Monday, May 17, 2010

Will the Last Republican Leaving Philadelphia Please Turn Out Off the Solar Panels?

John Kromer. Fixing Broken Cities: The Implementation of Urban Development Strategies. New York: Routledge, 2010.

Kromer believes the main question that should be asked when considering urban policies is who benefits from their implementation. The most common recent urban policies have involved making downtown areas more economically viable, improving neighborhoods, eliminating bloight, and create quality education. Often economically disadvantaged people are greatly impacted in the public outcomes. Care needs to be taken, he urges, to determine who will gain and how economic conditions, geographical limitations, and how politics influences these policies.

The author served as Philadelphia’s Housing Director, with a $100 million budget, under Mayor Ed Rendell. The job presented some difficulties. He began at a time when the city was near bankruptcy. Kromer helped convince the U.S. Housing and Urban Development Department not to penalize Philadelphia $14 million for past errors. He found himself under strong City Council questioning where one session lasted eight straight hours. He found the housing program’s policies were “too piecemeal and too scattershot.” Political considerations were a leading factor in where funds were invested. He sought new directions and had the benefit of a supportive Mayor in Ed Rendell and department heads who all worked together to product positive results. The following is a summation of his views on how to fix a broken city, Philadelphia in particular.

Most current urban development programs seek to improve or replace aging infrastructure (including streets, buildings, and removing environmental hazards), upgrade schools, housing stores, and service facilities, and to attract or expand existing businesses and create more jobs.

Philadelphia’s city government had financial difficulties. It was low in cash. Many cities including Philadelphia could not afford to make large investments in revitalizing their economies. An alternative often used was to offer tax abatements to private investors who made these desired investments. This was done to address the problem of empty office buildings in the early 1990s. The incentive of a ten year real estate tax abatement helped several developers to renovate and operate these buildings. The abatement was contingent upon the project being completed and it was calculated according to the building’s pre-rental value.

In the later part of the 20th century, many public urban direct investments were in conjunction with private investors with political influence, such as stadium owners, convention center investors, hotel owners, waterfront developers, and performance arts owners. These minimized funds for investing in neighborhoods or downtown improvements.

The additional tax revenues generated from increased property values that result when a development happens play a key part of tax incremental financing. The revenues are targeted for further investments. Tax incremental financing was used in Philadelphia for building a convention center, renovating a subway terminal and marketplace, constructing office buildings, parking garages, and a performance center, as well as for renovating the Philadelphia Navy Yard. This is a political popular as it does not require increasing taxes. Instead, it diverts new revenue streams.

The Keystone Opportunity Zone (KOZ) was created within Pennsylvania in 1999. This allowed public agencies with state approval to designate a block or series of blocks (which were mostly abandoned or blighted) and then offer a partial or total local and tax exemptions to a developer to develop within that area. These exemptions could last up to ten years, and sometimes longer. A problem with this program was that many businesses that located within these zones left another Philadelphia site where they had been paying taxes. Another problem was that other existing businesses complained that they felt it unfair their competitors received tax breaks.

There is often a stigma to designating an area as being officially blighted. The designation alone can create more instability as those remaining in a blighted area may then feel a need to leave, thus making the area even more abandoned. Philadelphia avoided this by declaring, for tax abatement purposes, the entire city as being blighted. This led to $110.6 million of new investment through 2004 with $29.2 million in taxes abated. Some abandoned areas were renovated. Most building renovators happened in the central business area. 1,038 single family homes were built on the former Navy Base with $4.6 million in tax abatements over ten years.

Philadelphia still has a relatively lower achieving school system as well as higher wage taxes than does its surrounding counties. These factors are detrimental in attracting people to move to Philadelphia rather than their suburban counties. Philadelphia also has relatively higher labor costs, in part due to the higher wage taxes and in part due to higher unionization rates, than does its surrounding counties, which can be detrimental to attracting new businesses. Philadelphia is also slower than its’ surrounding counties in processing request for building permits and zoning variances.

Kromer found the abatements were often misdirected. They were not targeted towards the poor and politically weaker neighborhoods that most needed renovating. Instead, they were used more often in downtown business areas and neighborhood were home sales prices already were relatively high. Plus, if was often the wealthier developers who obtained these abatements.

There were proposals to create homestead exemptions for long term home owners that would have addressed some equity concerns. Yet, there were never adopted.

Downtowns require a proper and successful mix of retain, offices, and residences in order to thrive. They need retain and residents to maintain economic and social vibrancies after normal business office hours.

A tax was imposed upon Center City residents and businesses to pay for increased services within Center City. This paid for 100 maintenance employees who power-washed streets monthly and vacuumed them daily. Employees were hired for additional trash removal and for graffiti removal services.

Transition zones are areas separating business districts and distant stable residential areas. The transition zones often contain a mixture of businesses and residences. Making transition zones economically stable helps stabilize business districts. Weak transition zones can lead to instability spreading to larger geographic areas.

Eastern North Philadelphia is a transition zone. It had about 1,230 vacant homes and 1,711 vacant lots. The scattered placement of these required addressing multiple problem rather than creating one large project.

Many urban transition zones lost populations and businesses in clusters. This creates hollow cores within these zones. The city government tore down abandoned structures which created vacant lots. Public investment in these areas should occur more quickly and is better targeted than waiting for private investment. This is especially important when public investment can prevent further deterioration which would make private investment even less likely.

In 1993, U.S. Housing and Urban Development (HUD) Secretary Henry Cisneros sought to work with the Philadelphia government to exert more city government control over public housing. HUD was running the public housing program at the time. HUD offered to renovate the city’s troubled housing site at Southwark Plaza. The city took over code enforcement of public housing. Twenty years later, though, the housing authority remains a state agency that is not controlled or reviewed by city government.

Philadelphia made a priority of providing housing to people with jobs or in school. It decided it would not be the “housing of last resort, available to anyone.”

As Federal and state funds decreased, the Philadelphia Housing Authority found itself in a weaker position to compete with private developers for desired real estate.

A public housing project in Eastern North Philadelphia met a goal of looking similar to public housing. It is criticized for not meeting smart growth goals on sprawl and for not being close to public transportation.

Mayor Rendell was devoted to downtown rehabilitation. His successor, Mayor John Street, tried to focus more on neighborhood rehabilitation. A problem is it takes more investment over several years to turn around distressed neighborhoods.

Mayor Street addressed distressed communities by removing abandoned cars. He got City Council to approve a plan for blight demolition, buying land, and repairing homes that could be used by elderly or disabled people. A proposal was made by Temple University researchers to create zones that would eliminate all blight within these zones. The idea, though, was rejected by City Council.

The Redevelopment Authority (RDA) face problems acquiring properties when housing and land prices increased. Less land could be purchased and fewer projects were undertaken. There were 1,463 Redevelopment Selection actions from 2000 to 200t with 329 in a North Philadelphia zone, 288 for the PHA, and 107 for a private developer working with an agenda supported by Council member Jamie Blackwell.

The RDA was given a diminished role under the Street Administration. The RDA is a state government agency. There were fears the RDA would become more influenced by the Republican Governor than by the goals of the Democratic Mayor. Mayor Street sought layoffs in the RDA which led to a bitter feud with RDA Chairman of the Board John Dougherty, a labor leader who had previously supported Street.

Urban improvement strategies are changing. Construction jobs needed for improvements are no longer the permanent positions they once were. Public investments are decreasing.

The author recommends the Federal government coordinate urban improvement efforts from one funding source. He advises the state government should concentrate in providing housing for people who are employed or in job training programs. City government should direct actions according to what is best locally.


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