If your business were stocked with items that weren't selling, you would have to consider dramatically discounting prices to avoid going out of business.
The City of Philadelphia is in the business of acquiring land and buildings through sheriff's sale. The current inventory is more than 6,300 parcels. But the city's policy of selling properties at appraised value has done little to reduce inventory: nearly 50 percent of transactions never make it to closing when the appraised value is made known to potential buyers.
When no one wants to buy nearly half the properties you offer, you need to do what a smart businessperson would do: steeply discount prices to reduce inventory and stimulate growth.
That is precisely why I introduced a bill that would create development districts throughout the city. In development districts, city-owned property would be discounted, depending on the level of distress in the market. In return, the buyer must begin construction within six months and complete construction within 24 months or risk forfeiting the property.
Development districts would be established only in census tracts where at least two of three factors are present — public ownership, vacancy, and tax delinquency. In districts where two of the three factors are present at a 10 percent level, the property discount would be 50 percent; at 20 percent, properties would see a 70 percent discount; and at 30 percent, properties would see a 90 percent discount.
An Econsult report indicates moving 500 properties per year through development districts would net the city about $13 million annually. Revenue would be realized in the form of sales proceeds, reduced maintenance costs, tax revenues from construction activity — including the creation of about 600 jobs — and real-estate-transfer taxes. This estimate doesn't even include real-estate taxes on the finished properties. And the city would no longer bear the costs of maintaining and securing these once-neglected properties.
In these times of ever-tightening fiscal constraints on local governments, we need to offer creative solutions to stimulate growth and development. It is my hope that with programs like development districts, the city will no longer, by default, find itself in the real-estate business. n