Insider: How to Incentivize Development In Philly’s Overlooked Neighborhoods

Ben-Amos: This plan would fuel construction without a single tax break.

The Paseo Verde complex alongside SEPTA’s Temple University Station is an example of what great transit-oriented development can look like in Philadelphia. | Photo by Ariel Ben-Amos

The Paseo Verde complex alongside SEPTA’s Temple University Station is an example of what great transit-oriented development can look like in Philadelphia. | Photo by Ariel Ben-Amos

(This is an opinion column from a Citified insider.)

Last week, Councilman and Condo King Allan Domb went public with a proposal to double the city’s controversial tax abatement from 10 to 20 years for properties worth less than $250,000. Domb points out that developers have not invested in neighborhoods in North Philly, West Philly and Southwest Philly the way they have in Greater Center City, and he thinks his legislation will change that.

Whether or not you agree with his proposed solution, it’s undeniable that the problem he identified needs to be fixed. Many Philadelphians are worried — rightly — that they will miss out on the massive growth of Greater Center City. These are residents who are isolated from downtown amenities, as well as those who have been driven out of their former homes by rising housing costs.

But there’s a better way to spur development in outlying neighborhoods than to expand the city’s expensive tax abatement.

Here’s how: The state’s General Assembly should pass Senate Bill 385. It wouldn’t even threaten the school district’s budget the way Domb’s proposal could.

I’ll explain how the bill would work in a second. But first, a history lesson: In 2004, the state legislature sought to support transit-oriented development by passing legislation that allowed SEPTA and the city to forge a partnership that could float bonds in order to help pay for upgrades at transportation stations — and then letting the pair pay back the bonds with the additional real estate taxes that are generated by any improvements made.

These enhancements can include new lights, rehabbed sidewalks and even environmental remediation work. The idea is that by making a train station more accessible or cleaning up a dirty site, a developer will be more apt to build there.

Senate Bill 385 is an update to this law, and it does two things that would be particularly good for Philadelphia.

The new legislation would make it possible for SEPTA and the city to repay the bonds using the increase in liquor, sales and use, personal income, corporate net income and other taxes that are generated by the fixed-up infrastructure, instead of just property taxes. This means you don’t have to divert any money that would otherwise go to the school district — something that could prevent SEPTA and the city from taking advantage of the current law.

The bill would also let SEPTA and the city use these funds to finance planning for construction projects. In today’s environment, the projects most likely to succeed are those that are “shovel-ready,” but you can’t be shovel-ready if you don’t have the money to do planning and design.

There’s a hitch. This bill is something of a pilot: It would only allow entities such as SEPTA and the city to repay bonds using the tax revenue hikes in two separate developments in the entire state. Hopefully, though, legislators would expand the program once it proved successful.

And if that happened, it could make a real impact on blight and poverty. More than 6,000 — or 60 percent — of the city’s 10,000 publicly owned vacant properties are located within a quarter-mile of rail transit. And given that transportation costs eat up to one-third of the incomes of poor Philadelphians, largely because of car-related payments, it is imperative that we figure out how to make it easier to build dense, mixed-income housing that is accessible by transit. Plus, neighborhoods that had numerous transit options grew far faster between 2000 and 2010 than those that didn’t, according to the Census.

In recent years, a few nonprofits have built impressive transit-oriented developments. Asociación Puertorriqueños en Marcha, a community development corporation in North Philly, opened Paseo Verde in 2013. It’s a modern, green, mixed-income, mixed-use gem, which backs up on to the Regional Rail tracks at Temple University Station.

With Senate Bill 385 (and hopefully expanded legislation later on), we could build more Paseo Verdes — in North Philly, West Philly, Germantown and beyond. In so doing, we’d be continuing the city’s legacy of transit-oriented development: Many of the city’s neighborhoods originally sprouted up along its trolley and rail lines built in the 19th century, like kudzu on a trellis.

Ariel Ben-Amos is a lecturer in the Urban Studies Program at the University of Pennsylvania.

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  • PicklePaul

    St At first glance, this sounds interesting. I suppose Allan Domb’s proposal could be used in conjunction with this proposal. Anybody have additional details?

  • connied

    it’s about time that development is encouraged in existing neighborhoods. that hasn’t happened since before the GI bill after world war II. Everyone thinks the GI bill was SOOOOO great! well, it would have been if it allowed GI’s a home wherever they wanted to live. unfortunately, the GI bill ONLY supported the purchase of A NEWLY CONSTRUCTED HOME! Hence, the development of suburbs like levitown and other small town suburbs. If it had supported veterans housing needs in WHATEVER neighborhood they wanted, communities throughout the city would have thrived. government is it’s own worse enemy to sensible and sensitive development.

  • eixample

    This idea does make a lot of sense. To improve property values near regional rail stations I would also suggest that SEPTA make fares on rail stations in the central area of the city the same as for a subway, bus or trolley — not just to go from Temple station to 30th street, but also from stations like 49th Street, Wayne Junction and North Philadelphia stations. Also, SEPTA should be actively moving towards a “transitized” commuter rail system like they have in Europe with all high level platforms, no conductors walking around punching tickets and more frequent service.

  • pickaname

    Alan Domb “points out that developers have not invested in neighborhoods in North Philly, West Philly and Southwest Philly the way they have in Greater Center City”…..funny that on his site doesn’t list any of these neighborhoods in his own investments.

  • joshuavincent

    Not a bad idea, but the incentive is immediately blocked by Philadelphia’s Byzantine and broken tax system. Bonding has become very difficult in Philadelphia due to the extravagance of offerings over the past few decades. Philadelphia ought to consider, and has considered the land value tax, which is a revenue neutral shift of taxation away from existing or proposed buildings and on to the taxable value of land citywide. The numbers have always worked out to provide significant tax reductions for existing buildings, especially poor neighborhoods.

    Another benefit is that the high land values of Center City would finally pay its fair share of Philadelphia taxes. It’s a permanent, and universal abatement that isn’t temporary and would apply to everybody. It’s an improvement on existing and proposed abatements simply because you don’t have to apply for it; there is a good reason people from lower income neighborhoods don’t want to go to the MSB in tangle with bureaucracy.

    • kclo3

      One could also argue that the current state of land valuation greatly disadvantages poorer neighborhoods with vacant parcels, as the huge assessment differential discourages speculative developers from upgrading the lot to anything beyond a trash-strewn grass lot; the current abatement is disproportionally more powerful in CC and revenue for city services continues to suffer for it.