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Tax abatements: Do they rob a generation of Philly kids?

By Helen Gym on Apr 20, 2009 08:24 AM
Photo: Eric Joselyn

The Notebook cartoon from the Summer 2007 edition; little has changed!

Yesterday I was listening to "Radio Times" on WHYY discuss property tax abatements, which are coming to the end of their 10-year term. One strand largely absent in the dialogue was the impact of property tax abatements on school district financing.

Property taxes are the bread and butter of public school financing. This is the way our schools are funded in the Commonwealth and in most places around the country. This method of school financing has been the subject of numerous lawsuits around the country alleging gross inequity between tax wealthy districts and tax poor districts. But for now, this is largely what we’re stuck with here in Pennsylvania.

Last fall, the Philadelphia Inquirer’s Patrick Kerkstra did an excellent in-depth analysis of the city’s tax abatement program. Although the city has arguably reaped benefits from tax abatements (wage/sales taxes, development, residential sales, etc.), the School District has suffered immeasurably from the program with little recompense from the city.

In its newspaper version, the Inky published a chart of the tax impact on the city and schools. I asked about specific numbers and the Inquirer graciously provided me with raw data on the estimated forfeited amount of property tax revenue. Keep in mind that these numbers are only on one-third of the abated properties that exist. That’s because Econsult, which did the study, assumed that two-thirds of housing would not have been built/redeveloped without the abatements. The school numbers are a 60% calculation of the amount that would have transferred to the schools (this is because since 2007, the City has divvied up the local property tax revenue as 60% for schools and 40% for the City).

Here's what the cost of abatements:

  • Since 2008:
    City = $84,727,393 in total lost revenue
    Schools = $50,836,436 forfeited
  • By 2012:
    City = $181,406,923 in total lost revenue
    Schools = $108,844,154 forfeited
  • By 2016 (peak loss):
    City = $239,932,516 in total lost revenue
    Schools = $143,959,509 forfeited

Between 2016 and 2025, the total amount lost for schools declines. The District will begin to see profits from the program in 2025 when we get the first check for $1.6 million . . . after 26 years. By 2025, all three of my children will have graduated from high school – a generation, in my opinion, robbed.

Robbed partly because the City largely has not compensated for the losses or engaged in serious dialogue about ways to offset the cost of losing millions of dollars a year. In fact, this year, the City is delivering $10 million less to the schools due to anticipated reductions in property tax collection.

To its credit, in 2007, City Council voted to transfer a little less than 2% of real estate taxes to the school district, resulting in roughly $20 million additional dollars a year. However, keep in mind that this was the first city increase since the state takeover, and nowhere in the city’s five year plan is there discussion of options for additional revenue generation to the schools.

Other cities, as the Inquirer points out, target their abatement programs to minimize financial costs:

“Some national abatement researchers say the city is giving away the store to the wealthy.

"Philadelphia is being overly generous. It makes absolutely no sense," said C. Kurt Zorn, an Indiana University professor who did a national study of abatements in 2005.

Abatements offered by other cities usually have significant restrictions. They can be used only in low-income neighborhoods, for instance, or the discounts are capped.

Not so in Philadelphia.”

The City notes that there are boosterish revenue projections for the district after 2025, but here’s the problem: Property tax revenues are just about the only funds we’re legally entitled to. Anything else we have to beg and scrape for - and I mean beg and scrape. It's painful to look at the next 16 years as potentially a "lost generation" for public school financing. We won't recoup that money; and we'll suffer the consequences for its loss.

And telling kids to wait 26 years for profits that may or may not come down the road is a lot to ask when our kids need books, our teachers are underpaid, our classrooms are overcrowded, our libraries have been shuttered, and the best we get, is "the School District will get theirs," according to Mayor Nutter.

We don’t normally think of property tax abatements and school financing, but the next time the issue comes up, let’s not forget the impact on school funding for this generation of school children.

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Comments (4)

Submitted by Anonymous (not verified) on April 20, 2009 12:25 pm

Now there is an original cartoon...

Yes, those suburban school district don't deserve to be funded...whereas Philly uses every penny it gets from Harrisburg wisely and efficiently...

That cartoon is exactly the same as the cartoon last year...right before Rendell gave the district an additional 300 million...

Just ask Fast Eddie for money...he loves the district...he'll help ya out...

Submitted by MB (not verified) on April 20, 2009 2:18 pm

Hi, I'm wondering if you saw Bill Moyers interview with David Simon, the author of The Wire, an HBO series that was so inspirational to Michael Nutter that he hosted a screening at City Hall last year for the series finale. I have not seen the show so it was incredibly interesting to learn why the Mayor was such a devoted fan. In view of Nutter's own embrace of "free" market solutions and public/private partnerships to solve the city's problems, it's interesting that he was so moved by a tv show that dramatizes urban poverty and crime by drawing connections between failed social policies (including urban school systems) and "successful" money policies that benefit the rich at the expense of the poor.

I posted excerpts below because of Simon's blunt explanation that "there's no profit to be had" in investing in the urban poor (or their schools) because the urban poor are not "needed" in our economy. This was the first time I heard it explained like that--that our society has abandoned the inner city to the drug wars and inadequate education because the people are "not needed" in the economy. So it was also very interesting to hear Simon describe this situation as a casino where most of the players will lose, no matter how well they play the game. Although Simon was not speaking specifically about Philadelphia, the man whose tv show inspired the Mayor of another blighted city managed to encapsulate all of our city's major issues: from poverty to the schools to crime to the rich versus the poor and to the casinos.

Since his recommendation for change is to create a New Deal with an intense focus on areas directly related to inner-city job creation, that sounds like a useful direction for the abatement program (a good education is a big part of getting a good job).

DAVID SIMON: Again, we would have to ask ourselves a lot of hard questions. The people most affected by this are black and brown and poor. It's the abandoned inner cores of our urban areas. And we don't, as we said before, economically, we don't need those people. The American economy doesn't need them. So, as long as they stay in their ghettos, and they only kill each other, we're willing to pay a police presence to keep them out of our America. And to let them fight over scraps, which is what the drug war, effectively, is. I don't think-- since we basically have become a market-based culture and it's what we know, and it's what's led us to this sad denouement, I think we're going to follow market-based logic, right to the bitter end.

BILL MOYERS: Which says?

DAVID SIMON: If you don't need 'em, why extend yourself? Why seriously assess what you're doing to your poorest and most vulnerable citizens? There's no profit to be had in doing anything other than marginalizing them and discarding them.


BILL MOYERS: Why do you think, David, that we tolerate such gaps in between rich and poor?

DAVID SIMON: You know, I'm fascinated by it. Because a lot of the people who end up voting for that kind of laissez-faire market policy are people who get creamed by it. And I think it's almost like a casino. You're looking at the guy winning, you're looking at the guy who pulled the lever and all the bells go off, when a guy wins, and all the coins are coming out of a one-armed bandit. You're thinking, "That could be me. I'll play by those rules." But actually, those are house rules. And you're going to lose. Most of you are going to lose.

BILL MOYERS: The character in that excerpt we just saw says, "What's the answer?" Do you have the answer after all these years?

DAVID SIMON: Oh, I would decriminalize drugs in a heartbeat. I would put all the interdiction money, all the incarceration money, all the enforcement money, all of the pretrial, all the prep, all of that cash, I would hurl it, as fast as I could, into drug treatment and job training and jobs programs. I would rather turn these neighborhoods inward with jobs programs. Even if it was the equivalent of the urban CCC, if it was New Deal-type logic, it would be doing less damage than creating a war syndrome, where we're basically treating our underclass. The drug war's war on the underclass now. That's all it is. It has no other meaning.

Submitted by Helen Gym on April 20, 2009 2:00 pm

Thanks for taking the time to write out such an interesting post.

I too, like many, am a huge fan of The Wire, and certainly note the ironies above. Of course, I hope what our Mayor loved so much in the show was the cost of abandoning our different systems - whether the police, the schools, our economy and the media! - and leaving our streets behind. I hope he was touched by the compassion, tragedy, and hope portrayed by the young people in the show. And at the very least I hope he came away with an understanding of the lasting legacy of neglect and the sleaze that accompanies that neglect. I certainly hope no Mayor, least of all Mayor Nutter, becomes the embodiment of the superficiality of the political system in the show - living for your next election. But of course, only time will bear that out.

Love the interview with Bill Moyers. I'll be looking that one up soon!

Submitted by Erika Owens (not verified) on April 20, 2009 3:00 pm

Dale Mezzacappa wrote a piece about The Wire, Mayor Nutter, and the dropout crisis last spring. You can read a PDF of it here, it originally appeared in the Chestnut Hill Local.

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