A financial evaluation of the 10-year tax abatement on new construction in Philadelphia commissioned by City Hall found the program is still making Philadelphia money, even as it’s value is questioned in City Council.
City Councilwoman Helen Gym introduced a resolution at the May 24 session of council for a series of hearings on how to “modify the abatement so it meets the original intent of the program and the needs of our school children.”
Gym said that an “overhaul” of the abatement was needed because of the “urgent school facilities crisis,” citing the Inquirer’s recent findings in the Toxic City investigative series of asbestos and lead paint in Philly public schools.
“We cannot ask homeowners to bear the brunt of this facilities crisis alone. Harrisburg needs to meet their constitutional obligation of funding our schools and we need to ensure that city tax policy is fair and balanced,” she said in a statement.
Calling the abatement “one of the most generous in the nation,” she claimed the city “forfeited $42.5 million in potential tax revenue” in 2017 alone.
But also on May 24, City Hall released a Finance Department-commissioned report by a Chicago firm, Jones Lang LaSalle, which found “the program’s benefits will continue to outweigh its costs in the long-term.”
The firm’s report said that in a 30-year time-window, changing or ending the abatement is worse for the overall economy.
“Changes to the abatement are likely to lead to a reduction in the number of projects developed in the city,” a City Hall press release said. “Over a 30-year period, the current program is still projected to generate more development, jobs, and tax revenue than scenarios that modify or even eliminate the incentive.”
The report, which is available on Phila.gov and analyzes different schedules for phasing out the abatement, was not intended as an argument for or against the abatement, the city said, but as a way to examine the issue.
“I’m confident that this new study provide sustenance to the robust discussions taking place on the future of the abatement, in the larger context of the Mayor’s proposed budget now before City Council and the need to adequately fund the Philadelphia School District,” Finance Director Rob Dubow said in a statement. “Gauging the value of the abatement is difficult, since we’re trying to estimate what would have happened had the incentive not been in place.”
In April, Controller Rebecca Rhynhart released a policy analysis of the abatement, noting that the city is also considering a property tax hike on residents.
“The Ten-Year Tax Abatement, a much-needed tax incentive at its inception, has spurred development in the city – development that may not have happened otherwise,” Rhynhart said in a statement. “On the other hand, long-time residents and homeowners feel frustrated by what they believe to be an unfair benefit going to wealthy developers, investors and individuals. With yet another property tax rate increase on the table, this frustration is only growing.”
Rhynhart’s office found 59 percent of abatement tax benefits are in just six percent of Philly neighborhoods, and properties valued over $700,000 make up just seven percent of abated properties, but receive more than 51 percent of the tax benefit of all abatements.
