For Immediate Release
May 27, 2015
Contact: Brian Dries
Butkovitz’ Analysis: Proposed Gallery Renovation Would Generate $194 Million
in New Tax Revenue
City Controller examined 20-year tax subsidy that would benefit City,
Pension & School District
PHILADELPHIA – City Controller Alan Butkovitz today released an economic analysis of the proposed Market East Gallery mall renovation that indicates as much as $194 million in new tax revenue would be generated over 20 years, if the City approved a Tax Increment Financing (TIF) plan for the developers.
By allowing the developers, the Pennsylvania Real Estate Investment Trust and Macerich, to enter into a TIF, it would allow them to revamp the mall, creating more jobs and boosting overall economic growth. The TIF acts as a loan that is repaid by projected future tax increases, which the City is not liable for even if the payments do not meet projections.
In return, the City would gain new revenues from Sales, Wage, Use and Occupancy and Liquor taxes. Over the period of the TIF, these tax increases would provide additional revenues for the following:
|School District of Philadelphia
|Sales, Liquor, Use & Occupancy
|City General Fund
|Philadelphia Pension Fund
|Sales (after School District portion
“This plan would grow our local economy and it makes economic sense for the taxpayers of Philadelphia,” said Butkovitz. “It would provide much-needed additional revenues for our schools and help reduce our pension liability.”
According to the Philadelphia Industrial Development Corporation, the Gallery mall renovation is expected to increase occupancy rates from the current 60 percent to 93 percent. If the City continued to maintain the Gallery mall at its current level and provided no TIF for the renovation, it would generate $56 million in tax revenues over the 20 years, instead of $250 million with the TIF.
“This is a zero-risk investment for the City that could generate $194 million in new tax revenues,” said Butkovitz. “Similar financing projects in Philadelphia have all generated more tax revenue after the TIF than before it.”
In addition, the renovated mall would create 3,950 permanent jobs, which 1,400 will be new jobs. There will be a commitment to 25 to 30 percent minority-owned inclusion among tenants of the new mall. However, the current TIF proposal does not address the City’s requirement that recipients of City financial assistance adhere to minimum wage and benefit standards, as long as they employ at least 25 workers.
“City Council needs to insist on including language in the proposal that would uphold the City Code relating to job quality,” said Butkovitz. “It is important that this proposed development provide not only new employment opportunities but offer good paying jobs.”
Tax Increment Financing (TIF): As required by &sect;17-1100 of the Philadelphia Code, the Office of the Philadelphia Controller has reviewed the analysis performed by the Philadelphia Industrial Development Corporation (PIDC) of the proposed “Market East Tax Increment Financing (TIF) District,” as put forth in Bill No. 150380. In Philadelphia, TIFs are a form of private bond issued by the Philadelphia Authority for Industrial Development (PAID), a subsidiary of PIDC; TIFs must be approved by City Council. At present there are about 12 TIF districts in Philadelphia.