CITY COUNCIL PANEL ADVANCES LEGISLATION TO HELP FUND $400 MILLION PLAN THAT INVESTS IN AFFORDABLE HOUSING, POVERTY REDUCTION AND JOBS

In Bobby Henon, Cherelle Parker, Council News, Darrell L. Clarke, Featured, News by PHL Council

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PHILADELPHIA, PA – A key City Council committee this evening voted to advance a series of tax bills intended to generate $400 million in bond revenue to fund massive citywide investments in affordable housing, home repair, poverty reduction and job creation.

Council’s Committee of the Whole voted favorably to advance a 1 percent Development Impact Tax on residential construction and legislation that reduces the real estate tax abatement for commercial construction projects by 10 percent.

Revenues from the Development Impact Tax and commercial abatement reduction will be utilized to fund the Neighborhood Preservation Initiative, a $400 million program to address disparities magnified by the COVID-19 pandemic, including the need for more affordable housing, repairs to residents’ existing homes, support for first-time homebuyers, neighborhood business corridor revitalization, and the creation of a more inclusive workforce and family-sustaining jobs across the city.

“In June, City Council passed a New Normal Budget Act — a first step towards addressing the ills and racial disparities magnified by the COVID-19 pandemic,” said Council President Darrell L. Clarke (5th District). “Our action in committee today builds on the New Normal Act and the recommendations in Council’s Poverty Action Plan which we released in March. There is no time to wait. Poverty is growing. These needs are urgent. We need to act now to create a better, more equitable future for every Philadelphian, and everyone has to pay their fair share.”

The Committee of the Whole vote this evening sent to the full Council a 1 percent Development Impact tax on residential construction and legislation reducing the tax abatement for commercial construction projects from 100 percent down to 90 percent.

The Development Impact tax on residential construction will yield an estimated $9 million to $11.7 million in revenue per year, according to projections by Council’s budget and technical staff. The 10 percent reduction in the commercial real estate tax abatement will generate an estimated $83 million in revenues for city services and schools over the next decade. The revenue from the reforms will also help pay the debt service for the planned $400 million bond issue. Both tax reforms will take effect on January 1, 2022.

What the Neighborhood Preservation Initiative Will Do

  • Build thousands of new affordable housing units
  • Keep thousands of homeowners in their homes through home repair grants
  • Create thousands of construction and related family-sustaining jobs
  • More inclusive construction workforce through job training and apprenticeships
  • Aggressively expand contract opportunities for minority-owned businesses
  • Preserve thousands of existing affordable rental units
  • Homeownership opportunities for thousands of people through Philly First Home
  • Help disabled residents stay in their homes through adaptive modification grants
  • Strengthen small businesses by revitalizing neighborhood commercial corridors

The $400 million bond is expected to generate a large burst of economic activity in Philadelphia – $2.5 Billion — producing $71 Million in new tax revenues over the first 4 years. It is also estimated that it will support employment of over 14,700 jobs with $765 Million in wages.

“We can’t sit by idly and wait for someone to come to our rescue; we must be proactive,” said Council’s Majority Leader, Cherelle L. Parker (9th District), who introduced the legislation on Clarke’s behalf. “This legislation will generate close to a half billion dollars that will impact the lives of our most vulnerable residents who have been hurt most directly by the coronavirus. It will help those in poverty, prevent those living on the margins from falling further behind, and create sustainable jobs and assist small businesses – which need help the most right now.”

An earlier version of the Development Impact tax, introduced in Council in 2018, encountered resistance from the development community, and that legislation was withdrawn. To garner more support this time, Council is also moving forward with legislation that will delay by 12 months the scheduled implementation of a rollback in the residential portion of the real estate tax abatement.

That legislation, offered by Councilmember Bobby Henon (6th District), will delay the start date for the rollback of the residential tax abatement and set it to begin in January 2022. The rollback of the residential tax abatement will remain in place; it is the start date only that will change. The residential abatement will reduce by 10 percent annual increments over 10 consecutive years for all new residential dwellings.

Today’s hearing prompted more than two dozen witnesses to testify, some in support of the Neighborhood Preservation Initiative package, including the tax abatement bills, some in support of some portions of the package, and others in opposition.

The Kenney administration testified in support of the full legislative package. Leading its testimony was Deputy Mayor Anne Fadullon, who said, “The bills achieve a good balance and achieve the desired objective of investing in all of our communities.”

A group of non-profit organizations supporting more affordable housing in Philadelphia testified in support of the full package, led by Beth McConnell of the Phila. Association of Community Development Corporations, who said, “These bills will help the city attack inequality – particularly among people of color – and provide more affordable housing.” Others noted that more affordable housing and improvements to existing homes could also act as a deterrent to the spread of COVID-19.

The city’s construction and development communities testified in opposition to the Development Impact Tax and the reduction in the commercial real estate tax abatement. Their representatives all stated broadly that they supported the concepts of “equitable growth” and job creation – yet all, with one exception, testified against the tax and the commercial abatement reduction.

That led Council President Clarke to address one of those business witnesses, from the Chamber of Commerce for Greater Philadelphia. Clarke recited multiple tax breaks received by the development community from the Trump administration – “$30 billion windfall for new pass-through and real estate dividend deductions, $16 billion windfall for real estate exemption from limitations on interest deductions – I can go on and on.”

Clarke noted $384 million in tax credits granted businesses through Keystone Opportunity Zones in Philadelphia over a 12-year period, and then addressed the real estate tax abatement program, in which the city abated an average $150 million in real estate taxes each year to the City and School District over the last three years.

“If people want to know why we’ve come to the construction and development industry and asked them to contribute, it’s because that’s where the money is,” Clarke said.

One business group that testified in favor of the Development Impact Tax and the Neighborhood Preservation Initiative was the Building Industry Association. “As we did in 2018, the BIA has made the hard decision to support and endorse a Construction Impact Tax,” testified Mo Rushdy, BIA’s treasurer. “We are acutely aware of how Philadelphia has turned into an extreme housing example of the “haves and the have nots”, and that more must be done immediately to ensure our City has opportunities for all to grow and flourish. The BIA believes it is time to collaboratively craft policies that help all residents in this City share in its prosperity.”

A group of citizens, students and advocates for public education testified against making any changes to the planned rollback to the residential tax abatement – and many testified in favor of eliminating the abatement entirely.

The Neighborhood Preservation Initiative is the latest neighborhood revitalization and anti-poverty measure advanced by Council. Last month, Council authorized that $10 million be spent to create and initially fund a Poverty Action Fund, a public-private entity inspired by the work of Council’s Poverty Action Plan, released in March.

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