Inquirer Editorial: Smells like a tax hike

So much for the "temporary" portion of Philadelphia's increase in property taxes. And so much for a "revenue-neutral" fix to the city's broken property-tax system.

Instead, Mayor Nutter's 2012-16 budget plan includes a 20 percent hike in property-tax revenue. The hefty increase comes even as the administration says the city's budget crisis is easing, and that the expected funding cuts in Gov. Corbett's proposed budget aren't nearly as bad as expected.

More disturbing, the Nutter administration - which promised an open and transparent City Hall - dropped the property-tax increase into its five-year plan without any comment or explanation. In fact, during his budget address, the mayor said: "There are no tax increases in the budget that I propose today."

The mayor conveniently failed to mention that last year's temporary, two-year property-tax increase of 9.9 percent wasn't going away. Instead, it is built into the city's five-year plan.

The mayor plans to further increase property-tax revenue by an additional 10 percent once the city completes a reassessment of property values and moves to what is called an Actual Value Initiative, or AVI. Then, property-tax revenue will increase, but City Council won't have to vote for another tax hike.

Brett Mandel, a citizen advocate and former political candidate, was the first to flag the permanent increase on his website.

City Finance Director Rob Dubow acknowledged the increase last week during a budget hearing. He then offered a tortured explanation for what is clearly just a backdoor tax hike.

Dubow said the increase would compensate for the two-year freeze in assessments that was put in place while the administration spends millions to try to fix its uneven property-tax system. He added that the inaccurate assessments caused the city to miss out on the growth in the real-estate market over the last decade.

Dubow's explanation ignores the fact that property values have been dropping nationwide since 2008. As a result, it's unlikely the city missed out on any increase in property values during its assessments freeze. If anything, the freeze may have kept some assessments from going down. The latest data show median home prices in the region dropped 3.1 percent in the last year.

Dubow also said the uneven assessments had caused the city to miss out on tax revenue from the housing boom over the last decade. Granted, some homeowners have been paying more, and some less, due to the uneven assessments. But as many homeowners can attest, their tax bills increased by double digits during the past 10 years as the city hiked assessments in neighborhoods that are thriving and growing.

Dubow testified at the City Council budget hearing that properties have increased in value by about 2 percent a year for 10 years, but he did not provide any data to support his claim.

By resorting to a backdoor tax increase, Nutter is undermining the argument for moving to his new assessments program, which was supposed to be revenue-neutral. Instead, it just looks like a new way to raise property taxes.