Abatement-Palooza: What's Happened, and What's Next in This City Council Term?

(2040 Market Street)

Council President Darrell Clarke's late-breaking push for changes to the 10-year tax abatement has been spicing things up at the end of this City Council term, with the rumored introduction of two such bills, and the eventual introduction of just one bill. In keeping with the same spirit of our other post this week summarizing the bills likely to be left on the cutting room floor at the end of this term, let's take a look back at the many abatement bills introduced this year in light of these recent moves, and see where this may all be headed.

What Happened This Week?

Despite all the discussion about the tax abatement during this past election season, there's been very little in the way of legislative action around it since Helen Gym first introduced four bills in 2018 to jumpstart more debate about the issue. Council President Clarke hasn't even scheduled a hearing about any of the bills, to the consternation of abatement opponents.

But then, out of nowhere, Clarke decided to introduce two bills into the mix this week, in what looks like an attempt to try and wrap the issue up during this Council term before new members can join. At first, Clarke was reported to be introducing two bills: one that would cap the abated amount at an unspecified number rumored to be between $200,000 and $400,000, and another that would wind down the abated amount by 10% each year for 10 years, effectively cutting the value in half. Then, in the course of one day, Clarke was persuaded not to introduce the cap bill, but he did introduce the wind-down bill which was notably sponsored by all members of Council. The wind-down bill seemed to have the begrudging support of the Building Industry Association, but the organization—which represents residential home builders—signaled they would vigorously oppose the cap bill.

Because of the tight timing mentioned in the other post, Mayor Kenney is able to pocket-veto any legislation introduced this Thursday by refusing to sign it and letting it lapse. Jake Blumgart at PlanPhilly had initially reported that the bills were negotiated with the Kenney administration, but the administration has also had a pretty consistently skeptical take on abatement repeal, based on two studies they commissioned showing that all repeal scenarios would entail non-trivial costs in jobs, housing, and long-run tax revenue. In the follow-up article at PlanPhilly, Councilmember Maria Quinones-Sanchez is quoted saying that Council will need to find "12 votes" for abatement changes—the number required to override a Mayoral veto rather than a simple majority of 9. 

The Building Industry Association may yet oppose the bill, on the grounds that it would kick in too early and impact some projects currently in the development pipeline. The bill as drafted would go into effect in July of 2020.

It's also worth mentioning for context that Council is gearing up to expand a different tax abatement at the end of this session, at the same time as they're looking to roll this one back. The Homestead Exemption, which mostly goes to low-income and middle-income homeowners, would be increased for the third time in a row to exempt the first $50,000 of assessed property value from taxes by 2021—up from $40,000 in 2019. This is the largest and most expensive residential tax-abatement program that the City currently has, and it costs more money than the abatement for improvements. Together, the five tax abatement programs targeted to current homeowners cost the City more than double what the abatement for construction improvements costs, and Council has continued to expand the Homestead Exemption in particular without much thought to the costs.

What Other Bills Are Still Out There?

There are currently seven other 10-year tax abatement reform bills sitting in Council. Four are from Helen Gym, intended to provide a menu of options for different phase-out scenarios.

The wind-down bill currently under consideration bears a lot of similarity to the prior wind-down bill introduced by Helen Gym in 2018, with a few notable exceptions. Gym's bill would have started in July 2019, and would have applied to commercial property too, not just residential. The new bill from Clarke also has a provision requiring a reevaluation mid-stream:

"At least once every three years, beginning with the year 2024," it reads, "the Council shall, by separate ordinance, select an independent expert to evaluate the specific impact on the real estate market of the modification made by subsection."

Other existing Gym bills would have eliminated the school portion of the property tax abatement, since property taxes are split between the School District and the general fund; limited the geographic scope of the abatement to carve out wealthier central areas; and capped the abatement amount at the Federal Housing Administration mortgage limit for a one-family dwelling in Philadelphia County—about $385,000, according to The Reinvestment Fund.

There’s also a bill from Allan Domb to have the abatement begin phasing out in the last 3 years, which he says would make it the equivalent of an 8.5 year abatement.  And Cindy Bass introduced a bill to fully eliminate the tax break, which Councilmember Gym then co-sponsored. There is also a bill from Bobby Henon and Al Taubenberger limiting the abatement to licensed contractors, presumably as a way to freeze out non-union contractors.

How Will the Politics Change Next Year?

The conventional wisdom about how much the vote math will change for the abatement in the next Council seems pretty exaggerated, for the simple reason that most of the more hard-core anti-abatement candidates didn't win their elections.

The replacement of Al Taubenberger with Kendra Brooks is a big change, but even though Brooks was the most anti-abatement of all the 2019 Council winners besides maybe Helen Gym, she still only has one vote. Meanwhile, Katherine Gilmore-Richardson and Isaiah Thomas don't seem to be any more or any less likely than Blondell Reynolds-Brown or Bill Greenlee, who they will replace on Council, to support or oppose repeal. And Jamie Gauthier migrated during the campaign to a pro-repeal position, but hasn't especially emphasized it publicly. 

At most, the abatement repeal cause has gained 3 votes on net, and it's unclear whether that even adds up to the 12 votes needed to overcome a Kenney veto. The building trades at least have a key backstop with Mayor Kenney, who's much more sympathetic to the construction (manufacturing!) jobs arguments against some of the more radical scenarios. Whether or not Kenney supports different bills will make the crucial determination of whether a change needs 9 or 12 votes, and who on Council sits at the veto point. 

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