Philly councilman says SRC should decide on controversial tax break

Philadelphia Councilman W. Wilson Goode Jr. continued Thursday in his crusade to change the city’s controversial 10-year property tax abatement. He introduced a bill that would allow the School Reform Commission to decide whether a portion of the tax break on new construction should live or die.

About 55 percent of the city’s property taxes are set aside for the school district; the rest go into the city’s coffers. 

Goode’s proposal would require the SRC to determine whether to continue the abatement on property taxes that go to the school district beyond June 2014.

Currently, Council makes that call — something Goode said is legally questionable.

“We should be clear legally about whether the school district should have the authority to decide whether its tax revenues are abated or not,” he said. “And the SRC should take a stand either way.”

The proposal would put the SRC in the difficult political position of choosing between additional school funding, at least in the short term, and a tax break that critics see as unfairly benefiting big business and affluent condo owners. The schools opened this year with about 3,000 fewer teachers, assistant principals, guidance counselors and other employees due to drastic budget cuts and attrition.

“I think that all [the SRC’s] financial decisions right now are uncomfortable,” Goode said. “This should make it a bit more comfortable, being able to have that authority to decide [on the tax abatement].”

Goode recently introduced another bill to eliminate the abatement on property taxes that go toward the school district. He argues that there is no proof that the abatement is vital to construction projects, whereas additional funding is clearly needed for the city’s schools.

Councilman Bill Green believes that ending the abatement, whether at the behest of Council or the SRC, would diminish Philadelphia’s tax base and therefore hurt the city’s schools.

“There will be less construction, and ultimately, the school district will receive fewer resources,” he said. “It’s a bad policy, no matter how you frame it or how you try to pass it.”

The city’s tax abatement, which began in the early 2000s, is meant to encourage real estate investment. Kevin Gillen, an economist at the University of Pennsylvania, argues that it has done just that: Shortly after the abatement was implemented, new construction increased by 263 percent in Philadelphia, according to his recent study funded by the Building Industry Association of Philadelphia and the Greater Philadelphia Association of Realtors.

If the abatement on the school district’s portion of property taxes were scrapped, Gillen said it would have a “minuscule” effect on the current funding crisis, while likely adversely affecting the real estate market. In the best-case scenario, Gillen said, it would raise an extra $2.4 million in property taxes annually for the schools. That is less than 1 percent of the school district’s $304 million budget gap announced earlier this year.

Gillen also questioned whether Goode’s new bill was legally feasible, “as it’s not clear that the SRC has the legal status of a taxing authority,” he said.

Goode said Council’s technical staff members helped craft the bill, and are confident that it can be implemented.