Philadelphia tax abatement reform: City Council pushes for a phase-out
The new legislation came during City Council’s final session for bill introductions on Nov. 19.
It’s been a long time coming, but Philadelphia may finally have a reform for its long-discussed real estate tax abatement.
Enacted in 2000, Ordinance 1456-A formed tax abatement as Philadelphians know it today. It initiated the now contentious, 10-year exemption from real estate taxes for any major improvement — which encompasses everything from individual room renovation to entire apartment complexes — made to any piece of land within the city’s boundaries.
In its almost 20-year existence, the abatement has spurred widespread development and turned around the city’s population regression.
However, as the city drew in investment from outside developers and businesses, the tax abatement policy also led to a significant uptick in gentrification — a consequence which most members of City Council today view as a reason to reform the law.
Almost 20 years later, that reform comes in the form of legislation that would phase the ordinance out over the next 10 years, making all new residential development ineligible for the tax break.
New commercial development, however, would still be eligible for the 10-year abatement. The new bill would also not apply to residential development already under construction.
The reform bill, introduced by Councilmember Cindy Bass on behalf of Council President Darrell Clarke on Nov. 19, aims to start small.
In the first proposed year (2020), 100% of the abatement would still be in place. But in each successive year, the tax break percentage would decrease by 10%.
At the end of 10 years, the tax abatement would sit at 10%.
Right now, the set start date for the phasing out is July 2020, but that could change before the bill is passed — which, Clarke hopes, could be by the end of the year.
Before the announcement of the phase-out bill, WHYY reported that Clarke had two reforms in hand to introduce for the tax abatement.
The other bill, which would have capped the amount of land value that could be exempt under the tax abatement, was reported by The Philadelphia Inquirer to have been killed off by developers’ lobbying efforts.
Despite the reform—which many think will pass—, there is likely to be a push for further action from the new slate of first-time councilmembers coming to City Council in January, including Kendra Brooks and Jamie Gauthier, both of whom ran with tax abatement reform as one of their top issues.