Around the Block: 5/20/2022

As we discussed last week, the new 2023 Philadelphia tax assessments can be absurdly inaccurate. I mean some can be on-point; perhaps somewhere above the broken clock is right twice a day level, but not clear how far above that. Some homes that were already under-assessed compared to their Fair Market Value (FMV) were actually reduced further in 2023. While other homes that were more accurately assessed were increased so they are now over-assessed.

When you have a system this inaccurate, with so many properties under-assessed, every property owner who is accurately assessed is actually subsidizing those who are under-assessed. Often to the tunes of thousands of dollars a year. Say two homes have a FMV of $1,000,000, and one is assessed at $1,000,000 and one is assessed at $650,000. This is a typical scenario in Philly. Not an outlier. So, the homeowner with the accurate assessment is paying $13,368 in annual taxes while the under-assessed homeowner is paying $8,469. This is a whopping difference, and it is seen regularly throughout the City. One set of property taxpayers is substantially subsidizing another. And not because of a pre-determined policy or programs like the tax abatement or LOOP. But because of pure inaccuracy and arbitrariness in the assessments.

Another thing to consider is that while a property owner who is over-assessed will have a solid chance at a successful appeal, one who is properly assessed will not. And of course, those who are under-assessed will generally just stay where they are and hope it stays that way as long as possible. If an over-assessed property owner appeals, they will most likely end up as a properly assessed property owner (i.e., not a great place to be in Philly).

Let me be clear—no property owner who is under-assessed is at fault for anything or has any responsibility to somehow reexamine their assessment in any way. If you are under-assessed, then consider yourself lucky and enjoy the tax break while you can. There is nothing else to do but that. Because this inequity is 100% and solely on the City of Philadelphia and is its burden to correct. Until the City can determine a method for accurately assessing its properties, they will have a class of taxpayers (the properly and over-assessed) subsidizing another class (the under-assessed).

Assuming the City could fix this issue and assess its properties at their actual value (which is the stated goal, to wit, the Actual Value Initiative), then it could collect the same amount of tax revenue with a lower tax rate and with all property owners paying a substantially similar amount based on their Fair Market Value. Until such time, here is a solid article from the Inquirer about the property tax appeal process. I also recommend hiring an attorney experienced in Philly property assessment appeals, especially if significant value is at stake. If you have any questions or would like an attorney recommendation, please let me know.

Finally, keep in mind that the City Council and Mayor still need to determine what to do with these 2023 assessments. They could increase the Homestead Exemption beyond its current $630 annual property tax reduction. They will likely beef up the LOOP program to further protect long-time homeowners below certain income thresholds. They could change the tax rate, though that seems highly unlikely. And they could ultimately delay the assessments if they face enough political blowback. We shall see.

Have a great weekend.

Thank you,

Jeff