How should the developer of a luxury apartment complex compensate the city for reneging on an agreement to set aside 25 apartments for low-income Philadelphians?
City housing advocates think the only fair solution is for PMC Property Group to pay a penalty to Philadelphia's Housing Trust Fund, to the tune of $5 million, for breaking the agreement, which earned its apartment project a 48-foot height bonus.
The developer has other ideas.
This week, PMC submitted what is effectively a new zoning application for One Water Street, a 16-story apartment building on the Delaware riverfront, next to the Ben Franklin Bridge. That L-shaped apartment house, which is now nearing completion, was built five stories taller than the zoning would ordinarily allow. That change gave the developer at least 30 additional units.
In place of the 25 subsidized apartments PMC promised for the extra height, the company now wants to meet its zoning obligations by substituting a collection of smaller bonus items. PMC is offering to add one 5,000-square-foot retail space, one piece of public art, and wants to install a souped-up, energy-saving system to One Water Street.
On paper, those three items will probably do the job because they add up to the magic number: 48. Under Philadelphia's zoning bonus system, retail space is worth 12 feet in height. A public art installation will net a developer another 12 feet. And a gold-level certificate from the U.S. Green Building Council is enough to justify an additional 24 feet in height.
But even if those items pass muster with the Department of Licenses & Inspections, it's unlikely they will please community leaders.
Housing and waterfront advocates lobbied for years to get Philadelphia to adopt the inclusionary zoning bonus, a market-based approach to providing affordable housing that is used in cities around the country. One Water Street, at 250 N. Columbus Blvd., was the first Philadelphia project to sign up for the option, back in 2014.
While substitute bonuses are perfectly legal under the city's zoning law, community leaders complain that they appear to let PMC off the hook too cheaply.
Unlike subsidized apartments, the proposed amenities cannot be construed as a high-minded contribution to the public good. The retail, public art and energy-efficient features created by the substitute bonuses will be enjoyed primarily by the residents of One Water Street, enhancing the value of PMC's property.
"This was supposed to be the first big project to use the inclusionary housing bonus, and they used a loophole to get around it," City Councilwoman Maria Quinones-Sanchez said. "I think the whole thing was choreographed. They knew from the very beginning what they were doing ... This is as disrespectful and arrogant as anything I've seen."
Ever since PMC's plan to back out of its affordable-housing commitment became public in early June, the company has declined to comment on its reasons for the decision.
Quinones-Sanchez, who is a longtime advocate for affordable housing, was so upset by PMC's change of heart that she introduced a City Council resolution June 9 calling on the developer to satisfy "its contractual and moral obligation" at One Water Street.
She wants PMC to either include the subsidized units, or make a contribution of equal value to the Housing Trust Fund, which helps low-income homeowners pay for repairs.
Although approved Thursday, the resolution is unlikely to derail PMC's case at L&I.
Because PMC paid the city for expedited service, L&I now has 10 business days to review the revised plan to make sure the numbers add up. After that, the individual bonus items will have to be vetted, said L&I spokeswoman Karen Guss, by various city entities: the Art Commission, Civic Design Review, and the city law department.
Winning their approval may not be as easy as PMC thinks, said Joe Schiavo, the vice chairman of the Central Delaware Advocacy Group. He noted that new federal floodplain standards could interfere with PMC's plan to install ground-floor retail at One Water Street. And before PMC can win Art Commission approval for its public art, it will have to undergo a rigorous selection process.
Until everything is sorted out, Guss said that L&I would not allow tenants to move into One Water Street.
Regular rents start at $1,795 a month for a one-bedroom apartment and go up to $5,525. The subsidized units were intended for working people, renting for about $900.
Housing advocates see the PMC case as a wake-up call.
"We will continue to push the Kenney administration and every relevant board to hold PMC accountable," said Beth McConnell, policy director for the Philadelphia Association of Community Development Corporations.
Schiavo also said that PMC, the largest private apartment developer in the city, could run into problems with future projects.
"No one will trust them ever again," he predicted.