Philadelphia's first new property assessment since the outbreak of the pandemic showed a massive jump in the city's aggregate land value, potentially setting up a key budget confrontation over how to use an infusion of property tax revenue.

All land in Philadelphia, over 580,000 lots combined, has gained an aggregate 21% in value since 2020, Mayor Jim Kenney's office announced  Tuesday.

For the first time, the Office of Property Assessment used its Computer Assisted Mass Appraisal program to arrive at the new property valuations, which will be effective for tax year 2023. The CAMA system is intended to increase uniformity for a system of appraisals that property owners call arbitrary.

Factoring in estimated losses from appeals and delinquencies, the city estimates that new assessments will generate an additional $460M in tax revenue over the five-year period ending with 2027. Kenney has proposed using the entirety of that revenue toward funding a cut to the city's wage tax — a local tax on income earned in the city — and relief programs to offset the cost of spiking values for homeowners.

That proposal will be heard by Philadelphia City Council in its ongoing budget hearings for fiscal year 2023.

Kenney's proposal calls for using $260M of the additional revenue to offset a reduction in the wage tax for city residents from 3.84% to 3.7% and for nonresidents from 3.45% to 3.44% over the next two years.

The remaining $200M would be used to increase the amount of property value exempt from taxation under the Homestead Exemption, from $45K to $65K, and to add $5M per year to the Longtime Owner Occupants Program, which offsets spikes in tax bills as a result of higher property assessments for income-qualified homeowners — a 20% annual increase.

Combined with a program that freezes property tax bills for senior citizen homeowners, the Homestead Exemption and LOOP represent powerful tools for reining in property taxes for longtime residents of neighborhoods rapidly increasing in value. Though statistical links between rising property tax bills and gentrification-related displacement have been difficult to prove, the connection is strong enough in constituents' minds to make it a hot-button issue for voters, sources close to city council told Bisnow.

A separate but related budget proposal would call for the city to spend $40M over the next five years to improve implementation of financial relief programs, including reaching out to more homeowners to make them aware of such programs. Other uses mentioned in the announcement for the $40M include expansion of rent relief, which would require working with the city council.

Kenney's announcement also stated that he will seek state authorization to adopt market-based sourcing for service businesses, in line with how the rest of Pennsylvania operates. Market-based sourcing means that service businesses based in the city would only have to pay the city's Business Income and Receipts Tax for sales to customers within city limits.

Both the wage tax cut and modified BIRT proposals have long been called for by Philadelphia's business community, which has for years criticized the city for relying too much on business taxes and not enough on property taxes for its revenue.

But spending the increased revenue on tax cuts rather than boosting social services may not fly with council, which spent Tuesday in an all-day budget session with SEPTA.

That precluded it from commenting on the announcement beyond a brief statement issued by Council President Darrell Clarke's office and co-signed by councilmembers Cherelle Parker, Mark Squilla, Kenyatta Johnson, Allan Domb and David Oh that did little but acknowledge Kenney's announcement.