With $36 million in desperately needed tax revenue at stake for Philadelphia and its financially beleaguered school district, the state has agreed to reconsider a ruling that could mean victory for many Philadelphians appealing their property assessments.

"We want to get this right," said Renee Reynolds, executive director of the State Tax Equalization Board (STEB), which announced its decision on Friday.

At issue is an arcane concept known as the "common level ratio," computed by the tax board. And its latest calculation was a potentially costly one for Philadelphia.

Here is how it works:

Counties are supposed to submit monthly figures on property sales to the board. It then compares the prices to their assessments - that's the percentage of property value subject to taxation.

The board calculates the average assessed ratio for all properties for the calendar year and publishes that figure on July 1 of the following year. That's called the "common level."

For legal purposes, that becomes the countywide measure of fairness for property owners filing appeals - whether their assessment is fairly related to their property value.

Philadelphia presents another complication. It plans to convert this year to a simple "full value" system in which the actual value of a property and the assessment would be one and the same.

For now, however, its opaque system remains bewildering to most taxpayers, even more so than it is in other counties.

State law allows counties to assess properties at any percentage - 100, 50 or the square root of negative -1 - so long as the percentage is the same for every property owner.

For over 20 years, Philadelphia has used 32; therefore, a home worth $100,000 is supposed to carry a $32,000 assessment; a $50,000 home, $16,000, etc.

As long as the city's official ratio stayed within 15 percent of that - 27.2 - it could hold property owners to that standard. If it fell below, the actual common level would become the appeal standard.

Analyses by The Inquirer and others have documented that only a small portion of Philadelphia properties are assessed that highly - and the city's numbers had been way off for years.

And on July 1, STEB decreed the 2010 common level to be 18.1, opening the door for successful appeals and, hence, lower property tax bills. The accurate assessment for a $100,000 became $18,100, instead of $32,000.

Pending appeals represent $16 million in potential lost revenue for the city and $20 million for the School District, said city Finance Director Rob DuBow. About 2,000 appeals were filed, he said.

Philadelphia asked for a ratio recount. It said its new Office of Property Assessment, which replaced the Board of Revision of Taxes, had more-refined 2010 data, and DuBow said the new numbers would push the ratio close to 27.2. STEB has agreed to take another look, though it is not clear when a decision might come.

"I think STEB did the right thing," said David R. Glancey, former chairman of the defunct Board of Revision of Taxes.

The decision, however, has raised eyebrows among some property-tax experts who questioned whether the numbers were being manipulated.

"I have never seen anything like this," said Philadelphia tax lawyer Joseph Bright, a partner at Cozen O'Connor. "I've occasionally seen some revisions, but nothing of this scale."

The revised estimate is based on just under 9,500 sales deemed "valid" by the city in 2010, or less than a third of the total sales.

"This seems rather low to me," Robert P. Strauss, a tax expert at Carnegie Mellon University, said of the sales sample.

He added that one of the fundamental flaws with the state law is that county assessors are on the honors system since STEB has no enforcement powers.

Reynolds said most of the 67 counties - including Bucks, Chester, Delaware, and Montgomery - comply with the monthly requirements and forward solid data. Philadelphia didn't file any 2010 reports until last June, and then filed them all at once, she said. That complicated the vetting process.

"When something is voluntary, it's nuts," said Strauss. "Other states don't make the collection of data voluntary."

Strauss was skeptical of the city's 27.2 figure. In fact, analyses in 2008 by The Inquirer and Strauss estimated a ratio well below 15.

"That's consistent with what I've heard from appraisers," said Bright.

Dubow said the ratio debate speaks to a need for a system overhaul.

"This shows the urgency of getting the actual-value done," he said.

In the meantime, Strauss said he is surprised that the system hasn't been a richer source of billable lawyer hours.

"I don't understand why no one has brought a suit," he said.

Said Glancey: "I'm assuming this won't end here."

Contact Anthony R. Wood at 610-761-8423 or twood@phillynews.com