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Nutter Unveils New Budget Plan; Possible Sticker Shock For Homeowners

By Mike Dunn

PHILADELPHIA (CBS) -- Saying the City of Philadelphia needs a fair and honest property tax system, Mayor Nutter today announced plans to move ahead with a new property assessment system that will bring in an extra $90 million.

The announcement came today as the mayor delivered his new budget to City Council.  He told Council members that the current assessment system must go:

"For decades this broken, mysterious system has meant that many people have been paying more than they should, while others have paid less than they should," the mayor told councilmembers.

So, starting in the coming year, property taxes will be based on a brand-new set of assessments that are part of a move to a system called the "Actual Value Initiative," or AVI.

"Some Philadelphians will see their tax bills cut by this reform," said Nutter. "Others, whose homes have been undervalued for years, will probably have to pay more."

The tax rate, or millage, will be lowered, but it won't be revenue-neutral.  Instead, property taxes as a whole next year will bring in at least $90 million, all of which will go to the deficit-ridden school district.

Listen to Mayor Nutter's full budget address in this CBS Philly podcast...


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The portion of property taxes that goes to the city will remain level with this year.

Nutter says they hope to have buffers in place to minimize the hit.

"We have asked the General Assembly in Harrisburg to authorize homestead relief for Philadelphia, something that is already available to other jurisdictions in Pennsylvania.  We will also work with City Council to put in place smoothing measures to phase in these new values over time, to minimize any impact felt by property owners.  And many low-income senior citizens will be eligible for the tax freeze program so that they will see no increases in their real estate bills," he said.

Nutter acknowledged that the change will be a tough sell:

"This isn't the easiest, most popular reform that we could have taken on.  If it was, somebody would have done it by now.  But we must have a fair system, an honest system, a transparent system, and so we're going to take it on."

There will be no new taxes or formal tax increases in the mayor's budget.  Nutter said that in the following fiscal year, beginning July 2013, he will restart wage tax reductions that had been suspended during the height of the recession.

Critics -- including some on City Council -- were already described the mayor's property tax plan as a "back-door tax hike."  City finance director Dubow, prior to the mayor's speech, rejected that characterization, saying the extra $90 million merely reflects an increase in property values since the last full reassessment eight years ago.

"It's the same thing as if wages go up," Dubow told KYW Newsradio.  "Values of homes have gone up, we are capturing that increase."

City Council must approve the change, and it may be a tough sell.  Budget hearings begin next week.

Beyond property taxes, the mayor's proposed budget is slightly larger than the current one: $3.6 billion compared to $3.5 billion.  The plan projects modest growth in other revenues, including wage and sales tax revenues.

The mayor's proposed budget also:

  • sets aside $4 million to hire 400 new police officers.
  • reduces the amount of overtime allocated to the Philadelphia Fire Department by about $2 million.  Officials say this is possible because the department will, for the first time in several years, begin hiring new firefighters.  Between 80 and 160 new firefighters are expected in the first "class."  Officials say the department's controversial police of "rolling brownouts" (temporary closures of fire stations to reduce overtime) will continue despite the new hiring.
  • sets aside $9 million for design work to build a new Police Administration Building, at 46th and Market Streets in West Philadelphia.  The current PAB in center city (the "Roundhouse," at 7th and Race) would be closed in three years when construction of the new facility is complete.  The new site would also include the city morgue and Health Department.
  • includes $20 million in capital funds for a full-scale renovation of JFK Plaza, better known as "Love Park."  The project will complement the ongoing renovation of nearby Dilworth Plaza, the west apron of City Hall.
  • adds $4.5 million in capital funds for renovations to branch libraries over three years.
  • adds $18 million in capital funds for street repaving.

Nutter also announced a partnership with Children's Hospital to build a new health center in South Philadelphia.  And he said the city will build a new traffic operations center to better adjust signals and monitor traffic flow.


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