"Philadelphia Mayor, City Council Seek to Offset Property Tax Increases"

Jennifer Karpchuk article on "Philadelphia Mayor, City Council Seek to Offset Property Tax Increases"

Reprinted with permission from the June 2, 2022, edition of The Legal Intelligencer © 2022 ALM Media Properties, LLC. All rights reserved. Further duplication without permission is prohibited, contact 877-257-3382 or reprints@alm.com

Philadelphia Mayor, City Council Seek to Offset Property Tax Increases

By Jennifer W. Karpchuk

As property prices have soared across the country over the past two years, property tax reassessments have been slow to catch up. The City of Philadelphia just completed its property reassessments for the first time since the pandemic began. The reassessments are notable for a number of reasons. First, the reassessments represent the City’s first use of a new system that is meant to help modernize property valuation in the hopes of creating a more equitable and consistent system. The new approach utilizes a Computer Assisted Mass Appraisal (CAMA) system.  It is hoped that the CAMA system will reduce some disparities that existed between comparable properties under the antiquated system.

However, at the same time the City is rolling out its new CAMA system, it is confronted with a sharp increase in property values spurred by the pandemic. The results are in: There was an average 21% increase in aggregate value since 2020.  Meanwhile residential properties saw an average 31% increase.  The increase in property values is estimated to result in the City bringing in additional tax revenue of $92 million during fiscal year 2023.  What is good news for the City, may be unwelcomed news to those property owners whose values increase sharply. 

Recognizing the effect the rising property values (and corresponding tax bills) will have on residents, Mayor Jim Kenney and City Council have suggested proposals to help offset the increases. The Mayor’s first proposal is a reduction in the City’s wage tax. For residents, the tax rate would decrease from 3.84% to 3.7%. Meanwhile, for non-residents, the rate would decrease from 3.4481% to 3.44%. While the effort to lower the wage tax is certainly applauded, the practical effect of the lowered rates will not be staggering for the average individual. For instance, a resident making $100,000 would see a reduction in their wage tax liability of approximately $140, while a non-resident would see a reduction of $8.  If adopted, the change would go into effect for tax year 2023. While the reductions may appear minor, in actuality the proposed reduction would bring the wage tax to its lowest rate since 1976.

Mayor Kenney also proposed $200 million in additional homeowner and rent relief through a number of programs, including the Homestead Exemption. The Homestead Exemption reduces the assessed property value for a homeowner’s primary residence, thereby reducing the property tax burden. The current reduction is $45,000. The Mayor proposed increasing the reduction to $65,000. That change is estimated to save eligible homeowners approximately $900 on their real estate taxes. On May 19^th, City Councilmember Brian O’Neill proposed legislation that would increase the amount of the Homestead Exemption to $90,000.

Finally, Mayor Kenney proposed increasing the total amount of funding available through the Longtime Owner Occupant Program (LOOP) from $25 million to $30 million.  LOOP locks in property values for certain qualifying homeowners, capping the value at 150% of the previous year’s value. 

If the proposals pass, residents may see an offset of the increased property tax burden in the form of tax cuts and relief programs.  However, residential and commercial property owners alike should review the new reassessments to determine whether or not the CAMA system has properly valued their property.  Those property owners who believe their property is incorrectly assessed must file an appeal with the Board of Revision of Taxes by October 3, 2022.

Jennifer Karpchuk is the co-chair of the State and Local Tax (SALT) Controversy and Planning practice at Chamberlain Hrdlicka. She may be reached at jennifer.karpchuk@chamberlainlaw.com.