Property Tax Rebellion Brewing After Real Estate Collapse

[DrDoom]

Can't wait to see the rebellion in Philly if they decide to raise RE taxes on bogus assessments thanks to BRT. The whole BRT fiasco with Nutter just adds to the mess....

Never judge a house by its tax bill. That's the lesson Don Newby, 65, is learning.

The construction manager from Gibbsboro, N.J., is paying boom-era property taxes on a home that has lost 20 percent of its value in the past three years. He blames the Gibbsboro tax authorities, which haven't reassessed property values in the town since 2003.

"That's absurd," says Newby, who pays $14,000 a year in taxes on a four-bedroom, bi-level modern house in the New Jersey township that's not far from Philadelphia. Newby, who was unemployed for a year following the economic collapse, claims the government is intentionally delaying new assessments to benefit from the lag as long as possible.

Property Tax Rebellion in States After Real Estate Crash - ABC News

[seand]

To be clear the real fiasco at the BRT was made by the two local parties. The Democratic Party, being dominant locally, of course getting the biggest slice of the patronage - but both parties milked the agency as a place for patronage without so much as batting an eye at their awful assessments.

Interestingly the most awful quote about patronage at the BRT came from the GOP, specifically Meehan heir to the Meehan fmaily dynasty in local GOP politics.

In more up-to-date assessing operations, hiring is based on merit, not politics. In Maryland, for example, all property assessments are done by the state Department of Assessments and Taxation, headed by a trained assessor appointed by the governor. Nearly all the jobs, from clerks to assessors, are chosen through civil-service rules.

"If property owners don't feel the system is fair and accurate, we lose credibility and the whole thing goes down the tube," said Bill Stansbury, an agency deputy director.

Not so in Philadelphia. In filling openings at the BRT or other patronage agencies, like the Philadelphia Parking Authority, Meehan worries more about candidates' comfort than their qualifications.

"Most of the people at the parking authority are actually writing tickets," Meehan said. "At a certain age, they can't be out on the street on a cold day and walking.

"The BRT is a more attractive place," he said.

Names are passed up the chain from committee people to ward leaders to the party chairs, who send them over to the BRT. The school district pays the salaries but doesn't make the hiring decisions.

BRT serves as political jobs bank | Philadelphia Inquirer | 05/04/2009

This is a mess that has been brewing for 20 years and both local party machines bear direct responsibility for making it.

[billy ross]

Can't wait to see the rebellion in Philly if they decide to raise RE taxes on bogus assessments thanks to BRT. The whole BRT fiasco with Nutter just adds to the mess....

People in Philly are much more likely to pay $1,400 per year than $14,000 per year. It's just an entirely different ballgame out there in Jersey. Maybe even $140 per year is more common here than $14,000. Everyone in Philly knows that our real estate taxes are overdue for an increase (overall - some, few, people are overassessed and will benefit from the day of reckoning which is coming). The best way to do that is to bring assessments into reality and to lower the millage to an intelligent level. Since, due the the BRT's screw-ups, the assessments have been more or less fixed for a few years and they look to remain fixed for another year or two, it stands to reason that the city can buy some time by adjusting the millage upwards. Over time, eventually the assessments will be fixed, and at that point the millage can be brought back to reality. Property values have skyrocketed in Philly in the past 15 years. Property taxes haven't come close to capturing that gain (on a percentage basis). I don't think that it is the city's goal to capture it one for one. I just think that the city expected that if it spent money to improve the QOL, it would benefit through some increased revenues, and this hasn't happened. The city got away with it during the boom, because all of the property sales generated enormous transfer taxes (our extremely high real estate transfer taxes represent about four years' property taxes, collected upfront and 100% indexed to the sale price of the house). However, when the music stopped on the sales end of things, the cash flow dried up, leaving the city beating some bushes to replace that fat income.

[StrangeTanks]

I agree with Billy. Comparing NJ and Philly is apples to oranges.

I always thought that Philadelphia's relatively low RE taxes were there to encourage people to move into the city. If you live and work in Philly, you have to pay city tax, but have the benefit of a lower RE tax.

If your taxes are based on assessments, why would you want to apply for permits to do work on your house? Its a big red flag for your taxes to go up. If you are re-assessed where is the proof that it reflects the actual value? It is also absolutely unreasonable for taxes to be allowed to rise several hundred percent in a single year.

I still think RE taxes should be based on sales price and not assessments. I don't care how you assess properties its going to be completely bogus and ripe for abuse. You purchase a house, and the RE taxes are a simple percentage of the purchase price. Your taxes do not go up.

This way we can get rid of most of the idiots at the BRT. It encourages people to become long term owners of their houses. Taxes become a predictable cost in a household budget. RE taxes will naturally rise as neighborhoods become gentrified. The long term residents instead of being punished by higher taxes will be rewarded with a relatively lower cost of living.

[raider.adam]

For the topic, there is no difference between Philly and NJ. The discussion isn't about the millage, it is about fair taxation.

[billy ross]

For the topic, there is no difference between Philly and NJ. The discussion isn't about the millage, it is about fair taxation.

And that's where you fall on your sword. The colonies broke from the crown when the crown raised taxes to levels they felt were unjustified. At that point taxation without representation became an issue, and not before then. The amount people pay matters more than the formula which generates that amount. Ask any person rebelling against 'high' taxes. Similarly, ask anyone buying gas in Jersey. It's still taxed highly in Jersey, but people don't rebel, because it's not taxed so highly as elsewhere. People in Jersey rebel against property taxes there, because they know they're getting ripped off. Not because the tax is fair or not, but because people in Jersey pay high taxes relative to people in other states. It's the absolute value of the tax that flips people out, not the formula. $14k per year would really stick in my craw.

[seand]

NJ's reliance on high property taxes is in turn a reflection of a suburban "exclusive community" approach to maintaining its tax base. In Philly we have b contrast the wage tax, which is a reflection of our tax base of poorer ex-industrial tax base. People complain less when they pay the bill on the installment plan when they are on a budget because they can handle the budgeting better and to a certain extent they don't notice.

Our property taxes would be as high and we wouldn't have a wage tax if they could figure out a way to collect them a little at a time out of your paycheck.

[seand]

I still think RE taxes should be based on sales price and not assessments. I don't care how you assess properties its going to be completely bogus and ripe for abuse. You purchase a house, and the RE taxes are a simple percentage of the purchase price. Your taxes do not go up.

So you want Prop 13 for Philly? That your assessment is locked in at purchase? I know folks in CA who have "inhereitted" their living parent's homes but as long as they are alive keep it in their parents name to avoid real estate taxes. Don't think thats necessarily fair.

I think the cost of things and services that schools and city government go up over time and locking in the cost of paying for those services for your do-nothing grandchildren who "buy" your house for $1 or never officially "buy" it is a crappy way to attract new people to the city and inherently unfair to people in jobs like the military where they have to move around a lot. And property taxes are more stable, less jobs exporting than relying on wage taxes and biz taxes.

If your house goes up in value, thats real money you can borrow against to start a business or refi personal debt. When you sell it, its definitely real money. That's why I support partial deferments so old folks aren't taxed out of their homes but the city gets it share when people actually cash out or attempt to pass it on to their heirs.

[raider.adam]

And that's where you fall on your sword. The colonies broke from the crown when the crown raised taxes to levels they felt were unjustified. At that point taxation without representation became an issue, and not before then. The amount people pay matters more than the formula which generates that amount. Ask any person rebelling against 'high' taxes. Similarly, ask anyone buying gas in Jersey. It's still taxed highly in Jersey, but people don't rebel, because it's not taxed so highly as elsewhere. People in Jersey rebel against property taxes there, because they know they're getting ripped off. Not because the tax is fair or not, but because people in Jersey pay high taxes relative to people in other states. It's the absolute value of the tax that flips people out, not the formula. $14k per year would really stick in my craw.

Then you didn't read the article. The guy didn't bitch about the $14K. He bitched that it was based off a value for his house that was no longer accurate.

The construction manager from Gibbsboro, N.J., is paying boom-era property taxes on a home that has lost 20 percent of its value in the past three years. He blames the Gibbsboro tax authorities, which haven't reassessed property values in the town since 2003.

[palvar]

That's why I support partial deferments so old folks aren't taxed out of their homes but the city gets it share when people actually cash out or attempt to pass it on to their heirs.

I always hear this when a discussion of real estate assessments comes up. [Sean- I realize that I am taking your statement and making a different point then you were and, for that, I apologize]. Does anyone have an example of someone in Philadelphia being taxed out of their home? I mean, isn't one of our big financial problems the fact that collections of back property taxes are rarely enforced? It just seems like a non-issue.

[billy ross]

NJ's reliance on high property taxes is in turn a reflection of a suburban "exclusive community" approach to maintaining its tax base. In Philly we have b contrast the wage tax, which is a reflection of our tax base of poorer ex-industrial tax base. People complain less when they pay the bill on the installment plan when they are on a budget because they can handle the budgeting better and to a certain extent they don't notice.

Our property taxes would be as high and we wouldn't have a wage tax if they could figure out a way to collect them a little at a time out of your paycheck.

I disagree. Some places have ridiculously high income taxes - see Philly or California. CA's property taxes have been limited by the Proposition from 1978 (13), and it has relied overly high on the income tax, to its detriment. Ditto Philly, although our property taxes have been limited by other political reasons. Other places have high property taxes, like New Hampshire or Florida, and low (in the case of these two states, zero) income taxes. Only New Jersey is stupid enough to combine high income taxes and high property taxes. PA has a low income tax, but it just defers income taxes to the municipality; PA is fairly unique in having local income (i.e. wage) taxes be pretty much the norm.

My point is that not only are Jersey's property taxes insane. The income taxes are also insane there. This is a place which had zero income tax until 1976. Now they're so deep in debt that even high taxes everywhere won't pull them out of their mess.

[billy ross]

I always hear this when a discussion of real estate assessments comes up. [Sean- I realize that I am taking your statement and making a different point then you were and, for that, I apologize]. Does anyone have an example of someone in Philadelphia being taxed out of their home? I mean, isn't one of our big financial problems the fact that collections of back property taxes are rarely enforced? It just seems like a non-issue.

Thankfully, there are those who pay their bills even if there is lax enforcement, and who would sooner move than fall behind on their bills, even in Philadelphia.

[DrDoom]

Here is a similar article

Now that the housing bubble has burst, up to 60 percent of the nation's taxable property may be overassessed, meaning owners are paying thousands of dollars more in taxes than they need to, experts say.

That is leading to a flood of appeals in many markets from homeowners eager to cut their taxes and speed the process of aligning tax valuations with reality.

While home prices have fallen by 30 percent on average since their 2007 peak, according to the Case-Shiller Home Price Index, many counties only reassess every three to five years and have little incentive to move faster considering how important property taxes are to funding local government operations.

So homeowners are increasingly appealing the valuations, although the number is still a tiny fraction of the total — 2 to 4 percent, according to the National Taxpayers Union.

“People forget they need to appeal,” said Barbara Payne, executive director of the Fulton County Taxpayers Foundation in Georgia. “Everyone should have appealed more than once in the last five years or you’re paying too much.”

Those who appeal are getting mixed results. Only 20 to 40 percent of those who challenge their assessment walk away with a victory, the NTU said.

“Appeals have become more difficult in the last two years now that municipalities are fighting tooth and nail for everything,” said Anthony Sarro, president of eTaxReductions.com, a company that represents people on property tax appeals.

Overtaxed homeowners start to fight back - Real estate- msnbc.com

[eldondre]

And that's where you fall on your sword. The colonies broke from the crown when the crown raised taxes to levels they felt were unjustified. At that point taxation without representation became an issue, and not before then. The amount people pay matters more than the formula which generates that amount. Ask any person rebelling against 'high' taxes. Similarly, ask anyone buying gas in Jersey. It's still taxed highly in Jersey, but people don't rebel, because it's not taxed so highly as elsewhere. People in Jersey rebel against property taxes there, because they know they're getting ripped off. Not because the tax is fair or not, but because people in Jersey pay high taxes relative to people in other states. It's the absolute value of the tax that flips people out, not the formula. $14k per year would really stick in my craw.

Incorrect, it was as much about taxation without representation as anything. Colonists had gotten used to being left alone and didn't take kindly to new taxes over which they had no control. Indeed, the taxed tea thrown into the harbor had been priced below market.property taxes are a big issue in Penn despite having much lower rates than nj. Ca's problem is spending not which taxes it uses, something you seem to overlook.

[seand]

I always hear this when a discussion of real estate assessments comes up. [Sean- I realize that I am taking your statement and making a different point then you were and, for that, I apologize]. Does anyone have an example of someone in Philadelphia being taxed out of their home? I mean, isn't one of our big financial problems the fact that collections of back property taxes are rarely enforced? It just seems like a non-issue.

No you are right - in Philly we have a political structure with intentionally out-of-date and flawed assesments and crappy collection instead. I'm just saying some deferments that the city collects when people cash out the unrealized wealth in their now gentrified neighborhood but assessing values at real market-based rates is the non-dysfunctional way to deal with the problem.

[seand]

Dr. D, part of the reason you are not getting traction is because our assessments are already rebellion worthy. If people were going to rise up they would have.

This guy in NJ pays a significant amount of taxes and he knows their assessment process is not as up to the minute as it could be. Officially our assessments are intentionally 20 years out of date and based bad data.

The assessment process here is muddled with assessments that say on paper everyone's house is assessed at a fraction of what its actually worth - its just some people's fraction is wrong by 50% further in the wrong direction and others its 50% in the right direction. You can't say you are over assessed because the number is still less (even after this real estate bubble burst) then a real estate agent would put on it tomorrow - even though you are paying disproportionately more compared to your even more underassessed neighbor.

[DrDoom]

Dr. D, part of the reason you are not getting traction is because our assessments are already rebellion worthy. If people were going to rise up they would have

I don't necessarily disagree but has anybody paid out yet on the new bogus assessments? A lot of people were fuming when they posted the valuation generator on philly.com. I saw quite a number of remarks saying if they insitute the tax they would forcefully appeal...the thread is on here somewhere...

[seand]

I don't necessarily disagree but has anybody paid out yet on the new bogus assessments? A lot of people were fuming when they posted the valuation generator on philly.com. I saw quite a number of remarks saying if they insitute the tax they would forcefully appeal...the thread is on here somewhere...

No. There is a moratorium on new assessments until 2012. The new test assessments were no worse in terms of being arbitrary than the current ones.

Part of the problem with the new assessments they floated before the BRT was exposed for being as bad as it is is that the BRT data which the bad old current assessments were supposed to be based on was all screwy. The market-rate assessments were bad because they took the BRT's bad data and just plugged it into a modern industry standard formula.

People already forcefully appeal if their bill goes up, whether its fair or not. And the current BRT under its current method was basically sending out spot reassessments based on arbitrary methods and bad data anyway. At least the new fair market rate assessments were based on a consistant logic and method - just bad data.

And FWIW the old BRT wanted to move to full-value assessments and when its under the city Finance Department they will use full-value assessments also.

[DrDoom]

No. There is a moratorium on new assessments until 2012. The new test assessments were no worse in terms of being arbitrary than the current ones.

Part of the problem with the new assessments they floated before the BRT was exposed for being as bad as it is is that the BRT data which the bad old current assessments were supposed to be based on was all screwy. The market-rate assessments were bad because they took the BRT's bad data and just plugged it into a modern industry standard formula.

People already forcefully appeal if their bill goes up, whether its fair or not. And the current BRT under its current method was basically sending out spot reassessments based on arbitrary methods and bad data anyway. At least the new fair market rate assessments were based on a consistant logic and method - just bad data.

And FWIW the old BRT wanted to move to full-value assessments and when its under the city Finance Department they will use full-value assessments also.

The moratorium was announced after the valuations came out. Yes they were equally arbitrary but again nobody had to pay out a dime yet. Once people have to seperate their pennies from the lint in their pockets there will be more backlash..especially considering all the other taxes, fees and cost of living increases on the horizon...

[raider.adam]

The moratorium was announced after the valuations came out. Yes they were equally arbitrary but again nobody had to pay out a dime yet. Once people have to seperate their pennies from the lint in their pockets there will be more backlash..especially considering all the other taxes, fees and cost of living increases on the horizon...

They never implemented actual value assessments. BRT said they had them, but they were never implemented.