Economic Development

Bills to expand, regulate tax-free zones speed through City Council

Philadelphia City Hall – courtesy of WIkimedia Commons

Philadelphia City Hall – courtesy of WIkimedia Commons

A bill to expand tax-free zones in Philadelphia to some 80 new properties is moving fast enough to make longtime Philadelphia City Council observers’ heads spin. Councilmembers assured reporters the expedited timeline was just to meet an Oct. 1 state deadline for approval of so-called “Keystone Opportunity Zones.” (The bills were heard in committee on Wednesday, and could see a vote as soon as next week.)

But not everyone is so sure.

“It’s just not clear enough why councilmembers are picking these specific properties,” said Jon Geeting, from Philadelphia 3.0, a political advocacy group. “I could see the logic if there’s some particular area of the city we want developed for some policy reason...But that's not what we’re doing. We’re just picking and choosing parcels.”

The Philadelphia Keystone Opportunity Zone website defines the zones as “parcel-specific areas where a KOZ property owner and/or business located in a KOZ could enjoy greatly reduced or tax-free status.” The zones were designed in decades past to spur development by greatly reducing federal and state tax burdens in exchange for certain annual payments.

But some of the new proposals were already slated for redevelopment, while others are in currently booming sections of the city, like University City.

Coincidentally, Councilmember Helen Gym passed long-delayed legislatIon the same day to improve the loose reporting requirements for the zones’ economic impact, which have drawn criticism in the past.

The bill will require recipients to report the amount of subsidy received, the number of jobs created, and other information. Currently, reporting requirements for KOZ beneficiaries are, in Gym’s words, “effectively nonexistent” – meaning that the city doesn’t know what it's getting in return for forgone tax revenues.

“We want to be assured that entities aren’t just shifting jobs from place to place to place, but that we’re actually creating new jobs,” Gym said. “Right now, we’re still in the dark.”

Councilmember Jannie Blackwell introduced inclusionary employment requirements for one new KOZ in her district, the site of Wexford Science and Technology’s $1 billion University City High School redevelopment. The amendment removed those addresses from the KOZ legislation, in hopes of imposing a 25 percent minority employment requirement at that site.

In a public statement made during the session, Blackwell seemed to criticize the rushed nature of the KOZ projects, but said that gentrification concerns had motivated her amendment. She received applause for her comments. 

But Wexford’s site is one of several new KOZ proposals in her district. Afterward, Blackwell struggled to articulate exactly why this and other projects in the heart of a growing science and technology hub needed tax exemptions at all.

“These are major projects,” she said. “All around University City, we have so much development, and they need those dollars – they worked hard in applying for them.”

But Gym, who has not committed to either supporting or opposing the KOZs, suggested the rationale was more about keeping up with the Joneses. She said that existing KOZs may be inspiring neighboring property owners to ask for their own tax exemptions, regardless of economic factors.

“As more properties get added, you begin to see contiguous KOZ areas,” she said. “Why wouldn’t you ask for it?”

Geeting also cited another West Philly development seeking KOZ status, 3.0 University Place, which had already scheduled a groundbreaking for later this year. A sister building, 2.0 University Place, has been built on an adjacent KOZ site.

“Maybe there’s a good reason, but maybe there’s not,” he said. “Council hasn’t had much time to debate this.”