Reviewing the First Level Review
The City of Philadelphia and local media have been encouraging taxpayers to file First Level Reviews (FLR). But what exactly is this process, and how does it work? Before the Monday deadline for both your FLR application and to appeal to the Board of Revision of Taxes, let’s review the FLR.
Bottom line: the BRT appeal process is the only process authorized by statute that gives taxpayers protection by way of the right to appeal.
The FLR process did not exist before the City’s actual value initiative (AVI) in 2014. For those of you who don’t recall, AVI was the City’s effort to value properties at their “actual values”- that is to say, the City had not undertaken a citywide reassessment in so long that the values it had on the books for real property were wildly inaccurate. Moreover, property was being assessed for tax purposes at only thirty-two percent (32%) of value, which, basically, meant applying two different ratios to get a taxpayer’s property tax bill. That is to say, it was confusing.
However, because it had been so long since the last citywide reassessment, that undertaking was going to result in huge jumps across all categories of realty. Even though the City simultaneously planned to readjust the tax rate down, that meant that it was expecting an influx of property tax assessment appeals. In a city with a population of almost 2 million people, even a relatively small percentage of taxpayer appeals counts in the thousands. While I don’t know the average number of appeals prior to 2014, I worked for the City just prior to AVI, and there was a property tax issue in 2011 that resulted in about two thousand appeals to the BRT in 2011. This was considered, at the time, to be overwhelming. In fact, the City’s Office of the City Solicitor only had 2.5 employees dedicated to real estate tax issues to handle the five hundred (500) appeals to the Court of Common Pleas from the BRT in 2012.
So how to deal with an even greater anticipated influx of appeals for AVI? Enter: the First Level Review.
As I have (repeatedly) noted over the past few months, the statute enacted in the run-up to AVI requires the City’s Office of Property Assessment (OPA) to certify values for all real property in Philadelphia on or before March 31st of the year prior to that being certified. Because City officials don’t approve the budget until late June, that left, in 2013, plenty of time to review the results of a citywide assessment to determine what reduced tax rate to approve. (AVI was supposed to be revenue neutral.). A March 31st certification date also meant that there were many months between certification and the BRT assessment appeal deadline (the first Monday in October). The City thus created the FLR process to allow the City to begin reviewing new property values that might need further adjustment right away, which would also hopefully reduce the BRT’s appeal burden.
Logical, right? And, personally, I think it was relatively effective then. That said, it is also not, strictly speaking, legal.
The statute that authorized Philadelphia to enact a home rule charter also prohibits it from deviating from any statutes the Pennsylvania legislature passed that govern property taxes. 53 P.S. § 13133. The statute passed by the Pennsylvania legislature, which has governed property tax assessments in Philadelphia since the 1930s, established one appeal process if taxpayers are unsatisfied with the assessed value the City certified for their properties—an appeal to the BRT. 72 P.S. § 5341.14(a). From there, if taxpayers are unsatisfied with the decision of the BRT, they can appeal to the Philadelphia Court of Common Pleas. 72 P.S. § 5020-518.1(a).
Accordingly, an alternative process for “review” (i.e., another appeal process), is pretty clearly a deviation from the procedure authorized by statutes passed by the Pennsylvania General Assembly. And what happens if you don’t like the OPA’s decision on your FLR application? Nothing. You have no appeal rights from there, either to the BRT or the Pennsylvania Court of Common Pleas. While immediately after AVI the City would still allow taxpayers to file an appeal from their FLR to the BRT deemed timely, that is no longer the case. In recent years, I have thus seen taxpayers become confused by the difference between a BRT appeal and an FLR application. Accordingly, they throw away their appeal rights for a given tax year by filing for an FLR, waiting for the OPA’s decision, then trying to appeal that decision to the BRT only to have that appeal rejected as untimely. The only option at that point is to file a petition to appeal nunc pro tunc, which is basically an application for permission to appeal late that may, or may not, be granted.
Another protection that taxpayers will not get if they file only an FLR application is the ability to take advantage of the “safe harbor” provision the Philadelphia City Council has authorized every year since AVI. Specifically, for the last couple citywide reassessments, City Council authorized taxpayers to pay the amount of the real estate tax due for the year prior to the reassessment, with no interest or penalty, if the taxpayer “timely filed with the Board of Revision of Taxes” an appeal of their new assessed value. Phila. Code § 19-303(6) - (8). The language of the ordinance means that if a taxpayer filed an FLR application, even if it is later granted by the OPA, they cannot take advantage of the safe harbor provision and pay the prior year’s pre-reassessment taxes. If they do, I have seen the City mark their real estate account delinquent and send it out for collections to a third-party debt collector. It doesn’t look like City Council has yet authorized a safe harbor provision for this year, but it is something to keep in mind when you get your tax bill later this fall.
Note that Councilmember Rue Landau recently introduced a bill to “encourage” the BRT to grant taxpayers’ nunc pro tunc applications through March 31st of next year, 2025, because of the OPA’s delay this year in certifying the 2025 assessed values. However, given the legal structure outlined above, that would be a deviation from the statutory process that is unlikely to be enforceable if the City pushes back. The City may have to do so, since City Council approved this year’s budget at the current real estate tax rate before the City certified its 2025 values and, thus, kind of already spent the revenue they intended to raise through the assessments as-is. Too many appeals may, therefore, threaten the budget.
In sum, if you are debating whether to file an FLR application or a BRT appeal to challenge the new assessed value on your property this year, it may be best to go with the option that gives you the most protections—an appeal to the BRT. Especially because the deadline for both this year is Monday, October 7th, there is little benefit to the FLR process, in my opinion.
There is still time before Monday to file, and you may contact me if you need or want an attorney’s assistance.