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Philly, where leaders’ good intentions don’t help a poor city grow

Business leaders with a national view say Philadelphia is falling behind competing metro areas.

Members of the Pennsylvania National Guard patrol in front of City Hall, Friday, Oct. 30, 2020, in Philadelphia. (AP Photo/Michael Perez)
Members of the Pennsylvania National Guard patrol in front of City Hall, Friday, Oct. 30, 2020, in Philadelphia. (AP Photo/Michael Perez)Read moreMichael Perez / AP

Philadelphia trails other big East Coast cities in business formation, jobs, wages, and personal wealth. To employers, it often looks as if this city is more interested in its progressive image than attracting the for-profit companies that employ most people.

Bill Hankowsky, a past city commerce official whose former company built the Liberty and Comcast Towers and projects across the country, worries that Philly leaders, grappling with social conflict, have lost the long-term vision the city needs to add jobs and fight poverty.

Asked what’s in our way, he compares Philly with Boston, another historic university center and our longtime rival for biotech, finance, and software employers. “In Boston, there is no wage tax, no business-income or business-receipts taxes,” and no cost differential between city and suburban locations, Hankowsky said. “Businesses in Boston make their decision to locate on rents, and where their workforce is.”

A glance down City Avenue on the edge of Philadelphia shows the difference: After decades of higher city taxes, “all the office buildings are on the Montgomery County side.”

This isn’t new. The last three mayors trimmed the wage tax. But it remains the nation’s highest. And it’s headed back up: This past summer, City Council raised the levy on suburban commuters, to 3.5%.

Philadelphia also has its own labor office. Even with good intentions, the local rules, added on top of state and federal laws, boost employer costs and “require companies to do business in a different way than Cherry Hill or Malvern,” where hiring remains simpler, Hankowsky said.

To be sure, Philadelphia has attracted investment by suspending taxes, such as with the Keystone Opportunity Zones that lured pesticide giant FMC to a tall University City tower, or the tax breaks that helped fund the Philadelphia Fashion District. But why should only some get breaks?

“Philadelphia has all the main ingredients of a city that can thrive — the universities, the health-care system, strong intellectual capital that ought to create more entrepreneurs,” says Dale E. Jones, chief executive of Diversified Search Group, the Philadelphia-based executive recruiters.

And yet, “Philadelphia is under the radar” for top management and diverse job candidates, as well as employers, Jones added.

He worries the city has fallen behind not just its neighbors, but regional centers such as Dallas and Houston, Raleigh, N.C., and Atlanta, where “business and the public sector collaborate, you don’t have big ... [local] regulations,” and labor union benefit costs don’t weigh as much on construction.

The inability of authorities to prevent damage to hundreds of stores after protests of police killings earlier in the year also made the city look bad to job candidates and employers, he added.

Still, “Philly can get beyond this,” Jones concluded. “You no longer have as many Fortune 500 companies there as you should. But at one time, Silicon Valley had none. So it’s about leveraging and harnessing the leadership you do have.”

The link between business, jobs, and personal incomes used to not need explaining in Philadelphia, where Republican manufacturers such as Sun Oil’s Pew brothers often picked Council and congressional candidates and pushed policies that made the city attractive to factories and workers, from the Civil War to after World War II.

Democratic mayors such as Ed Rendell worked selectively with favored industries, for example, with commercial real estate developers to build and grow the city’s convention center. That sparked a hotel and tourism boom, even as financial and manufacturing companies kept leaving town and drug, software, and investment employers located in the suburbs.

But business leaders today seem to have an extra tough time being heard. A campaign led by Jerry Sweeney, chairman of Brandywine Property Trust, the city’s dominant office landlord, couldn’t convince elected officials in Harrisburg and Philadelphia to allow city property tax reforms designed to boost construction and jobs. David L. Cohen, a former city official and a top executive at Comcast, the largest company based in town (and the only for-profit among the city’s 10 top employers), failed in his appeals to stop the city hiring rules.

Philadelphia leaders are still congratulating themselves on how their campaign to lure 50,000 Amazon jobs made it to the 20-city semifinals two years ago. But business people I talked to worry about the city’s ability to attract and keep businesses.

City boosters also complain that luring big employers and training workers in Pennsylvania is mostly left to local agencies, not the big-bucks state effort it is down South, or even in New Jersey. Back in 2016, then-Delaware Gov. Jack Markell added his name to a business-backed letter urging General Electric to consider Philadelphia for its new headquarters, but top Pennsylvania officials wouldn’t sign on, he told me. GE went to Boston.

Drug giant AmerisourceBergen last year moved out of its aging Chester County headquarters — not to Philly, but suburban Conshohocken. City Councilmember Helen Gym, a leader in the city’s labor-legislation efforts, is married to a department head at AmerisourceBergen. I asked her spokesman whether she urged the company to consider the city, and what else Philadelphia should do to lure private employers. Gym, the top vote-getter in last year’s Council election, had no response.

Stephen Mullin, cofounder of Econsult Solutions Inc., an economic consulting firm, listed the big financial companies with suburban campuses — Lincoln and Susquehanna, Vanguard — that “ought” to be in Center City, as their rivals are in New York, Boston, and Chicago. “People confuse the service businesses (hospitals, colleges, restaurants) that depend on residents with these base businesses that pay well and spread the wealth,” he said. “When they raised the wage tax, it’s like saying, ‘We don’t want you.’”

The view of Philly from the suburbs has not improved with this year’s events.

“I talk about Philadelphia, and my members care less and less. No one talks about opening a business there,” laments Guy Ciarrocchi, who runs the Chamber of Business & Industry in Chester County, the state’s richest.

A city native and former federal official, Ciarrocchi is worried: Philadelphia’s problems are “bad for the `burbs,” driving opportunity from the region.

David Oh, a lonely Republican on City Council, relies on a political coalition that includes diverse immigrant and small-business groups. “The store owners are at a loss. They are talking about arming themselves. They have a right to protect themselves. But an armed confrontation is a terrible thing.”

He traces the frustration to being “left out of the conversation. Many of these people work long hours for very little money. They don’t have a retirement plan. They have been hit by the COVID closures. And then they are confronted by people who say their business — their livelihood — ‘is just property.’ This city has to prioritize what creates stability and opportunities to grow.”