Last November, Mayor Cherelle L. Parker announced with great fanfare that Philadelphia could create a property tax break to spur the conversion of derelict buildings, such as empty Center City office towers and vacant school facilities, into apartments.
She had worked with legislators in Harrisburg to change state law to allow Philadelphia to pursue the legislation, which would create a 20-year property tax abatement for conversions of “deteriorated” properties.
But 10 months later, no such legislation has been introduced in City Council, and Parker on Wednesday called on city lawmakers to consider her 20-year abatement idea for distressed properties.
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“We have an affordability crisis here in the city of Philadelphia,” Parker told reporters on Wednesday. “What if we marry that challenge with these persistently vacant buildings that have gone underutilized, and we put them to their best and their highest use to incentivize affordable housing?”
Parker’s administration, however, has not yet transmitted a draft of the bill to Council, which is typically the first step for lawmakers to consider legislation championed by the mayor.
“Tell them send the bill over,” Council President Kenyatta Johnson told reporters Thursday. “We haven’t seen any piece of legislation regarding 20-year tax abatement at this particular point in time.”
Asked about the delay, Tiffany W. Thurman, Parker’s chief of staff, said Thursday that city agencies “are collaborating to ensure the proposed legislation is legally sound and can withstand constitutional scrutiny.” She added that Parker “remains firmly committed to presenting City Council with a bill that incentivizes the development of affordable and workforce housing on vacant, publicly owned land.”
On Thursday, several members of Council questioned the lack of specifics from the mayor’s office, and others were less than enthused about the idea of approving a new tax break when the Philadelphia School District is facing a funding crisis.
“I continue to appreciate an effort to make sure that we have access to affordable housing in the city of Philadelphia,” Councilmember Nicolas O’Rourke said. “At the same time, I am very much so laser-focused and desirous of the city getting the revenue that it needs.”
A controversial policy
Property tax abatements have long been controversial in Philadelphia, with opponents contending they starve the city and school district of needed revenue while favoring real estate developers.
Philadelphia’s 10-year abatement program, which was established in the 1990s, previously exempted owners from paying real estate tax on all new construction or improvements on any type of property for 10 years.
That program was long hailed as key to the city’s turnaround in the early 2000s. But concerns about its impact on neighborhood inequality and school funding grew over time, and Council in 2019 roughly halved the value of the tax break.
Parker argues that the idea behind her legislation is different: She wants to see a far more narrowly targeted bill that would only help developers who seek to redevelop large, derelict buildings.
“We’re talking about … persistently vacant school buildings that have been vacant from three up to 30 years,” Parker said Wednesday.
The mayor also noted that the development environment has worsened dramatically since Council cut the 10-year tax abatement’s power, with soaring interest rates and construction material inflation factors that weigh heavily on complex and large-scale projects.
Still, many Council members are skeptical of tackling a potentially controversial measure that is seen to favor developers ahead of next year’s municipal elections, when all 17 city lawmakers will be on the ballot.
“I’d like to get more information on exactly what the plan is because the tax abatements are, as you know, hugely unpopular,” said Councilmember Cindy Bass, who represents parts of North and Northwest Philadelphia.
Bass said that while the abatement has spurred needed growth, she would need to see any expansion of it balanced with the needs of lower-income Philadelphians who are struggling with rising costs and property taxes.
And Johnson on Thursday reiterated his comments from earlier this year that he would like to see the newly authorized 20-year abatement include a provision that requires an affordable housing component of the projects it enables.
“Any type of legislation like that should really focus on making sure that we’re providing a level of affordability, also senior housing,” he said. “Obviously, the devil’s always in the details.”
But it isn’t clear that state law would allow Philadelphia to mandate affordability in an abatement bill, and Parker cautioned against doing anything that would exceed the city’s authority.
“We have to make sure that whatever we are proffering, that it is directly connected to what has been enabled,” Parker said. “It has to pass legal muster, for no one to question the constitutionality of what it is that were doing.”
Persistently vacant schools
A 20-year abatement would apply to empty office buildings in Center City and long-vacant industrial buildings. But Parker and administration officials have focused their pitch on revitalizing empty public schools.
“We need to pass it because it’s going to be extremely beneficial for challenging properties,” John Mondlak, the Department of Planning and Development’s chief of staff, said Wednesday. “You think about schools in 10 years, 20 years — they are very difficult to reposition.”
That pitch, however, runs up against another festering policy issue between Parker and Council.
Councilmember Isaiah Thomas said some of the hesitation to take up the abatement legislation is due to Council’s dissatisfaction with the Philadelphia School District’s facilities plan, which the school board adopted last spring and calls for the closure of 17 school buildings and the renovation of 169 others.
Thomas and other Council members vigorously protested the plan and are still pressing for the board to reconsider it.
“That’s our priority,” Thomas said Thursday. “I don’t want to have a conversation about schools that are vacant until we have a conversation about schools that are occupied.”