City Council and the Nutter administration reached agreement Monday on two bills that would eliminate most business start-up fees and provide significant relief from the widely despised business-privilege tax.
The fees and taxes long have been blamed for putting the city at a disadvantage when competing with the suburbs and other cities to attract employers.
The bills, which were moved out of Council's Finance Committee on Monday, eventually would provide more than $70 million in relief, signaling that the city "is open for business," said Councilman Bill Green, who cosponsored one of the measures.
"It's a tremendous victory for businesses in the city . . . and for people looking for jobs," he said. "This is the biggest impact in tax reform done for businesses in the history of Philadelphia in a single day."
Councilman James F. Kenney, who sponsored the bill to help start-up businesses, said that "almost every problem we deal with in this city" is caused by people out of work. Both bills, he said, are meant to jump-start employment.
Government figures place the city's unemployment at 11 percent, but Kenney said the real figure was probably closer to 25 percent.
"Imagine, if every person in this city who could work was working, the money we would not spend on those human services and police and courts and prisons," he said.
The bill cosponsored by Green and Councilwoman Maria Quiñones Sánchez would provide a $100,000 exemption on the gross-receipts portion of the business-privilege tax. Businesses also would not have to pay the net-income portion on the first $100,000 in sales.
The bill also moves the city to what's known as single sales factor apportionment, meaning businesses are taxed only on sales made in the city.
That change would aid larger companies that do most of their business outside the city and might encourage some companies to locate here.
Single sales was part of the tax-incentive package that recently enticed Teva Pharmaceuticals to choose the city over the suburbs for its new distribution center.
Edward Kicak is the chief financial officer of Sandmeyer Steel, which shares a "fence line" with the property that will host the new Teva facility. The steel company has been in the city for nearly 60 years and employs 115 people.
"If the privilege tax as currently regulated weighs heavily on a business like Teva," Kicak testified, "then I can guarantee it does on its neighbor, Sandmeyer Steel Co."
Nancy Minor, with the United Steelworkers local that represents Sunoco Inc. employees, said she hoped the tax changes would encourage a company to buy the refinery in Southwest Philadelphia. Sunoco plans to sell or close the facility, which has 1,000 employees.
"If your bill brings in a new employer, the city will continue to get the $30 million a year in taxes that Sunoco pays," she told the Council members.
Kenney said his bill would eliminate the $2,000 to $5,000 in fees that businesses have to fork over to set up shop in the city.
His bill also would exempt start-ups from paying business taxes for two years if they employ three city residents in the first year and six by the second year.
"This is kind of a tax abatement to get you through the most difficult years . . . of any business," he said.
The Nutter administration agreed to support both bills with a few changes to soften the effect on the city treasury. Primarily, the sponsors have agreed to delay or phase in the changes, with all the provisions of the bills in effect no later than 2015.
Nutter called the two bills "a dramatic shift in policy."
"Changes need to be made to the tax structure of the city of Philadelphia," he said. "We are now embarked on a new direction."