This article originally appeared in The Inquirer on April 4, 2004.
Pennsylvania officials have credited tax-free Keystone Opportunity Zones with saving or creating thousands of jobs in the state since 1999.
But the state Department of Community and Economic Development, which administers the increasingly popular tax-incentive program, has publicized widely differing figures.
Last year, the agency under outgoing Gov. Schweiker attributed 21,575 jobs statewide to the Keystone Opportunity Zone program through September 2002.
This year, the agency said 17,614 — 18 percent fewer — held jobs in the state's Keystone Opportunity Zones as of November. The higher number was based on projections contained in companies' initial applications for benefits, state officials said.
On Friday, the state tallied 4,312 jobs in Keystone zones in Philadelphia, accounting for 0.6 percent of the city's civilian workforce. The Inquirer, through telephone interviews during the last six weeks, was able to verify 3,736 of those jobs — including about 1,150 at a huge Marshalls department-store chain warehouse in the Northeast.
In a city that has a reputation as a difficult, high-cost place to do business, the Keystone Opportunity Zone program has won some big fans.
"It's a wonderful benefit," said David DiIenno, owner of Blue Mountain Recycling in Philadelphia's Grays Ferry section. He said employment at the processor of paper, glass, metal and other recyclables has ballooned from seven in 2001 to 70 now.
But for every job-creating success like Blue Mountain, there is a company that failed to grow when it moved across town, that lost jobs, or even ceased to exist.
More than a dozen companies on a Philadelphia Department of Commerce list of Keystone Opportunity Zone occupants did not return repeated calls.
Uncertainty about the number of jobs linked to the program, originally conceived as a way to entice businesses to blighted areas of the state, is not the only problem.
It remains unclear if taxpayers — who pick up the revenue slack — will get their money's worth from the Keystone Opportunity Zones, experts said. The payoff would be more jobs, higher wages, and increased tax revenue in a state that has lagged the nation economically.
"No one in the city or state to my knowledge has ever conducted an impact study of these, either before or after introduction," said Peter Linneman, professor of real estate and finance at the University of Pennsylvania's Wharton School.
Emily White, deputy secretary for business assistance in Harrisburg, confirmed that. She said the state had not studied whether Keystone Opportunity Zones have contributed to job growth that would not have happened anyway, or have simply shifted jobs around in local labor markets.
Even if officials wanted to calculate Keystone zones' effect on businesses, it would not be easy: "There are so many layers of incentives built in that it is very difficult to figure out what they are taking advantage of," said Marisa Waxman, an assistant city controller who has analyzed other subsidies, such as tax-increment financing.
Despite this uncertainty, Gov. Rendell and Mayor Street are pushing Philadelphia City Council to approve Keystone Opportunity tax benefits for a new office building that could serve as Comcast Corp.'s headquarters on a prime Center City parcel.
Some Philadelphia participants said the program had worked like a charm. "We are living proof that KOZ does work, applied right," said Leonard Szyper Sr., owner of Custom Co-Pak L.L.C., which bags and packages tea for Carrington Tea Co. and others.
Since moving in 2001 from another Philadelphia location into an empty, graffiti-marred Frankford building, Szyper said he had invested more than $200,000 in renovations and hired more than 10 people from the neighborhood.
The payroll increased from $329,000 to $641,000 last year, not including a $170,000 tab for temporary help, he said. The company has 25 workers.
Szyper put his total 2003 benefits from the Keystone Opportunity Zone program at roughly $27,500. That included a $12,000 property-tax exemption, according to records at the city's Board of Revision of Taxes.
On the other side of the ledger, Szyper said, he and his employees had paid nearly $30,000 in local wage taxes and $19,000 in state income taxes.
Custom Co-Pak is one of many companies that moved from one area of the city to another. Much of that activity involved companies' moving around Northeast Philadelphia industrial areas, raising questions about whether the program contributes to broad-based economic growth or merely encourages companies to relocate.
CompuData Inc., for example, the first company to break ground for a new building under the Keystone program, moved in 1999 from Philadelphia Industrial Park to Byberry Industrial Park.
The computer-services seller expected to increase employment from 45 to 80. Recently, CompuData had 40 employees here, after falling to 35 at the beginning of 2003, said company president Steve Ciarciello.
Others who moved into Byberry East from nearby included: Almo Corp., a wholesale distributor of appliances and electronics; Elliott-Lewis Corp., a building-services provider; and Antonio Origlio Inc., a beer distributor.
These companies accounted for 761 of the 2,337 jobs at Keystone Opportunity Zone participants in Northeast Philadelphia industrial parks, primarily Byberry East, where only empty parcels were eligible for Keystone benefits. The Philadelphia Industrial Development Corp. took over Byberry 25 years ago.
It is difficult to evaluate the effect of the Keystone Opportunity Zone benefits, because when companies in Pennsylvania move or expand, they typically take advantage of a smorgasbord of aid programs, which, during the last two fiscal years, cost a total of $462.6 million — not including Keystone benefits.
They include Opportunity Grants, tax credits, low-interest machinery loans, job-training assistance, and low-interest financing, which has been the bread-and-butter of economic development since the 1950s.
Premium Pallet Co., which went from 22 to 30 jobs after moving into a building in Bridesburg, has benefited as much over the years from low-interest loans for equipment as from the Keystone Opportunity Zone, said company president Erik M. Bronstein.
"We've never really analyzed" whether low-interest loans or Keystone benefits give taxpayers more bang for their buck, because it would be hard to avoid double-counting, said Vincent J. Dougherty, assistant director of the city's Commerce Department and local Keystone Opportunity Zone manager.
The Pennsylvania Department of Revenue estimated that the Keystone Opportunity Zone program has cost the state treasury $47.7 million in foregone taxes, including $13.2 million in the current fiscal year.
The city's Board of Revision of Taxes lists 112 properties that are exempt from real estate taxes through their inclusion in Keystone zones. The list does not include the one-million-square-foot Marshalls distribution center, which is on land leased from the city.
The total assessed value of those exempt properties in the tax board's database is $38.4 million. Without the exemption, the property tax on that amount would be $3.2 million.
That is a tiny fraction of the nearly $900 million the city expects to collect this year in real estate taxes for the general fund and the school district.
But Bruce H. Schwartz, who owns an aluminum-fence factory in Byberry East, finds it hard to believe that some of his neighbors, such as P. D'Andrea Inc. and Antonio Origlio, pay no real estate taxes.
Schwartz faces nearly $250,000 in property taxes alone because in January 2001, he moved Jerith Manufacturing Co. and its growing workforce from the Juniata section of Philadelphia into an existing building, which was ineligible for Keystone benefits. He did receive $100,000 in state income-tax credits for three years when Jerith moved.
“Everybody pays extra in taxes,” Schwartz said, "to subsidize these other companies. "