Philadelphia could get a better understanding of the impact of various tax breaks and subsidies it hands out to private businesses if a bill introduced in City Council on Thursday becomes law.
The “Subsidy Accountability Bill” was introduced by Councilwoman Helen Gym, who attended her first regular meeting of Council on Thursday, along with four other newly elected Council members. It would require businesses that benefit from special tax reductions at the local or state level to publicly report the total value of the subsidies they receive every year.
The bill would also require reporting on the number and quality of jobs created by businesses that receive subsidies. Subsidized businesses would be required to report the number of people they employ at the beginning and end of the year in which they received the subsidy, as well as for the next five years after receiving the subsidy. They would need to disclose information about compensation and benefits for their employees and the use of independent contractors as well.
“Every year, businesses are granted tax breaks from the City of Philadelphia but we have no way to evaluate the return on investment,” Gym said in a press release. “This legislation will help us target our limited resources toward businesses that are using these subsidies to grow the local economy and increase good jobs. These annual reports will help us champion businesses that deliver on their promises.”
In the press release, Gym cited a 2014 PlanPhilly report describing a dearth of information about the impact of Keystone Opportunity Zones, areas with reduced tax liabilities meant to spur business development, and a report from the Controller’s Office showing that KOZs have cost the city and school district more than $380 million since 1999.
Gym’s bill would apply to businesses receiving a variety of subsidies, including “a reduction in any tax obligation to the City or State” such as Tax Increment Financing packages; local grants, loans and loan guarantees; and properties acquired from the city at below market value. It would not apply to licenses, permits, zoning changes or other non-monetary legislative benefits, or to “by right” subsidies like the 10-year property-tax abatement.
In the future, the bill could apply to companies like Comcast, which received $40 million in state and local subsidies for its second tower in Center City, and to development partnerships like Brook Lenfest’s, which received a $33 million Tax Increment Financing package to build a hotel at 15th and Chestnut.
“We want to be able to track some of the value of what we’re giving out as well as the quality of jobs that we’re receiving,” Gym told PlanPhilly on Thursday. “I don’t think that we’re in a phase anymore where just any job is acceptable for us. We clearly have a living wage standard, we’re enforcing paid sick leave—there are things that we care passionately about as a body that we’re trying to understand a little better.”
A 2013 PlanPhilly report showed that Tax Increment Finance (TIF) districts, which let businesses keep certain increases in property and business taxes and redirect them to the cost of improvements, tend to underperform relative to projections. Most recently, City Council and the School District approved a $55 million TIF package for the redevelopment of the Gallery at Market East.
If Gym’s law were in place at that time, the mall’s owners, PREIT, would have had to disclose the number of employees they had at the beginning and end of the year and how well they were compensated. The company would also have to report whether PREIT—or any subsidiaries or parent companies—had been found in violation of any federal, state, or local laws or regulations in the previous calendar year.
All the information collected would have to be posted online in a searchable, downloadable format.
“Philadelphia’s actually going to enter the late 20th century in terms of subsidy accountability,” said Greg LeRoy, the director of Good Jobs First, a research and advocacy group that tracks corporate subsidies nationwide, on Thursday.
A 2013 report on local subsidies from Good Jobs First showed that Philadelphia was among the largest cities that had no online tracking requirements for special local tax breaks and incentives. LeRoy said that his group’s advocacy for disclosure of state subsidies had coincided with a major increase in the number of states requiring such disclosure, and that Good Jobs First was hoping to inspire the same changes at the local level.
“We know that often as a result of investigative work and organizing around these issues, local governments can become much more transparent,” LeRoy said.
In addition to Keystone Opportunity Zones and Tax Increment Financing, Philadelphia has locally created tax credits for job creation, green roofs, contributions to Community Development Corporations, and other incentives. The Commerce Department makes annual reports about participation in some of these programs, but there is no required, coordinated disclosure of subsidies at the local level.
“What we’re trying to do is get some accuracy to the subsidies that are given,” Gym said on Thursday. “And I think we’ll learn a lot because right now we don’t have anything at all. Not having any information doesn’t seem like it’s good government in any way, shape, or form.”