Officials request tax-exempt status for properties in Philly's 'hottest neighborhood'

Others warn Fishtown is already developing, so tax subsidy doesn't 'make sense'

Pat Loeb
July 16, 2018 - 8:19 pm
A lot on the list requesting Keystone Opportunity Zone status.

Pat Loeb/KYW Newsradio

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PHILADELPHIA (KYW Newsradio) — Anyone who's dined at Fette Sau, had a drink at Frankford Hall or danced at Johnny Brenda's understands why Forbes magazine named Fishtown "the hottest neighborhood in the country." 

So it seems an odd place for the city to request tax-exempt status for 62 properties through the Keystone Opportunity Zone (KOZ), a state program designed to spur investment in "underutilized or underdeveloped areas" by forgiving all state and local taxes.

The properties include garages, parking lots, retail and office spaces, and a proposed hotel along several blocks of Front Street and Frankford Avenue. They are the majority of the 81 total properties included in a KOZ expansion bill introduced into City Council last month, which passed through committee less than two weeks later — an unusually quick turnaround. 

"In parts of the city that are already developing — and developing rapidly — it doesn't really make sense to me to see this level of a subsidy," said Councilwoman Helen Gym. "The Keystone Opportunity Zone is the most generous tax subsidy program that we've got, in the state of Pennsylvania and the city of Philadelphia, and it should used very sparingly and it should be used very strategically, and I don't think that's what we're seeing here."

Several of the properties belong to developer Roland Kassis, who has been a major force in Fishtown's renaissance. He unapologetically defended lobbying to get them KOZ status and argued they are an appropriate use of the subsidy because they need an incentive to attract financing for office development, which is scarce in Fishtown but something he considers vital to its continued success.

"Right now, look at this," he said recently while standing on the site of a proposed KOZ on Front Street. "There's not one soul, there's not one human being walking here. This is 9 in the morning. If we can create offices here and attract tenants to come to Fishtown, there would be more energy in the daytime. We need more daytime traffic for business to thrive and survive."

A lot on the list requesting Keystone Opportunity Zone status.
Pat Loeb/KYW Newsradio

Kassis has already developed numerous residential and commercial spaces in the area. He has a grand vision for the neighborhood of a thriving hub, not merely a bedroom community for Center City and a weekend hangout. 

"It is the hottest neighborhood," he conceded. But he pointed to coffee shops and lunch spots that are mostly empty on weekdays. "For these businesses to stay alive and stay there, they need day traffic."

He also argued the impact on local taxes is negligible since new development gets the 10-year tax abatement, in any case. In fact, the School District of Philadelphia is slightly more protected through the KOZ program than the tax abatement because property owners pay taxes on 110 percent of the land value throughout the term of the KOZ — another factor that bothers Gym.

"One of the problems that we have, both in our state and in our city, is that we're not developing new tools to deal with the city that we've got," she said. "We use these decades-old programs built for times in which Philadelphia was desperate and would have forfeited millions of dollars a year in subsidies just to get anything moving. But that's clearly not the case anymore, and neither the state nor the city is coming up with new tools and creative ways to incentivize development that allows us to build the kind of city we want to see in the future and not the one we had in the long-ago past."

Given that there is not other program at the ready to deploy in Fishtown, she opposes the inclusion of many of the properties in the city's expansion package.

Deputy Commerce Director Duane Bumb said that no final decision has been made on any of the properties, and he expects the bill will be amended to eliminate some of them.

"We began with a pretty sure list," he added. "There were 18 properties in the original bill. We were asked to consider lots of additional properties and we really didn't have the time to do that full evaluation. We added them just for the purpose of holding them for consideration with the understanding that we would use the summer to evaluate the applicability of each of those properties to the program and our objectives and then come back in the fall with what we expect to be a more reduced and refined list." 

Given the flux, Bumb could not estimate how much the city would forfeit in taxes.

City Council will take a final vote on the package in the fall. Meanwhile, the state and the school district are looking it over. Both must approve it in order for it to move forward. Neither would comment.