Politicians, teachers, students, researchers and dozens of other community members convened at the East Passyunk Community Recreation Center last week to discuss issues and foster solutions surrounding potential correlations between the city’s 10-year tax abatement and the conditions of Philadelphia public schools.
Hosted by the Our City Our Schools coalition, an assemblage of local organizations, unions, parents and educators, the hearing considered the possible connection between both entities from various perspectives, including Councilman Mark Squilla, Councilwoman Helen Gym, City Controller Rebecca Rhynhart, representatives from Philly Power Research and Econsult Solutions, and school district employees and students.
Along with examining the tax abatement’s possible impact on school funding, the evening centered upon a few concepts, including whether or not the construction incentive is still needed, and whether or not the city’s recent increase in development would have ever happened without the policy in the first place.
Varying research conducted by the meeting’s presenters attempted to answer those questions.
In partnership with Our City Our Schools, Philly Power Research, a group of research volunteers working to support economic justice in Philadelphia, presented data from its November 2018 analysis of the 10-year tax abatement by Council districts.
The study, which focused on a few regions, including Squilla’s and Councilman Kenyatta Johnson’s districts, found that, in 2018, more than $111 million in taxes were lost due to abated properties, causing the entire school district to lose out on $61 million, as about 55 percent of property tax revenue goes toward the school district.
“We really wanted to drive home the point that ending the abatement is really a viable way to fund schools, especially the repairs around schools,” said Lauren Parker, representative of Philly Power Research. “And really, that there’s a growing sense that the abatement is not really needed right now…We really wanted to try to highlight the real strong connections between education and housing and how the abatement really connects these two systems and argue that we don’t really need to be subsidizing luxury development at the expense of school-aged children.”
In Squilla’s district, which includes the majority of South Philadelphia east of Broad Street, more than $28.4 million was lost in property taxes related to abated properties, averaging roughly $15.6 million to be lost in school funding, which could have funded 226 teachers, 207 nurses and 216 counselors, according to the study.
In Johnson’s district, which includes the majority of South Philadelphia west of Broad Street and the sports complex, more than $21.8 million was lost in property taxes related to abated properties, averaging close to $12 million to be lost in school funding, which could have funded 173 teachers, 160 nurses and 166 counselors, also according to the study.
“Areas, especially in South Philadelphia, where’s there’s some of the most toxic schools, such as Furness and Palumbo, are receiving the highest tax abatement breaks and families of students are being pushed out of their homes, because they can no longer afford the costs,” said Academy at Palumbo senior Kamryn Sacksith.
Considering the average repair cost is $14 million, the school district could have completely renovated four schools with these lost funds, according to the Philly Power Research study that supports its findings using evidence from last year’s Inquirer report on toxic school conditions, such as high levels of lead and asbestos.
“I approach working in my classroom as a health hazard now,” said Southwark STEM teacher Janene Hasan, who says her classroom tested positive for lead. “…We need to remediate these hazards immediately. It’s a very real threat for our children and our school district employees’ health. We need to explore all of the options on how to fund this expensive but absolutely necessary remediation, and this includes ending the tax abatements in Philadelphia.”
Rhynhart, who took office in January of last year, presented her office’s recent findings, which analyzed the tax abatement based on geographical concentration, distribution of benefit and developer profitability.
According to the report, of the 158 neighborhoods in Philadelphia, only 10 of them, or about 6 percent, receive 59 percent of the tax benefit. The top five neighborhoods receiving the total tax benefit are Rittenhouse, Northern Liberties, Logan Square, Washington Square and Graduate Hospital in South Philly. Properties with abated values exceeding $700,000 comprise 7 percent of all abated properties but receive 51 percent of the tax benefit, according to the Office of the Controller’s report.
The analysis also shows that, due to high construction costs in Philadelphia, only about 10 ZIP codes in the entire city have positive development with or without the abatement, including neighborhoods in Center City, Old City, Northern Liberties and Graduate Hospital.
However, even though these areas have experienced an increase in development, the vast majority of the city, according to the city controller report, could still benefit from the incentive.
“I think it would be risky to get rid of the abatement all together, because there’s a lot of the city that still needs it,” Rhynhart said.
Another presenter, Peter Angelides, senior vice president and principal of Econsult Solutions, a Center City-based firm that “provides businesses and public policy makers with consulting services” in urban economics, development, neighborhood development and more, contended that, contrary to popular notions, the city is not developing enough new construction.
According to Angelides, the abatement most likely allows development to happen that otherwise would not take place, arguing that the incentive not only increases the amount of development in the city but increases the quality of development in the city.
Reasonably, with more people migrating and settling in the city, tax revenue will boom in other ways, such as sales, income and liquor taxes.
“The reality is – the more revenue that comes from the city in whatever form, the more money would ultimately become available to the schools,” he said.
He also argues that the city is not developing quickly enough to keep up with its housing stock. There are 500,000 residential units in Philadelphia, and just last year, 2,000 homes were built. If the average new addition of units is 2,000 each year, it’ll take 250 years to build half-a-million units, or replace all of the city’s housing units, according to Angelides.
He says most houses don’t stand for more than 250 years, and his findings do not include population growth.
“There’s this notion that development is out of control,” Angelides said. “I’d say quite the opposite. We don’t have anywhere near enough just to maintain our existing housing stock. The abatement helps us build. We want that to happen.”
Seeking middle ground, both the city controller and Council members assert that a solution to the tax abatement concerns means potentially revising the policy in some way.
“When we’re thinking about how should we change the tax abatement, and I do believe it does need to be changed,” Rhynhart said. “I think that’s important to keep in mind.”
The Office of the Controller’s report offers six possible scenarios for improvement, including rescinding the abatement, rescinding the school district portion, removing the abatement in the city’s eight most profitable ZIP codes, capping abated value more than $700,000, capping abated value at $150 per square foot of a property or amortize the abatement.
Currently, several pieces of legislation are circulating Council that all aim to either eliminate or modify the abatement.
Encompassing similarities to the city controller’s suggestions, the subject of these bills include eliminating the school district portion of the tax abatement, phasing the abatement out at 10 percent each year, restricting the policy based on geography and limiting the abatement for homes more than $400,000.
Squilla, who says a public hearing for these tax abatement bills will be scheduled sometime in the spring, suggests massaging all of these resources into one piece of legislation.
“Tax subsidies are the most powerful thing that municipal governments have within our power, and, so they’re not meant to stay fixed,” Gym said. “A city evolves. Tax subsidies can also evolve. There’s no such thing as a pure program that cannot be changed. Everything evolves. Our city is changing. Our neighborhoods are changing. Our schools are evolving, and we need to figure it out.”