With the city economy slumping and real-estate sales flat-lining, City Councilman Darrell Clarke yesterday proposed to scale back the 10-year property-tax abatement for new construction while offering incentives for people to buy existing properties.
Builders, union laborers and the author of the abatement legislation, Councilman Frank DiCicco, immediately worried that tinkering with the program would just make things worse.
Clarke introduced legislation that maintains the 10-year exemption on property taxes for new residential, commercial and industrial buildings but reduces it from 100 percent to 80 percent.
"I think at this point it could probably withstand some tweaking," Clarke said of the abatement program, approved in 2000. "While we want to alter it, we don't want to see it go away."
Clarke also introduced legislation to provide a rebate, spread over five years, on purchases of existing buildings in 2009. He is working with real-estate companies and Mayor Nutter's staff to come up with the amount.
"We want the amount to be lucrative enough to stimulate interest in purchasing a home within the next calendar year but we don't want it to be too much that it will create an economic burden on the city," said Clarke, adding that all of the legislation is designed to raise more money for the city's budget crunch.
The city's portion of the real-estate tax would fund the rebates.
DiCicco signed off on the rebate idea but said he recently shelved ideas to adjust the abatement because the city is facing a $1 billion shortfall in the five-year financial plan. "I've been holding off because I don't think this is the appropriate time given the economic situation and the real estate market," he said.
The Board of Revision of Taxes, in a report prepared three weeks ago, listed 4,027 new residential properties in the city receiving the abatement worth $22.9 million in property taxes for 10 years and 1,663 new commercial and industrial properties worth $23.3 million in taxes for 10 years.
Clarke said pending real-estate sales or construction in development would be "grandfathered" into the 100 percent abatement program, with only new projects at the 80 percent exemption.
Pat Gillespie, business manager of the Building and Construction Trades Council, said he worried that the abatement change could worsen the city's economy.
"I don't see how this is going to do any good," he said. "They might be throwing the baby out with the bathwater."
Sam Sherman, president of the Building Industry Association of Philadelphia, said a change would send the wrong message.
"Right now, we're all as a development community really fighting for our lives," he added. "It's really tough out there."
Nutter, while running for mayor last year, proposed scaling the abatement back to 90 percent and setting it at five years in areas booming with development and 15 years for areas where the construction market was weak.