As you hopefully know from our prior client alerts, the City of Philadelphia is now in the process of implementing the Actual Value Initiative (AVI) for tax year 2014. This is a City-wide undertaking impacting all properties and all classes of real estate (residential, commercial and industrial).
The notices from the OPA (Office of Property Assessment) are in the mail and are on the City’s website.
This reassessment program seeks to determine and set the Actual or Fair Market Value for real estate and, in doing so, correct the long standing disparity and lack of equalization among similar properties. As part of this process, many properties that have not been reassessed for many years will now be set at a value reflecting the market. Of course, this adjustment to reflect Actual Valuation will result in significant increases in valuation from the 2013 assessment. However, we still do not know the millage rate that will determine the actual tax for 2014. The speculation is that the millage will be reduced from the current rate of .09 to approximately .0125-.013. Please note that under AVI, the Fair Market Value will be the same as the assessed value. This is a change from prior years in which the City used a predetermined ratio (usually 32%) in order to determine the assessed value before applying the millage rate.
For example, in 2013, a property may have a Fair Market Value set at $100,000 and, utilizing an assessment ratio of 32%, there would be an assessed value of $32,000. Applying the millage of .09, the tax would be $2,880. Under AVI, the same property may be adjusted to reflect a Fair Market Value or Actual Value of $200,000 and the property will be assessed at 100% of value or $200,000. Applying the projected millage of approximately .013, the new tax for 2014 would be $2,600. So there would be a decrease in the actual tax, despite a significant increase in the Fair Market Value.
As mentioned in prior alerts, City Council is looking at various Homestead Exemptions and other buffers to protect against potential tax increases for areas which were historically under assessed. We suggest that you file for the exemption even though all of the details have not been finalized.
When you receive the Notice of Proposed Valuation for 2014 from the OPA, you should review them for factual accuracy concerning the size of the lot and the nature of the improvements. You will see in the notice that you have the right to file a Request for Informal Review with the assessor on or before March 31, 2013. This will give you a chance to discuss how the Actual Valuation was determined. Of course, you will also have the right to file a formal Petition of Appeal to the Board of Revision of Taxes (BRT) on or before October 7, 2013. Please remember that the School District has been filing a cross appeal over the past 2 years from all appeals filed by property owners. This cross appeal allows the School District to argue that the assessment should be increased and that the valuation set by the OPA is too low. Obviously, the purpose of the cross appeal is to chill the taxpayer from filing an appeal under the fear that the School District will prevail and the assessment and actual tax will increase over what was originally proposed by the City.
As we await the final decisions by City Council concerning the millage and other aspects pertaining to the 2014 assessment, we suggest that you contact us if you have any questions or need assistance in submitting a request for informal review or an actual formal appeal to the BRT.
Klehr Harrison attorneys have been actively representing property owners in real estate tax appeals for years, and we understand the process and procedures for challenging assessments. We work with appraisers in evaluating assessments and developing appeal strategies to save our clients’ money. We also work regularly with our clients regarding various real estate tax abatements and exemptions, as well as in connection with Tax Increment Financing and Keystone Opportunity Zone legislation and initiatives.