Philly City Council amends 10-year tax abatement bill after Mayor Jim Kenney’s threat to block it

After Mayor Jim Kenney threatened to block pending legislation to curtail the city’s controversial 10-year tax abatement Thursday, City Council acceded to the mayor’s wishes and changed the bill.

Council President Darrell L. Clarke framed the move, which would delay the date that the legislation takes effect, as a compromise with the mayor and developers, who said that changing the abatement in July could derail construction projects already underway.

Due to a timing quirk, with the end of Council’s four-year term approaching, the bill would not be able to become law without the mayor’s signature. The maneuver he threatened was a pocket veto, in which the executive can kill a bill by inaction at the end of the Council term. With the amendment in place, it is expected to cruise to final passage next week.

Clarke said that he compromised because it was important to pass the bill, which is expected to bring in $265 million in additional revenue for the city and School District in the next decade.

“Our ability to move the needle forward and to get the necessary revenue on the table for children was of utmost importance,” he said.

The amendment moves the implementation date of the bill from July to Dec. 31, 2020. Councilwoman Helen Gym was the only member to vote against it.

“It’s embarrassing for our mayor and city to freak out about tax subsidy reform while residents are being displaced and schools crumble,” Gym tweeted Thursday morning.

After Thursday’s Council hearing, Gym said that she would probably vote for the bill to pass next week, but noted she would still need to “review it.”

The mayor and developers had pushed for an even later effective date of July 2021.

Council was not swayed earlier this week by pleas to move the date. They unanimously voted Tuesday to advance the bill, which would reduce the tax abatement for new residential construction by 10 percentage points each year it is in effect. Under the abatement, which has been in effect for two decades, property owners pay no taxes on the value of new construction or rehabilitation for a decade. They still pay taxes on the value of the land underneath their buildings.

Kenney then made his threat Thursday morning in a letter to Clarke that marked a last-ditch effort to address concern from developers that the legislation could have a negative impact on construction projects planned for 2020.

“Please know that if Council were to pass this bill as currently proposed I will not sign it, and it will not become law,” Kenney wrote in the letter, obtained by The Inquirer. “If that were to happen, I look forward to working with you and the other members of the new Council on this issue in 2020.”

Because a new Council term begins in January and Council is set to pass the bill so late in its current session, all bills not signed by the mayor this month die. Supporters of the abatement have said they would rather compromise on legislation now than wait for a new Council session. Four Council seats are turning over next month. Two of the newcomers have said they support abolishing the abatement.

» READ MORE: Philly City Council is about to see some big changes

Gym said Thursday that discussion of the abatement, other tax subsidies, and school funding would continue in Council’s next term.

Asked whether there would be a push to repeal the tax abatement, Gym said, “We will see how things evolve.”

Council members have said it is time to change the program because Philadelphia’s economy is doing better than it was when the incentive was created. Opponents of the abatement have urged Council to eliminate it, blaming it for accelerating gentrification and driving economic inequality in the city.

“If we want to make this change, we must ensure that we get it right,” Kenney wrote.

Kenney said the bill as previously written could also bring a “deluge of building permit requests" between now and July that the Department of Licenses and Inspections would not be prepared to handle.

Councilman Allan Domb, a real estate broker, said he supported Kenney’s stance. He called it unfair to change the tax break when it would impact construction projects already in the pipeline.

“I think he’s right," Domb said, “and I’m glad to see he’s taken a stand.”