Controller says KOZ program too expensive

Philadelphia’s City Controller says a new study shows a state job creation program isn’t delivering as promised.

Enacted in 1998, the Keystone Opportunity Zone program creates areas where new businesses can operate free of state and local taxes for 12 years in an effort to create jobs.

Philadelphia City Controller Alan Butkovitz says his report – the first in the program’s history – concludes it costs about $104,000 thousand dollars in city tax credits for each job created in the Philadelphia zones.

“Assuming that the annual wage for a job among KOZ participants is $50,000 a year, at the current wage tax of 3.92 percent, it would take roughly 52 years for each new job to pay itself off,” Butkovitz told reporters at a news conference.

Butkovitz said providing incentives for jobs isn’t necessarily wrong, but that in this case businesses who are already in the city are reaping big benefits.

“We spent about $384 million in free taxes in exchange for recovering about $40 million dollars in taxes that we wouldn’t otherwise have,” Butkovitz said. “Nobody runnning a business would think that’s a good idea.”

 The controller says he hopes his report will help in crafting future incentive programs for the city and state.

Mayor Nutter’s spokesman Mark McDonald said an statement that  “since the inception of the KOZ program, the City has attracted more than $1.2 billion in private investment at locations that had previously been vacant or underutilized. Since the KOZ term has expired for most of those sites, the City is now collecting real estate and U&O taxes that wouldn’t exist otherwise.”

McDonald also said that the Controller’s analysis “apparently counted the number of new jobs created but did not reflect the significant number of existing jobs retained when companies decided to stay and grow in the city.”

You read the entire Controllers’ report here.