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Testimony of
ALAN BUTKOVITZ
City Controller Before
City Council Finance Committee February 12, 2007

Good Morning Councilwoman Blackwell and Councilman O'Neill and Members of City Council. I am City Controller Alan Butkovitz. I want to thank you and other members of the Finance Committee for this opportunity to testify on Bill 060576 and Resolution 060590.

Philadelphia has enjoyed an extended period of economic revival over the past fifteen years. We are attracting thousands of new residents each year, and slowing the annual exodus of thousands of our own residents for the first time in decades - especially our young people - who are now making conscious decisions to stay here and make Philadelphia their home.

Real estate growth in Philadelphia is at an all time high - clearly evident by the tremendous growth in the Real Estate Transfer Tax. In 2006, this tax generated $234.5 million - an increase of 328% from 1997 and a 505% increase since 1991.

While cities throughout the nation are experiencing a slowdown in their real estate markets, Philadelphia continues to withstand this downward trend. Realty Transfer Tax collections for fiscal year 2007 through January stand at $ 136.5 million and are on a pace to exceed this year's budgeted estimate of $ 195 million.

The catalyst for much of this growth and revitalization in Philadelphia has been the ten year tax abatement program for new construction and the
relatively low real estate tax levied on existing properties.

Philadelphia is being transformed. We are changing for the better and while our future looks bright, our revival is a fragile work in progress that must be nurtured with a watchful eye towards not doing anything that would jeopardize, or impede the very stimulus policies that are now providing so much growth and renewal.

The success of our ten year tax abatement program is evident throughout the city - with new condos such as the Symphony House — and single family dwellings being built by John Westrum in Brewerytown and South Philadelphia as well as the development of Naval Square.

The recently completed Comcast Tower is the first new office building in the last ten years. All this development has taken place because Philadelphia is perceived to be a bargain when it comes to the value of real estate and the fairness of our real estate tax rates.

Why would we even contemplate impeding all this growth in center
city and other neighborhoods by changing the way we value real estate?

Because assessed values have not kept pace with appreciation and corresponding market values in many areas of the city, a citywide full-value reassessment would send shock waves and cause tremendous financial hardship for many homeowners - especially the elderly - and many center city business property owners as well.

People who have lived in Philadelphia for years - many of whom are elderly living on fixed incomes -- are now living in newly gentnfied neighborhoods and could see their taxes increased to the level where they would be forced to sell their homes.

With higher taxes - people will stop relocating here and others will move out - either voluntarily or by force because they are unable to pay their higher tax bills.

In addition, small business owners will be dramatically affected just as severely as homeowners - if not more so -- especially in Center City if their business properties are reassessed to full value. While we have done an excellent job of revitalizing center city and its surrounding areas, we are just beginning to see the positive effect of this revitalization in other city neighborhoods.

Changing property values and assessments would be a serious deterrent to the continued rebirth of our neighborhoods.

Contrary to the BRT intentions, a full-value reassessment that results in higher property values will definitely generate higher property tax revenues. While Gov. Rendell is proposing that we raise the sales tax and funnel gaming dollars to lower property taxes throughout the Commonwealth - why should we, the City of Philadelphia, go against a statewide trend aimed at reducing property taxes - by conducting a full-value reassessment that will have the opposite effect?

Should Gov. Rendell's sale tax increase proposal become law and the BRT moves ahead and conducts a full-value reassessment, Philadelphians will be hit with a double tax barrel of increased property taxes and an increased sales tax.

As I have continually said - nothing could do more to stop all the energy and revitalization taking place in our great city - than an ill-conceived citywide reassessment by the Board of Revision and Taxes at the present time.

So many people have worked very long and very hard to bring about the rebirth of so many of our neighborhoods. Property tax abatements combined with the Mayor's leadership on the "anti-blight initiative" is having dramatic results and turning around many areas of the city. Let's not do anything to jeopardize this positive transformation.

That is why I support placing this issue before the citizens of Philadelphia this May in a referendum. The citizens of Philadelphia deserve a voice on this subject and we, their elected leaders, need to listen.

Thank you for your time and I will be happy to answer any questions.