Philadelphia News & Search
Commercial property owners could be in for some sticker shock when they receive the city’s new property assessments mid-April.
The value of Philadelphia’s 14,000 commercial buildings went up by nearly 40 percent _ from $14.4 billion to $19.7 billion _ with the reassessments, an increase that is expected to result in $118 million in new tax revenue to be split between the city and school district.
This is the first full reassessment of commercial properties since the controversial Actual Value Initiative (AVI) in 2014, which uses actual market values as the assessment standard.
“The goal was not only to ensure the assessed values more accurately reflect sales and market forces but to also to reduce value inequities among comparable properties,” Michael Piper, chief assessment officer, said.
The Chamber of Commerce of Greater Philadelphia, whose members are likely to be impacted by the reassessments, did not respond to a request for comment Friday morning.
The market value for all 579,000 properties — both residential and commercial — grew by $17 billion this year to $153 billion with the biggest increases coming from hotels, apartments and commercial buildings.
Of that total market value, $111.3 billion is taxable property, a 15 percent increase from last year, according to city estimates. The total property tax revenue for the city is expected to be about $600 million. About $700 million will go to the school district.
The new assessments, which were finished last week, are not yet reflected in the city’s five-year plan. City finance director Rob Dubow estimates that there will be a 20 percent decrease in the total taxable assessed value due to appeals. Dubow is also counting on a 93 percent collection rate, which would pump $54 million in new tax revenue to the city’s coffers.
However, Dubow said there is no spending plan for that new money.
“Our recommendation is going to be that money is reserved as a contingency against what may or may not happen with the federal budget,” Dubow said.
The school district is estimated to receive $65 million in new tax revenue. The additional revenue has the potential to close by a third a projected $900 million budget deficit in the district’s five-year plan, announced just last week.
“It is good news for the school children of Philadelphia whenever we can identify new, recurring and reliable revenues,” Uri Monson, the district’s chief financial officer, said in a statement.
The district learned of the additional revenue Thursday.
Monson said once the district is fully briefed by the city, the district’s five-year plan will be updated.
Similar to last year’s residential property reassessment, which increased values by $2.2 billion and pumped an extra $14 million into the city’s general fund, commercial properties also saw an increase in the land portion of taxable assessments.
Piper said that as a category hotels saw the highest increase in value, largely because of the new inventory of hotels going up in the city.
Councilman Allan Domb, a real estate mogul whose campaign platform included fixing the city’s assessment system, said he knows some property owners will be pained by the increases. But he said many of those owners have for years received a “tremendous advantage” due to their properties being under assessed.
“I know one example where someone five years ago paid $40 million to the city for a piece of land. And we had it assessed at $4.5 million,” he said. “I realize it may be sticker shock but for five years we didn’t get the right money.”
Domb stressed that the new revenue should be placed in reserves, something he said he hopes will lead to the city’s bond ratings being raised, ultimately lowering the city’s cost of borrowing.
“City Council and the mayor can’t spend this money,” he said.
Philadelphia News & Search