by MICHAEL J. MISHAK

While the Philadelphia Tax Reform Commission delivered its final report last week in three massive volumes replete with painstaking detail, its "fiscally and socially responsible" recommendations to overhaul the city's burdensome tax structure will remain ideas on paper unless City Council and Mayor Street make them a reality.

While welcomed by many in the business community, that reality, which would include revising the property tax assessment system and phasing in land value taxation, has some in the Northwest, particularly some Chestnut Hillers, concerned about the potential devastation on the area's historic character.

When City Controller Jonathan Saidel visited Chestnut Hill early last year to sell his tax plan, which also proposed land-value taxation, Peter Lapham, among others, offered criticism. Lapham, executive director of the Chestnut Hill Historical Society, remains unconvinced.

"[Land value taxation] would destroy the fabric of Chestnut Hill," Lapham said.

The tax commission's recommendation to phase in land value taxation over 10 years, at the end of which half of all real estate revenues are generated from a land tax and half from a tax on the value of structures, is virtually identical to Saidel's plan. The idea is to maximize the land's potential and tax owners on the "best use" or value of the land.

Land value taxation, the commission's report insists, "will encourage private investment in the city and help reduce blight and abandonment."

Lapham argues that the new tax structure would encourage large landowners to sell their property for development rather than pay high taxes for large open spaces. A disproportionate amount of Hillers would also suffer an increase in taxes that are already too high, he said.

But Christopher Dwyer, the commission's executive director, maintains that the group's proposals are part of a "balanced program" and "not a redistribution of wealth in any sense."

Although the largest landowners will see the largest tax increases, Dwyer said, those increases would be complemented by the other reforms, including reducing the city's wage tax to 3.25 percent and eliminating the business privilege tax over the next 10 years.

Dwyer, a West Mt. Airy resident, said that 66.5 percent of properties throughout the Northwest would see a reduction in taxes, while 15.5 percent would experience an increase of $100 or less and the remaining 18 percent would feel an increase of more than $100 annually.

"There is a bigger story for Chestnut Hill," Dwyer said, "and [the land tax] is misconstrued as accelerating development … but [the tax] removes an impediment." Landowners will not be penalized, but rewarded for improving their property under the new plan, he said.

The commission has also asked the city to implement a quarterly payment plan, among other property tax relief programs, to soften the blow and assist struggling residents. Instead of assessing properties on a year-to-year basis, the commission suggested switching to a tax-buffering program that would levy real estate taxes based on the average of the assessed property value from the past three years. The buffering program is a way to "cushion neighborhoods like Chestnut Hill and Mt. Airy from surprising and unexpected spikes," Dwyer said.

The commission rejected any type of caps or freezes, claiming that an inaccurate assessment would be preserved under those conditions.

Philadelphia's assessment accuracy is "off the charts" when compared to competitor cities like Boston, Chicago and Washington, D.C., Dwyer said.

The city's property assessment accuracy (typically 35 percent off) misses the industry standard of 15 percent by more than 50 percent, he said. Poorer neighborhoods in North and West Philadelphia currently face higher property tax burdens relative to property values than those in more affluent areas like the Northwest, the report states.

The tax commission recommends separating the property assessment and appeals process, establishing a taxpayer's advocate, establishing accurate land and structure values through more comprehensive data collection, adopting more stringent assessment-practice principles, and eliminating fractional assessments — favoring 100 percent of market value instead of the current 70 percent factor.

Under the current assessment-driven system, the city often collects considerably more than its original projections from real estate taxes because it determines tax rates before setting the budget. "We want to align the real estate tax revenue with the city budget so that the city only collects what it needs for services," Dwyer said.

Fixing an inequitable assessment system is essential, Dwyer said, and although some will see tax increases, the hikes will not be devastating.

In fact, the commission's report suggests that adopting its proposals, particularly phasing out the gross receipts portion of the business privilege tax and reducing the city wage tax, would foster a surge in job creation, increase property values, and expand the tax base. While the city may experience a short-term fiscal gap, the report says, there will be no long-term negative net fiscal impact. The incremental nature of the proposal allows the city to gradually adjust its budget, the report says.

Suzanne Biemiller, executive director of the Chestnut Hill Business Association, heralds the suggested tax reforms. The business association fields many complaints from small business owners about both the wage and gross receipts taxes, Biemiller said. "We hear a lot about the cost to large businesses, but it affects small businesses more because they are dealing with less revenue," she said. "[The taxes] are heavy disincentives for businesses to locate in the city and in Chestnut Hill."

Biemiller called reforming both the wage tax and business privilege tax "steps in the right direction to making Philadelphia more competitive and a better place to live." The tax changes would invite more storefront retail to Chestnut Hill, further solidifying its perception as a place where people want to live, she said.

And although Biemiller called on the city to be "smarter with its tax code system and in the way it spends money," the CHBA's executive board voiced reservations about land value taxation at a meeting on Tuesday. Pending clarification, the board will vote to endorse the commission's report in January.

Robertson's Flowers in Chestnut Hill is just one of the city's many businesses that can testify to tax relief across the county line. The business moved the bulk of its sales department to Wyndmoor in January.

Owner Bruce Robertson said he didn't relocate because of the city's high tax burden, but has already seen the benefits afforded by Montgomery County. "It was a bonus," Robertson said of the reduced tax burden, which allowed him to attract a larger pool of employees.

Robertson, who still maintains a Chestnut Hill store, welcomed changes to both personal income and business taxes, but remains critical. "It would be great, but I'm not going to hold my breath," he said. "This government hasn't shown an ability to cut taxes and run the city."

But Dwyer hopes the commission's report will provide the city with the means to cut taxes and balance the budget.

"The city should be able to manage this," Dwyer said of implementing the commission's proposal, which would cost about $334 million by 2010, or about 2 percent of the city's total spending over the next five years.

Dwyer urged Mayor Street to use the commission's report as a "starting point" for the city's five-year plan and not as "something that's worked in later." Despite the uncertainties that stem from an absent state budget, Dwyer hopes the support of City Controller Jonathan Saidel, Gov. Rendell, former Gov. Schweiker, who is currently chairing the Greater Philadelphia Chamber of Commerce, and business associations across the city will help convince the mayor to adopt the tax-change proposal.

The diversity of the commission's 15 members — coupled with its 14-1 vote for the final report — virtually guarantees responsible recommendations devoid of anything that would endanger vital city services, Dwyer said.