Yesterday, we presented an admittedly biased plea against Councilman Wilson Goode Jr.’s plan for altering Philadelphia’s ten-year tax abatement. Not only did we suggest that Council should be focusing on other much more salient problems facing Philadelphia at this time, but we also issued a warning about the risks of messing with a successful policy without possessing any clear data showing that these modifications won’t have severe negative effects on development in Philadelphia. Regrettably, despite nobody knowing what impact the changes will have, the bill passed through committee yesterday, 9-7. Great job, guys!
Yaaaay!
We honestly weren’t going to come back to this topic today, but a quote from Goode in Heard in the Hall yesterday just set us off, and we felt the need to respond. At yesterday’s hearing, Goode stated “The discussion has to be about what’s best for all Philadelphians… this city isn’t going to succeed or fail based on Center City development.” Not only does this quote show that Goode doesn’t know or care about the reach of tax abatements, but it also shows he has virtually no understanding of the economics facing Philadelphia today.
First, tax abatements have been used for development all over the city. While there’s absolutely a higher concentration of abatements in greater Center City, properties in just about every neighborhood in town have been able to take advantage of this program. As this map from Kevin Gillen’s Philadelphia’s Ten Year Tax Abatement shows, the effects of the abatements are felt citywide.
Abatements everywhere
Much more importantly, though, data (scary word, we know) suggests that Center City development is exactly the determinant of whether Philadelphia can succeed or fail moving forward. For dozens of different priorities, the City needs more money, right? To raise additional funds, the City can either increase taxes (which seems to happen every single year annyway) or maintain current taxes on a growing population base. And what, Mr. Goode, is the engine for population growth in Philadelphia? That’s right! Center City!
Philadelphia's recent population growth. Map from CCD report Leading the Way: Population Growth Downtown
Data by neighborhood. Pretty amazing information. From CCD report.
Volume of new development in Center City. From CCD report.
And if you’re trying to maintain (or God forbid, reduce) taxes for the current population, you would want to attract new residents that are high earners and will pay high wage tax bills. And wouldn’t you know, that’s exactly the type of resident that’s moving to Center City.
Comparing incomes of Center City residents to the rest of the city. From CCD report.
We admit that we don’t understand the impact that Goode’s changes to the tax abatements will have on development in Philadelphia, big picture tax policy, or population growth trends. But neither does the councilman! He can’t know, because he’s presenting this proposal without any empirical study of these issues. So here’s our suggestion, City Council: 1) Figure out funding for our schools 2) Table the abatement proposal 3) Commission a study 4) Come back to tax abatements once you have some idea of what impact your changes will have on a city that needs all the help it can get right now. Sounds good? Thought so.
The bill will come before a full Council session for a vote on June 20th. If you think that it’s a bad idea to change the tax abatements without understanding the potential consequences, write, email, or call your favorite councilperson today.
Disclosure: Naked Philly is owned by OCF Realty, a real estate development company.