It was beginning to look a lot like Christmas in Philadelphia City Hall.
Proposals emerged from City Council to plaster a cash-starved public school system with advertisements, and to remake LOVE Park into a food court packed with seven restaurants. After the city paid Wall Street firm Lazard to conduct a study on whether to privatize Philadelphia Gas Works, Lazard (surprise!) recommended that it do so; the city then hired Lazard to manage the sale.
Developer Brook Lenfest received a $33 million tax-increment-financing (TIF) subsidy, on top of $42 million in state and federal monies, to build a W Hotel, and Carl Dranoff announced a plan to build a $210 million hotel on South Broad Street — until, just one day later, he threatened to abandon the project. The problem? Councilman Wilson Goode Jr. is not sure city schools should hand over millions of dollars in property-tax breaks.
The crisis-wracked Philadelphia School District gets 55 percent of property-tax revenues, and public-education advocates want a 10-year tax abatement for new construction and renovation to be scaled back or scrapped.
A 2006 Econsult study (paid for by the Building Industry Association) credits the tax abatement for prompting two-thirds of the residential development in the city since 2000. But it will also cost city schools nearly $50 million in forgone tax revenue in 2014 alone, according to a recent study conducted by the Philadelphia Coalition Advocating for Public Schools. The property-tax abatement has no doubt drawn new residents to the city. But the crumbling school system could very well compel many others to leave.
Abatement beneficiaries are often the well-to-do, including Dranoff’s unsightly but expensive Symphony House high-rise and the luxurious Residences at the Ritz-Carlton. The Comcast Center, home to the global media behemoth, has received a $28.8 million tax break over the past five years.
During the same period, most Philadelphians’ property taxes have been hiked twice to make up for state budget cuts to education.
“Clearly, a 100 percent abatement is not needed for every project,” says Councilman Goode, a leading abatement critic. “Every school needs more money. Before you tell the schools to ‘Go find money someplace else,’ we should say, ‘Let’s find the money for the projects someplace else.’”
Big business infrequently loses fights here: Witness the new Actual Value Initiative, which fixes broken parts of the city’s property-tax system but also quietly shifts $30 million of the tax burden from commercial and industrial properties onto people’s homes.
Tax-exempt universities and hospitals, which in many cities pay the government millions in something called Payments in Lieu of Taxes (PILOTS), pay almost nothing here, yet reap a publicly financed bounty. The charitable nature of some of their activities are questionable — as is University of Pennsylvania President Amy Gutman’s $2 million annual compensation.
In October, as local universities faced growing pressure to join the rest of us in paying for the city's operation, they paid Econsult for a study that boiled down to a not-very-subtle threat: “Controversy, confrontation and litigation often follow in the wake of municipal demands for increasing financial support from the nonprofit sector.”
Meanwhile, homeless people persist in eating and sleeping in Center City, making for an uncomfortable reminder (noted each year in holiday-season articles like this one) that many are left behind by all the trickle-down development schemes.
Last summer, a federal judge blocked Mayor Nutter’s effort to ban the service of meals to the homeless on the Benjamin Franklin Parkway. But the city did close the Ridge Avenue Shelter, in part, as one city official told the Daily News, because of “concerns about the ability to do other development in the area” — though other city officials disputed that characterization. (The city says it has boosted indoor meal service and replaced lost beds.)
AFSCME District Council 33, which represents blue-collar municipal workers, likes to call Nutter “a mayor for the 1 percent” (though union president Pete Matthews’ compensation of $222,574 puts him in the top 5 percent).
To be fair, highly mobile corporations put local leaders like Mayor Nutter in an unenviably weak bargaining position, and a thriving Center City is much better than the alternative. But residents of long-marginalized neighborhoods like Strawberry Mansion and declining ones like Frankford cannot be faulted for asking: What about us?
This Christmas, it’s clear that our wealthiest citizens expect the lion’s share of Santa’s bounty. In Philadelphia, the rich reap philanthropy in reverse.
Correction: We initially stated that Pete Matthews' salary is $222,574. That is actually his total compensation. Matthews' salary is $218,361. In addition, we initially reported that a city official had told the Inquirer that the Ridge Avenue Shelter was closed in part because of development concerns. The official was quoted in the Daily News.
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