Philadelphia City Council voted unanimously Thursday to make significant changes to the city’s 10-year tax abatement on new construction for the first time since it was enacted almost two decades ago.

The changes will reduce the tax break for new residential construction projects by roughly half of its value.

“Today is the first change that we’ve seen, unique in the history of a 20-year program,” Councilwoman Helen Gym, a fierce critic of the abatement, said before the vote.

Mayor Jim Kenney has said he will sign the bill, which will take effect Dec. 31, 2020. City Council approved the legislation on the last day of its current term, along with several other bills, including a ban on plastic bags and regulations for bedbug infestations.

The tax-abatement bill, which had 15 cosponsors, moved quickly through Council after its introduction last month. It will reduce the abatement for new residential construction by 10 percentage points in each of the 10 years it is in effect. The tax break will not change for rehabilitation projects or commercial construction, which will receive a 100% tax break on their added value for a full decade.

Some residents and advocacy groups have pushed for years for changing or ending the abatement, arguing that it accelerates gentrification and keeps important tax revenue from the School District. Some of them packed Council chambers Thursday, holding signs urging Council to vote against the bill.

Opponents of Philadelphia's 10-year tax abatement hold signs urging City Council to vote against changes to the tax break. They would prefer that Council eliminate the abatement entirely.
Laura McCrystal / staff
Opponents of Philadelphia's 10-year tax abatement hold signs urging City Council to vote against changes to the tax break. They would prefer that Council eliminate the abatement entirely.

“Our kids can’t wait” and “People over profit,” some of the signs read. Several residents told City Council members that the bill had been moved to final passage too quickly and did too much to appease developers.

“People are being moved out of their homes, people are being displaced through higher taxes [and] sheriff sales,” resident Gale Loney said.

Although Gym joined her colleagues in voting for the bill, she acknowledged the residents who spoke against it.

“People have a right to be here to demand more for their schools,” she said. "It’s a complete crisis. It’s why we’re making this change. And just because we make this change doesn’t mean it’s over.”

Developers and the real estate industry spent years lobbying against changes to the abatement, which they credit for spurring development in the city and growing the overall tax base. They pushed in recent weeks for limiting or delaying changes to the abatement.

After Kenney threatened last week to block the bill if Council did not delay the date it took effect, Council moved its start date from July to Dec. 31, 2020. The changes will not affect projects for which abatement applications are submitted before Dec. 31 of next year.

“We think we hit the sweet spot in terms of being fair and equitable across the board,” Council President Darrell L. Clarke said.

Plastic-bag ban

Council also passed a ban on single-use plastic bags in the city by a 15-2 vote. Councilmen Brian O’Neill and David Oh voted against it.

That law will take effect in July after a one-year statewide prohibition on plastic-bag regulations expires. The ban will apply to all retail sales and deliveries in the city, with exceptions for dry cleaners and deli counters.

“We need to stop being a disposable society and work toward and strive toward becoming a more reusable society,” said Councilman Mark Squilla, who sponsored the bill.

Environmental advocates had pushed to include a fee for paper bags, which they said would encourage residents to bring their own bags and reimburse retailers for providing more expensive bags. But Kenney and some Council members opposed a fee, so the final bill did not include one.

The plastic-bag industry spoke out against the bill after its passage.

“We share the Council’s desire to reduce waste and litter, but everyone, opponents and supporters, know this bill is seriously flawed,” Matt Seaholm, executive director of the American Progressive Bag Alliance, said in a statement.

The bill contains no provisions for enforcement or penalties for retailers that do not comply with the bill. But a spokesperson for the Kenney administration said a provision in the city code would allow for penalties not already specified in legislation. The administration is still working to determine how to enforce the plastic-bag ban.

Squilla said he would continue working to improve the bag regulations next year, and environmentalists said they would continue pushing to add a fee for paper bags.

Bedbug regulations

Council also passed a bill regulating bedbug infestations.

It requires landlords to pay for the remediation of infestations discovered within the first year of a lease. After that period, the costs will be split between landlords and tenants.

All of the bills passed Thursday await the mayor’s signature. Kenney has until early January to sign them before a new City Council term begins.