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Who said anything about churning the market? I was talking about lost revenue for school funding. In FY 2017, Philadelphia Pubic Schools ranked number #2 in the nation for lost revenue to tax abatements at $61.9M. See page 9: https://www.goodjobsfirst.org/sites/...s/newmath3.pdf
Scaling back and gradually ending the program will bring in revenue for Philadelphia's pupils.
Fair enough on the "churn" part, but while this isn't spoken, it seems to me that critics of the tax abatement forget that the abated properties will start contributing revenue in year 10 (under the revised abatement, year 2), and the length of time an abated property will contribute revenue will be far longer than the time when it contributed little or no revenue. (And even owners of brand-new abated houses still pay tax on the value of the land; shifting the city's tax burden from structures to land also gets rid of this revenue problem).
The way I put it in this 2018 analysis of a tax-abatement-reform study the city Finance Director's Office commissioned from JLL's New York office (to avoid possible conflicts of interest, it did not ask JLL Philadelphia to conduct it) was:
"Are we looking for a sugar rush or carbo-loading for the marathon?"
The study found that housing construction would take a hit under almost all of the possible alternatives to the status quo and that several of them would produce a good bit less revenue for the city and School District over a 30-year period than leaving things as they were would. Oddly enough, the alternative with the least downside impact was capping the dollar value of the property subject to abatement at $500,000.
That the schools need the money I don't dispute. But I'm also interested in both the city's long-term health (and continued growth, which could sputter) and the health of the construction market (even though I detest the building trades unions for shutting minorities out of the good-job pipeline for more than 50 years, these are still good-paying jobs one can get without a college degree, and we need more, not fewer, of those, and I think there may finally be some progress on bringing nonwhites into the building trades above the level of laborer).
That's assuming people continue with the developments and buying houses without the abatement.
Sure it is. And perhaps post-COVID would not be the best time to totally cut the program. But, like I said, the program began in the 90s when we were at a much different place regarding capital and human flight from the city. Development was chugging along at a healthy rate in the city pre-COVID, and I do not see any evidence that slowly ending the program would end this. Again, property taxes are already low in the city.
Fair enough on the "churn" part, but while this isn't spoken, it seems to me that critics of the tax abatement forget that the abated properties will start contributing revenue in year 10 (under the revised abatement, year 2), and the length of time an abated property will contribute revenue will be far longer than the time when it contributed little or no revenue. (And even owners of brand-new abated houses still pay tax on the value of the land; shifting the city's tax burden from structures to land also gets rid of this revenue problem).
The way I put it in this 2018 analysis of a tax-abatement-reform study the city Finance Director's Office commissioned from JLL's New York office (to avoid possible conflicts of interest, it did not ask JLL Philadelphia to conduct it) was:
"Are we looking for a sugar rush or carbo-loading for the marathon?"
The study found that housing construction would take a hit under almost all of the possible alternatives to the status quo and that several of them would produce a good bit less revenue for the city and School District over a 30-year period than leaving things as they were would. Oddly enough, the alternative with the least downside impact was capping the dollar value of the property subject to abatement at $500,000.
That the schools need the money I don't dispute. But I'm also interested in both the city's long-term health (and continued growth, which could sputter) and the health of the construction market (even though I detest the building trades unions for shutting minorities out of the good-job pipeline for more than 50 years, these are still good-paying jobs one can get without a college degree, and we need more, not fewer, of those, and I think there may finally be some progress on bringing nonwhites into the building trades above the level of laborer).
I actually like Helen Gym's proposal. I want more information on this JLL firm. I am not dismissing them outright, but to say they are not biased as a commercial real estate firm is false. Of course they support tax breaks for development. I will do more reading on them and their findings later.
Sure it is. And perhaps post-COVID would not be the best time to totally cut the program. But, like I said, the program began in the 90s when we were at a much different place regarding capital and human flight from the city. Development was chugging along at a healthy rate in the city pre-COVID, and I do not see any evidence that slowly ending the program would end this. Again, property taxes are already low in the city.
You are seriously underestimating the value of 10 year tax abatement for the "semi-well-off" (not rich) who make up a large majority of the new disposal income in the city. House purchases over 600k (which is most new construction) would not just drop, they would drop dramatically. I love the city and, with my wife working at Temple, once our last child is off to college, we're looking to move into one of those very houses in Fishtown or NL. If I had to pay 9-12k in taxes on top of wage tax, there is zero chance I'd do it. I'd be in Mullica Hill with a pool, garage, driveway and pay similar taxes without wage tax.
You have to look at it this way: paying 1k in taxes for 10 years (it will be more now that the regulation has been amended) affords me the ability to buy said house and justify wage tax as well as justifying the next 20 years I'll live there and pay full taxes. If I couldn't justify that, I wouldn't be there. And most of my peers feel the same unless they both work in the city. Even if that was the case, I think they'd probably just buy a lesser house (375-450k) which would really slow down new construction.
There couldn't be a more perfect example of cutting off the nose to spite the face. If you want Philly to start trending backward and become even more difficult for the disadvantaged and poverty-stricken, this is a good first step to achieve that.
And to your last statement, taxes are now comparable to those of South Jersey (they are not "really low" anymore).
DISCLAIMER: I have owned properties in Philly for 12 years and currently own three. I have never once qualified for, or taken advance of, tax abatements of any sort. I have no personal gain in this. I just can't believe such a stupid idea is actually being considered.
I actually like Helen Gym's proposal. I want more information on this JLL firm. I am not dismissing them outright, but to say they are not biased as a commercial real estate firm is false. Of course they support tax breaks for development. I will do more reading on them and their findings later.
Jones Lang LaSalle is (IIRC) the world's largest commercial real estate brokerage and property manager, but they also do lots of research, and I've generally found it trustworthy (I'm acquainted with Lauren Gilchrist, who heads JLL Philadelphia's research unit).
IMO development beats the alternative if we're talking urban land. Wouldn't you rather recycle a vacant city lot with all the infrastructure provided than dig up some Bucks County farm to plant tract mansions?
Ambler, Media, Newtown and West Chester are far from "inner ring" - you pass through anywhere from 10 to 20 miles of other suburban communities to reach them, and the areas around Newtown and West Chester are not that densely built either. In fact, you wouldn't confuse the towns surrounding any of those places for Upper Darby, which is an inner-ring suburb.
Your point about overall density of development in Philly vs. Houston holds — but it's worth noting that, as is the case in several other large East Coast metros, the density of development in the Philly suburbs varies a lot more than it does in most Sunbelt metros. Most of Bucks County above US 1 has a semi-rural character still, especially Central and Upper Bucks, and the Main Line railroad tracks separate densely-built areas to its south from thousands of acres of large estates to its north. The estates pop up again around Newtown Square, and the Brandywine River country in southwest Delaware/southeast Chester counties is also not that densely built either.
California metros are overall the most densely populated in the country. That's because their suburbs have been developed at nearly uniform densities that are not much less than those of the core cities, especially Los Angeles and San Diego but also San Jose. Very dense San Francisco becomes the statistical outlier here.
You are seriously underestimating the value of 10 year tax abatement for the "semi-well-off" (not rich) who make up a large majority of the new disposal income in the city. House purchases over 600k (which is most new construction) would not just drop, they would drop dramatically. I love the city and, with my wife working at Temple, once our last child is off to college, we're looking to move into one of those very houses in Fishtown or NL. If I had to pay 9-12k in taxes on top of wage tax, there is zero chance I'd do it. I'd be in Mullica Hill with a pool, garage, driveway and pay similar taxes without wage tax.
You have to look at it this way: paying 1k in taxes for 10 years (it will be more now that the regulation has been amended) affords me the ability to buy said house and justify wage tax as well as justifying the next 20 years I'll live there and pay full taxes. If I couldn't justify that, I wouldn't be there. And most of my peers feel the same unless they both work in the city. Even if that was the case, I think they'd probably just buy a lesser house (375-450k) which would really slow down new construction.
There couldn't be a more perfect example of cutting off the nose to spite the face. If you want Philly to start trending backward and become even more difficult for the disadvantaged and poverty-stricken, this is a good first step to achieve that.
And to your last statement, taxes are now comparable to those of South Jersey (they are not "really low" anymore).
DISCLAIMER: I have owned properties in Philly for 12 years and currently own three. I have never once qualified for, or taken advance of, tax abatements of any sort. I have no personal gain in this. I just can't believe such a stupid idea is actually being considered.
I made no effort to estimate the value of the 10 year abatement program for the "semi-well-off." I have asked for evidence of how it will end or impact development. So far, I have received a study from a commercial real estate firm analyzing the impact on school district revenue.
Your anecdotal examples are just that. I am personally interested in how the abatement impacts the a city as a whole -- for students (which has been my particular focus here), for renters, for long time residents of "revitalizing" neighborhoods -- not just for the "semi-well-off."
I want substantial evidence that, "If you want Philly to start trending backward and become even more difficult for the disadvantaged and poverty-stricken, this [rolling back the tax abatement?] is a good first step to achieve that."
I was speaking in relative terms for the low bit. They are relatively low. Perhaps because of an outdated tax system (re: city wage tax).
If you want to have a constructive discussion, you may not to characterize the ideas with which you are engaging as "stupid," especially if you are responding directly to one of my ideas.
Last edited by Muinteoir; 06-26-2020 at 09:55 AM..
Reason: clarify a point
And to your last statement, taxes are now comparable to those of South Jersey (they are not "really low" anymore).
Property taxes alone, or property and earnings taxes?
I thought the city's property tax rate was still somewhere just south of 1.5 percent. IIRC, property tax rates in South Jersey start at 4 percent and head north from there. I do note that houses in New Jersey still sell for less than comparable houses in Pennsylvania.
And if it's local property and earnings taxes together we're talking about, there's still the difference between Pennsylvania's flat 2.8 percent state income tax and New Jersey's graduated income tax that starts somewhere around 6 percent, IIRC.
Sure it is. And perhaps post-COVID would not be the best time to totally cut the program. But, like I said, the program began in the 90s when we were at a much different place regarding capital and human flight from the city. Development was chugging along at a healthy rate in the city pre-COVID, and I do not see any evidence that slowly ending the program would end this. Again, property taxes are already low in the city.
Development was chugging along pre-covid in a fairly limited section of the City. I can see an argument to be made for ending the tax abatement in the greater center city area but gigantic swaths of the city suffered (and still suffer) from an almost complete lack of investment. Incentives are needed to encourage risk takers in these areas; the tax abatement also encourages people to do things like buy vacant land at tax lien sales which brings in a considerable amount of revenue for the city and had really started to heat for the past four years or so.
As MSE pointed out almost all "research" in opposition to the tax abate merely looks at the total dollar value being abated without considering things like (1) assessments of surrounding property, (2) whether the abatement encourages bigger and more valuable improvements, (3) development leading to an increase in land value, (4) revenue generated from transfer taxes, (5)wage tax and BIRT revenue generated by construction, (6) the simple math that turning a vacant lot assesed at $50k to a house assesed at $500k is revenue neutral by year 12 and a huge boon by years 13+, (7) potential wage tax of new residents. It is also generally frustrating to see how many people seem to believe tax abated properties pay no real estate tax.
I grew up in Appalachia and now live in Philadelphia. It is sad for to me the misunderstanding between the rural and urban poor. Together, they could make a power voting block to demand economic and democratic justice in this country.
This is the second mention you made of voting for 'economic justice', which sounds good, but is totally devoid of substance. This thread's whole tangent is discussing how tax policy tends to have unintended consequences.
I'm frequently amazed at how simplistic and reductionist people tend to be with economic policy, as if one can just turn up the tax-and-redistribute knob and magically all of the alleged income/wealth inequality will disappear. This completely ignores the ability for those that are negatively affected by the policy change, to use DXBtoFL's term, to vote with their feet. This is especially true at the local level, where your feet only need to walk a few miles outside the city to get immediate and substantial relief.
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