Updates: Philly's top office landlord seeks tax reform, says Council drives off jobs

Brandywine Realty Trust CEO Jerry Sweeney looks out on the city while on a tour of the new Cira Green parking garage green roof and the FMC Tower construction in West Philadelphia.

(Update re Council position on tax reform below) Add Jerry Sweeney, CEO at Brandywine Realty Trust, which owns most of the high-rise offices in Center City and University City, to the business people who say Philadelphia's progressive wage and hiring initatives are doing more harm than good to the city's slow-grow workforce. (See my column in Sunday's Inquirer.) 

Council's resolution blocking employers from asking workers their past pay
"had the right motivation: to increase awareness of wage equity," says Sweeney. But Brandywine's own  HR pros found the Philly law "fraught with with both practical implementation ambiguities and significant risk for future legal actions or non-hired employee claims ... I wish Council took a more pragmatic approach" by talking to HR and job-search professionals, he added.

"Philadelphia was not attacking the overriding  problem. That problem is we don't have enough jobs."

(See State of Center City report from Center City District, shows Philly trailing other major cities and its own suburbs, while office rents here remain stuck at 1990s levels, a sign of weak demand. Compare to New York City, Boston, or Washington, D.C.)

"That problem is  caused by an arcane tax structure that stifles companies from growing in the city and prevents companies from moving into the city," Sweeney continues. "There is already a 20 to 30% [higher expense] premium for companies to do business in the city of Philadelphia versus other places in the region.

"That's why our job growth has been anemic compared to other places in the country and why, even in these stronger economic times, we have the lowest job growth rate among the 25 major cities in the United States.

"My hope is that the city would finally have the chutzpah to substantively  address its adversarial tax structure to one that encourages job growth, company formation/retention and growing public revenues through economic expansion, not by overtaxing a shrinking job base

"On a daily basis our city has almost 40% of all residents commuting outside the city to work — an unconscionably high percentage and a true harbinger of future job loss," since workers tend to migrate closer to jobs."

(Lauren Gilchrist, research director at commercial real estate agency JLL's Philly office, confirms city out-commuters are 39%, citing U.S. Census. The data shows that's not unusual vs. other cities: Philadelphians commute out to suburban and other-metro jobs about the same as in San Francisco, Seattle or Chicago, less than Detroit, L.A. or Boston, more than New York, Houston or D.C. Out-commutes haven't been growing faster here than elsewhere.)

Sweeney again: "A disciplined public policy approach to grow our job base  would send the business community and our neighborhoods exactly the right message that Philadelphia is open for business and welcomes new jobs.

"Legislation like this, while well intended, just adds to the morass of complicating public policy that complicates our efforts to grow jobs." (Emphases added)

UPDATE 1/31: While it agrees commercial real estate tax rates ought to be "decoupled" from homeowners, City Council is on record opposing the state tax bill Sweeney backs (HB 1871) because it ties higher commercial-building taxes to specific tax cuts in other areas, which to Philadelphia elected officials looks like sharp, unfair limits on the city's ability to target its own spending.

Council members believe the city is attractive to developers and many employers, and cite last year's Pew study arguing that it's increasingly competitive with suburban counties when viewed by total tax load. More on that from my colleague Caitlin McCabe here. 

 

ALSO: Center City District/Central Philadelphia Development Corp. today posted this report - Philadelphia: An Incomplete Revival - offering "an explanation of how and why the city has lagged in job growth and has one of the highest urban poverty rates," despite "vibrant growth" in Center City and the Penn-Drexel area. 

The report blames "Philadelphia’s nearly unique reliance on wage and business taxes to finance the lion’s share of local government." Those taxes "pushed residents to the suburbs, shortchanged schools and resulted in the highest poverty rate among the nation’s 25 most populous counties," even as other East Coast cities -- Boston, Washington, New York -- "forged ahead" and now have more jobs than in 1970, unlike Philadelphia.

The report backs tax reform, as contained in last year's state House Bill 1871, which will allow the city to start charging higher property taxes on office buildings and other commercial property. 

Though higher commercial property taxes would seem to damage Brandywine Realty and other big landlords, Sweeney and other backers say that, given the city's low office rents -- stuck at 1990s levels -- higher commercial-property taxes would be worth paying if it would allow the city to cut business sales, profits and wage taxes.

The state bill, if passed a second time (amending the state constitution), will allow Philadelphia to change its tax structure. According to the District report, "the goal is to get the wage tax below 3% for the first time in 50 years and cut the net income portion of the Business Income and Receipts Tax (BIRT) in half. 

"This can lower barriers to employment growth, reduce poverty and help Philadelphia participate in the more dynamic job growth that most major cities already are enjoying."