If Amazon picks Philly, it won’t have to pay construction tax to fund affordable housing

If Amazon decides to build its second headquarters in Philadelphia, it would not have to pay a proposed construction tax created to fund affordable housing.

City Council wants to make that explicitly clear.

Council today added an exemption for all Keystone Opportunity Zones from the proposed 1 percent tax on new construction. The three sites Philadelphia pitched Amazon, at the Schuylkill Yards and uCity Square sites in West Philadelphia and South Philadelphia's Navy Yard, are in Keystone Opportunity Zones.

Those zones, designated by the state and typically vacant land in under-developed areas,  already are exempt from most local and state taxes.

A final vote on the construction tax is scheduled for next week.

Whether the new tax would have applied to a Keystone Opportunity Zone seemed to fall into a gray area for some in the Kenney administration who requested the clarification, Council President Darrell L. Clarke said.

"This issue of Amazon was of concern to some members of the administration," Clarke said. "With this amendment, it will clarify that the three sites selected by the administration for Amazon will be exempt from the construction tax because of their placement on KOZs."

Mayor Kenney's office did not immediately respond to requests for comment. Last week, Commerce Director Harold Epps said the tax could affect Philadelphia's chances at Amazon's HQ2.

"One of the reasons Amazon has fallen out of favor with Seattle is some of the policies Seattle has put in place, which they concluded were too much to fast," Epps said at the hearing last week.

Seattle's City Council recently repealed a tax on big businesses, which Amazon had fought. That tax would have funded homeless services and affordable housing.

In Philadelphia, KOZs are exempt from real estate taxes, the use and occupancy tax, the sales and use tax, and the business income and receipts tax. KOZs are still subject to the city's wage tax and the state income tax.

If passed, the construction impact tax is expected to raise about $19 million for affordable housing at a time when the city is experiencing a dire shortage, proponents of the bill said.

It would exempt nonprofits, hospitals, universities but apply to certain organizations that build affordable housing but are registered as LLCs in order to qualify for low-income housing tax credits.

Habitat for Humanity and Project HOME, for example, could be on the hook for the tax on some affordable housing projects.

"It's unfortunate that the state and Council have approved so many KOZs"  (there are about 185 in the city), said Beth McConnell, policy director at the Philadelphia Association of Community Development Corporations. "And we'll be watching those more carefully moving forward. Some of them are prime real estate and may not need those deep levels of subsidies."

Revenue would go into a Housing Trust Fund where it could be used to build affordable housing for people making 120 percent of the area median income, or $105,000 for a family of four. Funds could also go toward down payments, closing costs and home repairs.

Councilwoman Maria Quinones-Sanchez, a sponsor of the bill, said that although it might seem like a "conflicting message," the city should provide incentives for Amazon and also address the city's affordable housing problem.

"On the one hand we have a recognition that there's some high need," she said. "On the other hand, we're willing to roll out the red carpet for new folks, and I think that's why the construction tax, at this point, is even more important because when people see the public plan of what we gave to Amazon, if we win they, they need to feel that we were just as forthright and as focused on current needs."