Developers File Latest Salvo in Tax Abatement Data War

New report should lead to close reading as a dose of skepticism

(Photo Left) BIA report debunks some misconceived misconceptions. Photo courtesy of Building Industry Association of Philadelphia.

As we have seen in recent weeks, the debate over the success or failure of public policy in Philadelphia is not just rooted in empirical data, but in where this data is generated and who is interpreting it. This dance between data, its generators and its interpreters has become ever more evident in the war surrounding the sugary drink tax. But there is another important public policy initiative, rife with data generator and interpreter spin, that is playing out in city hall; the battle waged over the use of tax abatements as a tool to drive real estate development in Philadelphia.

Just as the sugary drink tax pits two clearly defined foes — those advocating for universal pre-K championed by Mayor Kenney versus Big Soda — the battle lines on tax abatement are equally clear: a battle between those advocating for increased school district funding versus real estate developers championed by the Building Industry Association (BIA).

The difference between the soda tax data war and that of surrounding tax abatements lies in the sheer amount of data. While the sugary drink tax data battle is two months old, the one swirling around tax abatement has 17 years of data in the making. To show how data can be manipulated to win the war of public support for an aggressive tax abatement policy, let’s review the latest salvo in the tax abatement data wars that was fired earlier this month, when BIA produced its report on this 17 years of tax abatement data. Not surprisingly, the BIA Report attempts to “debunk several misconceptions about the abatement”:

•          “The abatement plan only helps very wealthy buyers and developers.” In fact, only 2.8% of tax-abated residences have assessed values of $1 million or more. The typical tax abated property is a single-family home priced between $200,000 and $300,000.

[The “very wealthy” equals $1 million or more is an arbitrary definition supplied by BIA; we are pretty sure that most folks living in Philadelphia would find a $300,000 single-family home to be pretty rich considering the median price for a single family home is less than half that or $143,000].

•          “The abatement only benefits Center City.” While the largest concentration of abated properties occurs in Center City, abated properties are dispersed throughout the city, with significant concentrations in South and West Philadelphia, Manayunk, Northern Liberties, Fishtown and Kensington.

[BIA sets the misconception up as being completely Center City driven. Had it been set up as “the abatement only benefits Center City and the gentrified areas of South and West Philadelphia, Manayunk, Northern Liberties, Fishtown and Kensington. The BIA Report would have proved the “misconception.”]

•          “The abatement takes revenue away from the city.” In fact, Philadelphia is currently realizing an additional $48.1 million in annual real estate tax revenues from properties with expired abatements. After all current abatements have expired in 2026, Philadelphia should realize an additional $169.4 million in annual real estate tax revenues in that year and every year afterwards.

[This is the most clever of the “debunkments.” It assumes that tax abatements are a zero-sum game on properties that have already been developed. So BIA gives tax abatements all of the tax revenue post-abatement and stays silent as to the tax lost during the years of abatement.]

The study also reports that homebuilding is up 376% in Philadelphia since the abatements took effect, while slipping 11.25% in the suburbs. This led Center City condo-king cum city councilman to crow to the Philadelphia Inquirer, “‘Building is up 376 percent; that’s a home run for us. We just hit a grand slam; why would we change how we play baseball?’”

But abatement policy was advocated in the late 1990s precisely because city development had flat-lined while suburban development was booming. Again, this is not a zero-sum game; the 376% increase was not solely caused by abatements; how much of that increase was caused by a surge of millennials coming into the city or the recent boom in office building construction?

Of course, none of this is to say that tax abatement is not, on balance, a public policy initiative whose benefit outweighs its costs. It is to say, once again, be on guard when the data war in a public policy debate is being waged by one side at the expense of the other.


Developers File Latest Salvo in Tax Abatement Data War

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