CDC Tax Credit is a transformative tool for neighborhoods

As City Council considers expanding the Philadelphia Commmunity Development Tax Credit Program to pre-recession levels, Community Contributor and Tacony CDC Manager Alex Balloon explains the program’s big impact in neighborhoods like Tacony.

Just a few years ago Torresdale Avenue in Tacony was a different place. Business closings, declining sales, growing problems with litter and trash, a rapidly climbing vacancy rate, boarded up buildings, deferred maintenance, and an overall sense of decline. At the Tacony CDC we’ve reversed that trend. In Tacony, business owners, neighbors, and partners are working together towards a common vision of a renewed Main Street. We’ve planted more than 50 trees along our corridor, rehabbed 15 storefronts (with 11 more in design), welcomed new businesses, helped our business owners better connect to customers, and we are in the process of opening a new destination restaurant. This was unthinkable just a few years earlier.

Our work has been strengthened in no small part because of the Philadelphia Community Development Corporation Tax Credit Program. Despite the wonky name pairing two abstract ideas- tax credit and community development-  the impact is concrete. The Community Development Tax Credit Program has been one of the most successful neighborhood economic development funding programs in the city’s history.

In 2002, many of Philadelphia’s key commercial corridors were struggling or being written off for dead. A growing disinvestment spiral, climbing vacancy rate, deteriorating cleanliness and safety, and an overall sense of decline were pervasive. When the CDC tax credit program was introduced by Councilman Wilson Goode, Jr it created a stable 10-year $1 million dollar partnership between a qualifying CDC and a qualifying business. Instead of paying $100,000 annually in Business Income & Receipts Tax (BIRT) a qualifying business could choose to make a contribution of $100,000 to a CDC and receive a credit against taxes due to the City from the Revenue Department. These funds were specifically to be used by the CDC for the purposes of neighborhood economic development detailed in a written plan. There were originally 10 partnership slots available, and gradually the program has expanded the number of partnerships to forty. In 2014 our CDC entered into a partnership agreement with Waste Management.

At the Tacony CDC that I manage, our CDC’s economic development plan is reviewed, approved, and monitored by the Philadelphia Commerce Department. This includes an annual review of specific projects and plans of investment both public and private, job creation and retention, and overall economic growth. Our CDC’s plan has concrete outcomes such as storefronts renovated, security cameras installed, bags of trash removed, business members recruited, promotional events completed, graffiti removed, blighted buildings improved, etc. In return for foregone city tax revenue we are held accountable for measureable economic development results through detailed annual reporting to the Commerce Department.

From a neighborhood revitalization perspective there are key advantages to the program:

  1. Leverage: When a CDC like ours receives a contribution we use it to leverage other investments. We use it to recruit volunteers, bring in new private investment, enlist business owners in cooperative projects, remove blight, and better align other government incentive programs strategically under the umbrella of neighborhood revitalization.
  2. Economic multiplier effect: New investments in our corridor generate growth in sales tax, wage tax, business tax, and other taxes that go directly back to the City of Philadelphia. Vacant storefronts cost the city money in the form of lost sales, unfulfilled employment, fewer vendor purchases, diminished rents, more problem properties, and declining property values.
  3. Stable 10-year flexible funding stream: This stable structure allows CDCs to build trust and cooperation amongst volunteers, business owners, and the community at large over an extended timeline. It allows us to cultivate businesses to take on transformative projects like storefront renovations, business expansion, or a new line of business to generate new sales and revenue. These are multi-year projects that require strong relationships and trust.

Outside of the tax credit program, nearly all of the City of Philadelphia’s funding for neighborhood economic development comes from the federal Community Development Block Grant (CDBG) program awarded on a fluctuating annual budget cycle that has steadily diminished over the past few decades. These funds can only be used in low-moderate income neighborhoods. This leaves commercial corridors that need support in neighborhoods that are just a few percentage points outside of the census income requirements ineligible. Ridge Ave, which has made tremendous progress in East Falls and Roxborough is an excellent example of such a corridor that receives CDC tax credit program support.

Professional leadership and managed places are critical to neighborhood revitalization. Center City District President Paul Levy wrote “[Successful places] have professional leadership coordinating services, partnering with, but independent from government. Their mission is to ask each day: ‘How can I make this place better?’ […] Place management is a template to be replicated, but it takes creativity to fund supplemental services where markets are still weak.”

Strong neighborhood development corporations provide that professional leadership and the CDC Tax Credit Program is that creative funding stream. Many markets in Philadelphia’s outlying neighborhoods and commercial corridors are weak and do not yet have enough taxable economic activity to create a Business Improvement District or self-fund through a membership program. Effective management and results can move them closer towards that goal.

Bill 141028 introduced by Councilman Goode would restore the level of funding to the credit program from $85,000 to $100,000 annually where it was before the recession. It’s a small change, but has significant impact for organizations with a $165,000 annual budget. I’ve spoken to colleagues in neighborhood revitalization organizations located in other cities across the United States and the CDC Tax Credit Program is viewed as a model of equitable development. It directly invests in neighborhood economic development outside of Central Philadelphia to promote growth. There is much work to be done on Philadelphia’s commercial corridors and Councilman Goode’s bill should be supported.


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