Why a property tax heavy system won't work in philly

[eldondre]

article does a good job highlighting that it's not just low property taxes but a shrinking tax base since more and more is exempt. a property tax reliant system would still leave an onerous burden on philadelphians so a shift won't work.

Charge less in business and wage taxes, and increase other taxes, principally the tax on real estate.

But there’s a big and yet often overlooked problem with the approach: nearly a third of the total value of property in the city of Philadelphia is exempt from property taxes, a ratio that’s been climbing in recent years and is among the highest of any big city in the nation...In the last decade, Philadelphia’s inventory of tax-exempt property has nearly doubled, the explosive growth driven by the city’s surging non-profit sector and the popular 10-year real estate tax abatement program...In the last decade, Philadelphia’s inventory of tax-exempt property has nearly doubled, the explosive growth driven by the city’s surging non-profit sector and the popular 10-year real estate tax abatement program...How much do those tax-exempt properties cost the city and School District in potential revenue? A whopping $528 million in 2012 alone.

On top of that total are the lost funds owed by Philadelphia’s large class of long-term property tax delinquents. There are more than 28,000 properties in Philadelphia that are a decade or more in arrears on their taxes

this next point is rather silly, the city implemented these taxes just as factories WERE leaving cities. the idea is that they wouldn't leave but leave they did. it's been a failure since day 1.

A half century ago, when Philadelphia’s economy was still manufacturing-based, the high rates the city charged on wages and business activity weren’t deal-breakers, in part because moving factories out of town was a costly proposition.

Fiscal reform in Philadelphia faces a taxing problem | PlanPhilly: Planning Philadelphia's Future

[billy ross]

Taxing productive nonprofits wouldn't be wise.

Killing new construction by killing the abatement wouldn't be wise - abating taxes you weren't going to collect anyway doesn't really cost you anything.

28,000 parcels in Philly that are a decade or more behind in their taxes? Bingo. Auction them off at whatever rate the market will bear. Start with 500 or even 1,000 per month. Get them back on the tax rolls. End the insanity.

[Volanova]

Taxing productive nonprofits wouldn't be wise.

Killing new construction by killing the abatement wouldn't be wise - abating taxes you weren't going to collect anyway doesn't really cost you anything.

28,000 parcels in Philly that are a decade or more behind in their taxes? Bingo. Auction them off at whatever rate the market will bear. Start with 500 or even 1,000 per month. Get them back on the tax rolls. End the insanity.

That would require a modicum of common sense and competence, something tax collection in this city hasn't had in a long long time. Plus, I imagine those in power would lose a lot of votes if they started enforcing tax delinquency codes properly, even if it would go a long way towards digging the city out of the hole it has dug for itself.

[Tartan69]

28,000 parcels in Philly that are a decade or more behind in their taxes? Bingo. Auction them off at whatever rate the market will bear. Start with 500 or even 1,000 per month. Get them back on the tax rolls. End the insanity.

This is a no-brainer. But why isn't Council pursuing this more aggressively? Is it because they are worried that they'll tick off their core voters?

EDIT - I see Volanova commented on that as well. Must be the key. How does Council solve this then?

[billy ross]

This is a no-brainer. But why isn't Council pursuing this more aggressively? Is it because they are worried that they'll tick off their core voters?

EDIT - I see Volanova commented on that as well. Must be the key. How does Council solve this then?

Add a slow boat to China payback plan for legitimately owner-occupied properties. Clear the vacant, abandoned, and speculator-owned properties through the system first. That alone will take the city a long way. All tax delinquent properties would fall under the dragnet, but legitimately owner occupied units could apply to be removed from the auction. Meanwhile any that fall between the cracks would still be eligible for the one year right of redemption.

[2happy4u]

we are living in a far left liberal city, They only have one answer to every problem, TAX the working man. it's been this way for a longtime.

[Debbie1125]

The best suggestion would be to get extremely aggressive and collect all of those millions from delinquent property owners.

If they don't pay up, then sell the properties at sheriff's sale. Mayor Nutless and city council need to grow a set.

[billy ross]

The irony is that the abatement helps with both the nontaxable land held by nonprofits and government organizations as well as the tax delinquent properties. Just look at what's happening in Point Breeze now. Formerly derelict land - certainly not producing taxes - is now producing taxes, on land value only for ten years then on full value after that, but that's better than before, when they were tax delinquent (on taxes which reflected the land value only, but I'm not 100% sure about that), or tax exempt - see nontaxable churches demolished and turned into taxable houses. Bingo - instand tax collection method and INCREASE in the city's tax base without the city lifting a finger. This doesn't include other taxes that people living in abated properties pay, at full rate. It really bothers me that the author of the article didn't see that we're not looking at a static model. It is dynamic, and second and third order differentials needs to be taken into effect, because they are real. The tax abatement broadens the property tax base and increases total tax revenues, and doesn't shrink either, as the author of the article states. That really bothers me. Temporarily exempting some, but not all, taxes is a cheap price to pay for permanently adding land AND improvements to the tax rolls, in my opinion. Again, though, filters can be added. At the very least abated properties should never see their tax bills go down from what they were before the work occurred (in the case of demolishing a property to build a more valuable property, the abated tax for ten years shouldn't be less than the tax paid by the property that got demolished). We're trying to grow the tax base here, not shrink it.

The sad thing is that the RDA/PRD owns land in Point Breeze that it's not paying taxes on which has a willing buyer in a developer who would then pay taxes on it, and they refuse to sell. They're the problem, not the solution. Remember when I said that productive nonprofits shouldn't get banged? There can be a filter to separate productive from nonproductive nonprofits, some sort of certification that the land is central to their mission. Certainly all governmental organizations should be required to pay property taxes, to the extent that federal and state law allow. Even though the city or agencies would be paying taxes to the city, which is somewhat circuitous, it would force city departments to use land more efficiently, since the property taxes should be coming out of their (limited) budgets and going into the general fund. If the RDA were paying taxes on its derelict land they'd change their tune and sell off their dross pretty darned quick. There are very many ways to skin this cat.

[Naveen]

That would require a modicum of common sense and competence, something tax collection in this city hasn't had in a long long time. Plus, I imagine those in power would lose a lot of votes if they started enforcing tax delinquency codes properly, even if it would go a long way towards digging the city out of the hole it has dug for itself.

I tend to think the issue is the first one you mention. Collecting all that money is hard work; Council probably sees the success of such efforts as limited and unreliable, hence the lack of desire to base fiscal policy around it.

[eldondre]

Taxing productive nonprofits wouldn't be wise.

Killing new construction by killing the abatement wouldn't be wise - abating taxes you weren't going to collect anyway doesn't really cost you anything.

28,000 parcels in Philly that are a decade or more behind in their taxes? Bingo. Auction them off at whatever rate the market will bear. Start with 500 or even 1,000 per month. Get them back on the tax rolls. End the insanity.

the abatement will no longer be necessary AFTER AVI goes into affect. the I agree, the most sensible short term strategy is to decrease the properties in delinquency. (also implementing AVI, THEN evaluating the abatement). really, the right solution is going to have to be multipronged if it isn't going to stick it to any one group. as far as non-profits go, it doesn't make sense to stick it to productive for-profits either and with ever increasing amounts of land in non-profit hands, the property tax based system makes less and less sense. the wage tax, OTOH, does tax the non-profits the same as everyone else which, in this case, is good. a shift away from the wage tax is a shift from taxing non-profits to taxing residents and for profits (many of whom already pay plenty).
afaik-as a renter and potential homebuyer, the abatement is really a non-factor. actually given the problems with getting mortgages, it actually makes it harder to buy since it inflates home values. two much scarier things are AVI (how will it affect any given property) and tax shift (higher property taxes mean lower prices, all things being equal). it's enough to be uneasy about buying. what's more interesting about point breeze are the homes being sold for profit in the sub 250k range

[raider.adam]

the abatement will no longer be necessary AFTER AVI goes into affect.

Why? AVI doesn't affect the reason for the tax abatement. (I am not defending the tax abatement. I think it should go, but AVI doesn't have any impact on why they have the tax abatement.)

[eldondre]

Why? AVI doesn't affect the reason for the tax abatement. (I am not defending the tax abatement. I think it should go, but AVI doesn't have any impact on why they have the tax abatement.)

sure it does...it protects you from sudden changes in your property tax. I believe its also intended to alleviate the newer properties being taxed at higher rates problem. once AVI is implemented, that should also be alleviated.
I'd also add that there is already going to be a shift from avi since commercial is taxed closer to value than residential

[raider.adam]

sure it does...it protects you from sudden changes in your property tax. I believe its also intended to alleviate the newer properties being taxed at higher rates problem. once AVI is implemented, that should also be alleviated.
I'd also add that there is already going to be a shift from avi since commercial is taxed closer to value than residential

The tax abatements weren't for any of that. The tax abatements were to increase the desirability of new construction and therefore allow developers to charge higher prices to cover the cost of building in Philadelphia. It was in essence the City not charging taxes for ten years so developers could get a better profit line.

[billy ross]

The tax abatements weren't for any of that. The tax abatements were to increase the desirability of new construction and therefore allow developers to charge higher prices to cover the cost of building in Philadelphia. It was in essence the City not charging taxes for ten years so developers could get a better profit line.

In the interest of being intellectually honest, I need to point out that the tax abatement was partially to deal with Philly's broken assessment system. Our millage rate is sky high, but that is no matter because our assessments are laughably low. Combing the two gets you affordable property taxes, generally speaking, in Philly The crazy low assessments are defensible if your house is 100 years old and reassessments didn't keep up with inflation. However, if your house is three months old it is much harder to assess it at a laughably low rate (since it just sold for a known number and the assessor needed to start out with a some number not particularly divorced from that to start your tax bill), so new construction in Philly pre-abatement was saddled with insane property taxes, so much so that new construction pretty much ended in Philly. The abatement fixed that, and more. It sparked a building boom which is still ongoing in this city.