PHILADELPHIA | Highrise Development Thread IX

[relnahe]

Originally Posted by PhiLaw

Just to spicen things up on this lovely Monday afternoon, check out Inga's article slamming the 10-year abatement.

http://articles.philly.com/2014-09-13/entertainment/53855414_1_families-new-residents-net-gain

Inga is the Stephen A. Smith of architecture. No credentials and just throws feces on the wall to see what can causes the biggest fuss.

[sayitaintso]

Originally Posted by PhiLaw

Just to spicen things up on this lovely Monday afternoon, check out Inga's article slamming the 10-year abatement.

http://articles.philly.com/2014-09-13/entertainment/53855414_1_families-new-residents-net-gain

Inga should stick to subjects she understands. Clearly economics isn't one of them. Simple math tells us that the abatements don't cost anything b/c 100% of 0 is 0 which is exactly what tax the city would be collecting on all those unbuilt homes had the abatements never existed. And now more and more come online and pay taxes each year. Ohh the deliberate spin by her and those like her make me so....

[tsarstruck]

Originally Posted by sayitaintso

Inga should stick to subjects she understands. Clearly economics isn't one of them. Simple math tells us that the abatements don't cost anything b/c 100% of 0 is 0 which is exactly what tax the city would be collecting on all those unbuilt homes had the abatements never existed. And now more and more come online and pay taxes each year. Ohh the deliberate spin by her and those like her make me so....

I hate to be defending Inga, but you're really calling the kettle black there. 100% of 0? C'mon, now. Can anyone with a straight face say that *no* new housing would have been built in the city if the abatement hadn't existed? At least the deeply flawed Econosult study uses the differential of new housing starts in the city versus the suburbs to derive the effect of the abatement. In reality: no one knows or has seriously studied how much the abatement has driven residential real estate development nor how much (if any) money the city is leaving on the table with the abatement structured as it is currently.

[apetrella802]

Originally Posted by tsarstruck

I hate to be defending Inga, but you're really calling the kettle black there. 100% of 0? C'mon, now. Can anyone with a straight face say that *no* new housing would have been built in the city if the abatement hadn't existed? At least the deeply flawed Econosult study uses the differential of new housing starts in the city versus the suburbs to derive the effect of the abatement. In reality: no one knows or has seriously studied how much the abatement has driven residential real estate development nor how much (if any) money the city is leaving on the table with the abatement structured as it is currently.

The more you tax something the less you get of it, period!!!

[bucks native]

Penn expands homeownership incentive program for its workers

Sep 15, 2014, 3:10pm EDT

http://www.bizjournals.com/philadelphia/.../penn-expands-homeownership-program.html

[Flyers2001]

Originally Posted by AbortedWalrus

The reason this is exciting to me is because this is where I see the future of all medicine, and it's awesome to see the UPenn is a leader in the field. I think it's good news for the future of the medical industry in the city in general.

Not to mention the continuous need for Penn and CHOP to expand. This is big news because many of the offices at Penn Tower were expected to move over to PCAM South.

Hopefully this speeds up the time table to develop something on the extra parcel at 3600 Civic.

**Also an update on PCAM south is it is moving at a snails pace. There has been many problems with syncing the new area's with existing systems. At least once a week the alarms go off and fire trucks show up to be turned away. The building no doubt is state of the art and its a blessing to have it here in Philly.

[skyscraper]

Originally Posted by sayitaintso

Inga should stick to subjects she understands. Clearly economics isn't one of them.

What subject *does* she understand?

[1487]

Originally Posted by apetrella802

The more you tax something the less you get of it, period!!!

The real estate tax is an existing tax. Its not a matter of creating a tax that didnt exist or raising a tax. The abatement removes a tax that already applies to other properties. The abatement has helped spur construction, but its not the sole reason for new construction in the city. Remember, the abatement does nothing to lower the cost for the developer. What it does is serve as a marketing tool for the developer to sell their pricey housing.

[PhiLaw]

Originally Posted by 1487

The real estate tax is an existing tax. Its not a matter of creating a tax that didnt exist or raising a tax. The abatement removes a tax that already applies to other properties. The abatement has helped spur construction, but its not the sole reason for new construction in the city. Remember, the abatement does nothing to lower the cost for the developer. What it does is serve as a marketing tool for the developer to sell their pricey housing.

The abatement indeed does not lower the cost for the developer. However, the abatement lowers the cost for the consumer/buyer. This in practical effect lowers the cost for the developer. It also raises demand for housing/new construction. Without the abatement, you would not see the sustainable growth in various neighborhoods adjacent to Center City that we've seen the past decade or so.

The City of Philadelphia has realized a net fiscal tax gain from the abatement. Net revenue from other sources (wage tax, sales tax) has more than offset any alleged decline in property tax revenue.

Additionally, a recently developed and abated property brings in over 500% more property tax revenue for the city than it did when the particular site sat undeveloped.

All-in-all, for every $1 in cash the City foregoes due to the abatement, it receives $2 in return.

Thus, the City made more revenue and effectuated an increase in its population/affluent demographic base.

Let facts be submitted:

https://www.fels.upenn.edu/sites/www.fels.upenn.edu/files/abatement_fiscal_analysis.pdf

[PhiLaw]

Royal Theater Development Plans Revealed:

http://philly.curbed.com/archives/2014/0...al-theater-remodeling-plans-revealed.php

[PhillySteaks]

I believe it's properly pronounced the "Debella-ware Valley"

http://www.bizjournals.com/philadelphia/...-of-the-term-delaware-valley-say-51.html

[McBane]

I didn't read the tax abatement article but just to play devil's advocate here:

When developers gush about the necessity of the tax abatement, do you really believe them? Of course, they have to come out in support of the abatement but there's really no way to tell what effect it would have on projects. Would some or all be outright cancelled? Use cheaper materials to balance things out? Scale back projects due to anticipated less demand due to no abatement? Or possibly, could they say, F it, rich people still want to live downtown and $10k/yr in taxes won't discourage many buyers.

Wouldn't we all prefer a situation in which the tax abatement ended, the city didn't "lose out" on the tax revenue, and it DID NOT slow down demand?

I'm not saying that is the case, but perhaps some people (Inga?) are more bullish on the city than others and don't think that the tax break is not the main driver for the city's resurgence?

[Jelly Roll]

Originally Posted by McBane

I didn't read the tax abatement article but just to play devil's advocate here:

When developers gush about the necessity of the tax abatement, do you really believe them? Of course, they have to come out in support of the abatement but there's really no way to tell what effect it would have on projects. Would some or all be outright cancelled? Use cheaper materials to balance things out? Scale back projects due to anticipated less demand due to no abatement? Or possibly, could they say, F it, rich people still want to live downtown and $10k/yr in taxes won't discourage many buyers.

Wouldn't we all prefer a situation in which the tax abatement ended, the city didn't "lose out" on the tax revenue, and it DID NOT slow down demand?

I'm not saying that is the case, but perhaps some people (Inga?) are more bullish on the city than others and don't think that the tax break is not the main driver for the city's resurgence?

The impact the the tax abatement makes when applying for a mortgage is huge. What percentage of new construction buyers have mortgages? If that percentage is low I would be inclined to believe the city might be past the period when it was needed but if the majority of buyers are financing their purchases then I would think it is probably a significant factor in the growth of housing starts in the city.

[VikingDutchman]

Maybe I'm alone here, but I don't get why this is being reported around the internet as an attack on the abatement.

Yes there's a comment in there related thereto, but the article is mostly a fairly sensible piece on how cities are failing to plan ahead and make investments for families.

Which I think is a point that needs to be made loudly and repeatedly wherever possible. Too many cities are planning for "young people" when they should be planning for "Millennials". In fifteen years, Millennials will probably still be the largest generation in American history, but only the the tail end of them will still be young.

We can quibble about where individual policies (such as the abatement) fit into that framework, and I am myself pro-abatement (though if I were Exalted All Powerful God-Emperor of Philadelphia there are alternatives I'd prefer), but the general point is the one I hope people take the time to pull out of Inga's piece.

[1487]

Originally Posted by PhiLaw

The abatement indeed does not lower the cost for the developer. However, the abatement lowers the cost for the consumer/buyer. This in practical effect lowers the cost for the developer. It also raises demand for housing/new construction. Without the abatement, you would not see the sustainable growth in various neighborhoods adjacent to Center City that we've seen the past decade or so.

The City of Philadelphia has realized a net fiscal tax gain from the abatement. Net revenue from other sources (wage tax, sales tax) has more than offset any alleged decline in property tax revenue.

Additionally, a recently developed and abated property brings in over 500% more property tax revenue for the city than it did when the particular site sat undeveloped.

All-in-all, for every $1 in cash the City foregoes due to the abatement, it receives $2 in return.

Thus, the City made more revenue and effectuated an increase in its population/affluent demographic base.

Let facts be submitted:

https://www.fels.upenn.edu/sites/www.fels.upenn.edu/files/abatement_fiscal_analysis.pdf

This doesn't mean it cant or wont be modified. 1997 is a long way from 2014 in terms of the city's appeal and the level of subsidy needed to attract development. If its as simple as abating taxes in exchange for double the revenue the city might as well abate every property.

[1487]

Originally Posted by McBane

I didn't read the tax abatement article but just to play devil's advocate here:

When developers gush about the necessity of the tax abatement, do you really believe them? Of course, they have to come out in support of the abatement but there's really no way to tell what effect it would have on projects. Would some or all be outright cancelled? Use cheaper materials to balance things out? Scale back projects due to anticipated less demand due to no abatement? Or possibly, could they say, F it, rich people still want to live downtown and $10k/yr in taxes won't discourage many buyers.

Wouldn't we all prefer a situation in which the tax abatement ended, the city didn't "lose out" on the tax revenue, and it DID NOT slow down demand?

I'm not saying that is the case, but perhaps some people (Inga?) are more bullish on the city than others and don't think that the tax break is not the main driver for the city's resurgence?

I dont buy the argument at all. If you think about it, what the developers are saying is that they would have to lower the prices on the homes if there was no abatement so having it allows them to price the homes a a premium to reflect the fact that the buyer is getting a deal on the taxes. The argument that developers makes about needing the abatement in order to justify building makes no sense.

[PhiLaw]

Originally Posted by 1487

This doesn't mean it cant or wont be modified. 1997 is a long way from 2014 in terms of the city's appeal and the level of subsidy needed to attract development. If its as simple as abating taxes in exchange for double the revenue the city might as well abate every property.

I'm no anarcho-capitalist but I cannot for the life of me understand how you can characterize the City not taxing you as a "subsidy." Did the street mugger who decided to pass me up accord me a financial benefit?

[MSFHQ]

Northern liberties used to be a dump, now it's thriving in part because of these abatements helping people to afford and buy in Philly. The city has a high wage tax and unfriendly business practices. Why on earth would we want to make it more costly for people to buy in this city.

Also, property tax it just on part of it. People who live in the city, but work outside will now be subject to the wage tax. They'll pay the extra 2% sales tax. They will eat out in then city, create a vibrant community and perpetuate the cycle of development.

I'm also tired to worshipping at the alter of children. Philly schools suck because they are unsafe and the parts either aren't able to participate in their child's education or they don't care. The schools in the city receive plenty of money, which is spent in ways I personally disagree with.

IMO, the city is improving because it is becoming more affluent. If you want to send more money to the schools then raise that money in ways that do not impact new affluent buys. I support the tax on cigarettes or soda, but making it more expensive to own in this city is just silly.

[tsarstruck]

Originally Posted by PhiLaw

All-in-all, for every $1 in cash the City foregoes due to the abatement, it receives $2 in return.

Thus, the City made more revenue and effectuated an increase in its population/affluent demographic base.

Let facts be submitted:

https://www.fels.upenn.edu/sites/www.fels.upenn.edu/files/abatement_fiscal_analysis.pdf

I should have bit my tongue, and I will now, but that study is to put it lightly "problematic." Regardless, this isn't the proper forum to argue back and forth about the abatement, so I won't go into it further other than to say that I most certainly don't view any of its conclusions as facts. There are a LOT of very, very optimistic assumptions in both of the main Gillen studies.

[PhillySteaks]

Originally Posted by tsarstruck

I should have bit my tongue, and I will now, but that study is to put it lightly "problematic." Regardless, this isn't the proper forum to argue back and forth about the abatement, so I won't go into it further other than to say that I most certainly don't view any of its conclusions as facts. There are a LOT of very, very optimistic assumptions in both of the main Gillen studies.

Assumptions are part of every financial projection model. That is why it is called a model. You tweak assumptions to understand the relative sensitivity. In this case, perhaps bullish assumptions were decided upon based on growth factors and other economic indicators.

In this case, I'm assuming assumptions were derived from available market data, as well a range in values. I read the study, it's not all that bad.