Center City’s Future: One Foot on the Banana Peel
For most of Philadelphia’s post-industrial existence, Center City has been the center of business life. Over the past decade, as job losses mounted, developers found a way to maintain the vibrancy of this critical area by converting office space to residential. No doubt this trend will continue. But I found it a little unnerving to read that Glaxo Smith Kline, the giant global pharma company, planned to relocate from its Center City home to the Philadelphia Naval Shipyard. Okay, the company and its 1,300 workers will remain Philadelphia based. The report is that Glaxo’s CEO, not development officials, identified the Navy Yard as an option. And everyone in the know said that the economics of rebuilding downtown were prohibitive, that absent a move to the shipyard, Glaxo might be gone.
Defenders of this move also point out that KOIZ tax benefits are not being taken by Glaxo. No new jobs are involved. Today. But next year, these benefits could be added to the mix if new jobs are transferred to the Yard. When and if this occurs, these Keystone benefits will again be contributors to musical chairs that often constitute economic development.
At the core of lack of competitiveness for office development is the omnipresent issue of taxes. Even with the 10-year tax abatement no new commercial office buildings have been built in Center City since 1991 without major incentives. The Cira Center required a KOIZ and the Comcast Center required a $40 million-plus capital grant from the state. And the two major employment sectors in the city that have grown in the last 20 years, health care and education, are exempt from two of our three major local taxes.
[SIGNUP]So whither the long term future of Center City? Are we seeing an era when office functions once headquartered in the center of town are ushered down Broad Street to the suburban office park that once was the Navy Yard? And what about the investments by Center City restaurateurs, retailers, and by SEPTA and the City, which collectively are designed to service the office and now-burgeoning residential markets? How will that good faith be rewarded if the slide to the south picks up steam?
The Navy Yard should be developed, but it should have a focus that emphasizes entrepreneurship, residential communities, alternative energy, life sciences, R&D, IT and media companies. Moving established legacy businesses down there sets up competition with the downtown that has significant repercussions. Soon the corporate and residential constituencies will be demanding extending the Broad Street Subway three-quarters of a mile from Pattison Avenue. Costs for this will push well beyond the $350 million estimated by some. For an aging and physically depleted SEPTA, these are resources badly needed to reinvigorate the existing assets and services. Using our declining political capital in Washington and Harrisburg to fund these new infrastructure investments will require significant trade-offs for current SEPTA riders. They might make sense in a nation hellbent on making infrastructure a priority. In the deficit nation, these choices are very risky.
The 2004 Master Plan for the Navy Yard calls for the renovation of 2.5 million square feet of existing buildings and the creation of up to 12 million square feet of new buildings. A few years ago, Center City was home to 267,000 jobs. The Navy Yard hosts nearly 8,000 workers. The lopsided nature of the workforce today will shift. The sexier and dynamic waterfront with the planned open space will be alluring to many companies. Once the trail is blazed, be certain that others will follow.
The city needs a clear strategy on growth. We need to fix the tax problem that makes our urban core—Center City—unattractive to office and new construction developers. We need to brand the Temple, University City and Navy Yard employment areas so they identify with core and relevant tenants and types of businesses and workers. And we need to recommit to making Center City the true center of the city’s economic, business, cultural and entertainment life.
Soon we also need to take a serious whack at reforming our tax structure and connecting it to a long-term plan for the future of Center City … or we could wake up and find out it’s too late.