The Changing Landscape of Economic Development
Download as PPTX, PDF1 like949 views
After decades of urban decline, most American cities have stabilized and begun growing again due to changing economic forces. Philadelphia underwent severe urban decline but reforms in the 1990s helped stabilize the city's finances. The city now faces challenges including improving its tax structure, schools, public safety, transit and water infrastructure. However, opportunities exist such as developing the Delaware and Schuylkill river waterfronts and innovation districts connected to higher education.
More Related Content
Similar to The Changing Landscape of Economic Development (20)
More from Econsult Solutions, Inc. (20)
The Changing Landscape of Economic Development
- 1. DICK VOITH, ECONSULT SOLUTIONS October 23, 2015 The Changing Landscape of Economic Development: Opportunities and Equity Issues
- 2. Presentation Overview • American Cities – Urban Decline – Changing Landscape • Philadelphia: Challenges and Opportunities – Tax Structure – Key Challenges – Opportunities 2
- 3. Changing Landscape of American Cities • After 40 years or more of decline, most American cities have stabilized and begun to grow 3
- 4. Urban Decline Decline in 1950 was inevitable: • Development of highway system • Housing subsidies for new construction • Extremely cheap suburban development • Changing manufacturing technology and globalization • Aging, disinvested city housing 4
- 5. Urban Decline Exacerbated by: • Social problems • Racial tensions 5
- 6. Urban Decline Formation of a new “American Dream” • Suburban house with lots of land • Cars equal freedom • Cities were only for the poor, living in the city was essentially a failure 6
- 7. Urban Decline American dream continuously reinforced: • Movies, TV, commercials • Cities were the opposite of the dream – Unsafe – Obsolete – Escape from New York (NYC was declining and near bankrupt in the 70s) • Potential positive benefits of cities were recognized by few.. 7
- 8. Changing Landscape 8 By the 1990s The landscape began to change once again, in part driven by basic economic forces: • Suburbs became expensive places to develop • Highway asset became expensive with transportation expenditures focused on replacement rather than new capacity • Cities began the transition towards knowledge centers • Production and consumption benefits of cities appreciated once again 8
- 9. Changing Landscape 9 9 23% 45% 50% 51% 0% 10% 20% 30% 40% 50% 60% 1950 1980 2000 2010 % of People Live in Suburbs
- 10. Changing Landscape 10 Cultural shift in attitudes towards cities reflected in: • Movies, TV, commercials 10
- 11. Changing Landscape City and Suburbs now on more even ground • Suburbs still growing but not fueled by city decline 11
- 12. Philadelphia Philadelphia was on the verge of bankruptcy in 1991 • Rendell administration reforms – Union contracts – Spending – Tax policies 12
- 14. Philadelphia Key issues for Philadelphia: • Tax structure • Schools • Public Safety • Transit • Water/Sewer 14
- 15. Philadelphia: Tax Structure Addressing Philadelphia’s Tax Structure • ESI involved since 2003 Tax Reform Commission 15
- 16. Philadelphia: Tax Structure Philadelphia’s wage and business taxes have proven to have negative impacts on jobs 16 • Despite Phila’s population renaissance employment growth is modest at best
- 17. Philadelphia: Tax Structure • Lack of competitiveness can be seen in the low rents for offices 17 $75 $63 $51 $45 $36 $33 $31 $27 $26 $25 $0 $10 $20 $30 $40 $50 $60 $70 $80 CBD Rent per Square Ft Q4 2014 (source: Center City District)
- 18. Philadelphia Wage Tax Reductions in Wage Tax: • Resident Wage Tax 1995: 4.96% • Resident Wage Tax 2016: 3.91% Achieved through a series of incremental cuts 18
- 19. Philadelphia Tax Abatement Real Estate Tax Abatement • Since 2000, Philadelphia has offered a ten- year abatement on all real estate improvements – Owner continues to pay tax on the value of the land and the prior value of the improvements during the 10 year period 19
- 20. Philadelphia Tax Abatement 20 • Pre abatement—virtually no residential construction • Post-abatement—construction on pace with suburbs
- 21. Philadelphia Tax Abatement 21 Category Code Total Property Count Abated Property Count Percent Properties Abated Abated LV Abated MV Residential 459,219 12,077 2.6% $389,325,957 $4,642,431,100 Apartments 40,927 1,183 2.9% $123,471,227 $1,978,538,800 Mixed Use 14,760 177 1.2% $17,521,180 $93,296,700 Commercial 14,934 376 2.5% $342,288,819 $1,574,214,500 Industrial 4,406 51 1.2% $22,058,800 $113,627,500 Vacant Land 45,513 10 0.0% $321,600 $4,294,000 Total 579,759 13,874 2.4% $894,987,583 $8,406,402,600
- 22. Philadelphia Tax Abatement 22 Abatement Issues • Center on fairness • Superficially reasonable: – Why shouldn’t those wealthy enough to develop be able to pay higher taxes?
- 23. Philadelphia Tax Abatement 23 Theoretical Basis for Abatement • Lowers tax on mobile capital—increases the rate of investment in the city – Half way to a land tax—but can tax the capital once it is fixed • Investment makes the city so much more attractive that demand increases hugely • Available to anyone—not subject to political manipulation
- 24. Philadelphia Tax Abatement 24 Theoretical Basis for Abatement • Increases the supply of housing at all levels • Result is greater housing opportunity for all, regardless of income level – This is not true only if 100% of the people looking for housing are new to the city • Multi-family rental supply increases, lowering rent costs for tenants
- 25. 25 • “Lost revenue” is only relevant if investment would have occurred anyway • Benefit taxes—high income people generate more revenue than they use—which results in more money available for basic services Theoretical Basis for Abatement Philadelphia Tax Abatement
- 26. Philadelphia Tax Abatement 26 Empirical Issues with Abatement • Concentrated in Center City but appear all over
- 27. Quartile Map of Single Family Residential Abated Properties by Neighborhood 27
- 28. Philadelphia Tax Abatement 28 Empirical Issues with Abatement • Both rental and owner-occupied housing
- 29. Philadelphia Tax Abatement 29 Empirical Issues with Abatement • Significant use of abatement for low/moderate income units
- 30. Philadelphia Tax Abatement 30 Empirical Issues with Abatement • Abated properties have been turning back to the tax roles – Approximately $1 billion per year (1% of taxable value) • Now property tax revenue are increasing at a faster rate than they otherwise would have • Careful studies have shown that the abatement generates more revenue to the city than it forgoes
- 31. Philadelphia Tax Abatement 31 Equity and the Abatement • Important to look at the total tax package – High wage and school taxes paid by high income people mean that their revenues exceed the cost of producing services for them—especially since they place little burden on schools • Philadelphia’s homestead exemption means that property tax rates are considerably lower for low and moderate income people (distribution of house values, and implied tax rates with the homestead invention)
- 32. Philadelphia Tax Abatement 32 Equity and the Abatement • Philadelphia’s homestead exemption means that property tax rates are considerably lower for low and moderate income people Market Value of Property Abated Property Count Percent of Abated Properties < $124,999 1,465 10.6% $125,001 to $250,000 3,317 23.9% $250,001 to $500,000 6,129 44.2% > $500,000 2,963 21.4% Total 13,874 100.0%
- 33. Philadelphia Tax Abatement 33 Equity and the Abatement • Philadelphia’s homestead exemption means that property tax rates are considerably lower for low and moderate income people Market Value of Property Abated Residential Property Count Percent of Abated Residential Properties Total Residential Property Count Percent of Total Residential Properties < $124,999 1,256 10.4% 264,956 57.7% $125,001 to $250,000 3,062 25.4% 145,914 31.8% $250,001 to $500,000 5,490 45.5% 39,875 8.7% > $500,000 2,269 18.8% 8,474 1.8% Total 12,077 100.0% 459,219 100.0%
- 34. Philadelphia: Tax Structure Philadelphia Growth Coalition Proposal • Lower wage tax • Lower net income tax • Increase commercial property tax 34 Fiscal Year Wage Tax – Resident Wage Tax – non Resident Real Estate Tax – Residential Real Estate Tax - Commercial BIRT – Gross Receipts BIRT – Net Income 2016 3.9102% 3.4828% 1.3998% 1.3998% 0.1415% 6.3900% 2026 3.0000% 2.5000% 1.3998% 1.6098% 0.1415% 3.0000%
- 35. Philadelphia: Tax Structure Philadelphia Growth Coalition Proposal 35
- 36. Philadelphia Key Issues: Transit SEPTA, once a drag on the city because of declining service, failing infrastructure, and uncertain funding is finally on solid footing • TFRC (2002-07) led to act 44 • More recently and more importantly Act 89—put SEPTA on solid footing • Ridership is growing • More importantly, investments are being made take advantage of SEPTA service creating a more viable, equitable and sustainable form of development 36
- 37. Philadelphia Key Issues: Water/Sewer Philadelphia is a world leader in green infrastructure • Saving billions by approaching the costs of its aging combined sewer system through pricing and incentives to limit runoff, rather than making huge capital investments 37
- 38. Philadelphia Key Issues: Water/Sewer Philadelphia is a world leader in green infrastructure • Saving billions by approaching the costs of its aging combined sewer system through pricing and incentives to limit runoff, rather than making huge capital investments 38
- 39. Philadelphia Key Issues: Public Safety Significant improvements overall… 39
- 40. Philadelphia Key Issues: Public Safety But geographically and demographically uneven… 40
- 41. Philadelphia Key Issues: Schools Schools remain a challenge for the City • Needy population • Fiscal challenges 41
- 43. Opportunities Schuylkill River Waterfront • Innovation Districts/Higher Ed tie-ins 43
- 44. Q & A
Editor's Notes
- #33: DICK! Wasn’t sure whether this slide option or the next was better. Let me know.