CERTIFIED VALUES Year Market Value Assessed Land Taxable Assessed Assessed

CERTIFIED VALUES Year Market Value $37,661,200 $36,411,200 $27,393,500 $13,895,000 $4,350,000 $4,350,000 $4,350,000 Assessed Land (Taxable) $1,100,000 $1,100,000 $1,100,000 $1,100,000 $1,100,000 $1,100,000 $1,100,000 Assessed Assessed Assessed Improvement Land Improvement (Exempt) (Taxable) (Exempt) $1,450,400 $1,050,400 $1,050,400 $1,050,400 $292,000 $292,000 $292,000 $0 $0 $0 $0 $0 $0 $0 $9,501,184 $9,501,184 $6,615,520 $2,296,000 $0 $0 $0 Total Assessment $12,051,584 $11,651,584 $8,765,920 $4,446,400 $1,392,000 $1,392,000 $1,392,000 Exemption Type Gross Tax $210,765.06 $177,709.06 $177,709.06 $177,709.06 $115,034.88 $115,034.88 $115,034.88 2005 2004 2003 2002 2001 2000 1999 Philadelphia’s Residential Tax Abatements: Accomplishments and Impacts CERTIFIED VALUES Year Market Value $40,000 $40,000 $9,600 $9,600 $9,600 $9,600 $9,600 Assessed Land (Taxable) $1,536 $1,536 $1,536 $1,536 $256 $0 $1,536 Assessed Assessed Assessed Land Improvement Improvement (Taxable) (Exempt) (Exempt) $1,536 $1,536 $1,536 $1,536 $256 $0 $1,536 $0 $0 $0 $0 $1,280 $1,536 $0 $9,728 $9,728 $0 $0 $1,280 $1,536 $0 Total Assessment $12,800 $12,800 $3,072 $3,072 $3,072 $3,072 $3,072 Exemption Type Gross Tax $253.87 $253.87 $253.87 $253.87 $42.31 $0.00 $253.87 2005 2004 2003 2002 2001 2000 1999 CERTIFIED VALUES Year Market Value $464,300 $464,300 $464,300 $82,400 Assessed Land (Taxable) Assessed Assessed Total UniversityAssessed Improvement Assessment of Pennsylvania Land Improvement (Taxable) (Exempt) (Exempt) Exemption Type Gross Tax $2,179.05 $2,179.05 $2,179.05 $2,179.05 $2,179.05 $0.00 $0.00 2005 2004 2003 2002 2001 2000 1999 $21,975 $0 $122,208 $148,576 Fels Institute of Government $4,393 $21,975 $0 $122,208 $148,576 John Kromer, Senior Consultant $4,393 $4,393 $4,393 $21,975 $0 $0 $122,208 $148,576 $26,368 $21,975 $0 Cartographic$0Modeling Lab $82,400 $4,393 $21,975 $0 $26,368 Vicky Tam, GIS Research$0Coordinator $ $0 $0 $0 $ $ $0 2 December 2005 $0 $0 $0 $ Philadelphia’s Residential Tax Abatements: Accomplishments and Impacts This report documents the results of research completed by the Fels Institute of Government and the Cartographic Modeling Lab on residential property tax abatements administered by the City of Philadelphia Board of Revision of Taxes (BRT) between 1997 and mid-2005. Property tax abatements associated with commercial and industrial development are not included in this project. The Fels Institute of Government, which is responsible for the writing of this report and the policy and program analysis that it contains, is part of the University of Pennsylvania’s School of Arts and Sciences. The Cartographic Modeling Lab, which completed data collection, data analysis, and data mapping for this project, is a joint venture of the School of Design and the School of Social Policy and Practice at the University of Pennsylvania. The data collection associated with this research is part of a larger Fels Institute/Cartographic Modeling Lab project, the Neighborhood Recovery Index, a compilation of data on the performance of housing program activities administered by municipal government agencies. This project was completed in coordination with David B. Glancey, Esquire, Chairman of the Board of Revision of Taxes and BRT staff (see Acknowledgments for details). Although information presented in this report was drawn from BRT data files, the Fels Institute is solely responsible for any errors or omissions, and all viewpoints expressed in this publication are solely those of the author of this report. 3 Findings Between 1997 and mid-2005, the Board of Revision of Taxes approved 1,876 ten-year property tax abatements associated with residential development and improvement activities. • 566 abatements were approved for 225 buildings developed for rental housing. Twelve of these buildings were subsequently converted to condominiums, with each condominium unit receiving its own abatement. 1,038 abatements were approved for new construction projects, including both townhouses and new condominiums. 272 abatements were approved for rehabilitation and improvement projects involving owner-occupied properties. • • A total of $12,124,819 in 2005 property taxes was abated for the properties identified above. This total includes $7,275,945 for the rental properties (including buildings subsequently converted to condominiums), $4,455,178 for the new construction projects, and $393,696 for the rehabilitation and improvement projects. The ten-year abatement terms associated with these 1,876 abatements will end between 2009 and 2015, with most ending between 2011 and 2014. As a development incentive, the abatement is more accessible and easier to administer than government-subsidized financing. As important, the abatement facilitates “apples-to-apples” comparisons of city and suburban for-sale housing options that will always favor Philadelphia. Most of the direct financial benefit associated with the abatement goes to housing developers in the city’s strongest real estate markets. Because real estate investment and development decisions are influenced by multiple factors that can vary from case to case, it is not possible to determine how many of the property improvements that received abatement approvals would have been completed anyway, without this incentive. If it is assumed that the abatement decisively influenced all of the activities summarized in this report, then one could conclude that the City succeeded in using an estimated commitment of $121.2 million (i.e., $ 12,124,819 x ten years) to leverage $458.5 million in new market value (i.e., $12,124,819 divided by the City’s .08264 millage rate, divided by BRT’s .32 assessment ratio). If, however, it is assumed that the abatements decisively influenced none of these activities, then one could conclude that the City unnecessarily gave up $121.2 million in tax revenues. The truth lies somewhere between these two extremes. 4 Recommendations • Starting in 2009, allocate the City’s share of the tax revenue associated with the ending of residential property abatement terms to support the preservation and development of affordable housing options for low-, moderate-, and middle-income residents, in order to help relieve Philadelphia’s growing housing affordability crisis. Through collaboration between City agencies, nonprofit housing counseling agencies, and private lenders, design education and financing strategies to enable low- and moderate-income owners of City-subsidized homes to prepare for the “spike” in property taxes that is likely to occur as the ten-year abatement terms on their homes come to an end. As a future policy for City-subsidized sales housing, either reduce the amount of development subsidy to recognize the value of the abatement and eliminate a double subsidy; or increase the sales price, in recognition of the value of the abatement. To provide for periodic evaluation of the need for abatements as conditions change in neighborhood and citywide housing markets, include a “sunset” provision in future tax abatement legislation or in amendments to current legislation. • • • Proposals for geographically targeting the abatement, limiting the maximum abatement amount, reducing the length of the abatement term, or phasing out the abatement amount over a period of fewer than ten years are all worth further consideration. However, the value of the abatement as a magnet for attracting investment and development should not be underestimated. Subject to the implementation of the actions recommended above, the abatement should continue to be maintained as an important element of Philadelphia’s overall community and economic development strategy. 5 Philadelphia’s Residential Tax Abatements: Accomplishments and Impacts Contents 1 3 7 13 27 48 51 59 61 Part One Part Two Part Three Part Four Part Five Part Six Part Seven Part Eight Introduction Legislative Authorization Application and Approval Process Five Development Projects Accomplishments and Fiscal Impact The Real Estate Tax Abatement as a Housing Development Incentive Planning for Year Eleven Conclusion Acknowledgments 6 Part One: Introduction During the past decade, real estate tax abatements on residential properties have helped stimulate the development and improvement of many units of housing in Philadelphia. Local legislation that took effect in 1997, 2000, and 2003 authorized ten-year abatements from real estate taxes associated with the value of certain new residential construction, rehabilitation, home improvement, and modernization activities across the city. Between 2000 and mid-2005, a large number of residential improvement projects were granted abatements. These projects included the conversion of former commercial and industrial buildings into residential apartments, the construction of new townhouses and condominiums, the rehabilitation of vacant houses, and the renovation of single-family homes. Although legislation enacted by the City Council of Philadelphia prior to 1997 had authorized limited abatements for some types of residential development, subsequent legislation made more kinds of residential projects eligible for this incentive and extended the term of the abatement. In 1997, Council authorized a ten-year abatement to support the conversion of eligible vacant or deteriorated commercial or industrial buildings into multi-family residential properties. The success of this “conversion abatement” in attracting investment influenced Council to broaden the eligibility of the ten-year abatement in 2000 and 2003 to include the upgrading of rental housing, new residential construction, and improvements to owner-occupied properties. During the years that have passed since these longer-term abatements first became available, Philadelphia has experienced a dramatic increase in residential development, particularly in the downtown area, on some sections of the Delaware and Schuylkill River waterfronts, in some areas of Northeast, Northwest, and South Philadelphia, and in University City. Although ten-year tax abatements helped support this development activity, other factors probably had a more decisive influence: the increasing popularity of downtown living (strongly influenced by the accomplishments of the Center City District and Central Philadelphia Development Corporation); the availability of single-digit mortgage financing over an extended period; the increasing attractiveness of real estate investment relative to other investment opportunities available during this time; and public investment made possible through Mayor John F. Street’s Neighborhood Transformation Initiative, which provided funding for blight removal, site assemblage, and sales and rental housing development. This publication provides information about the ten-year residential tax abatements, the location, scale, and type of development ventures that have received the abatements, along with commentary about current and prospective fiscal impacts of the abatements, public policy issues associated with the use of real estate tax abatements as a development incentive, and related public policy and investment strategies in support of affordable housing. Because this report is primarily a compilation of information— 2 as opposed to a comprehensive audit, evaluation, or assessment—the Fels Institute’s recommendations are preliminary in nature and are presented for further review, discussion, and debate. By serving as a source of information about tax abatements on residential properties in Philadelphia, this publication is intended to support strategic planning and policymaking associated with their use in Philadelphia and in other cities where similar incentives for stimulating residential investment and development activity are currently being planned or implemented. 2 Part Two: Legislative Authorization Legislation enacted by the Pennsylvania General Assembly authorizes local taxing authorities to establish tax abatements associated with the improvement of real estate. The City Council of Philadelphia, in turn, has enacted local ordinances to authorize property tax abatements on certain development and improvement activities. The first ten-year residential property tax abatement was established through the enactment of City Council Ordinance 97 0274 (Section 19-1303(5) of the Philadelphia Code). This ordinance provided a ten-year abatement for improvements associated with the conversion of deteriorated industrial commercial, and other business properties to commercial residential use (owner-occupied residential property and hotels were not eligible to receive this abatement). The first ten-year terms for development ventures that received this “conversion abatement” began in 1999. Between 2000 and 2003, Council enacted three ordinances (one of which superseded Ordinance 97 0274) that made a variety of other residential development and improvement activities eligible for ten-year abatements. These measures have the following characteristics in common: • The abatement period is ten years, beginning after the completion of improvements or the conveyance of the property following development. Geographic eligibility is citywide. Unlike targeted tax incentive programs (such as the Keystone Opportunity Zone or tax increment financing), any property in the city is potentially eligible for tax abatement due to improvements, subject to meeting other program requirements. The abatement amount is the property tax associated with the market value of the improvements, as determined by staff of the City’s Board of Revision of Taxes. Land value and the value of the pre-existing building, if any, are not subject to abatement and remain taxable. If property values increase due to changes that occur in the local real estate market during the ten-year abatement period, it is reasonable to expect that taxes associated with the pre-improvement value of the property will increase as well. During the years of the abatement term, however, such an increase would affect only the taxable (i.e., pre-improvement) value of the property. There is no maximum abatement amount or upper limit on the value of improvements subject to abatement. • • • 3 • In the event that the property is sold during the ten-year abatement period, the abatement is transferable to the new owner for the balance of the abatement period, provided that all other eligibility requirements are met. Transfer of ownership does not affect the length of the abatement period. Although the ten-year tax abatements are sometimes referred to as “exemptions,” properties that receive these abatements are different from properties that are tax-exempt. The former are privately-owned real estate that, but for the abatement, would be subject to property taxes in most instances. The latter are properties owned by government, faith-based institutions, nonprofit organizations and other entities that have no property tax obligation whatsoever (such properties are not automatically made exempt, however; exemption is based on the filing of an application, followed by BRT review and subsequent approval if the results of the review are favorable). The three types of ten-year abatements currently in effect are summarized in the table below. Table 2.1 Summary Information on Residential Property Tax Abatements Authorizing Ordinance 961, as amended 1130, as amended 1456-A, as amended Location in Philadelphia Code § 19-1303 (2) Eligible Improvements Rehabilitation or Upgrading* Rehabilitation or Upgrading* Eligible Owners OwnerOccupants InvestorOwners OwnerOccupants or InvestorOwners Date first applications accepted by BRT December 18, 2000, (April 25, 2003 for amended version) October 4, 2000 § 19-1303 (3) § 19-1303 (4) New Construction December 18, 2000 *Property may be vacant or occupied at time of improvement. Although the above abatements do not take effect until property improvements are completed, state legislation (Act 175 of 1984, as amended; 72 P.S. § 5020-205) provides for a construction-period abatement of up to thirty months or until the property is sold, transferred or occupied, whichever comes first. Since most or all of the residential property improvement projects that received ten-year abatements between 1997 and mid-2005 are likely to have also received construction-period abatements, this project does not include data collection and analysis on development and improvement activities associated with Act 175. 4 State and local legislation enacted prior to 1997 had made certain types of residential development eligible for more restricted tax abatements. Some of these abatements lasted less than ten years or were “capped” to limit the amount of market value subject to abatement. These legislative measures were superseded by the three City ordinances currently in effect and by state Act 175. As of mid-2005, the abatement periods for most properties that had been subject to this prior legislation have expired. 5 6 Part Three: Application and Approval Process All real estate tax abatements are administered by the Board of Revision of Taxes through a process that also involves the City’s Department of Licenses and Inspections (L&I) and Department of Revenue. Building Permit Approval Prior to applying to BRT for a tax abatement, a property owner must obtain an approved building permit from L&I. The building permit application includes information about the location and ownership of the property to be developed or improved, as well as information about the occupancy of the property (e.g., “single family dwelling”) and a summary description of the work to be authorized by the issuance of the building permit (e.g., “construction of second floor rear addition”). The building permit form provides the applicant with information about the opportunity to submit a request to BRT for tax abatement and indicates that a property owner’s application must be received by BRT within sixty days of the building permit issuance date. Application for Abatement Once the building permit is issued, a property owner may submit to BRT an “Application for the Exemption of Real Estate Taxes due to Improvement.” The application form calls for information about property ownership, tenancy, and proposed improvements. The applicant also must indicate which category of abatement is being requested, by referencing the associated authorizing legislation (Ordinance 961, Ordinance 1130, Ordinance 1456-A, or State Act 175, the construction-period abatement). Revenue Department Review and Certification For each completed application, BRT forwards to the City’s Revenue Department a “Request for Department of Revenue Certification under Ordinance 1202” (Philadelphia Code, Chapter 19, Section 19-1303 et. seq.) in order to determine whether the owner/applicant is current with respect to tax and utility obligations. These obligations include real estate taxes (on the property for which the abatement is requested, as well as on other properties owned by the applicant), business taxes, Licenses and Inspections charges, and water/sewer rents. Revenue Department staff approves or disapproves the request for certification and returns it to BRT. Disapproved cases are withheld from further processing until the delinquency is resolved. In 2005, City Council approved Bill No. 05 0204, which requires Revenue Department certification in advance of an application for property tax abatement. Through the enactment of this measure, which was signed by Mayor John F. Street, Revenue Department certification, along with an approved building permit, becomes a “threshold” requirement for application 7 to BRT. This change, which is expected to be implemented in 2006, would help ensure that BRT staff time is not spent on processing applications that will ultimately be denied due to unfulfilled tax or utility bill obligations. BRT Evaluation The application is then assigned to a BRT evaluator who is responsible for determining the market value of the improvements proposed for abatement. The BRT evaluator is a person who is familiar with real estate market conditions in the area where the property is located as well as with the type of building to be constructed or improved. From the BRT perspective, these two characteristics are more significant than the construction cost indicated on the applicant’s building permit and application for abatement, because expenditures on property construction or improvement do not automatically generate a corresponding dollar-for-dollar increase in market value. In some cases, a minor property improvement for which tax abatement has been requested is found by the BRT evaluator to have insufficient influence on market value to justify further processing and approval of the abatement application. However, many small-scale improvement projects may be eligible for abatement and may be approved if the BRT evaluator determines that the project would generate increased market value. Several dozen of the abatement applications approved by BRT as of mid-2005 involved property improvements assessed at less than $5,000. Since, under current practices, BRT assessments are set at 32 percent of market value, it can be concluded that these improvement projects were apparently found to have had market values of less than $16,000. Board Approval When a determination of market value is made, the evaluator submits a report to the Board of Revision of Taxes, which then considers approving the proposed abatement. In most instances in which an application is complete and the applicant has no outstanding tax or utility obligations, Board approval is likely to be forthcoming. Owner Notification Following Board approval, the applicant/owner is notified by letter that the abatement has been approved. The letter also addresses the following conditions associated with the abatement approval. • Right of Appeal. If the applicant/owner disagrees with the Board’s decision, an appeal of the Board action may be filed with the Court of Common Pleas within thirty days of the date of the Board’s notice of its decision. 8 • Evidence of Completion. For a residential rehabilitation or improvement project involving an owner-occupied property covered under Section 19-1303(2), the owner must notify BRT in writing at such time as the work has been completed. For a project involving an investment property covered under Section 19-1303(3), the owner must submit a copy of the Certificate of Occupancy (issued by L&I upon construction completion) to BRT. Abatement Period Start Date. For a residential rehabilitation/ improvement project as well as for a project involving an investment property, the abatement period begins on January 1 of the year following completion of work. For a new construction project, the abatement period begins on the first day of the month following conveyance of the property to the buyer. Compliance with Ordinance 1202. In order for a property to remain eligible for the abatement for the entire abatement period, the owner must remain current with respect to tax and utility payments, as required by Ordinance 1202. The Department of Revenue monitors owner tax status annually in order to ensure compliance with this requirement. In the event of non-compliance, the abatement is terminated and the abated assessed value is added to the tax roll • • Abatement Period BRT staff periodically review the valuation of all real estate in Philadelphia and establish new market values (which generate new assessed values) for any properties that, in BRT’s judgment, have undergone a change in market value. This valuation applies to properties that are subject to tax abatements as well as to any other properties. For a tax-abated property, BRT establishes separate values for 1) the current market value of the land and building in the condition in which they existed prior to development or improvement and 2) the current market value of the completed development or improvement activities for which the abatement was approved. In BRT property files (available on the BRT web site at http://brtweb.phila.gov/), the former is referred to as “Assessed Land (Taxable)” and “Assessed Improvement (Taxable),” and the latter is referred to as “Assessed Land (Exempt)” and “Assessed Improvement (Exempt).” The Phoenix Apartments at 16th and Arch Streets (1600-18 Arch Street) provides an illustration of the manner in which changing values are recorded. Between 2001 and 2005, BRT-certified values for this property were as shown in the table below the photograph. 9 The Phoenix Apartments Property Tax Assessment Schedule Assessed Land (Taxable) $1,100,000 $1,100,000 $1,100,000 $1,100,000 $1,100,000 Assessed Improvement (Taxable) $292,000 $1,050,400 $1,050,400 $1,050,400 $1,450,400 Assessed Land (Exempt) 0 0 0 0 0 Assessed Improvement (Exempt) 0 $2,296,000 $6,615,520 $9,501,184 $9,501,184 Year 2001 2002 2003 2004 2005 Market Value $4,350,000 $13,895,000 $27,393,500 $36,411,200 $37,661,200 Total Assessment $1,392,000 $4,446,400 $8,765,920 $11,651,584 $12,051,584 10 Because the practice of assessing properties at 32 percent of market value remained in effect during this period, the total assessment for each year is 32 percent of the market value established for that year. Starting in 2007, BRT plans to assess all properties at full value and to complete regular citywide reassessments in order to ensure that property valuation is consistent and reliable throughout the city from year to year. In the case of The Phoenix Apartments, • BRT determined that the value of the land underneath the former office building that was converted to The Phoenix Apartments was unchanged between 2001 and 2005, remaining at $1,100,000 throughout this five-year period. However, BRT’s assessment of the building, exclusive of the value of residential property improvements, increased from $292,000 in 2001 to $1,450,400 in 2005. The assessed value of the improvements that were completed in order to rehabilitate the building for re-use as luxury apartments increased from $2,296,000 in 2002 (the first year in which the abatement on this property was in effect) to $9,501,184 in 2005. • • Because the ten-year tax abatement applies only to property improvements, the Assessed Land (Exempt) column remains at zero for the entire period. If the property at 1600-18 Arch Streets were a government facility, a church, or some other property that BRT had determined was not subject to taxes based on an exempt use, then the amount in this column would have been $1,100,000, to indicate that the entire assessed value of the land was not taxable. The information above shows that the total market value (and the corresponding total assessment) tripled between 2002 and 2005, the years in which the abatement was in effect. The value of the improvements, which quadrupled during this period (from $2,296,000 to $9,501,184) was the primary contributor to the overall increase in value. Filing of Multiple Applications In many instances an owner files more than one application to BRT for the same property, based on one or both of the following considerations. Type of Abatement. A separate application must be filed for each type of abatement. For example, the owner of an apartment building proposed for rehabilitation would be likely to file two applications: • An application for abatement of real estate taxes during the construction period, as authorized by State Act 175 (as indicated 11 above, this legislation provides for a construction-period abatement of up to thirty months); and • An application for a ten-year abatement of taxes associated with the value of the completed improvements, authorized, in this case, under Section 19-1303(3) of the Philadelphia Code. Owner-Occupied Dwelling Units. One application must also be submitted for each owner-occupied dwelling unit proposed for abatement under Section 19-1303(2) and (4) of the Code. For example, the developer of a 50-unit new construction condominium venture would be likely to file 51 applications to BRT: • One application for the construction-period abatement authorized by State Act 175, for which the property owner would be eligible prior to the completion of the venture and the sale of the condominium units; and Fifty applications for ten-year abatements on the completed units (in this instance, Ordinance 1456-A would be identified as the authorizing legislation). Upon Board approval, the developer would receive 50 BRT letters of approval and certificates, one for each unit. Upon the developer’s sale of a unit, the buyer would receive the certificate from the developer and file it with BRT in order to begin the abatement term. • Because the BRT application form is standardized, uncomplicated and concise (less than one page for most property owners), preparation of multiple application forms, as in the examples indicated above, is not particularly time-consuming or complicated. 12 Part Four: Five Development Projects To provide more insight into the uses of the ten-year residential tax abatements, this section consists of summaries of five residential projects that received abatements under one of the three programs instituted in 2000 and 2003. 13 Improvements to Owner-Occupied Residence Torresdale, Northeast Philadelphia In December 2003, the owners of a two-story single-family residence in the Torresdale section of Northeast Philadelphia received a building permit for a series of renovations, including the construction of a second-floor dormer window and porch roof, as well as the installation of vinyl siding and stone facing. According to the building permit, the cost of these improvements was $40,500. Following issuance of the approved building permit, the owners filed an application for abatement under Section 19-1303(2) of the Philadelphia Code. A Revenue Department certification was obtained, and the BRT evaluator assigned to this case determined that the owners’ $40,500 investment would generate a $25,000 increase in market value, or an increased assessed value of $8,000 (i.e., $25,000 X 32 percent). Following completion of the improvements, the application was submitted to the Board and approved in 2004. As provided for in the authorizing legislation, the abatement term began on January 1 of the year after the completion of improvements (in this case, 2005) following BRT certification that the improvements had been completed as proposed. This abatement will remain in effect until the end of December 2014. As of 2005, BRT had established a market value of $92,000 for this property, amounting to a total assessed value of $29,440. The components of the assessment total were the land on which the residence is constructed ($7,697), the residence in its pre-existing condition, prior to the completion of the improvements ($13,743), and the additional assessed value associated with the improvements ($8,000). In light of the abatement, the owners are taxed on the assessed value of the land and pre-existing building only, amounting to $21,440 (i.e., $7,697 + $13,743). Based on this value, the owners’ 2005 tax bill was $1,771.80 ($21,440 X .08264, the millage rate in effect in 2005). If the improvements had not been eligible for abatement, then the owners’ 2005 tax would have been $2,432.92 ($29,440 X .08264). The tax abatement generated a savings of $661.12 in 2005. If annual property taxes on this house were to remain level through 2014, the owners’ total tax savings would be $6,611.20. 14 Torresdale Residence Torresdale Residence 2005 Tax Status Building/ Pre-Existing Condition $42,947 $13,743 $13,743 $1,135.72 Land Total Market Value (MV) Total Assessed Value (MV x .32) Taxable Assessed Value Abated Assessed Value 2005 Property Tax 2005 Abated Property Tax 2005 Property Tax without Abatement Tax Reduction due to Abatement (%) Abated Property Tax X 10 years $24,053 $7,697 $7,697 $636.08 Building/ Improvements $25,000 $8,000 $8,000 0 $661.12 Total $92,000 $29,440 $21,440 $8,000 $1,771.80 $661.12 $2,432.92 27.2% $6,611.20 15 Rehabilitation of Rental Housing Belmont, West Philadelphia In July 2002, a private limited partnership that had obtained financing through the federal Low Income Housing Tax Credit program obtained an approved building permit for the rehabilitation of a three-story house in the Belmont neighborhood of West Philadelphia. The property had been acquired in very deteriorated condition, and the rehabilitation project involved the installation of new major systems, as well as roofing and window replacement. Because the partnership wished to retain the house as rental property after rehabilitation, an application for abatement was filed under Section 19-1303(3), the abatement for investor-owned properties. In light of the poor existing condition of the property prior to rehabilitation, the BRT evaluator determined that the market value of the improvements (i.e., $30,400) substantially exceeded the combined market value of the land and the pre-existing building (each valued at $4,800). With a total market value of $40,000, the assessed value of the property was $12,800. The Board approved the abatement application, and the abatement term began in 2004. Of the total assessed value of $12,800, $3,072 (land and pre-existing building) was subject to property tax and $9,728 was abated. Based on this assessment, the owner’s 2005 property tax was $253.87 ($3,072 X .08264). If the abatement had not been available, the 2005 tax would have been $1,057.79, four times as much; for this property, the abatement amounted to a 76 percent reduction in the property tax bill. If annual taxes were to remain level throughout the abatement period, then the owner’s total tax savings would be $8,039.22. 16 Rehabilitated Belmont Rental Property Belmont Rental Property 2005 Tax Status Building/ Pre-Existing Condition $4,800 $1,536 $1,536 $126.94 Land Total Market Value (MV) Total Assessed Value (MV x .32) Taxable Assessed Value Abated Assessed Value 2005 Property Tax 2005 Abated Property Tax 2005 Property Tax without Abatement Tax Reduction due to Abatement (%) Abated Property Tax X 10 years $4,800 $1,536 $1,536 $126.94 Building/ Improvements $30,400 $9,728 $9,728 0 $803.92 Total $40,000 $12,800 $3,072 $9,728 $253.87 $803.92 $1,057.79 76.0% $8,039.22 17 New Condominium Unit Watermill at Manayunk Leverington Avenue, Northwest Philadelphia The Watermill at Manayunk is a condominium venture located on the north bank of the Manayunk Canal at Main Street and Leverington Avenue. The penthouse unit for which tax information is summarized below is entirely new; in this instance, there was no “pre-existing” structure. The developer of this venture filed an application for abatement under Section 19-1303(4) of the Code, the category that applies to new construction of residential properties. Because a property developed for condominiums is subdivided for sale to individual owners, an application for tax abatement associated with a condominium venture differs from single-owner applications in several respects. • Although the issuance of a single building permit may be sufficient to obtain L&I approval to start construction, a separate tax abatement application must be submitted to BRT for each condominium unit. In addition to establishing an assessed value for each individual condominium unit, the BRT evaluator must allocate to each unit a portion of the assessed value of the land on which the venture is built and a portion of the total assessed value of any pre-existing building on the site; Because in most instances not all of the condominium units will sell during a single month, the beginning and end of the ten-year abatement period will differ from unit to unit. As indicated above, the abatement term for a condominium does not start until the month after title to the unit is conveyed to the buyer. • • In this instance, the BRT evaluator determined that the total market value of this penthouse unit was $99,000, $10,000 of which was attributable to the land on which the venture was built and $89,000 of which was attributable to the newly-constructed unit itself. Following Board approval of the abatement application, the abatement term began in 2004. In 2005, the taxable portion of this property (the land) was assessed at $3,200 and the abated portion (the new condominium unit) was assessed at $28,480. The owner’s 2005 property tax, in the amount of $264.45, would have been $2,618.04—nearly ten times as much—had this unit not been eligible for the abatement. For this unit’s owner, the abatement amounts to an 89.9 percent tax reduction, which would have a dollar value of $23,535.87 if yearly taxes on this property were to remain level throughout the ten-year term. 18 New Leverington Avenue Condominium Leverington Avenue Condominium 2005 Tax Status Building/ Pre-Existing Condition 0 0 0 0 Land Total Market Value (MV) Total Assessed Value (MV x .32) Taxable Assessed Value Abated Assessed Value 2005 Property Tax 2005 Abated Property Tax 2005 Property Tax without Abatement Tax Reduction due to Abatement (%) Abated Property Tax X 10 years $10,000 $3,200 $3,200 $264.45 Building/ Improvements $89,000 $28,480 $28,480 0 $2,353.59 Total $99,000 $31,680 $3,200 $28,480 $264.45 $2,353.59 $2,618.04 89.9% $23,535.87 19 New Apartment Building The St. James Washington Sq. Washington Square, Center City The St. James is a high-rise apartment building that overlooks Washington Square near the corner of 7th and Walnut Streets. The construction of this building on a 42,814-square foot parcel involved the retention and restoration of some existing older street frontage that was integrated into the design of the new apartment tower. Like the Belmont rental venture, the St. James involves rental property retained by a single owner following the completion of construction activity. Accordingly, the owner of the St. James filed an application for abatement under Section 19-1303(3) of the Code, for investor-owned properties. Because all of the dwelling units in this building are owned by one entity, a single application to BRT was sufficient. In this case, the market value of the building improvements ($24,826,432) was more than ten times the combined value of the land ($1,955,554) and pre-existing building ($74,503). The 2005 taxable assessed value of $649,618 established by the BRT evaluator produces a 2005 property tax in the amount of $53,684.43. The abated value, $7,294,840, would have produced an additional 2005 tax obligation of $602,845.08. In this case, the value of the abatement is equal to a 91.8 percent reduction in property tax. This tax reduction would amount to more than $6,000,000 if the amount of tax obligation associated with this property were to remain level during the ten-year abatement term. 20 The St. James Washington Sq. Washington Square Apartment Building 2005 Tax Status Building/ Pre-Existing Condition $74,503 $23,841 $23,841 $1,970.22 $7,294,840 0 $602,845.48 Land Total Market Value (MV) Total Assessed Value (MV x .32) Taxable Assessed Value Abated Assessed Value 2005 Property Tax 2005 Abated Property Tax 2005 Property Tax without Abatement Tax Reduction due to Abatement (%) Abated Property Tax X 10 years $1,955,554 $625,777 $625,777 $51,714.21 Building/ Improvements $22,796,375 $7,294,840 Total $24,826,432 $7,944,458 $649,618 $7,294,840 $53,684.43 $602,845.08 $656,530.01 91.8% $6,028,455.78 21 New Single-Family Townhouse The Reserve at Packer Park South Philadelphia The Reserve at Packer Park, a new for-sale townhouse development promoted as part of Mayor John F. Street’s Neighborhood Transformation Initiative, is constructed on a site near 20th Street and Penrose Avenue in South Philadelphia on a portion of the former Philadelphia Naval Base property. The site plan and house design are of a type that can be found in many suburban subdivisions, and the development has been advertised as a place that offers up-to-date amenities and generous floor plans in a “Center City” location. The development of the overall site involved the demolition of 400 units of existing, long-vacant military-personnel housing (which was not architecturally noteworthy and was infeasible for rehabilitation) and the creation of a subdivision plan that included the addition of new streets. Like the developer of The Watermill at Manayunk, the developer of the new homes built on this site filed an application for abatement under Section 19-1303(4) of the Code, for new housing construction. Because this house was built on cleared land, there is no taxable pre-existing building on the parcel. The 2005 taxable assessed value of the land, assessed at $16,950 for a 4,074 square foot lot, generated a 2005 tax obligation of $1,401.57. The entire value of the house, assessed at $98,650, is subject to the ten-year abatement. Without the abatement, the 2005 property tax on this home would have been $8,145.00, nearly six times as much as the actual 2005 tax. Over ten years, the tax savings associated with the abatement would total $67,434.24 if the annual tax obligation associated with this property were to remain level throughout the abatement period. 22 Packer Park Residence Packer Park Residence 2005 Tax Status Building/ Pre-Existing Condition 0 0 0 0 Land Total Market Value (MV) Total Assessed Value (MV x .32) Taxable Assessed Value Abated Assessed Value 2005 Property Tax 2005 Abated Property Tax 2005 Property Tax without Abatement Tax Reduction due to Abatement (%) Abated Property Tax X 10 years $53,000 $16,960 $16,960 $1,401.57 Building/ Improvements $255,000 $81,600 $81,600 0 $6,743.42 Total $308,000 $98,560 $16,960 $81,600 $1,401.57 $6,743.42 $8,145.00 82.8% $67,434.24 23 These examples of the use of the ten-year tax abatement show the extent to which the abatement amount and associated tax savings can vary depending on the type, location, and scale of a development project. • New development on cleared land is far more likely to produce higher abatement amounts and lower taxes than the rehabilitation of existing buildings. A rental housing developer/owner has the best opportunity to gain directly from the tax abatement, because all of the developed units are aggregated into a single abatement that reduces taxes for the property owner, not the tenants. The buyer of a single-family home will achieve substantial direct benefit from the abatement if the home is newly-constructed and less direct benefit if the home is a rehabilitated or remodeled property. The owner-occupant of a house that has been upgraded may receive significant direct benefit from the abatement if the improvement project is substantial, but this benefit is far less than that achieved by the buyer of a newly-built single-family home. A developer of condominiums or townhouses achieves no direct benefit from the tax abatement because the entire value of the abatement is assigned to the individual buyers of the developed units (the developer would receive the benefit of state Act 175, the abatement of real estate taxes during the construction period). However, as discussed later in this report, condominium and townhouse developers are likely to be successful in demanding higher prices for units that are eligible for abatement. In the city’s stronger real estate markets, the market value (and the corresponding assessed value) of improvements eligible for abatement is higher than in weaker markets. If the same rehabilitation activities were to be completed at two identical vacant townhouses, one located in Center City East and the other in Belmont, the Center City East rehab project would generate a higher abatement amount and a greater tax reduction than the Belmont rehab project because real estate market values are significantly higher downtown (although market values may vary widely from one neighborhood to another, 2005 assessed values remain constant at 32 percent of market value). As is obvious from the above, developers with the best access to the largest amounts of capital can achieve the most benefit from the abatement. The larger the investment in a particular property (leading to an increase in market value), the larger the abatement amount. For a developer interested in maximizing the direct benefits of the abatement, the best opportunity is the construction of new luxury rental housing in or near Center City. However, a townhouse or • • • • • • 24 condominium developer who succeeds in promoting the abatement to prospective buyers may be able to achieve equal or greater financial benefit indirectly, through aggressive pricing of these sales units. Policy and strategic planning issues associated with the above and other characteristics of the abatement are discussed in the final sections of this report. 25 26 Part Five: Accomplishments and Fiscal Impact As indicated in the preceding sections, a substantial level of residential development and improvement activity has taken place since the implementation of the first ten-year residential abatement in July 1997, with a very high volume of activity occurring during and after 2000. Between 1997 and mid-2005, BRT granted 1,876 abatement approvals associated with the four residential abatement categories described in Part Two. These approved cases amounted to a total of $12,124,819 in abated 2005 property taxes. If the 2005 tax amount is assumed to represent annual average taxes for these 1,876 cases, then the total amount of abated taxes associated with these cases is $121, 248,190, for abatement terms that extend from 1999 (the first abatement year for the first cases approved) to 2015 (the last abatement year for cases with abatement terms that began in 2005). The “Conversion Abatement” As described in parts One and Two, eligibility for the first ten-year residential tax abatement, authorized through the enactment of City Council Ordinance 97 0274 (Section 19-1303(5) of the Philadelphia Code), was limited to deteriorated non-residential properties converted to commercial residential use. Although BRT was authorized to begin accepting applications in July 1997, the first abatements under this legislation took effect in 1999. It is unlikely that any abatements could have taken effect before 1999, in light of the fact that the abatement term does not begin until after the completion of improvements and because many conversion projects are likely to have involved a pre-development and development schedule of more than eighteen months. Table 5.1 shows the number of abatements approved by BRT annually as a result of the initial “conversion abatement” legislation, as well as the amount of abated 2005 property tax associated with the properties that received these approvals. The abatement approvals shown below amount to 17 percent of all residential abatements currently in effect. Table 5.1 “Conversion Abatements” Approved and 2005 Abatement Amounts, by Year Based on Ordinance 97 0274/Section 19-1303(5) Year 1999 2000 2001 2002 2003 2004 Jan.-June 2005 Totals No. of Abatements Approved by BRT 199 16 45 53 12 2 0 327 Amount of Property Taxes Abated, 2005 $1,007,811 $ 353,673 $ 697,604 $ 400,097 $ 443,358 $ 21,156 0 $2,923,699 27 These 327 approvals are located in 53 buildings, five of which were converted to condominiums during or after 2000, when condominiums were made eligible for ten-year abatements. The largest of these condominium conversions are 1100 Vine Street (200 condominium units approved for abatement as of mid-2005), 1512-14 Spruce Street (41 units), and 429 North 13th Street (25 units). The conversion process did not lengthen the abatement term beyond ten years. Instead, in each of these cases, a single abatement associated with one investment property was replaced by multiple abatements associated with the newly-created condominium units. The abatements for these units are included in this tabulation because the original abatement approvals associated with the properties where they are located were granted under the “conversion abatement” legislation. If it is assumed, for the sake of simplicity, that property taxes remain level over the ten-year abatement terms for all of the 327 abatements shown in Table 5.1, then the aggregate amount of property taxes associated with these abatements is $29,236,990 (i.e., $2,923,699 x 10 years). At the same time, these abatements were associated with $110,558,560 in capital investment that resulted in the production of new housing units at formerly deteriorated or vacant commercial or industrial sites (this amount is derived by dividing $2,923,699 by the .08264 millage rate, then dividing the result by .32, the ratio of assessed value to market value). Some supporters of the residential tax abatement would maintain that none of this investment would have occurred without the incentive that the abatement provided. The eventual drop-off in abatements shown in Table 5.1 is due to the enactment of Ordinance 1130, which broadened the eligibility of investorowned properties for abatement. Conversion-venture applications received during or after October 2000, when BRT was authorized to begin accepting applications for abatements under Ordinance 1130, were processed under this newer ordinance. Unlike Ordinance 97 0274, Ordinance 1130 did not include a “sunset” date; the provisions of the former terminated as of June 30, 2002, and BRT was prohibited from taking applications after that date, BRT staff completed the processing of conversion-abatement applications that had been in the BRT pipeline prior to the June 2002 termination date, with some abatement terms beginning as late as 2003 and 2004. As indicated above, a total of 327 abatements were granted under the conversion-abatement ordinance. Table 5.2 shows the addresses of the fifteen largest abatements granted under this ordinance that were identified as rental properties as of mid-2005, ranked by the amount of 2005 property tax abated. 28 Table 5.2 Fifteen Largest Abatements Approved under Ordinance 97 0274/Section 19-1303(5) Ranked by 2005 Abatement Amount Amount of Property Taxes Abated, 2005 $404,077 $370,227 $285,979 $276,348 $211,558 $133,811 $85,879 $69,854 $66,112 $64,525 $49,132 $46,225 $45,221 $37,023 $33,598 $2,179,570 Rank 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 Totals Address 1827-35 Arch Street 110-16 South 16th Street 1500 Chestnut Street 150 North 20th Street 1700 Walnut Street 315-19 Arch Street 1411-19 Walnut Street 509-19 Vine Street 1300-06 Chestnut Street 1600-02 Walnut Street 1222-26 Arch Street 161 Leverington Avenue 701-07 Sansom Street 1827-31 Pine Street 220-24 South 16th Street These fifteen properties account for 74.5 percent of the total 2005 property taxes abated under this ordinance. The top six properties account for 57.5 percent of the total. In contrast, the smallest abatement under this Ordinance, providing for an abatement of $362 in 2005 property tax, was granted to a property in the Belmont neighborhood of West Philadelphia. Map 5.1 shows the locations of all properties that received abatements under Ordinance 97 0274, with each dot representing a building that received the abatement (subsequent condominium conversions are not represented). As this map indicates, most abatements were concentrated in Center City, with a few in South, West, and Eastern North Philadelphia. Map 5.2 illustrates the amount of abated 2005 property tax associated with these ventures, displayed in three categories for comparison purposes. As indicated, many of the properties with the largest abatement amounts were located west of Broad Street in the downtown area. 29 30 31 Expanded Abatement for Investor-Owned Properties As indicated above, Ordinance 97 0274 was superseded by Ordinance 1130 (Section 19-1303 (3) of the Philadelphia Code), which also included other investor-owned ventures such as apartment building construction and rehabilitation. An example of the latter is the St. James Washington Square, described in Part Four, a project that would not have been eligible for abatement under Ordinance 97 0274 because it was not a “conversion” venture. Table 5.3 Investor-Owned Property Abatements Approved and 2005 Abatement Amounts, by Year No. of Abatements Approved by BRT 3 57 87 31 61 239 Amount of Property Taxes Abated, 2005 $3,299 $1,304,181 $1,856,161 $937,238 $251,367 $4,352,246 Year 2001 2002 2003 2004 Jan.-June 2005 Totals These approvals are located in 172 buildings, seven of which were subsequently converted to condominiums. The largest of these condominium conversions are 428-40 North 13th Street (30 condominium units approved for abatement as of mid-2005) and 36 Strawberry Street (23 units approved). As Table 5.3 indicates, the number of annual BRT approvals associated with this legislation grew as high as 87 in 2003, with 61 abatements approved in the first six months of 2005. If it were assumed that annual property taxes would remain at the 2005 level over the ten-year abatement terms for all 239 of these properties, the aggregate amount of property taxes abated is $43,522,460 (i.e., $4,352,246 x 10 years). These abatements were associated with $164,578,518 in capital investment that resulted in the production or upgrading of rental housing at a variety of sites. In addition to supporting large rental property development downtown, the abatements authorized through Ordinance 1130 have benefited small forprofit rental property developers in neighborhoods. Two of these developers, who have also made use of Low Income Housing Tax Credit financing to 32 rehabilitate West Philadelphia row houses for affordable rental occupancy, obtained a total of 67 of the 239 abatements shown in Table 5.3. The addresses of the fifteen largest abatements granted under this ordinance, associated with buildings that were maintained as rental properties as of mid-2005, are shown in Table 5.4. Table 5.4 Fifteen Largest Abatements Approved under Ordinance 1130 Ranked by 2005 Abatement Amount Amount of Property Taxes Abated, 2005 $785,178 $602,846 $436,604 $318,263 $231,111 $193,047 $163,429 $157,644 $143,196 $110,804 $91,631 $53,789 $44,956 $38,720 $34,948 $3,406,166 Rank 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 Totals Address 1600-18 Arch Street 200 West Washington Square 3175 John F. Kennedy Boulevard 2121-41 Market Street 1338-48 Chestnut Street 1930-34 Chestnut Street 2300-20 Walnut Street 2201 Park Towne Place 400-14 Walnut Street 180 Gay Street 905-49 South Street 1730 North 5th Street 1600-02 Chestnut Street 1522 North 15th Street 6701 Germantown Avenue These fifteen properties account for 78.3 percent of the total 2005 property taxes abated under this ordinance, with the top four properties accounting for nearly half (49.2 percent) of the total. The smallest abatement, amounting to $13 in abated 2005 property tax, was granted to a rental property in the Francisville neighborhood of Lower North Philadelphia, one of a group of houses within this neighborhood that had been packaged for rehabilitation and subsequent rental by a single developer. The locations of the properties that received abatements under Ordinance 1130 are shown in Map 5.3. This map, which represents individual buildings without reference to any subsequent condominium conversions, illustrates a much broader dispersion of the abatement, to include sites in North Central, West, Northwest, and Lower Northeast Philadelphia. The amount of abated 2005 property tax associated with these ventures is shown in Map 5.4. This map illustrates the approval of higher abatement amounts in locations across Center City and some adjacent areas. 33 34 35 Abatement for Residential New Construction Ordinance 1456-A (Section 19-1303 (4) of the Philadelphia Code) made residential new construction ventures, such as the condominium units in The Watermill at Manayunk and the townhouses at The Reserve at Packer Park, eligible for the ten-year abatement. BRT was authorized to begin accepting applications for this abatement as of December 10, 2000. As indicated in Part Three, a separate abatement application is required for each individual unit in a for-sale venture, because the benefit of the abatement is transferred to the purchaser when the housing unit is sold. While only one application for abatement would be required in connection with the development of a 75-unit apartment building eligible under Ordinance 1130 (because all of the units are under a single title), 75 applications for abatement would be required in connection with a 75-unit condominium venture, because, in most instances, each unit will have a different owner. In light of this distinction, the number of rental units associated with properties that received abatements is probably much higher than the number of sales units that received abatements, despite the fact that the number of abatements approved under Ordinance 1456-A (as shown in Table 5.5 below) is much greater than the number of abatements approved under Ordinance 1130 (shown in Table 5.3). Table 5.5 New Construction Abatements Approved and 2005 Abatement Amounts, by Year Year 2001 2002 2003 2004 Jan.June 2005 Total No. of Abatements Approved by BRT 227 224 279 264 44 1,038 Amount of Property Taxes Abated, 2005 $766,246 $867,220 $1,117,606 $1,492,356 $211,750 $4,455,178 Although the number of abatements approved by BRT during the first six months of 2005 suggests that total results in 2005 may be significantly lower than in previous years, this data is not sufficient to justify a conclusion that the new construction sales housing market in Philadelphia is weakening. To the contrary, large-scale condominium development ventures currently under construction in Center City, the Delaware River waterfront, and elsewhere are likely to generate significant increases in the number of approved abatement applications during the coming years, as these new units are 36 completed and sold. This future growth is documented in the Central Philadelphia Development Corporation/Center City District publication, Residential Development: 1997-2005, which includes a summary of proposed development ventures that, if completed, would produce 7,205 additional residential units in and near Center City between 2005 and 2009. If annual property taxes are assumed to remain at the 2005 level over the ten-year abatement terms for all 1,038 of the above units, then the aggregate amount of property taxes abated for these units would be $44,551,780 (i.e., $4,455,178 x 10 years). These abatements were associated with $168,470,852 in capital investment that resulted in the production of new housing units at a variety of sites. The streets and neighborhoods where the fifteen housing units (i.e., individual townhouse or condominium units) with the highest 2005 abatement amounts are located are shown in Table 5.6 (individual addresses are not shown). As this table indicates, abatement amounts range from $10,694 to $24,303. The fifteen properties shown below represent 5.2 percent of the total amount of 2005 property taxes abated in connection with this ordinance. Table 5.6 Fifteen Largest Abatements Approved under Ordinance 1456-A Ranked by 2005 Abatement Amount Amount of Property Taxes Abated, 2005 $24,303 $21,420 $21,156 $18,115 $16,131 $15,753 $15,535 $15,206 $14,545 $12,005 $11,900 $11,164 $11,130 $10,842 $10,694 $229,899 Rank 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 Totals Address St. Andrew Road, Chestnut Hill Glengarry Road, Chestnut Hill Walnut Street, Center City East Glengarry Road, Chestnut Hill South 2nd Street, Queen Village South 2nd Street, Queen Village St. Georges Road, West Mount Airy Bainbridge Street, Queen Village South 2nd Street, Queen Village St. Andrew Road, Chestnut Hill Panama Street, Center City West West Mermaid Lane, Chestnut Hill Cornelia Place, Chestnut Hill South 2nd Street, Queen Village Summit Place, Roxborough 37 In contrast, the smallest abatement under this Ordinance, amounting to $381 in abated 2005 taxes, was granted to a property on the Pennypack neighborhood of Northeast Philadelphia. Some of the abatements in Table 5.5 represent a single-property development (e.g., the construction of a townhouse on a vacant “infill” lot) while many others are part of larger-scale ventures involving multiple properties (Note: Due to the scale of the map, some properties in close proximity to each other may appear to be represented as a single point on the map). The clustering of approved abatements shown on Map 5.5 illustrates large-scale residential development downtown and in Fairmount, Spring Garden, Manayunk, Roxborough, and Northeast Philadelphia. The amount of abated 2005 property tax associated with these ventures is shown in Map 5.6, with high abatement amounts in Center City between South Street and Washington Avenue and near the Delaware riverfront, as well as in Chestnut Hill and Roxborough. 38 39 40 41 Abatement for Residential Property Improvements The rehabilitation or improvement of owner-occupied properties is eligible for abatement under Ordinance 961 (Section 19-1303 (2) of the Philadelphia Code). Activities that are eligible for this abatement can include the rehabilitation of a vacant house for owner-occupancy, as well as the upgrading of an existing occupied property such as the Torresdale home described in Part Four. Ordinance 961 called for BRT staff to begin accepting abatement applications as of December 18, 2000. When the ordinance was amended to include condominium units, applications for these properties were accepted by BRT as of April 25, 2003. To date, there are no large-scale property improvements associated with Ordinance 961. Most of the stronger neighborhood real estate markets in the city do not contain large numbers of vacant houses, and in those neighborhoods that do, the houses are dispersed and may be difficult to acquire. The City of Philadelphia owns few “surplus” vacant houses; nearly all of the City’s developable vacant-house inventory consists of properties that are being processed for conveyance to private or nonprofit developers. Title to many privately owned vacant houses is encumbered by public and private liens, making site assemblage time-consuming and difficult. For these reasons, most property improvement projects associated with Ordinance 961 are likely to continue to consist of the renovation or modernization of owneroccupied houses and some small-scale vacant house rehabilitation ventures. As Table 5.7 shows, the use of this abatement has grown every year, with a substantial increase in 2004 following approval of the amendment to Ordinance 961. Table 5.7 Rehabilitation and Improvement Abatements Approved and 2005 Abatement Amounts, by Year Year 2001 2002 2003 2004 Jan.-June 2005 Total No. of Abatements Approved by BRT 4 31 50 101 86 272 Amount of Property Taxes Abated, 2005 $ 4,751 $ 18,135 $ 58,847 $121,972 $189,991 $393,696 42 The blocks on which the fifteen houses with the highest 2005 abatement amounts are located are shown in Table 5.8. As this table indicates, abatement amounts range from $21,989 to $4,802. These fifteen houses account for nearly one third—30.6 percent—of the total amount of 2005 property taxes abated in connection with Ordinance 961. Table 5.8 Fifteen Largest Abatements Approved under Ordinance 961 Ranked by 2005 Abatement Amount Amount of Property Taxes Abated, 2005 $ 21,989 $ 11,027 $ 9,446 $ 9,414 $ 9,225 $ 7,867 $ 7,502 $ 6,836 $ 6,060 $ 5,344 $ 5,326 $ 5,315 $ 5,302 $ 4,975 $ 4,802 $120,433 Rank 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 Total Address South 18th Street, Center City West Pine Street, Center City East Kater Street, Bella Vista Queen Street, Queen Village Terrace Street, Manayunk Mt. Vernon Street, Fairmount Pine Street, Center City East Kater Street, Bella Vista Queen Street, Queen Village South 8th Street, Bella Vista Pemberton Street, Bella Vista Kater Street, Bella Vista East Moyamensing Avenue, Pennsport North Lawrence Street, Northern Liberties Monroe Street, Pennsport The smallest abatement approved under Ordinance 961, in the amount of $58 in abated 2005 taxes, was granted to a property in the West Torresdale section of Northeast Philadelphia. For the reasons described above, most of the abatements in Table 5.7 are associated with single-property projects. However, a number of multiproperty housing rehabilitation ventures received abatements under this ordinance. An example is the rehabilitation of ten vacant houses on the south side of the 3100 block of Berks Street by Friends Rehabilitation Program, Inc. with City of Philadelphia financing support. 43 As shown on Map 5.7, although many of the abatement approvals under this Ordinance were clustered in Center City south of Chestnut Street, this abatement produced much more geographically dispersed activity than that associated with the other ordinances. The amount of abated 2005 property tax associated with these ventures is shown in Map 5.8. As this map indicates, most of the highest abatement amounts could be found in neighborhoods in and near Center City (as in the preceding maps, some properties in close proximity to each other may appear to be represented as a single point on the map). 44 45 46 47 Part Six: The Real Estate Tax Abatement as a Housing Development Incentive A real estate tax abatement is a financial incentive that may stimulate housing development in one or more of the following ways. • By reducing the “soft costs” (i.e., expenses other than construction labor and materials) associated with housing rehabilitation and new construction, through the abatement of taxes on property improvements during the construction period (Act 175). By reducing an annual operating cost for owners of rehabilitated or newly built rental housing (Ordinance 1130). By reducing an annual expense for owner-occupants of rehabilitated housing or buyers of newly-developed sales housing (Ordinances 961 and 1456-A, respectively). • • Developers of sales and rental housing and owners of rental housing are the recipients of nearly all of the financial benefit associated with the residential abatement in all its forms. Although a ten-year abatement is available to eligible homeowners who develop and move into formerly vacant properties or who complete home improvement, expansion, or modernization projects in their own homes, the amount of abatement associated with these activities is relatively small compared with the value of ten-year abatements approved for apartment buildings or large-scale sales housing ventures. Buyers of rehabilitated or newly-built for-sale housing can gain the benefit of the ten-year abatements, and the availability of these abatements is prominently featured in advertisements for such properties. However, it is likely that many housing units for which this benefit is available are priced at higher levels than comparable housing units that have no abatement. The extent of this variability in price is not known; however, it is likely that, in the aggregate, a substantial portion of the value of the tax abatement is recaptured by developers through aggressive pricing, with developers of the most sought-after properties gaining more than the value of the abatement. In Philadelphia and other cities, most government incentives to stimulate housing development take the form of either financing, through belowmarket loans, deferred and/or self-amortizing loans, and grants; or site assemblage, through government acquisition and site preparation in support of large-scale housing development ventures. For the most part, these incentives are made available to support the production and preservation of housing for low- and moderate-income residents. Philadelphia’s residential property tax abatement is significantly different from incentives of this kind in several important respects. 48 • The abatement is not geographically targeted or income restricted. Any property in Philadelphia is potentially eligible for abatement, and income is not a factor affecting the prospects for approval of an application for abatement. The application, submission, review, and approval process is straightforward and uncomplicated and does not involve competitive bidding, the submission of detailed documentation, a financial underwriting process, or in-depth project review by city agency staff. No city inspection or monitoring of construction work in progress is required (over and above the level of Department of Licenses and Inspections oversight associated with any construction activity in Philadelphia and the level of site inspection required for the BRT evaluator to determine market value). The BRT simply requires certification of construction completion prior to establishing a date for the start of the ten-year abatement period. The abatement gives developers of sales housing a clear advantage in marketing their products in competition with suburban housing. With the ten-year abatement, the buyer of a for-sale house in Philadelphia has, for a decade, a tax expense that is considerably lower than that of a suburban resident living in comparable housing. Unlike other government incentives, the abatement facilitates apples-to-apples comparisons of city and suburban for-sale housing that, with respect to property tax expense, will always favor Philadelphia. • • • The limitations of the abatement are also significant. This incentive is most often used within downtown and neighborhood real estate markets that are already strong or that are showing signs of growing development potential. In weaker real estate markets that have a need for reinvestment, the abatement is rarely used, except in connection with housing development ventures that are receiving financing through government subsidy programs. The tax abatement is unlike a number of real estate development financing programs that are designed to use public funds in order to make feasible a development venture that is expected to provide certain economic and social benefits but cannot be financed entirely through conventional sources. Proposal underwriting for some of these programs includes an evaluation of what is sometimes termed the developer’s “but for” argument: a presentation of evidence that the venture cannot be implemented without the requested commitment of public funding. Applications for the tax abatement do not need to include a “but for” argument, and it is unlikely that the abatement has widespread value as “gap” financing for ventures that do not meet conventional underwriting standards. In most cases, the value of the abatement does not appear to be great enough to decisively influence overall financial feasibility. 49 However, the tax abatement may have important “but for” implications with respect to the marketing of for-sale townhouse and condominium units in downtown and neighborhood real estate markets that had not been competitive previously. The extent to which the availability of the abatement was decisive in influencing buyers within these markets is not known. However, it seems clear that the abatement was an important factor and, in some cases, may have been the most important factor, in buyer decision-making associated with for-sale housing in these markets. 50 Part Seven: Planning for Year Eleven What will happen in Year Eleven, after decade-long residential abatements come to an end? How will the end of the property-specific abatements described in this report and the taxation of previously abated property improvements affect market values, homeownership, and the Philadelphia economy? A detailed analysis of these questions is beyond the scope of this project, which is primarily a compilation of information. In addition, any such analysis would be limited by the difficulty of determining precisely the extent to which the availability of ten-year abatements has been a critical, necessary factor in influencing investor, buyer, and owner decisions. Although it may be reasonable to conclude that the abatements provided a significant incentive to undertake many residential property development and improvement projects (including the five projects summarized in Part Four of this report), it is not possible to determine how many of these projects would not have been initiated if the abatement had not existed. For the same reason, it is not possible to predict with certainty the extent to which the value of the housing units generated through these projects will be affected when their abatement terms end. As indicated at the end of Part Four, residential developers with the best access to the largest amounts of capital, and the related ability to invest in the city’s strongest real estate markets, achieve the most benefit from the abatements. Many such developers are likely to maintain that the abatements had a crucial influence on their decisions to implement projects in Philadelphia.. However, other factors, such as the increasing popularity of living in Center City and certain other neighborhoods, the rapidly growing demand for luxury apartments and condominiums, the availability of financing at low interest rates, and the substantial increase in higher-income, over-fifty population, are likely to have been more important. It is not likely that the effect of the residential tax abatements on decisions relating to project location, design, size, pricing, amenities, and marketability can be measured in isolation from these other important factors. In the period following the end of the abatement terms associated with these properties (i.e., after ten years of occupancy following the completion of improvements), it will be possible to begin analyzing these factors in the absence of the abatements. This analysis can help guide future policy regarding the continuation of these ten-year residential abatements; however, because such analysis will be completed in the context of market conditions eleven or more years after the completion of improvement activities, it will not be likely to shed new light on the extent to which the availability of the abatements was a necessary condition for investment and development decisions made before the start of improvement activities. 51 Despite these limitations, currently available information can be used to anticipate some post-abatement conditions and to consider related public policy issues, two of which are discussed below. Abatement Term Schedules The first ten-year residential abatement terms to come to an end will be those associated with abatements that had been granted pursuant to Ordinance 97 0274 (Section 19-1303(5) of the Philadelphia Code). As described in parts One and Two, this measure provided a ten-year abatement for improvements associated with the conversion of deteriorated industrial commercial, and other business properties to commercial residential use. Because the first abatement applications submitted under Section 19-1303(5) were approved in 1999, the first ten-year abatement terms will end in 2009. As indicated in Part Five, a total of 327 properties received ten-year abatements based on this legislation. The amount of 2005 property tax abated for these properties is $2,923,699. If it is assumed that the 2005 tax amount can be regarded as a reasonable estimate of the average annual amount of taxes abated on these properties over the ten-year abatement term, then the increase in City tax revenue associated with the end of the abatement terms of these properties would be as follows. Table 7.1 End of Abatement Terms and Projected Increase in Tax Revenue Based on Ordinance 97 0274/Section 19-1303(5) (stable taxation scenario) Ending Year of Abatement Term 2009 2010 2011 2012 2013 2014 2015 Total No. of Abatements Ended 199 16 45 53 12 2 0 327 Increased Tax Revenue $1,007,811 $ 353,673 $ 697,604 $ 400,097 $ 443,358 $ 21,156 0 $2,923,699 As described in Part Two, the three ten-year residential abatements currently in effect were first implemented in 2000. Accordingly, the abatement terms for the first properties that were granted these abatements will end in 2010. Based on currently available information, the sequence of abatement term endings is anticipated to be as follows. 52 Table 7.2 End of Abatement Terms for Current Residential Abatements No. of Abatement Terms Ending Rehab/Improvement New Construction Owner-Occupant Investor Ordinance 961 Ordinance 1130 Ordinance 1456-A 4 31 50 101 86 272 3 57 87 31 61 239 227 224 279 264 44 1,038 Year 2010 2011 2012 2013 2014 2015 (partial) Total Totals 234 312 416 396 191 1549 The associated increase in property tax revenues (based on an assumption, for the sake of simplicity, that property taxes remain level) associated with all four of the ten-year residential abatements is shown in Table 7.3 below. Table 7.3 Projected Increase in Property Tax Revenue for Current Residential Abatements (stable taxation scenario) Projected Property Tax Revenues by Ordinance 0274 961 1130 1456-A $1,007,811 $ 353,673 $ 697,604 $ 4,751 $3,299 $766,246 $ 400,097 $ 18,135 $1,304,181 $867,220 $ 443,358 $ 58,847 $1,856,161 $1,117,606 $ 21,156 $121,972 $937,238 $1,492,356 0 $2,923,699 $189,991 $393,696 $251,367 $4,352,246 $211,750 $4,455,178 Year 2009 2010 2011 2012 2013 2014 2015 (partial) Totals Totals $1,007,811 $353,673 $1,471,900 $2,589,633 $3,475,972 $2,572,722 $653,108 $12,124,819 Based on the information on proposed 2005-2009 residential projects presented in the Center City District/Central Philadelphia Development Corporation publication referenced in Part Five, it seems certain that post-2014 revenues will be substantially higher than those shown. 53 Allocation of City Revenue Rather than allowing the City’s share of the new revenue associated with the end of ten-year tax abatements to be used for general government operations, this revenue should be allocated specifically to support the preservation and development of affordable housing for low- moderate-, and middle-income residents. Such a policy should be established for the following reasons. • New resources are needed to support affordable housing in Philadelphia. Federal housing funds have been reduced substantially during the past quarter-century, and the prospect of further funding cuts in future years seems certain. The Commonwealth of Pennsylvania has never been a leading source of affordable housing funding for Philadelphia (although the Pennsylvania Housing Finance Agency’s administration of the federal Low-Income Housing Tax Credit program, and PHFA-sponsored programs have provided significant value to Philadelphia over the years), and the City has never consistently made allocations from the General Fund to support affordable housing. Philadelphia has less of an opportunity than other cities to create affordable housing “linkage” policies. In some cities where real estate markets have been consistently strong, municipal policies have been established to leverage commitments in support of affordable housing from for-profit housing developers. Two examples of “linkage” policies are inclusionary zoning (through which for-profit housing development ventures are required to contain a certain proportion of below-market housing units) and impact fees (fees collected from private developers that are used to support programs or investments that have broad public benefit). Philadelphia’s citywide real estate market has been weaker than that in other major cities during most of the past halfcentury, and many of the city’s neighborhood real estate markets are still not strong enough to attract a significant level of private investment and development activity. For these reasons, “linkage” policies would be more difficult to design here than in other areas, such as Montgomery County, Maryland, where one of the nation’s best-known inclusionary zoning policies has been maintained for years, in which the areawide real estate market has been consistently strong. Most of the direct beneficiaries of the ten-year residential abatements are private developers and investors and upper-income residents. The abatements have produced relatively little benefit for smaller private developers, nonprofit developers, and low-, moderate-, and middleincome residents. Attracting wealth to the city should be a high public policy priority, and the residential tax abatements, taken together, may be the government initiative that has been most successful in addressing this priority during the past decade. However, equally high • • 54 priority should be given to providing housing opportunity and development incentives associated with those Philadelphia residents and businesses not among the direct beneficiaries of the residential tax abatements. • As Philadelphia’s housing markets grow stronger, housing affordability becomes more of a problem. As property values rise, low-, moderate-, and middle-income homeowners need to make informed choices (about refinancing, reverse mortgages, or cashing in their increased equity by selling their homes) and to be knowledgeable about the danger of entering into agreements with predatory lenders. For many of these homeowners, access to independent housing counseling and financial planning services is essential. As rents increase, low-, moderate-, and middle-income renters need better access to welllocated, responsibly-managed subsidized housing in neighborhoods across the city. The use of new value generated through a housing incentive that has benefited a population with few housing affordability concerns to benefit a population with significant housing affordability challenges would be an equitable policy that would broaden the beneficial impact of the abatements on Philadelphia’s neighborhood housing markets. An allocation of City funding to support affordable housing development and preservation could be especially useful in assisting middle-income homeowners and renters who are not eligible to receive assistance through income-restricted federal funding administered by the City. Post-Year Eleven City revenue could be allocated to support affordable housing in one or more of the following ways. • Allocate to an affordable housing fund. In June 2005, City Council passed legislation in support of the establishment of the Philadelphia Housing Trust Fund, a new resource that is to provide financial support for affordable housing production, affordable housing preservation, and homelessness prevention activities. Another fund, capitalized through the proceeds of sale of the Capehart tract on the naval base site (now being developed as The Reserve at Packer Park, a marketrate housing venture that includes the home described in Part Four), will provide citywide support for homeless housing and related activities. Allocate to financial intermediaries such as The Reinvestment Fund (TRF) or the Local Initiatives Support Corporation (LISC) that have substantial experience in providing working capital, construction financing, and permanent financing for affordable housing ventures. Determine allocation plan on an annual basis, as part of the City’s budget review and approval process. For this option, the best • • 55 approach would be to schedule City Council consideration of the annual allocation plan at the same time as Council’s review of the annual Community Development Block Grant proposal for federal housing funds. The prospects for an allocation plan of this kind should be considered now, well before the first of the ten-year residential tax abatements expires, so that policy options can be fully evaluated and an implementation plan designed in a timely manner. Year Eleven Impact on Low- and Moderate-Income Homeowners Although all of the owners of housing that received ten-year abatements will experience an increase in property taxes after the abatement period ends, the homeowners that are likely to be most affected by this increase are the owners of City-subsidized sales housing developed during the past decade. In several Philadelphia neighborhoods where private real estate market activity is weak, the City has financed the development of new-construction sales housing by using government funding to make up the difference between the cost of development and the price at which the completed housing can be sold, based on prevailing property values in the neighborhoods where this housing is produced. The Year-Eleven impact for owners of these houses is likely to be greatest for two reasons. 1. Eligibility for the purchase of these homes has been limited to low- and moderate-income buyers (i.e., households with incomes at or below eighty percent of area median income, currently $55,050 for a fourperson household); in general, these homeowners will not be able to absorb the impact of a property tax increase as well as most owners of tax-abated townhouses and condominiums in Center City and other strong real estate markets. 2. A substantial amount of this City-subsidized sales housing consists of new construction on formerly vacant lots. This housing type produces the highest level of tax abatement; since the entire house is taxabated (because there was no pre-existing building), the owners are paying property taxes on land only. As a result, the Year-Eleven property tax increase for these units, as with all tax-abated new construction, will be much higher than for existing housing rehabilitated for sale to homebuyers. Pre-purchase housing counseling is required for all buyers of City-subsidized homes, and it is likely that these buyers had been informed about the tax abatements and the associated Year-Eleven impact prior to settlement. However, it is equally likely that many of these buyers are not sufficiently aware of the extent of the Year-Eleven impact and may need to begin financial planning in order to manage the Year-Eleven transition effectively and avoid a crisis. 56 The status of a typical home in the West Poplar sales housing development in Lower North Philadelphia illustrates the significance of the Year Eleven impact on low- and moderate- income homeowners. According to BRT’s evaluator, the house shown on the opposite page has a 2005 market value of $42,000, $12,781 of which is attributable to the land and $29,219 of which is attributable to the new house, which was sold to the current owner in 2001. Because the value associated with the house is subject to abatement, the owner is currently responsible for payment of taxes on the land, amounting to a 2005 tax bill of $338. If the abatement had ended in 2005, however, the tax bill would have increased by 329.3 percent, to $1,113. Because Lower North Philadelphia property values have been increasing in recent years, the real estate tax increase may be even higher when the abatement term for this property does end in 2011. Although it is likely that the incomes of a significant number of buyers of City-subsidized sales housing have risen and will continue to rise during the ten-year abatement term, an annual property tax increase of this magnitude may become a serious threat to financial stability for some of these homeowners. Because this problem will not emerge for several years, it is important that current owners of these properties become aware of YearEleven consequences and of how to gain access to housing counseling and financial planning support in order to prepare to manage this property tax increase when it occurs. City housing agencies, nonprofit housing counseling agencies, and private lenders that have provided financing for Citysubsidized sales housing should work together to determine how best to conduct outreach to affected homeowners and how to design homeowner education and assistance strategies to address this year eleven challenge. In the future, as a matter of public policy, the City should either reduce the amount of development subsidy to recognize the value of the abatement and eliminate a double subsidy; or increase the sales price, in recognition of the value of the abatement. Homeowner education and financial planning to prepare for Year Eleven would still be needed if the latter approach were to be pursued. 57 West Poplar Home Land Total Market Value (MV) Total Assessed Value (MV x .32) Taxable Assessed Value Abated Assessed Value 2005 Property Tax 2005 Abated Property Tax 2005 Property Tax without Abatement Tax Increase without Abatement (%) $12,781 $4,090 $4,090 $338 Building/ Pre-Existing Condition 0 0 0 0 Building/ Improvements $29,219 $9,350 0 $9,350 0 $775 Total $42,000 $13,440 $4,090 $9,350 $338 $775 $1,113 329.3% 58 Part Eight: Conclusion The first of the ten-year tax abatements associated with residential properties, Ordinance 97 0274, enacted in 1997 as Section 19-1303(5) of the Code, was designed to stimulate a certain type of housing development (rental housing) that was limited to a finite number of properties (abandoned or deteriorated commercial and industrial buildings). Subsequent ten-year residential abatements authorized in 2000 and 2003, taken together, made nearly every significant housing development and improvement activity and nearly every property type eligible for abatement. As this report shows, a high level of residential development activity has occurred in Philadelphia since 2000, accompanied by a high level of associated property tax abatement. It is not possible to determine whether or not any, some, or all of this activity would have occurred if the ten-year abatement had not been available. In the relatively weak Philadelphia real estate market of 1999, a compelling case could be made in support of a ten-year residential tax abatement with broad applicability. In the considerably stronger Philadelphia real estate market of 2005, making the case for a ten-year abatement with broad eligibility criteria is more difficult. At what point does the real estate market in Philadelphia or its most attractive submarkets become so robust that a ten-year tax abatement is no longer needed? The City cannot afford to forgo ten years of property taxes, amounting to millions of dollars of potential revenue, to support market-rate development that would have occurred without this incentive. In 1999, it is unlikely that anyone could have predicted accurately the significant changes that were to take place in Philadelphia’s real estate market during the years that followed. By the same token, it will not be possible to reliably predict housing market trends for the remainder of this decade and to legislate property tax abatements that would stimulate the market without unnecessarily sacrificing tax revenue. For this reason, a periodic review of tax abatement legislation, based on an analysis of recent, current, and anticipated market activity, is critical. It may be appropriate to change existing tax-abatement legislation now, in response to the opportunities and limitations of Philadelphia’s current real estate market. If multi-year abatements are to continue in some form, however, the inclusion of a “sunset” provision, limiting the number of years in which these incentives may remain in effect (after which legislative authorization for renewal or extension would be required) is strongly recommended. If a decision is made to allocate to affordable housing the City’s share of increased tax revenue associated with completed abatement terms, this allocation should be guided by an investment strategy based on clearly articulated goals, priorities, and underwriting standards. Philadelphia’s history during the past half-century—like the histories of many other cities— 59 includes examples of constructive, well-managed public investment in neighborhoods as well as examples of wasteful, mismanaged public investment in neighborhoods. In order to be effective, supporters of an affordable-housing allocation policy will have to show that such a policy will be implemented in a reliable, equitable manner that will produce genuine long-term value for Philadelphia and its neighborhoods. Housing developers who want a continuation of one or more of the ten-year residential abatements and housing advocates who want an allocation of Year Eleven revenue for affordable housing should recognize that they have an interest in common: supporting public policies that call for the effective use of available resources, both the ten-year abatement and the affordablehousing allocation, to maximize the potential for investment and development in all of Philadelphia’s residential communities. 60 Acknowledgments This research project could not have been completed had it not been for the willingness of David B. Glancey, Esquire, Chairman of the Board of Revision of Taxes and his staff to provide the Fels Institute with access to BRT real estate records, as well as to share information and insights about BRT’s administration of the ten-year tax abatements. At a time when “transparency” in government is often praised but much less frequently observed, this example of openness and collaborative spirit is especially noteworthy. In addition to Mr. Glancey, BRT staff members who provided assistance to the Fels Institute include Richard Haas, Ronald Hoppes, Robert Vierick, Ruby Ingram, Jason Pflugfelder, Eugene Davey, Joseph Faraldo, and Barbara Krauss. The inclusion of data on the ten-year residential tax abatements as part of the Fels Institute Neighborhood Recovery Index project was suggested by Kevin R. Hanna, the City of Philadelphia’s Secretary of Housing and Neighborhood Preservation, in a meeting with John Kromer. Support from Penn’s Cartographic Modeling Lab included assistance and advice from CML Faculty Director Dennis P. Culhane, Amy Hillier (now Assistant Professor at the Department of City and Regional Planning), and Emily Kahoe (now GIS Associate at The Reinvestment Fund). Working with Vicky Tam, Nicholas Klein produced the maps included in this report, and related advice was provided by Sara Green. At the Fels Institute, Donald F. Kettl, Director, Christopher Patusky, Executive Director, and Rebecca Perry provided assistance and encouragement as this project was developed. Jacob Fisher reviewed a draft of this report and provided many useful comments and suggestions. Photos for this publication were provided by Andrew Kromer. Communication with Paul R. Levy, Executive Director of the Center City District/Central Philadelphia Development Corporation (CCD/CPDC) and Michelle Schmitt and Nancy Goldenberg of CCD was very helpful in guiding the completion of this project. The CCD/CPDC report, Residential Development: 1997-2005, was an invaluable reference. The completion of this project and the production of this publication were made possible by a grant from The William Penn Foundation. 61