Philadelphia’s Assessment Troubles A Constructive Program for their Cure Prepared for the City Club of Philadelphia by WALTER W. POLLOCK President Manufacturers’ Appraisal Company, Cleveland, Ohio b 5 *L- \ ■ynvY STUDY of the assessment conditions iA-Philadelphia in 1910 and since then has made the writer and his associates in the operation of the Somers System very familiar with the tax valuation problems that must confront any city administration. With an idea solely to be helpful to Mayor Blank- enburg and his associates the following letter was addressed to the Mayor of Philadelphia on December 13, 1912. Inasmuch as it con¬ tains many facts of importance, not only to the officials of the city, but to the citizens as well, it is herewith reproduced for the benefit of the members of the City Club and other citizens. LETTER ADDRESSED TO MAYOR RUDOLPH BLANKENBURG > X % Philadelphia, December 13, 1912. Hon. Rudolph Blankenburg, Mayor, Philadelphia, Penn,a. Dear Sir: I beg leave to submit herewith a few of the instances of under¬ valuations on taxable property in the central wards of Philadelphia which came under our notice during the appraisal of central property which we made in 1910 by order of City Councils, and which as you know was inter¬ rupted by injunction from the courts. I desire particularly to call your attention to the fact that the taxable under-valuations herein contained were for the year 1910, and that a number of them have already been in a meas¬ ure corrected by the Board of Revision of Taxes, which based their new figures partly on our reports published at that time, and partly on prices developed by the sales of many of these properties. The assessment lists for the present year which we have inspected show that in the case of sales made during the past two years, since our work was interrupted, the Board of Revision of Taxes has apparently made an effort to arrive at approximate true values based on those sales, with respect, however, only to the properties which were sold, and possibly two or three properties adjoining. This has been in accordance with the usual procedure of the Board of Revision in making assessments in the past. The faultiness of this method is very apparent when we discover a few proper¬ ties in a block which have been greatly increased in assessment value, due to the price paid for one in the immediate vicinity, while the assessed val¬ uations of the other properties in the block are permitted to remain un¬ touched, evidently on the assumption that the rise in value which was dis¬ closed by this particular sale has been confined to that property and a few adjoining, instead of being distributed over the whole block or district. With the use of a unit system for determining and distributing values such practices as this on the part of the assessors would be impossible, as the Somers System provides a method by which the assessors can express intel¬ ligent judgment of street values, and can distribute that judgment to the various lots in accordance with their respective sizes, shapes ,and locations. One of the most recent central sales is that of the property 1425-27 Chestnut Street, which has been sold for a consideration reported on good authority to be $600,000.00. Our total valuation on these properties in our appraisal of 1910 was $422,703.00. They were assessed at that time by the Bo,ard of Revision of Taxes at a total of $350,000.00. Since that time, I understand that there has been a great increase in value in the vicinity of Broad and Chestnut Streets, so that it is quite probable that an appraisal made by us at present on the properties would disclose a much higher figure than that of two years ago. The present assessment is $440,000.00. Another recent sale was that of the property 1420-26 South Penn Square, owned by the Joseph Harrison Estate, which was sold recently to Mr. George H. Earle, Jr., for $800,000.00. Our appraisal of this lot in 1910 was $722,976.00. It was taxed in that year by the Board of Revision of Taxes £ on a valuation of $500,000.00. The present assessment is $600,000.00. 3 The building 12 and 14 South Broad Street was recently sold to the Finance Company of Pennsylvania for about $450,000.00, and immediately after resold to the Pennsylvania Railroad for a price stated on good author¬ ity to be $525,000.00. Our appraisal of this lot in 1910 was $451,283.00. It was assessed at that time on a valuation of $375,000.00. The present assess¬ ment is $430,000.00. The adjoining property, 16 South Broad Street, which was also sold to the Pennsylvania Railroad quite recently for $225,000.00. was appraised in 1910 at $204,769.00. It was assessed in that year by the Board of Revision of Taxes on a valuation of $160,000.00. The present assessment is $190,- 000 . 00 . The lot at the northeast corner of 13th and Filbert Streets, on which the hotel Vendig is now being built, was appraised by us in 1910 at $465,- 871.00. It was assessed in that year by the Board of Revision of Taxes at $275,000.00. Its present assessment is $356,000.00. The properties 22 to 36 North 13th Street, which were recently sold by the Roger Brown Estate for $342,500.00, and resold immediately after for a price considerably higher were appraised by us in 1910 at $326,330.00. They were assessed in that year on a valuation of $252,000.00. The present assessment is $296,000.00. The property 1015 Market Street was appraised by us in the year 1910 at $349,590.00. It was assessed in that year on a valuation of $300,000.00. It has since that time been sold to Berg Brothers for $375,000.00, and is now incorporated in their store. The present assessment is $355,000.00. The Wanamaker Store was appraised by us, both land and buildings, in 1910 for a total of $17,378,219.00. Its assessed valuation in that year was $9,250,000.00. Its present assessed value is $13,000,000.00. The lot 1229 to 1235 Chestnut Street, on which the new Adelphia Hotel is being built, was appraised by us in 1910 at $1,115,538.00. It was assessed in that year at $800,000.00. The lot has since been resold to the Bingham Hotel Company for $1,250,000.00. The present assessment is $1,200,000.00. The Snellenburg Department Store at 11th and Market Streets, owned by the Girard Estate, was appraised by us in 1910, at $6,749,630.00. Its assessed valuation in that year was $4,250,000.00. Its present assessed valu¬ ation is $5,000,000.00. The Betz Building, at Broad and South Penn Square, was appraised by us in the year 1910 at $2,288,802.00. Its assessed valuation in that year was $1,800,000.00. The property is understood to be in the market today and is held very firmly at a figure of $2,500,000.00. The present assessment is $2,000,000.00. The properties 25 and 27 North Juniper Street owned by the Joseph Harrison Estate, were appraised by us in 1910 at $251,124.00. Their total assessment for that year was $150,000.00. It is stated on good authority that they cannot be purchased today for much less than $260,000.00. The pres¬ ent assessment is $215,000.00. The adjoining property, 23 North Juniper Street, was appraised by us in 1910 at $101,632.00. It was assessed in that year ,at $70,000.00. It cannot be bought today for much less than $150,000.00. Its present assess¬ ment is $110,000.00. The lot on the southeast corner of Broad and Walnut Streets, on which the Ritz-Carlton Hotel is now built, was appraised by us in 1910 at $529,- 028.00. It was assessed in that year at $450,000.00. The lot was since sold to P. A. B. Widener for $550,000.00. Its present assessment is $500,000.00. The adjoining property, 211 South Broad Street, was appraised by us in 1910 for $131,103.00. It was assessed in that year at $100,000.00. It has since been sold for $175,000.00, which was considered an unusually high price paid by the Weightman Estate, on account of the value of the lot to the estate. Its present assessment is $110,000.00. No. 1334 Walnut Street was appraised by us in 1910 at $320,406.00. It was assessed in that year for $260,000.00. It has since that time been sold for about $350,000.00. The present assessment is $275,000.00. 4 There has been, as your Honor doubtless knows, a great development in the neighborhood of Broad and Walnut Streets in the past two years, due to the erection of several large buildings in that immediate vicinity. This has greatly improved real estate values on Walnut Street for a couple of squares east and west of Broad Street. While the assessors have taken note of this condition by making a number of increases in taxable valua¬ tions in this vicinity, their figures are as yet according to our information considerably below the real value of the properties. We might give as an instance of this the property 1324 Walnut Street, which was appraised by us in 1910 for $106,339.00. The owner of this property according to reliable information given us has recently refused an offer of $100,000.00 for this property, with the intimation that the price will have to be close to $150,- 000.00 to buy it. This property was assessed in 1910 for $60,000.00, and we are informed that the assessment for next year remains at the same figure. As we have not had access to the 1913 valuations we cannot answer for the accuracy of this. We note, however, that the assessment for the present year is still $60,000.00. Between $9,000.00 and $10,000.00 a front foot are the figures at which practically all property on Walnut Street between 13th and Broad Streets is at present held. The taxable valuations for the pres¬ ent year are very much below those figures. No. 1304-6 Walnut Street, for instance, were appraised by us in 1910 at $97,263.00 and $85,832.00. They were each assessed in that year at $63,000.00. It is well known that the owner could easily get today $300,000.00 for the 42 feet 6 inches of frontage which he controls in this location. His price is believed to be close to $400,- 000.00 or almost $10,000.00 per front foot. These properties are assessed today for a total of $63,000.00 each. The row of dwellings on the south side of Walnut Street extending from 1418 to the Flanders Office Building, all of which are built on very large lots, were ap'praised by us in 1910 at an average of $250,000.00 for each one. They were assessed in that year at $135,000.00. No. 1418 Walnut Street was sold several months ago for $300,000.00 as a site for a new building. We understand, though the information is not given authoritatively, that the assessors have added $50,000.00 to the taxable valuation of each of these properties for the year 1913, making their valuations on an average of $185,000.00 for each one, which is still considerably below their real value. They are assessed for the present year at from $128,000.00 to $135,000.00. On the north side of Walnut Street, west of Broad, the properties 1419 to 1437 Walnut Street were appraised by us in 1910 at figures running from $95,867.00 to $119,082.00, running as follows: No. 1419, $99,052.00; No. 1421, $98,616.00; No. 1423, $98,105.00; No. 1425, $97,249.00; No. 1427, $96,325.00; No. 1429, $95,867.00; No. 1431, $99,130.00; No. 1433, $105,380.00; No. 1435, $111,838.00, and No. 1437, $119,082.00. These properties were valued for taxation purposes in that year at figures running from $80,000.00 to $84,- 000.00 for each one. They are assessed for the present year at figures run¬ ning from $90,000.00 to $94,000.00 each, and sell at close to $125,000.00 each. The Dexter Building, 1439-41 Walnut Street, corner of 15th, was ap¬ praised by us in 1910 at $346,685.00. It was assessed in that year at $200,- 000.00. Since that time it has been sold for $310,000.00, and resold for a slight advance. It was generally considered very cheap at $310,000.00. The owner today, it is understood, will not consider less than $400,000.00. The property is assessed for the present year at $275,000.00. The improvement in values on Walnut Street manifests itself very clearly as far as 16th Street. The properties 1529-31 Walnut Street, north¬ east corner of 16th Street, were appraised by us in 1910 at $284,047.00. They were assessed in that year at $190,000.00. This property has been resold during the present year for a price reported to be $350,000.00, which must be discounted somewhat, however, as the transaction represented a trade in equities. These properties are assessed for the present year at $ 200 , 000 . 00 . No. 1501 Walnut Street, northwest corner of Walnut and 15th Streets, was appraised by us in 1910 at $268,328.00. It was assessed in that year at $175,000.00. It is considered unlikely that this property could be purchased today for much less than $300,000.00. Its present assessment is $190,000.00. No. 1503 Walnut Street was appraised by us in 1910 at $168,494.00. It was assessed that year at $100,000.00. It is considered doubtful whether the property could be purchased today for less than $175,000.00. Its present assessed valuation is $105,000.00, the price paid for it 6 years ago. No. 1527 Walnut Street was appraised by us in 1910 at $124,221.00. Its assessed valuation at that time was $115,000.00. The property is under¬ stood to be held today at $150,000.00, though it is considered probable that it might be purchased for about $135,000.00. Its assessed valuation today is $ 110 , 000 . 00 . In our appraisal of 1910 we discovered that some of the most striking examples of discrepancies between assessed valuations and real values occurred on the smaller streets in the immediate vicinity of that part of the central section where the highest values were disclosed. On Drury Street, between 13th and Juniper Streets, within half a square of the best section of Chestnut Street we found several properties which were taxed at not more than half the real value of the ground and in some instances at less. Nos. 1310-14 Drury were appraised by us at $66,374.00. They were assessed for the year 1910 at $35,000.00. The assessed valuation today is $50,000.00. No. 1308 Drury Street, which we appraised at $18,067.00 was taxed on a valuation of $8,000.00. It is assessed today at $12,000.00. No. 1306 Drury Street, which we appraised at $18,979.00 was taxed on a valuation of $9,000.00. It is assessed today at $13,000.00. Nos. 1302-04 Drury Street, which we appraised respectively at $28,- 768.00 and $19,115.00, were taxed respectively on valuations of $10,000.00 and $10,500.00, They were assessed today respectively at $12,000.00 and $13,000.00. The building 101-109 Juniper Street below Drury Street, which we ap¬ praised at $240,049.00, was taxed on a valuation of $125,000.00. It is as¬ sessed today at $170,000.00. This property was sold three years ago to the present owners for $245,000.00. No. 1317 Sansom Street, which we found to be worth $28,151.00, was assessed on a valuation of $13,000.00. It is assessed today at $15,000.00. No. 1315 Sansom Street, which we found to be worth $27,262.00, was taxed on a valuation of $13,000.00. It is assessed today at $15,000.00. No. 1309 Sansom Street, which we found ■ to be worth $38,908.00 was taxed on a valuation of $15,000.00. It is assessed today at $15,000.00. The foregoing three properties are conspicuous instances of under¬ valuations. The last sale of a lot of this size in this block disclosed a price of $30,000.00, and this lot was unimproved. Practically the same condition was found in many of the smaller streets in the immediate vicinity of the best central section, the assessors having- failed to take note of the fact that the rise in value of ground fronting on the more traveled thoroughfares was also reflected in a greater or less degree on the smaller streets in the immediate vicinity. Respectfully submitted, WALTER W. POLLOCK, President and General Manager Manufacturers’ Appraisal Company. I 6 A CONSTRUCTIVE PLAN FOR EQUALIZING TAX ASSESS¬ MENTS OF REAL ESTATE IN PHILADELPHIA, AND FOR REORGANIZATION OF THE ASSESSMENT MA¬ CHINERY Philadelphia citizens do not require all of the evidence of the appraisal of central business property made by the Somers System several years ago to prove the lack of equity of assessments. There is so much evidence of this sort that it seems merely repetition to argue further along this line. The question now is, “What are you going to do about it?” These sugges¬ tions I believe will throw some light on the situation. They are based upon our experience in reforming .assessment methods in a dozen cities, in five different states, in addition to our work here in Philadelphia. I would di¬ vide my suggestions into two chapters: First, administrative reorganization; second, reform methods. ADMINISTRATIVE REFORMS 1. The assessing organization should be a part of the City government. There should be one responsible assessor, appointed by and removable by the Mayor, with full authority to make correct assessments in the light of the fullest possible publicity, in accordance with the best approved methods. 2. There should be not more than five experts in land values and not more than two experts in building values, to do the actual work of ap¬ praising the land and buildings. These seven experts can easily do all of the work of the sixty-odd real estate assessors, if they will use a scientific system. The assessor should have full authority over the employment and compensation of these men, with power to decide all differences that may arise between them concerning assessable values. These seven men could easily make a complete reassessment within a year, using the services of draftsmen, building measurers and non-expert clerks, obtainable through civil service examination. The five real estate experts and two building ex¬ perts could make such a reassessment, if correct lot dimension maps exist, at a total cost not exceeding the present annual budget appropriation to the Board of Revision, which for this year is, I understand, $279,000.00. In future years the annual cost of the efficient operation of this department should not exceed $100,000.00. The multiplicity of assessors is unnecessary. The assessment of personal property for state taxation purposes should be made by a separate organization. 3. The cost of the complete reassessment of the city of Philadelphia under a scientific system, could as already stated be kept within $279,000.00, the present budget appropriation of the Board of Revision, as follows: Assessor’s salary . $10,000.00 Five real estate experts. 20,000.00 Two building experts... 8,000.00 Somers System service, for direction of a scientific system for computing relative lot valuations for the entire city. 25,000.00 7 $63,000.00 3 0112 098428417 which deducted from $279,000.00 leaves $216,000.00 to pay (a) for field men to measure and describe upon cards all buildings in the city for a permanent record, the values to be determined uniformly by the two building experts; (b) for clerks to compute mathematically the relative values of lots, based upon the judgment of the real estate experts, after criticism by the property owners and the public generally; (c) for clerks to copy the office records, supply information to the public; (d) for the miscellaneous expense of the office. 4. After a complete reassessment had been completed, the cost of the Somers System service would be reduced from $25,000.00, the first cost, to $6,000.00 per year; and leaving the salaries of the Assessor and his real estate and building experts at $44,000.00, would give $56,000.00 for all the addi¬ tional expense of operating the department, if a total budget of $100,000.00 should be arranged for. It is possible that three real estate experts and one building expert could after the first year keep track of all changes in land and building values. All changes in real estate conditions could be discov¬ ered and considered by the real estate experts, expressing their judgment in the form of units. The building experts could easily keep track of new buildings and old ones destroyed, as well as give attention to developing a scientific system for applying future building depreciation uniformly. REFORM OF METHODS Leaving out of consideration any questions concerning the incompetency of the present assessors and alleged favoritism on their part, there are some fundamental reasons for the lack of equity in Philadelphia assessments. The same conditions exist everywhere throughout the United States, except where the Somers System has been used for equalization. These reasons may be briefly summarized: 1. There is a lack of common judgment in ascertaining values. 2. There is a lack of a common method of applying judgment, no mat¬ ter how obtained. 3. There is no adequate basis for comparing the value of one lot with that of another; the value of one farm with that of another; the value of one city block with that of another. 4. No clear idea of the origin of land value exists in the minds of assessors. 5. No analysis of the factors that enter into the value of city sites is attempted. 6. While there is a general recognition of the law of comparative valuation, there is no method, or at best the very crudest methods, of car¬ rying that law into effect; either by the assessors or the Board of Revision of Taxes. When we come to appraising the values of buildings and structures, we find: 1. There is no classification of buildings, either as to use or con¬ struction. 2. There is no proper or uniform inventory of building construction. 3. There is no proper or uniform method of ascertaining reproductive cost. 4. There is no proper or uniform method of depreciating building values. All of these faults which are sure to exist in some measure wherever no scientific system has been installed, can be easily remedied by the intel¬ ligent use of the Somers System, and expert services for installing it. If there are other systems we shall, of course, welcome comparison and com¬ petition. 8