COUNCIL OF THE CITY OF PHILADELPHIA PUBLIC HEARING - COMMITTEE OF THE WHOLE - - - Room 400, City Hall Philadelphia, Pennsylvania Wednesday, June 9, 2004, 5:45 p.m. - - - Bill 040640 - An Ordinance amending Chapter 6 19-2600 of The Philadelphia Code, entitled "Business Privilege Taxes," by establishing a program under which a Job Creation Tax Credit will be given to certain businesses creating new jobs in the City of Philadelphia, all under certain terms and conditions. Bill 040642 - An Ordinance providing for the contingent exemption, abatement or credit of certain taxes within specified geographic areas, including by amending Bill No. 030242 (approved May 29, 2003), relating to the boundaries of the Keystone Opportunity Improvement Zone, and by amending Chapter 19-3200 of The Philadelphia Code, entitled "Keystone Opportunity Zone," including by revising the conditions for exemption from net profits tax and by clarifying and amending the provisions relating to relocating businesses, all under certain terms and conditions." PRESENT: COUNCIL PRESIDENT ANNA C. VERNA COUNCILWOMAN BLONDELL REYNOLDS BROWN COUNCILMAN DAVID COHEN COUNCILMAN W. WILSON GOODE, JR. COUNCILMAN JAMES F. KENNEY COUNCILMAN JUAN F. RAMOS COUNCILMAN FRANK RIZZO COUNCILMAN FRANK DI CICCO COUNCILWOMAN JANNIE L. BLACKWELL COUNCILMAN MICHAEL A. NUTTER COUNCILMAN DARRELL L. CLARKE COUNCILWOMAN JOAN L. KRAJEWSKI COUNCILMAN RICHARD T. MARIANO COUNCILWOMAN DONNA REED MILLER COUNCILWOMAN MARIAN B. TASCO COUNCILMAN BRIAN J. O'NEILL 2 Whole (Hearing) - 040640, 040642 - 6/9/04 - - - P R O C E E D I N G S - - -
May I have everyone's attention, please. Thank you. And thank you so much for your patience. This is a public hearing of the Committee of the Whole, regarding Bill 10 Numbers 040640 and 040642. I would ask Mr. McPherson to please read the titles of the bills. MR. McPHERSON: Bill Number 040640, An Ordinance amending Chapter 19-2600 of The Philadelphia Code, entitled "Business Privilege Taxes," by establishing a program under which a Job Creation Tax Credit will be given to certain businesses creating new jobs in the City of Philadelphia, all under certain terms and conditions. Bill 040642, an Ordinance providing for the contingent exemption, abatement or credit of certain taxes within specified geographic areas, including by amending Bill No. 030242 (approved May 29, 2003), 3 Whole (Hearing) - 040640, 040642 - 6/9/04 relating to the boundaries of the Keystone Opportunity Improvement Zone, and by amending Chapter 19-3200 of The Philadelphia Code, entitled "Keystone Opportunity Zone," including by revising the conditions for exemption from net profits tax and by clarifying and amending the provisions relating to relocating businesses, all under certain terms and conditions.
Thank you. Our first witness is the Revenue Commissioner. Is the Revenue Commissioner here? The Chair recognizes Councilman Goode.
Thank you, Madam President. I have some questions for the Revenue Commissioner before her testimony.
Very well. 4 Whole (Hearing) - 040640, 040642 - 6/9/04 The Chair recognizes Councilman Goode.
Can you tell me why you're testifying on one bill and the Commerce Director is testifying on the other?
I don't know that there's a particular reason. I'm testifying on this one because it's a direct tax program to be administered by the Department of Revenue, and it is a credit against the Business Privilege Tax; whereas, the Keystone Opportunity Zone Program which was established by the state is intended to be an economic development program. And I'm supporting the Commerce Director's testimony but am not giving the main testimony.
Well, both bills 5 Whole (Hearing) - 040640, 040642 - 6/9/04 deal with tax incentives for job creation, so why aren't you testifying on the second bill? Are there any revenue concerns for the second bill?
Yes, there are. And I just indicated that I will be with the Commerce Director in providing support and answering questions.
So you advised the Commerce Director on her testimony for the second bill?
We provided some cost analysis information, tax impact analysis information to the Commerce Director, that was taken into account in preparing her testimony.
Can you offer that process? I mean, exactly how does the City reconcile revenue concerns with economic development policy?
That's a policy 6 Whole (Hearing) - 040640, 040642 - 6/9/04 issue that I would suggest you address to the cabinet members, not to me.
It comes through the Commerce Department, with input from various other departments and agencies: the Department of Revenue, PIDC. There are a number of departments and agencies that contribute. The Budget Bureau is also involved in doing some of the calculations and analysis. So, it's not --
So the Commerce Director is responsible for economic analysis?
Will you please have the Commerce Director approach the witness stable? 7 Whole (Hearing) - 040640, 040642 - 6/9/04
Certainly. Would the Commerce Director please approach the witness stable. (Ms. Naidoff complies with request.)
Good evening, Miss Naidoff. Can you tell me why you're testifying on one bill and the Revenue Commissioner is testifying on the other?
I'm sorry. Would you pull the microphone closer to you?
We're having difficulty hearing you. And identify yourself for the record before you respond.
I'm Stephanie Naidoff, 8 Whole (Hearing) - 040640, 040642 - 6/9/04 and I'm the Commerce Director. (Discussion held off the record.)
You were explaining why you're testifying on one bill and not the other. Yes. Excuse me. Let me start again. I'm Stephanie Naidoff, and I'm the Commerce Director of the City of Philadelphia. Councilman, I believe that the answer that the Revenue Commissioner just gave is the same understanding I have, that because the jobs tax credit is primarily a program that is administered would be administered by the Revenue Department going forward, the Revenue Commissioner was asked to prepare the testimony on that, and I was asked to prepare the testimony on the Keystone Opportunity Zone.
So you have no 24 economic development concerns with the first bill. 9 Whole (Hearing) - 040640, 040642 - 6/9/04
I don't think that's correct. I think that we worked together on these, and we hope that the policy with regard to economic development is consistent between the two, and between every other piece of legislation that has to do with economic development.
Well, is the first bill good economic development policy?
I believe that it is a tool, and an important tool. It is one that we already are beginning to see some response to. And I understand that the bill as it stands suggests certain changes which we believe deserve consideration, that we'd like to see.
Well, what economic analysis did your department do in the first bill and why would you not come here and testify, in terms of economic analysis?
We relied on the Revenue Department to do the revenue 10 Whole (Hearing) - 040640, 040642 - 6/9/04 analysis.
I'm just speaking about your responsibility as... according to economic development in the economic analysis, what economic analysis did you do in the first bill? And why would you not come to this Council to testify on what is good economic development policy or not? Let me ask this question: Who assigned you to testify?
Okay. Is anyone here from the administration to explain -- come here and explain to me why the Revenue and the Commerce Director... Revenue Commissioner and Commerce Director would not be testifying on both bills at the same time?
Is there anyone from the administration that can answer that question?
Well, Madam President -- 11 Whole (Hearing) - 040640, 040642 - 6/9/04
Perhaps we can call someone to ask if they're available.
That's what I'm going to ask. I'm going to ask that we bring forth some other witnesses. And I'm going to ask to continue the hearing on this bill until tomorrow, and bring the administration back when they'll be better prepared.
Are there any other witnesses that you would like to bring forward at this time?
Yes. I believe there's a witness list. The first one is David Campoli. MR. McPHERSON: Mr. Campoli, come forward.
Is Mr. Scott here? UNIDENTIFIED WOMAN: I have his testimony. He unfortunately had to leave 12 Whole (Hearing) - 040640, 040642 - 6/9/04 for his daughter's 11th birthday party. I'll be testifying on his behalf.
If you don't mind coming to the witness table. Good seeing you. UNIDENTIFIED WOMAN: Nice to see you again. Mr. Campoli's in the security line coming in. He's testifying. And I have...
And you're going to present testimony for Mr. Scott? UNIDENTIFIED WOMAN: I'll just submit it to you.
Is it rather lengthy or did you want to read it? UNIDENTIFIED WOMAN: It's a little lengthy, and I think that Mr. Campoli's statements will cover much of it.
All right. UNIDENTIFIED WOMAN: If there's any questions, we have Rick Reeves of Sun Belt, who will join us here, and Mr. Campoli --
I'm sorry. 13 Whole (Hearing) - 040640, 040642 - 6/9/04 There's a point of order. The Chair recognizes Councilman Goode.
Oh, okay. And if you want to leave Mr. Scott's testimony, we'll make certain that the stenographer transcribes it in full. Thank you. UNIDENTIFIED WOMAN: Mr. Rick Reeves is here from Sun Belt. He'll be joining you, and Steward Evy who is the counsel for the Center City Owners Association.
They're going to testify? UNIDENTIFIED WOMAN: Just be here if you have any questions.
Good evening. Please identify yourself for the record, and proceed with your testimony.
Good evening, Committee members and guests. My name is Dave Campoli. I'm the President of both the Center City Owners Association, CCOA, and Keep Philly 14 Whole (Hearing) - 040640, 040642 - 6/9/04 Competitive Political Action Committee. The CCOA is an organization that represents approximately 80 percent of the total Philadelphia central business district office market. Our members include both major, national and local investors, whose total national holdings exceed 214 million square feet of real estate. According to the Center City District, the CCOA buildings, through its property and tenant taxes account for 14 percent of Philadelphia's annual revenue. 15 Many of our members are here today, 16 along with employees and others, to support 17 us. Also with me is Rick Reeves who is one 18 of the members of CCOA and owns, well, Sun 19 Belt -- President of Sun Belt Management 20 that owns Liberty One and the Shops at 21 Liberty Place, along with Stew Evy, who's 22 counsel for CCOA. 23 Personally, I am the regional 24 managing director for HRPT Properties Trust. HRPT is the largest investor in the 15 Whole (Hearing) - 040640, 040642 - 6/9/04 Center City Philadelphia office market and has amassed 4.7 million square feet, with a market value in excess of $1 billion. Currently in Center City we own Mellon Bank Center; Centre Square, the current home to Comcast; 1600 Market Street; One Franklin Plaza; and 1525 Locust. HRPT owns an additional 2 million square feet throughout Pennsylvania and 33 million square feet nationally in 42 states. While many people believe this debate is just about jobs, one important factor you must seriously consider is the investment of all those -- is the investments and all they represent to this City. Our group is invested in this -- in this -- in Philadelphia in property value in excess of $15 billion. We can not grow the City without outside and inside firms investing here. And if you move ahead with this KOIZ at 16 Whole (Hearing) - 040640, 040642 - 6/9/04 17th and JFK, you are seriously discouraging the people we represent and the investment community as a whole --
Excuse me a moment, please. The Chair recognizes Councilman Kenney for a point of order.
Just so I can orientate myself to the testimony, is Mr. Campoli testifying on Bill 040640 or 642?
I believe we're testifying on... I don't know number order but --
Is it Councilman Goode's tax credit bill or is it the KOIZ?
Oh, I'm sorry. I apologize. Thank you. 17 Whole (Hearing) - 040640, 040642 - 6/9/04
Back up a second. I'm sorry. You cannot grow the City without both inside and outside firms investing here. If you move ahead with this KOIZ, you're seriously discouraging the people we represent in the investment community as a whole, staying invested or getting invested in our City. Comcast is a highly respected industry leader, and we are pleased to have their pledge to continue to remain headquartered in Philadelphia. Our political leaders in this City and state need to craft an incentive package for the cable giant, while at the same time understand the needs of the rest of the community, both business and residential. This package should go with Comcast as portable, so they could use it wherever they go. And it should not be site specific. The KOIZ, while touted as the only 18 Whole (Hearing) - 040640, 040642 - 6/9/04 tool in this effort, is the absolute worst tool we could ever allow in the central business district. There are alternatives and compromises that must be worked out. Careful and sensitive planning and review is needed, instead of a rush to approve the legislation, out of a concern for rising steel prices. The lifeline of our industry is jobs. Jobs fill office buildings and occupied office buildings create jobs. Thousands of jobs, in fact, exist in janitorial, engineering, construction, administration and management. Union members fill the majority of our jobs in Philadelphia. In addition to the steady employment we create, CCOA members pump millions of dollars into the City and state annually, through renovations, capital improvements, and tenant fit-outs. This year HRPT will invest another $40 million in the Philadelphia area 19 Whole (Hearing) - 040640, 040642 - 6/9/04 buildings we own through capital projects and upgrades to our properties. If you totaled the entirety of the CCOA members in the 40 Center City 6 office buildings that we own, this number 7 would be in the hundreds of millions of 8 dollars per year. 9 Practically all of these dollars are 10 spent using union and professional labor, 11 and all of it is taxed, providing 12 significant additional revenue for both the 13 City and state. 14 Vacant or significantly vacant 15 buildings, on the other hand, eliminate 16 jobs, defer investment, and reduce revenue 17 to the City. 18 Unfortunately, due to tax structure 19 in Philadelphia that's the highest in the 20 nation, thousands of jobs have left the 21 City over the last 15 years. 22 Whether Comcast brings these 23 proposed jobs to the City or not, the 24 debate over KOIZ has clearly pointed a 25 spotlight directly at the underlying 20 Whole (Hearing) - 040640, 040642 - 6/9/04 problem of much-needed tax reform. The fact that Mayor Street's administration is vehemently opposed as too expensive, a platform of tax reform that will lead to certain job growth, and then embraces a plan that entitles a very few to equally expensive tax breaks is beyond comprehension. The Center City office market is comprised of just over 38 million square feet of office space, primarily in the West Market Street office towers. Geographically this is a very small area, but it represents some of the highest valued real estate in the State of Pennsylvania. This is certainly not a blighted and impoverished area, as defined as the rationale for designing -- for designating opportunity zones. We previously forwarded you a study, the Grobe and Ellis Horizon Study which reflects 173 full-floor vacancies in the City of Philadelphia. That's three Liberty 21 Whole (Hearing) - 040640, 040642 - 6/9/04 Place Towers empty currently. These vacancies do not include the final resolution of the three remaining large deals that have yet to be completed. Towers Perrin, Comcast and Sunoco. Towers Perrin and Sunoco will both shed significant space in the market when their new leases are finalized, thereby making the situation even worse.
While the current published vacancy rate is 14, this figure does not include all the impending vacancies resulting from some of the high-profile, recently completed renewals that will create additional space availabilities over the next 12 months. It's a bad market. We recognize it. We know it. The sky is not falling in. But it's a very bad time to build a new building. 66 percent additional space, as compared to the West Market 22 Whole (Hearing) - 040640, 040642 - 6/9/04 Street submarket will cause vacancy levels to increase over percent. 4 At today's vacancy, rental rates 5 have significantly decreased, in some cases 6 and some places as much as 50 percent, as 7 landlords are forced to slash rents to 8 fight for the few remaining tenants in the 9 market. 10 The corresponding reduction in 11 rental rates and increase in vacancies will 12 directly correlate to lower tax revenue for 13 the City and reduced employment. 14 The reduced valuation of office 15 buildings will continue to erode but at a 16 much faster space if the KOIZ is approved. 7 million 19 square feet of tax-free space. 2 million square feet that Comcast does not occupy? C. The result will be a further erosion of value in rental rates, and a significant reduction in revenue for the City, state -- and most telling, the School District. As you're aware, 58 percent of real estate tax and 100 percent of UNO tax, both assessed by property value, go directly to the School District. There is no offsetting wage tax funding available to a School District that continues to face difficult challenges. We believe you need to be absolutely certain that all school funding that may be given up is addressed and not disrupted. A relatively stable real estate market would see vacancy rates below ten percent. Developers avoid new construction in cities with soaring vacancies levels that exist in Philadelphia today. 24 Whole (Hearing) - 040640, 040642 - 6/9/04 It is clear that the cost of a 60-story office tower and the accompanying rental rates it would require could not compete under today's -- not compete today under non-subsidized rates. It is the reason most cities in the United States, unfortunately, have very limited new office construction. Using the KOIZ tool in the downtown is the wrong method to create jobs. The City of Philadelphia already provides the ten-year property tax exemption for any new construction and improvements. That's ten years no property tax. It's available today. It's more than any of -- any of the -- at all of any of the existing buildings that were built with state or with City help before ever got. And that's available today. Most of us representing new buildings were granted some type of public investment. None of them, however, came close to the existing ten-year full tax 25 Whole (Hearing) - 040640, 040642 - 6/9/04 abatement, and none of them had State tax relief. In addition, the City and Commonwealth have produced transparent incentive packages for a host of other firms to help landlords retain their tenants all over the state and City. Incentive packages in downtown Philadelphia till now had been tenant specific, not site specific. We need to help Comcast. We don't need to help the plot of ground at 17th and JFK. While KOZ's were originally designed to aid development in distressed sub-markets where it would otherwise be unprofitable, these benefits in a downtown, highly valued location would consume the most valuable part of the tax base, the tenants. We have no objection to a new building. We want a level playing field. And we will not allow it to be paid for with our tax dollars nor stand by while a policy is enacted that amounts to a taking Whole (Hearing) - 040640, 040642 - 6/9/04 of our investment. Pennsylvania has a fair and equal taxation requirement.
And while we agree that the KOIZ tool can be beneficial when applied as intended by law, such as the one proposed now for the fruit growers, vendors and distribution center, a KOZ at 17th and JFK is not only unfair, but could lead to other challenges to the premise of the designation across the state. Some will say this whole debate is simply about jobs. In reality it's about much more: Fairness, stagnant to decaying market conditions, major revenue reductions, school funding deficits, city-wide service cuts, and the implosion of the real estate investment community. There is a point where the cost is just too great. And that, members of the Committee, is why we're here. As Jonathan Saidel, Philadelphia City Controller, asked recently, since when is Center City a blighted and impoverished area? Thank you. 27 Whole (Hearing) - 040640, 040642 - 6/9/04
Thank you. Good evening. Please identify yourselves for the record.
Yes. My name is Richard Reeves. I'm President of Sun Belt Management, the owner of One Liberty and the Shops at Liberty. I really can't add any more than what David has said. He clearly defines the position and thoughts of the majority of owners of office buildings in Center City Philadelphia. I am here along with Mr. Evy to help answer any questions, clarify any details that members of the Committee would like to hear. Thank you.
Thank you. If you'll just remain at the table. Are you going to testify, sir?
Very well. The Chair recognizes Councilman Ramos. Your light is on. Do you have any questions?
Thank you, Madam President. I just wanted to get an idea, relative to what happened years ago when we started developing in west of Market Street with Liberty One and Two. I remember -- and I was younger then, and I wasn't as engaged, I guess, in public policy debate as I am now. But I remember what seems to be a totally ridiculous argument that was being made back in, I guess, the '80s or late '70s, '80s whether or not we should build above 29 Whole (Hearing) - 040640, 040642 - 6/9/04 Billy Penn's hat. And when I think back to that kind of argument or that kind of major public discussion, you wonder how the City survived as long as it did, when cities like Chicago and Boston, New York were just going gangbusters and building high buildings, you know, and that kind of stuff. Back then, when we started going west on Market Street, a lot of arguments were similarly made, and could have been very solid arguments, that a lot of the big office space that would be created as a result of Liberty One and Two, for example, was going to cause a major hardship on the City's economy. And for a number of years, there were some movement of firms to west of Market Street, leaving buildings like Land Title and other buildings on the east side of Market Street. And as a result of Councilman DiCicco's legislation, we were able to 30 Whole (Hearing) - 040640, 040642 - 6/9/04 rebound from that. And I'm not saying it's an exactly similar situation, but rebound from that by doing tax incentives which got those buildings renovated and used as residences. Was there not subsidies also used in the expansion, City subsidies? I don't know if there were state subsidies also, used in the expansion of the building of buildings on West Market Street which has become our new skyline?
Well, yes, I think you're right. First of all, I think I've heard the argument that this debate is similar to the Billy Penn hat incident. First of all, the real estate community --
I've heard that come from the Governor's Office, but it just 31 Whole (Hearing) - 040640, 040642 - 6/9/04 would say we -- we were not --
So you understand, for the record, I did not talk to the Governor or anyone in his office. And I'm not making an exact comparison to that debate. What I'm saying is that over the years, as we've progressed forward, there have been major obstacle issues that have arisen. I don't think the Billy Penn hat argument is the same as the one that you're making. I'm not implying that.
But there were arguments made that, you know -- And I wonder how -- you know, how we progressed. But I'm really concerned about the issue of subsidy vis-a-vis the buildings that were created as a part of West Market Street expansion.
I think all buildings... I know most buildings were created with some form of subsidy. 32 Whole (Hearing) - 040640, 040642 - 6/9/04 However, the subsidy, actually, that built Centre Square back in 1974 is the same subsidy that Liberty has for 18th and JFK, 17th and JFK. And in addition to that, they have an additional ten-year tax abatement available. To my eyes, there has not been a building built in Philadelphia with anything more than that. I know I could testify for Thomas Properties that owns Commerce which is one of the most recent buildings built or the last, really, multi-tenant. They received a ten-year declining tax abatement, wherein in year one it was fully, the next year it was 90 percent, and therefore down. But in no case has ever there been a talk of a 15-year, tax-free office building in one of the, as I said, most valuable parts of the state.
I understand. And I do recognize the difference. But I think it's important in 33 Whole (Hearing) - 040640, 040642 - 6/9/04 context to recognize and to have in the record and in the public debate that buildings are subsidized often in order to get them constructed in cities that are competing and struggling with other cities for business and for construction. I mean, for example, I have some numbers here from New York. And you would think New York would be in such a buyer's market, they could just sit back with their feet on the desk and wait for somebody to come in and build a building in New York because it's New York. I mean, Philadelphia doesn't have the same panache or the same attraction as New York does. But I look at some of these numbers: Four Times Square received about $114 million in public assistance, and One Bryant Park is getting $175 million. Time Warner. I can't get -- I think -- Is Time Warner a bigger company than Comcast? I'm not sure if they're on an equal scale. They're getting $50 million to do their building. 34 Whole (Hearing) - 040640, 040642 - 6/9/04 And The New York Times new headquarters is getting $100 million in direct City subsidy for the City of New York. So I don't... You can argue whether or not this makes sense for Philadelphia to do, but other cities like New York City, with their great attraction and great marketability, are doing some of the same stuff.
I'd like to tell you a little story. You remember when One and Two Liberty were built. And I was not here at the time. We did not own the building at the time. It was developed, as you know, by Bill Raus. There was a lot of concern that there was no need for that much office space in Center City. And there was a debate whether some of the subsidies really were necessary, and whether the market would be hurt. I can only tell you the effect of that was, is the person we bought the 35 Whole (Hearing) - 040640, 040642 - 6/9/04 building from, we bought it for a hundred million less than they paid for it. The building was a failure, a financial failure, as far as attaining where they thought it was going to be because the market was, in fact, soft; rates were driven down; and the building wasn't as profitable. We stepped up for a quarter of a billion dollars which is a lot of money, but felt that it couldn't go any lower, that the market as bad as it could possibly get. And we foresaw some of the downsizing in tenants, but was going to be fine. But we're going to run into the same scenario of falling values, falling rents, accelerated by adding close to 800 to a million square feet of vacant space, and not competitive space. It will be super competitive in that the tenants will go there first because there's a 15-year tax abatement. 36 Whole (Hearing) - 040640, 040642 - 6/9/04 As of two weeks ago, you may have read in the paper, we got a $20 million assessment reduction. That has nothing to do with the KOIZ. It has to do with current market conditions. Our vacancies have gone to -- 9 percent. 8 I expect that that will continue and 9 accelerate for myself and others in CBD, if this spec space is built.
What effect, not that it makes any difference to you on the bottom line, but what effect does 9/11 have on the vacancy rate in what are termed trophy buildings, high-rise, high-profile skyline buildings that could be subject to targets of terrorism?
It's very interesting. We happen to own five buildings similar to One Liberty around the country. I was in Philadelphia on 9/11. Had to spend five days here. Couldn't get back to our corporate headquarters. The initial fear was, is that people, one, were not going to move into 37 Whole (Hearing) - 040640, 040642 - 6/9/04 high buildings. And we actually saw tenants came to us and said, we want out of our lease. That panic ended as people looked at the reality of what happened and the chance of it happening again, et cetera, and the odds of it happening to different buildings. What was more important was people said, we're getting out of cities because if terrorist acts happen, it's going to happen in cities because that's where people got hurt, not the suburbs. That was a bigger effect than people saying, we're getting out. To this day we are still having tenants talk to us about the lower floors, not the higher floors; and obviously a tremendous amount of extra money we've had to spend for security. But to be honest, quite frankly, I think that the 9/11 will not keep people from staying into high quality buildings in the center district because, for a lot of 38 Whole (Hearing) - 040640, 040642 - 6/9/04 reasons: Prestige; obviously a good working area for certain businesses. And quite frankly, the fear has subsided.
Are there insurance issues involving the insurance of employees --
-- over a certain level of employees to a building like that?
Well, what happened initially was, the insurance market for terrorism insurance went away. We ended up going from about a hundred thousand dollars a year to something like a million three in insurance premiums.
In some instances you couldn't get it for certain buildings. Sears Tower in Chicago, they almost said no 23 way. That created defaults under your loan documents because they required 39 Whole (Hearing) - 040640, 040642 - 6/9/04 insurance. And there was a lot of talk about defaults and foreclosures, et cetera. That market has come back because the fears have gone away. And now it's about double, 200,000 a year, but not a million.
Okay. And just -- I know I'm taking some time, and I'll come back. But just curious. That site, the JFK site we're talking about has been vacant, I guess, for about 20, 20, 13 years? 14
You guys are all 16 in this business. Can you give me some 17 idea as to why you think that that property 18 has not been developed in more than two 19 decades? 20
I can answer that. And 21 I really don't mean to hog it, but I have 22 actually spent some time studying this. I have testified yesterday at another hearing that this site is one of the best development sites in the country 40 Whole (Hearing) - 040640, 040642 - 6/9/04 from a locational, and from an amenity standpoint. It is one of the worst sites from an economic standpoint. And it's just fairly simple. The building cannot be built with open market leases, open market financing, without there heavy subsidy. If it could have been, it would have been. Developers love to build.
But doesn't that make an argument as to why we should consider seriously doing this? And let me tell you. What I think makes great cities, in addition to good economy and good business opportunities and good neighborhoods, I think great cities have great, tall, beautiful buildings. I go to Chicago, I mean, Chicago, New York. Those cities are vibrant and exciting because they just build downtown. And in order for us in this economy and in this market, to get those building built, don't we have to do the things we did at Cera, at Brandywine? Don't we have 41 Whole (Hearing) - 040640, 040642 - 6/9/04 to do the things we're contemplating doing at Liberty.
We need to build the buildings. We need you as a body to give us the ability to build the buildings. This City has lost jobs for 8 years. We can't fill the buildings. I 9 would love to have a 60-, 70-story 10 skyrise -- skyline building. We can't 11 afford it because which can't put anybody 12 in it. 13 And what are you going to do with 14 the rest of them? Are you saying to the 15 rest of the investment community, we want this big deity in the sky, to say we're successful, when in the meantime the rest of the City is suffering? It's not -- It's not that simple, I don't think.
Well, the efforts that you guys could help us with is getting some type of reasonable rational effective tax reform for the entire business community and the entire City of Philadelphia. 42 Whole (Hearing) - 040640, 040642 - 6/9/04 And, you know, we would have loved to have you come in and testify on behalf of the Tax Reform Commission's recommendations on how we could have made that happen.
I understand that. But I mean, as vocal as you are on this issue, I think we need to be equally vocal on tax reform for everybody.
I agree. And our problem was, if we were fighting two competing forces --
-- we were at an issue where we're saying, how can you afford one for one but not for all?
The other thing is, you have a bill in front of you now that we support, is the Jobs Credit Bill, which we think is better economic planning. 43 Whole (Hearing) - 040640, 040642 - 6/9/04
Thank you, Madam Chair. For clarity of the record, I just want to state that I believe the testimony by Mr. Campoli was definitely in support of comprehensive tax reform, was definitely in support of subsidy for buildings, but a different type of subsidy.
A different type of subsidy, a subsidy still in the amount of tens of millions of dollars. So he testified on behalf of comprehensive tax reform and on behalf of subsidizing buildings, but not in the way proposed through this KOIZ.
Thank you. 44 Whole (Hearing) - 040640, 040642 - 6/9/04 Are there any other questions or comments from members of the Committee? (No response.)
Point of information. The composition of the building owners, what percentage of them are Philadelphia based?
Well, I haven't done a percentage, but we have -- we certainly have Miramar, we have... God. There's probably --
And Ma'am, I think it's very important that you have more than just Philadelphia based investors. We're a national international investor. So I'm not a Philadelphia native. I'm not a native of any of the cities, quite frankly, that we've invested in. But it's important you have those capital flows in and out, and that you don't just want local investors. No city should have local investors.
Thank you. Any other questions or comments of the gentlemen before us? (No response.)
Seeing none, I thank you. Our next witness is Kevin Gillen. Good evening.
Good evening, Madam 46 Whole (Hearing) - 040640, 040642 - 6/9/04 President, members of City Council. My name is Kevin Gillen. D. candidate at the Wharton School, and I'm a former consultant to the Tax Reform Commission. Thank you for the opportunity to appear before you this evening. Philadelphia's high tax burden and complicated tax structure have been the subject of rigorous study for decades. While there's a general consensus that the City's tax structure harms Philadelphia's ability to retain and attract jobs and residents, there's less agreement among decision-makers, in terms of a policy prescription to address this problem. One tension lies between providing incremental tax relief for the general marketplace over time which is compensating for our high tax burden with more significant but narrowly-focused subsidies, targeted abatements, or tax breaks such as KOIZ's. 47 Whole (Hearing) - 040640, 040642 - 6/9/04 In recent years Philadelphia has pursued both policies to some limited extent. Over the course of the last decade the City has trimmed it's wage tax, as well as the gross receipts portion of the business privilege tax. At the same time, the City has often offered direct subsidies to certain employers and provided place-based tax abatements for small areas of Philadelphia. Recently, however, support for the scale and extent of these programs has grown so tremendously that the City now faces a very stark choice. Do we offer comprehensive and tax reform for all or do we give targeted but deep tax breaks for a few. Although various studies have been commissioned in order to inform and guide debate over these issues, their estimates of the direct impact on City revenues have been contradictory. The short-term forecasts of annual revenue losses ranges from approximately 6 48 Whole (Hearing) - 040640, 040642 - 6/9/04 million in the E-Consult study, to 24 million in the CCD study, to 44 million in my own study. While I'm more than prepared to defend the particular results of my own research, I think we can all agree that none of these numbers are overwhelmingly devastating to a city with an annual budget over 3 billion. However, I also believe that the true cost of this legislation will be in the negative signals broadcasted about how business is done in Philadelphia, and that this cost will likely be much greater than what any of these various studies, including my own, have predicted. For starters, it actively encourages remaining businesses to threaten to leave, even if they have no intention of actually doing so, in the hopes of obtaining special tax breaks for themselves. For another, this practice also creates a deterrent for outside businesses to ever locate here because they believe 49 Whole (Hearing) - 040640, 040642 - 6/9/04 that they will not receive equal treatment by the City's and state's tax codes. And even those firms that might have considered relocating or expanding here will have an incentive to aggressively demand special treatment, even if they were not originally planning to do so. The Comcast Corporation is a wonderful asset to the City, and everyone in this room, including myself, would love to see them grow and prosper here in Philadelphia. I personally agree with Comcast's position that they are deserving of tax breaks in order to facilitate this growth, but granting tax breaks only to Comcast and other favorite firms only averts attention from the fundamental and unfortunate truth. If the cost of doing business here is too high for Comcast, it is too high for everyone. While targeted abatements are a good and useful policy when properly applied, such as in the improvement of blighted 50 Whole (Hearing) - 040640, 040642 - 6/9/04 areas, the repeated application of ad hoc and one-off targeted breaks, as consistent policy amounts to treating the symptom rather than the disease.
As more and more site specific or firm specific tax breaks and subsidies are granted, the final outcome of this process will be the effective creation of two different tax codes, one for preferred insiders, and then a more burdensome one for the rest of us. Granting profitability for specific firms via specific treatment, rather than creating a sound and fair economic environment for all is simply not a viable economic strategy for the long run. It is a strategy that favors older industries over newer ones, established companies over up and coming ones, the politically connected over ordinary citizens, as well as preferring insiders to outsiders and the big guy over the average Joe. Although I sincerely wish that 51 Whole (Hearing) - 040640, 040642 - 6/9/04 Comcast will become to Philadelphia what Coke is to Atlanta or Microsoft is to Seattle, most economists are very skeptical that the government is better than the marketplace in predicting winners and losers. It is not clear to me why Comcast should be specifically targeted for tax relief, at the expense of their competitors, such as Verizon. In the end, the greatest cost of these KOIZ-induced projects may actually be their opportunity cost. Because these projects will doubtless set back or even eliminate the other more widespread and fundamental tax reforms that are currently being considered, we will never know what might have been otherwise. We won't see what existing businesses might have expanded or how many other firms might have started up or chosen to relocate here, in response to more widespread tax relief. 52 Whole (Hearing) - 040640, 040642 - 6/9/04 Although the tax-paying public may be reassured by the fact that certain large employers have decided to stay in town, they will never know what potentially larger gains might have been realized for more equitable types of tax reform. Madam President and Council members, as you are probably aware, the Philadelphia region's retention rate for graduates of top schools is quite low, relative to our competitors in other cities. Speaking specifically for myself, I know that a substantially smaller percentage of graduates from the Wharton School decide to stay in Philadelphia, compared to our counterparts in top schools in cities like New York, Chicago, and San Francisco. In the course of my six years at Wharton, I have had the opportunity to talk with many of our MBA's about their job interview experiences and their ultimate career decision. As faculty at our school have 53 Whole (Hearing) - 040640, 040642 - 6/9/04 pointed out one, one phrase that is heard over and over from our MBA students is that Philadelphia is a place where commercial success is usually more dependent upon whom you know, rather than what you know. This should be very disconcerting. When the success of a business becomes more contingent upon your contacts in government, rather than your ability to deliver quality products at a competitive price, it is a major signal that your economy is not structured in a fair and equitable way. The fact that most independent entrepreneurs seem to decide to go elsewhere to pursue their dreams should then come as no real surprise. Madam President and Council members, I sincerely wish the Comcast Corporation and Liberty Property Trust nothing but the greatest of success in their future endeavors. But as a resident and taxpayer, I remain concerned that Philadelphia's future 54 Whole (Hearing) - 040640, 040642 - 6/9/04 not be solely reliant on the eventual future outcome of just one single company. As such, I would respectfully request that Council keep this in mind as it goes forward with its discussion of these important and pressing issues. And I thank you for the opportunity to be with you today.
Thank you very much for your testimony. Do we have anyone who has a question of this witness? Council members have a question or comment? (No response.)
Thank you again for your testimony. Michael Sklaroff is our next witness. Is Michael Sklaroff here?
Council President, thank you. We're going to defer to the Commerce Director, Stephanie Naidoff, and to the President of PIDC, Peter Longstreth, who will speak on behalf of the proposal with 55 Whole (Hearing) - 040640, 040642 - 6/9/04 respect to the produce terminal.
Whatever the -- Whichever the bill is, the KOIZ bill which I understand will cover the tract of land on Delaware Avenue and Oregon.
Yes, sir. Thank you. Tom Ralph. Is Tom Ralph here? While we're waiting for Tom Ralph, I understand there's a representative from Senator Fumo's office here. Is he present in the room? Would you please come forward, while we wait for our other 56 Whole (Hearing) - 040640, 040642 - 6/9/04 witnesses. Good evening. Oh, Councilwoman Krajewski.
Thank you, Madam Chair. I would like to ask that to be excused for a short time, but in the event my absence of the bill, I would like to be voted favorably upon the bill and all bills and amendments.
Good evening. Please identify yourself for the record.
Good evening, Council President. My name is Charles Hoffman, and I'm from Senator Vincent Fumo's office here in Philadelphia.
Just a moment, please. The noise level is much, much too high. 57 Whole (Hearing) - 040640, 040642 - 6/9/04 Thank you. Please proceed.
I wanted to read a statement on behalf of the Senator, who is unfortunately still in Harrisburg on legislative business. And it reads as follows: Thank you for giving me the opportunity to express my full support for two very important projects currently before City Council, both of which are in my Senatorial District. The proposed new Food Distribution Center, to be located in South Philadelphia at Columbus Boulevard and Oregon Avenue, and the proposed One Pennsylvania Plaza Office Tower at 17th and JFK. Both of these projects require Council approval for the designation of the Keystone Opportunity Improvement Zones or KOIZ's. And the designation for both projects is vital to our City's future. The Food Distribution Center is a South Philadelphia institution, as we all know which for the last 50 years has 58 Whole (Hearing) - 040640, 040642 - 6/9/04 literally been the nerve center of food and produce distribution for the greater Philadelphia region. It currently sits on acres on 6 Packer Avenue, contains approximately three 7 million square feet of food-related uses, 8 has 5,000 employees, and generates $2 9 billion in annual sales. 10 But the Food Distribution Center it 11 showing its age. With increasingly tighter 12 federal regulations governing and handling 13 the sale of produce, plus the sheer volume 14 of business that is transacted, the produce 15 market and its companion seafood market, 16 also located on the same property, 17 accommodate approximately 1500 trucks per 18 day. 19 It makes it critically important to 20 develop a modern new center to replace this 21 outdated facility. 22 And let's not forgot that we are not 23 alone in competing for the Food 24 Distribution Center. 25 Our neighbors in South Jersey are 59 Whole (Hearing) - 040640, 040642 - 6/9/04 openly courting the center, and they've had extended negotiations on the idea of developing an incentive package to move the entire operation to the Camden waterfront. As a result, we have been hard at work to secure the development of a modern new state-of-the-art hundred million dollar produce market on approximately 70 acres of land at Columbus Boulevard and Oregon Avenue. We have developed a proposal that will anchor the center and the seafood market in South Philadelphia for decades to come. It will be large enough to accommodate the growing needs of the center, and it will be built to meet or exceed federal requirements, while at the same time creating a more friendly environment for customers. This is a project that Philadelphia needs, if it is to continue to serve as the food and produce hub of the region. And the competition for this 60 Whole (Hearing) - 040640, 040642 - 6/9/04 facility makes it imperative that we act now to keep the center growing in our City. For these reasons, I urge the members of Council to improve the creation of a KOIZ for this site. Similarly, I strongly support the designation of the KOIZ for One Pennsylvania Plaza. This is a tremendous project. It will be the tallest office tower in Philadelphia, and the tallest building anywhere between New York and Chicago. And more important, it will become the world headquarters of Comcast Corporation, one of the fastest-growing companies in the country. Let me offer some perspective on this project. We're talking about a private investment of nearly half a billion dollars. It means securing Comcast's future for Philadelphia which could mean as many as 3,000 new, high-wage Comcast jobs over the next ten-plus years. 61 Whole (Hearing) - 040640, 040642 - 6/9/04 It will be a magnet for growth companies, particularly companies that do business with Comcast which means creating scores of additional new jobs in Philadelphia. And it increases tax revenues for both the City and the state from day one of the project, right on through to the end of the 15-year KOIZ.
This is a deal that every other city in America would do anything to get their hands on, and we have the chance to bring it home for Philadelphia. Comcast will be Philadelphia's Microsoft. We have heard criticisms of the project from other Center City building owners, in most cases owners who bought their buildings with an understanding of the fluctuation of the City's real estate market. They know that if they prevent One Pennsylvania Plaza from being built, they will enjoy greater profits. 62 Whole (Hearing) - 040640, 040642 - 6/9/04 These owners portray the prospect of public subsidies for One Pennsylvania Plaza as unfair competition, yet many of these very same buildings: Centre Square, Six Penn Center, One Franklin, Three Franklin Plaza, Liberty Two, all had the benefit of receiving significant public subsidies when they were built. Their argument about dramatic increases in vacancy rates are mostly unsupported speculation. We must make our judgments in these matters on the basis of the public interest, not the interest of a few. In this case, a signature new office space that moves Philadelphia's office market into the 21st Century, and helps us keep a major national Fortune 100 corporation headquartered here is in the public interest. We have the chance to build one for the future, both in South Philadelphia with the Food Distribution Center, and in Center City with One Pennsylvania Plaza. 63 Whole (Hearing) - 040640, 040642 - 6/9/04 These are Philadelphia institutions, great Philadelphia public citizens, and most important these projects mean jobs, jobs and more jobs for our people. Let's capitalize on the opportunity to make Philadelphia a better, more competitive City. For these reasons, I urge you to approve Council Bill 040642. Thank you very much.
Thank you. Are there any questions? (No response.)
Please identify yourself for the record and proceed with your testimony.
My name is Thomas Ralph. I'm a partner in the firm of Dechert LLP in Philadelphia. To my left is Dan O'Donnell also a 64 Whole (Hearing) - 040640, 040642 - 6/9/04 partner in the firm of Dechert in Philadelphia. And to my right is Dale Heist, who's a partner in the intellectual property firm of Woodcock Washburn. And you might ask why we're here. We are here not to talk about --
Excuse me. Mr. Ralph, I think your testimony is just being distributed. So if you don't mind waiting just a minute, please.
Thank you, Madam President. You may ask why we are here. We're not here to talk about the two KOIZ's that have been proposed and mentioned in the prior testimony. We're here because in 2003 our firm, as did Woodcock Washburn, entered into a binding lease with Brandywine Realty Partners for nine floors in the new Cira Center Building now under construction in 65 Whole (Hearing) - 040640, 040642 - 6/9/04 the KOIZ, the Keystone Opportunity Improvement Zone, adjacent to 30th Street Station in Philadelphia. Our lease there is for years, and 6 we are scheduled to move in there at the 7 end of 2005. 8 Now, the amendments that you have 9 before you, as currently drafted, would 10 change the present KOIZ ordinance so that 11 it would take away the KOIZ tax abatement 12 benefits that were the law when Dechert and 13 Woodcock signed their leases last year. 14 We believe that result would be 15 fundamentally unfair, would constitute a violation of both state and Federal law, and would be bad public policy for the City. We are here today to urge you not to support the amendments, to the extent that they would produce those results. Now, who is Dechert? Dechert was founded in Philadelphia over 130 years ago. We provide jobs for more than 700 people in the City of Philadelphia, and we have more 66 Whole (Hearing) - 040640, 040642 - 6/9/04 lawyers here than any other firm. Our personnel reside in the City, of course, and all of the surrounding counties. We are a good employer. We treat our people fairly. We contribute to the community. We are proud of our record of public service. In my lifetime Dechert has produced a Mayor of Philadelphia; two United States Senators, both of whom came from Philadelphia; many judges; and many cabinet members, and other ranking officials at all levels of state, federal and City government. We are also a leader in providing pro bono services for the poor. In Philadelphia, we serve all of the major pro bono referral agencies, including Philadelphia Volunteer for the Indigent Program, the Homeless Advocacy Project, and Philadelphia Volunteer Lawyers for the Arts. We contribute significantly to Community Legal Services. Our lawyers and 67 Whole (Hearing) - 040640, 040642 - 6/9/04 staff serve on numerous civic, charitable and educational boards, and play a constructive role in the life of our community. Today Dechert is a worldwide firm with over 1,600 people in offices, 8 including five in Europe. We have become 9 one of the largest law firms in the United 10 States. 11 But most importantly, we have chosen 12 to make Philadelphia our headquarters and 13 the support center for our firm worldwide. 14 Our decision to move to the Cira 15 Center and to make a financial commitment 16 of $175 million in our lease demonstrates 17 our continuing belief in the City. Let me talk a little bit about the Cira Center. As you all know, it will be located in the 30th Street Station area. You can see the cranes out there today. It's now under construction. It's across the Schuylkill River from our present space in Center City in the Bell Atlantic Tower. 68 Whole (Hearing) - 040640, 040642 - 6/9/04 Since at least the 1970's, when I first knew about it, that area was talked about as a possible site for the 1976 Bicentennial Celebration, and later as a possible site for a baseball stadium for the Phillies. And since that date, the development of that rail yard, the rail yard adjacent to 30th Street Station, has been recognized as an important part of the future of Philadelphia. Development of the area is key to uniting University City and West Philadelphia to Center City. And that would obviously result in a more economically vital Philadelphia. But I point out that despite many great ideas and many plans and many hopes, no significant development took place in that area, none, until Cira Center came along. The Cira Center site was designated as a KOEZ in 2001, under a then existing state program originally enacted in 1998.
69 Whole (Hearing) - 040640, 040642 - 6/9/04 Dechert and Woodcock had nothing to do with the designation of the Cira site as eligible for tax abatements. At the time the Cira site was designated, we at Dechert had not even started to look for new space in Philadelphia because we wouldn't need it until the very end of 2005, the beginning of 2006. And, in fact, the tax benefits that have been granted to the Cira site did not make it an instant success. In its search for a tenant willing to commit to the financial obligations necessary to justify the start of construction there, the developer Brandywine contacted more than 3,300 prospective tenants before Dechert ever had discussions with Brandywine. None of those 3,300 prospects was willing to move there or to make the financial commitment necessary to give the redevelopment of that area a chance to become reality. 70 Whole (Hearing) - 040640, 040642 - 6/9/04 And why was that? And that was because the Cira Center was going to be new construction, and therefore expensive. It wasn't downtown, and it carries the significant risk that the amenities that people like to have near where they work: Places to have lunch, places to shop, might never develop there. But Dechert and Woodcock made the commitment. We took the risk and made that commitment. How did we come to do that? Historically our offices have been in Center City east of the Schuylkill River. When we began to consider our space needs in 2002, we focused our efforts on Center City. And like most businesses our size, we retained a firm of real estate experts to help us conduct that search. In the course of that search, those experts introduced the idea of a possible move to Cira Center as an alternative to other sites. We were initially skeptical, but 71 Whole (Hearing) - 040640, 040642 - 6/9/04 they explained to us that there were preexisting -- and I quote from the statute -- binding and irrevocable tax abatements that applied to the site because of its prior designation as a KOIZ. And they explained to us that although the rent at the newly constructed center would be higher, and in fact 50 percent higher, than we would have had to pay in other downtown locations, and although the Cira Center site was in the ways I have mentioned a less desirable location for us, the tax abatements, we were told, might offset those disadvantages. And after much discussion and internal debate, we decided to select that site, relying on the preexisting quote, and I quote again, binding and non-revocable tax abatements. Before we did that, however, we obtained a private letter ruling from the Commonwealth's Department of Community and Economic Development, the DCED. And that 72 Whole (Hearing) - 040640, 040642 - 6/9/04 is the only governmental body with the power to make decisions as to qualification for KOIZ benefits. And they gave us a letter stating that we would qualify for those tax abatements. We are submitting a copy of that letter to you with this statement. The next to last paragraph of the DCED's ruling said to us -- and I point out this was given to us during the present administration in Harrisburg -- Dechert may rely on this ruling, notwithstanding a subsequent change in the department's position, whether arising from a change in the law, the promulgation of inconsistent regulations, or otherwise. On this basis, I and my partners made a financial commitment of $175 million, and Dechert signed a 15-year lease for space in the Cira Center. The ordinance you are considering today, with the language in it dealing with qualifications and tax matters, would retroactively reduce or eliminate the tax 73 Whole (Hearing) - 040640, 040642 - 6/9/04 abatement provisions on which we relied. It would change the rules, after we were induced to rely on them. And to do this we think would be fundamentally unfair, illegal and unconstitutional. It risks having the City's and the Commonwealth's entire KOZ development initiative struck down.
And in addition, adoption of these amendments, with their retroactive and taking aspects will, we believe, have a significantly adverse effect on the important efforts under way to attract business to the City. It will send a chilling message to businesses considering expanding in or relocating to Philadelphia. And that message would be, you cannot rely on promises made to induce you to invest in this City. Those binding promises can be broken for political expediency. That is not the message that Philadelphians should be sending. It is precisely for these reasons that so many 74 Whole (Hearing) - 040640, 040642 - 6/9/04 members of the Pennsylvania legislature and, particularly in the Senate Finance Committee hearings on KOIZ issues that were held yesterday, have been outspoken in opposing any amendments to the KOIZ rules that would change those rules after the Cira Center tenants relied on them. The proposed amendments also address a number of important development issues, as I earlier mentioned, that do not directly affect us, such as the creation of the two new KOIZ's. We have no position on those issues, except to say that what we have relied upon to commit to an existing project, the Cira Center, should not be taken away in order to broker political support for new projects, no matter how worthy they may be. Let me close by identifying more specifically the aspects of this ordinance 22 to which we object. The sponsors of the amendments have used a number of devices to attempt to undo what has already been done. These would 75 Whole (Hearing) - 040640, 040642 - 6/9/04 include a provision that would eliminate the abatement for net profits tax except for actual, quote, residents of a zone, and make other changes that the sponsors evidently believe will eliminate the net profits tax abatement for partnerships such as Dechert and Woodcock Washburn. But of course, both current state law and the current City ordinance on which we relied, specifically prohibit the imposition of a residency requirement. And current state law on which we relied provides that the net profits tax must be abated in a zone. The second aspect, device that's been used to affect us adversely, are provisions that would change the KOIZ eligibility requirements for tenants and establish a second local level of review of eligibility, even for tenants such as Dechert and Woodcock, who have signed leases based on the existing rules, and have received binding rulings from the DCED, the only agency, I again point out, 76 Whole (Hearing) - 040640, 040642 - 6/9/04 the only agency with authority under the law to make those determinations. As applied to Dechert and Woodcock these devices are intended to accomplish the same retroactive result. All of them, as applied to businesses like ours, our firms, who entered into binding leases on the basis of existing law, these leases and with leases that demonstrate a long-term commitment to the City of Philadelphia, all of these devices are equally unfair, illegal and bad policy. We think that they do not deserve your support. We urge you not to adopt the amendments in their present form. Thank you for your time and attention.
Thank you very much, Mr. Ralph. I think you have presented a very clear case. And we appreciate your going into such great detail. Thank you so much. The Chair recognizes Councilman 77 Whole (Hearing) - 040640, 040642 - 6/9/04 Mariano.
Thank you, Madam President. I need to leave the chambers for Council business. I'd like to be recorded as voting yes for all bills and amendments today.
Leave will be granted. The Chair recognizes Councilman Nutter. Councilman Nutter.
Good afternoon. I wanted to ask you a couple questions with regard to your testimony. Let's go to .
The first issue that you raised, is that covered by Section 24 19-3203, sub 4, in the bill on Page two?
Well, you'll have to let 78 Whole (Hearing) - 040640, 040642 - 6/9/04 me look at the bill, sir. Would you repeat that, sir, for me, the section number?
Subject -- The section 8 says, subject to the conditions set forth in Section 19-320... and elsewhere.
A taxpayer resident in this zone is exempt -- No. It -- It actually -- That's not the only place where the language defines -- requiring residency is set forth in the statute, sir.
I'm trying to understand the two items that you raised and where --
-- those provisions are specifically in the bill in front of us. Let's talk about the first 79 Whole (Hearing) - 040640, 040642 - 6/9/04 one.
When you read the bill, it's clear that the word taxpayer is being deleted, and resident of the zone is exempt from has been inserted here. What is... From your reading or understanding, what is the effect of that language, as compared to what's being deleted?
I believe that the... that the effect of that is to eliminate the abatement of the net -- of the tax liability, based on net profits, to eliminate the abatement for anyone but a resident of the zone.
Okay. And I guess my question there is, how would a person be a resident of the zone? Don't these... Isn't there commercial space?