tax abatements

Philadelphia's Population Problem

View downtown from the Art Museum

Last week, the Census Bureau released its population estimates for the country’s top 25 cities. Philadelphia is still holding on to its spot as the 6th most populous city — but one has to wonder for how long. Out of the 25 largest cities, Philadelphia is one of only four cities — along with Detroit, Memphis and Baltimore — that has lost population since the 2000 census. In the past eight years, Philadelphia has lost more than 70,000 people, or roughly 4 percent of its population — a faster rate of population loss than any other American city.

You won't be reading Jonathan Stein's letter to the Daily News in the paper, so I thought I'd post it here

To the Daily News Editor,

If there's living proof that the Reagan era's legacy of unabashed subsidies for the wealthiest lives on, despite the biggest recession since the Depression, its the People's Paper zealous embrace of tax abatements for buyers of $7.7 million condos at Two Liberty Place. (Editorial of Apr. 6, 2009) Beyond your bold assertion of the necessity of this tax give-away, there's no convincing evidence that the private market place would not have developed these prime locations for mega-millionaire purchasers.

Your editorial relies uncritically on a flawed Building Industry Assn. funded study, done by the usual research-for-hire crowd who will defend any tax abatement or break for any client. The industry report, for example, assumed that everyone moving into tax abated residences are new residents into the City, and will add to city wage taxes now and property taxes in the future. We know this is untrue. The Inquirer's story on abatements last December reported on Pat Burrell's $37,284 annual abatement on his Center City $2.6 million condo, and he was already a Center City resident who lived in unabated properties. His lawyer was quoted as saying, "the abatement played no role in Pat's decision" to move there.

Indeed, although you quoted abatement booster Paul Levy, Levy's own 2006 Center City District survey of new residents found that 60% of new residents to Center City already lived in the City, presumably already paying property and wage taxes, and that for all new residents in Center City surveyed, the inducement of the 10 year tax abatement ranked #16, dead last, among top inducements like proximity to shopping and entertainment and neighborhood safety (the latter aided by property tax-funded police).

Your editorial relying soley on an industry funded report, completely ignores the major, independent national report done in 2005 by Indiana University, and which was cited by Peter Kerkstra in his Dec. 14, 2008 Inquirer story--the best local news story on the subject. Indiana University researchers found abatements wasteful and too generous, and flawed, and its main author, Prof. C. Kurt Zorn, was quoted by Kerkstra as saying that Philadelphia's abatement was "overly generous" and that "it makes absolutely no sense" as it is not targeted to low income or blighted areas and has no caps, for example.

The City has the most generous, non-targeted abatement give-away program in the nation. When all other property taxpayers in the City are facing a tax increase of $271 million over the coming two years, continuing this tax abatements now just doesn't pass the basic smell test for fairness.

Jonathan M. Stein

Tax abatements and school district finances

This post has been edited to correct misinformation from its original posting. Apologies. HG

The Inquirer has an interesting in-depth analysis of the city’s tax abatement program. The story is one of the most extensive looks at a program that has changed the face of Philadelphia. Unfortunately, the story leaves the consequences for Philadelphia schools as somewhat of an afterthought.

Although the city has arguably reaped benefits from tax abatements (wage/sales taxes, development, residential sales, etc.), the school district has suffered immeasurably from the program with little recompense from the city. In its newspaper version, the Inky published a chart of the tax impact on the city and schools. I inquired about the specific numbers on the chart, and then did a 60% calculation of the amount that would have transferred to the schools.

Here's what the cost of abatements will be for the schools:

  • since 2008: City = $84,727,393 in total lost revenue
    Schools = $50,836,436 forfeited
  • by 2012: City = $181,406,923 in total lost revenue
    Schools = $108,844,154 forfeited
  • by 2016 (peak loss): City = $239,932,516 in total lost revenue
    Schools = $143,959,509 forfeited

Between 2016 and 2025, the total amount lost for schools declines. The District will begin to see profits from the program in 2025 when we get the first check for $1.6 million . . . after 26 years. By 2025, all three of my children will have graduated from high school – a generation, in my opinion, robbed.

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