By Mike Dunn
PHILADELPHIA (CBS) – It was a close vote this past week as Philadelphia City Council decided to revise the city’s controversial 10-year tax abatement on new construction.
The abatement gives owners of newly-constructed properties a 10-year break on property taxes.
Councilman Wilson Goode proposed tweaking it so that each abatement would be capped at $500,000 and a percentage would decrease from 100 percent to zero in the final five years.
The changes under Goode’s bill would not take effect until 2015. Goode says only high-end development would be affected.
“It is not going to have a tremendous effect on the overwhelming majority of abatements. It will have an effect only on some high-scale development in Center City,” he explained.
Arguing against the change was Carl Dranoff, developer of several Center City high rises, who said the current abatement has helped the entire city.
“You’re getting people to move into the city who don’t have to move into the city, who are paying enormously high wage taxes and big (real estate) transfer taxes far in excess of the abated taxes,” said Dranoff.
Goode sparred with Dranoff at the hearing, arguing that the changes to the bill will ensure that the abatement is preserved for those who need it most, those who need affordable housing.
“The fundamental question is: Should we change the tax abatement program? Your answer is no, my answer is yes,” said Goode.
Dranoff was firm in his opposition to Goode’s plan.
“The tax abatement has drawn new people to the city and reversed the population decline, so why would we want to cap that growth, and why would we want to cap the revenue from that growth?” asked Dranoff.
Goode’s colleagues were clearly divided on the matter, and his bill passed out of committee by only a two-vote margin.
Goode plans to change it again so the effective date would not come until 2016. With that amendment, final vote by council would not come until the lawmakers return from their summer recess.
A spokesman for the mayor says the Nutter Administration is reviewing the measure.