everybody has all the data," he said, "all the hardships aren't visible."