Illustrating The Real Estate Tax Problem: Mansion For Sale...Low Tax Bill

While we continue to wait on word about pending Real Estate Tax assessment appeals, an interesting mansion for sale profiled in the media last week paints the picture quite clearly about how unfair real estate taxation is in Philadelphia.  The media reported on the story that a local politician's home was on the market for a nearly $7 million asking price.  The Inquirer wrote:
State Sen. Vincent J. Fumo is about to part with something else near and dear: his 27-room, four-story house.  [The home is pictured to the left of this text.]  With his federal corruption trial looming, the influential Democrat has given Philadelphia real estate agents the go-ahead to start showing his mansion, complete with its basement shooting range, underground tunnel entrance, and servants' quarters. It's at 22d and Green Streets in the Art Museum neighborhood.  The asking price: a hair below $7 million.  (Full Article)
If the Board of Revision of Taxes were following current law, the annual tax bill for this home should be roughly $185,113 per year. 

 
That number is calculated by following the law and taking the home's Market Value -- defined by the BRT as "The most probable price (in terms of money) which a property should bring in a competitive and open market under all conditions requisite to a fair sale, the buyer and seller each acting prudently and knowledgeably, and assuming the price is not affected by undue stimulus" -- and applying our 8.264% tax rate to 32% of that Market Value.  The equation would look like this:
$7 million x .32 x .08264 = $185,113

Instead, the BRT lists the mansion's Market Value as $250,000 (the same value for the last five years despite the fact that home values were doubling during this time) and the tax bill for the mansion is currently $6,611.  The equation looks like this:
$250,000 x .32 x .08264 = $6,611

Interestingly, the mansion on Green Street DOES NOT face an assessment increase this year despite the fact that more than 400,000 other Philadelphians will see an increase.

To help illustrate how hopelessly flawed the current system is, looking at a few homes that recently sold for $250,000 in different parts of the city, one can easily see that, despite the fact that the true Market Value of these homes is about $250,000, they are valued by the BRT at dramatically different amounts -- and pay dramatically different tax bills.
2007 PRICESTREET ADDRESSCITY NEIGHBORHOODBRT MARKET VALUE2008 TAX BILL
$250,000 17XX AnninSouth Phila.$6,400 $169.25
$250,000 21XX WebsterCC/Fairmount$15,500 $409.89
$250,000 10XX Tasker South Phila.$35,000 $925.57
$250,000 12XX Crease Kensington$36,600 $967.88
$250,000 31XX DRAPERUpper NE Phila.$88,400 $2,337.72
$250,000 18XX NapfleLower NE Phila.$87,700 $2,319.21
$250,000 5XX PelhamNW Phila.$113,800 $3,009.42
$250,000 67XX N 06th North Phila.$125,000 $3,305.60

Maybe the mansion won't sell for $7 million, but even if it goes for $6 million, the mansion is being taxed as if it is a $250,000 house -- the property is being taxed on approximately 3% or 4% of its true value.  My own home is taxed at about 20% of its true Market Value, but I'm not getting such a good deal in comparison while other Philadelphians are paying taxes on 50%, 70% or more than 100% of their home's actual Market Value.  I guess we just don't know the right folks.

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