New Philly Council bill would change real estate tax abatement

By: - November 25, 2019 6:30 am

Philadelphia City Council Member Cindy Bass, sponsor of the tax abatement bill ( Philadelphia Tribune file photo)

By John N. Mitchell

PHILADELPHIA — City Council has introduced long-awaited legislation aimed at phasing down the city’s 10-year residential property tax abatement over 10 years.

Under the proposed legislation, which was introduced by Councilwoman Cindy Bass on behalf of Council President Darrell Clarke, new construction of residential housing would be eligible for a 100% abatement in the first year, 90% in the second year, and so on, decreasing to 10% 10 years after construction.

“This day and this bill is long overdue,” Bass said. “It will begin to address many of the economic inequalities that exist in our city, particularly some of the long-term residents who have found it more and more difficult as taxes have increased.”

The bill does not alter the existing tax abatement for commercial properties or rehabilitation. Those projects would continue to receive tax exemptions on 100 percent of their new building value for 10 years.

In a related move, Clarke also introduced legislation to increase the city’s existing homestead exemption for homeowners. Currently, more than 200,000 homeowners across the city benefit from the exemption, which is set at $45,000.

Thursday’s session marked the last session this year that new bills could be introduced and voted on before Council’s final session of 2019, which will take place on Dec. 12.

As those two bills moved on, another abatement reform measure did not reach the floor. That bill would have capped the value that can be exempt from taxes under the abatement. Developers and construction companies, who have benefitted from the wave of building in the city, oppose a cap in any form.

“There is not support for the cap bill,” Clarke said. “One of the things that we like to do is focus on things that we think can actually pass. There were a number of proposals for a cap at varying levels of phase out.”

In the run-up to the council session, Clarke had written up legislation for a cap with specific figures left out, according to two sources familiar with the scrapped bill.

Mike Dunn, a spokesman for Mayor Jim Kenney, said in an email the administration has been open to and engaged in discussions on a range of possible reforms to the tax abatement. He did not answer whether the administration supported instituting a cap on the program.

“Our goal has been to engage in a robust discussion on the future of the abatement informed by these findings,” he said. “We have not advocated for or against a particular proposal.”

Builders back changes to 10-year tax break as Philly City Council mulls next steps

After the session, more than a half dozen councilmembers punted when asked whether they would endorse a cap on the abatement, declining to take a stand for or against it.

Only Councilwoman Helen Gym fully supported a cap on the abatement program. Gym, who previously sponsored legislation for a tax abatement limit that has stalled, said a cap has the potential to prevent developments that appear out of character in neighborhoods.

“If people are deeply concerned about certain types of development that are dramatically out of whack with existing residential structures, the cap should be appealing,” she said.

Councilwoman Blondell Reynolds-Brown also said she would support a cap, but only if it were shown to benefit the school district.

Gym, a longtime advocate of the School District of Philadelphia, has argued that the tax abatement strangled off money desperately needed for the school district.

“This is only a start and there is more that needs to be done,” Gym said. “But I’m really happy to be a part of this body which is showing so much leadership on this.”

Who benefits? Philly leads largest cities in property tax breaks | Analysis

Clarke said preliminary projections show the amended legislation could bring in between $200 million and $300 million for the city over the next 10 years.

Clarke said he expects “as much as 55% of the money generated by the phase out to go to the School District of Philadelphia.” Clarke also said that at least 45% will “go to the city of Philadelphia and not just to the general fund.”

“It should be invested in home owners in the city of Philadelphia that have experienced these increased values, through no fault of their own,” Clarke said. “The whole structure of our real estate market has changed and that can’t be refuted. It was time to move the needle.”

John N. Mitchell is a reporter and columnist for the Philadelphia Tribune, where this story first appeared. Tribune staff writer Michael D’Onofrio contributed reporting.

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