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Can Sanchez' plan to stave off side effects of AVI save the day?
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Can Sanchez' plan to stave off side effects of AVI save the day?
This morning, City Councilwoman Maria Quninones-Sanchez quietly and without speechifying, offered what may be a solution to one of the central problems created by the Actual Value Initiative, the city's property-tax reform effort. The problem: An estimated $200 million of the tax burden is being shifted from large commercial properties to residential ones, while small businesses are also in many cases expecting to see their taxes skyrocket. Sanchez's solution: Put some of that burden back onto the large commercial properties by way of the Use & Occupancy (U&O) tax, which is applied to commercial tenants, and let the city keep some of that money to use for tax relief for the rest of us.
U&O is calculated based on property valuations, and under the new property assessments, the roughly $100 million annual take is expected to double. The thinking had previously been that the U&O rate would probably have to be reduced — even cut in half. Instead, Sanchez's plan is to keep the rate intact at 5.51 percent, but to waive the first $2,000 of that tax. Given that the median U&O bill is just $664, but the average U&O bill is $6,000, it's clear that the vast majority of businesses would have to pay no U&O tax at all. However, large properties, the ones that would have received a windfall tax reduction under AVI, will end up paying something closer to what they've been paying to do business in Philly all along.
In a memo to her fellow City Council members, Sanchez wrote:
"As the effects of the AVI re-assessments have become clearer, I am deeply concerned about the increased assessments on our small business sector, particularly in our neighborhood commercial corridors, and the unintended decrease in tax liabilities these new assessments will create for the city’s largest commercial and industrial property owners.
In speaking with many small businesses in my district who have received their new assessments, many are expecting huge increases of $700 - $1,000 in tax liability. “Stores with Dwellings”, the type of properties that make up the bulk of our neighborhood commercial corridors, will see an average tax increase of nearly 40%, the highest of any sector. …
Even more concerning is that the tax reductions for commercial real estate are concentrated amongst the most valuable and profitable properties in the city. A single property, the Franklin Mills Mall at 4301 Byberry Road, will see over $3.4 million dollars in tax reductions. The 100 most valuable commercial properties in the City will receive forty five (45) million dollars in tax breaks."
The effect of Sanchez's plan would apparently be more funding for the school district as well also some funding to go toward either a lower millage rate or overall relief measures. It would also theoretically make collecting U&O way easier since so many businesses would be taken off the rolls of this particular tax. Whether there's support for it in Council or the administration, though, is another matter.
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