Ten Year Tax Abatement

There is a lot of confusion about the tax abatement program is and what it does.

Recipients of the abatement do pay taxes. The abatement foregoes taxes on improvements for ten years.  In other words, new residents still pay taxes on the value of the land for new construction and on the building if it’s been converted or rehabilitated.  Often times, these taxes have gone unpaid for decades because of negligent and absentee landowners.

The abatement does spur new construction. Because of the abatement, a new resident moves in, a vacant lot or empty building becomes more attractive and the neighborhood safer and more desirable.

The abatement does not cost the City millions of dollars.  The City foregoes taxes on property improvements for 10 years.  With or without the abatement, these taxes never would have been collected because the property never would have been built.  But with the new residents, the City collects real estate transfer taxes, wage taxes and sales taxes.  The abatement actually makes the City money. 

The abatement does not increase property taxes for current residents.  However, neighborhoods have definitely changed and have caused property values to go up across the City.  I’m actively working on the issue of gentrification with other Councilmembers and look forward to protecting our long-time residents.

Recipients of the abatement do not jump from one tax-abated property to another.  Those that have made this claim provide no proof and no documentation.  This is a myth.

When I first took office, I was dismayed to see our city struggling to attract new residents and new construction projects.  I have always believed a vibrant city continues to grow and change.  In the mid-nineties, while we were beginning to see signs of life, we still suffered from dozens of empty factories, vacant lots and an empty waterfront.

In 1997, I began to discuss the problem with several local developers.  Because of the cost of materials, union labor, the City’s refusal to cover infrastructure costs and a depressed market, it was impossible to make a profit on new projects or even conversions of some older buildings.  Through these discussions, I wondered if an incentive would spur the market and help attract new residents to Philadelphia.

Since the mid-seventies, the City had offered a three-year tax abatement on new construction.  I wondered if we expanded that program to ten years if it would provide the incentive we were looking for.  I introduced the necessary legislation the same year and it was adopted.  More importantly, it worked. 

Old office buildings in Center City began to be converted to condominiums.  Old factories became lofts.  The program was expanded to cover all new construction and vacant lots became row homes.  Because of the new residents, restaurants, theatres and shops soon followed.  Empty streets became crowded.  Neighborhoods were transformed.

With the help of the abatement, we were able to slow our population decrease.  We attracted new residents that paid the city wage tax, paid sales tax when shopping in local stores, and helped create the renaissance our city is now enjoying.