Council OKs tax breaks for Center City hotels

PHILADELPHIA At its last meeting of the year, City Council approved a package of tax breaks that should clear the way for construction of a 50-story hotel development in the heart of Center City.

The vote on the tax deal was delayed nearly two hours after Council President Darrell L. Clarke called a recess to give the developers and union representatives more time to hash out a "labor peace agreement."

Developer Brook Lenfest later emerged to say that he felt like he had "climbed Mount Everest" but that a deal had been reached that would make it easier to organize future hotel workers, such as maids, parking attendants, and cooks.

Council reconvened and passed the tax breaks by a 15-1 vote, with W. Wilson Goode Jr. casting the lone vote against.

Without the agreement, Council would have been unlikely to support the tax breaks. And without the tax breaks, Lenfest said, he was ready to "throw in the towel."

"I think it's a huge win for the city," Lenfest said. "We're trying to break ground as soon as possible."

The project, a tower with two hotels, would be built on a half-acre parking lot at 15th and Chestnut Streets adjacent to the site where a 1991 fire killed three firefighters and left One Meridian Plaza a burned-out blemish on the skyline.

Council also passed a raft of other major legislation, including bills that would establish a land bank to deal with vacant and abandoned property; create an independent board to set water and sewer rates; and - if the voters concur - end the requirement that elected officials resign from office to run for a new post.

The change to the resign-to-run rule, sponsored by Councilman David Oh, also would have to be approved by voters in the May primary election. The change would not go into effect until 2016, after the next mayoral election.

Mayor Nutter intends to sign the land bank bill and the hotel tax bill, said his spokesman, Mark McDonald. Nutter has not made a decision on the water rate board or the resign-to-run legislation. The bills, however, passed by 16-0, so a veto seemingly could be overturned.

Clarke led the move to create an independent body to set water rates. Currently, the water commissioner has the sole authority to change rates after a hearing process.

The new board would consist of five members appointed by the mayor and confirmed by Council. Clarke said he hoped to have nominations to consider in January.

The hotel bill - hailed by supporters as potentially transformational for the city - hinged precariously on the labor agreement.

Both sides offered few details on the deal they reached, but typical labor peace agreements require employers to allow organizers on their property and remain neutral about workers unionizing.

Rosslyn Wuchinich, president of Unite Here Local 274, which represents hotel, stadium, and airport workers, said she was "very happy that we've been able to come to an agreement."

"We knew we needed to get it done today and we did," she said.

The $280 million hotel tower is being built with union labor.

The deal Council approved is known as tax increment financing. It allows the developers to borrow $33 million and repay the loan over 20 years through the tax breaks.

The hotel is expected to generate vastly more in taxes than if the site remained a parking lot. An economic analysis included in the legislation predicted the parking lot would generate $10.8 million in tax revenue over 20 years while the hotels would generate $220.6 million.

The tower would house two hotel brands, W and Element, that would be operated by Starwood Hotels. The developers have secured $40 million in other public financing and plan to invest more than $205 million in debt and equity.

The project, which would take three years to build, would be a "headquarters hotel" for the Convention Center, agreeing to set aside large blocks of rooms for conventions.

"We already know of at least one convention that put it in their contract that if the hotel wasn't coming, they weren't coming to Philadelphia," said Lenfest, son of H.F. "Gerry" Lenfest, a part-owner of The Inquirer.