28 MARCH 2013
REGIONSBUSINESS.COM
OPINION
35
Time To Reconsider City’s Job-Killing Tax Strategy H
Joseph Zuritksky is chairman and CEO of Parkway Corporation, a family-owned parking and real estate development company.
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aving been actively engaged in business in Philadelphia for over 50 years, I’ve watched our city slowly decline from a vibrant business center to one which has driven away most big business and made it extremely challenging for small businesses to survive or grow. Over these years, as other major cities our size and smaller, grew and prospered by taxing mainly real estate rather than its businesses and workers, our city’s population shrank in size by 25% and it lost well over 230,000 jobs. The irony is, this didn’t have to occur. Philadelphia has more to offer than almost any other city with whom we compete. We have the most historic city in our nation, a walkable city business district, a fabulous array of restaurants and shops, plus worldclass cultural institutions. Our region has the largest number of higher education institutions in the nation, as well as a dominant position in pharmaceutical and medical industries. In addition, we have one of the best transit systems in the nation, as well as one of the shortest commutes. Our housing stock, in both the city and the suburbs, is among the best in the nation. The only area where, historically, we have fallen flat is attracting and retaining businesses, even though when questioned, most business leaders would locate or remain here as they grow larger and stronger, but only if our city were on a level playing field with its competitors on a taxation basis and had a predictable legislative future. As a matter of fact, they would even pay a bit more to be here because of all the advantages that I listed above, but they just can’t bear the job-killing business and wage taxes that our city has uniquely levied on its job-producing businesses and citizens. The proof of this should be obvious to all – over 35 once viable office buildings have been converted to apartments, hotels and condos in the last decade, and we have not been building new ones because there is no demand to do so. It’s great to have new residents downtown, but the conversion of these office buildings cost the city and school district millions in lost real estate and U&O taxes, as well as wage taxes. As a result of this low demand, our office rents have been stuck at the same dollar rate for over 25
PHOTO BY G. WIDMAN FOR GPTMC
Only a well-thought out, long-term plan built around a strategic tax policy for business growth will succeed in changing the message our city sends to our country’s entrepreneurs and to the rest of the world’s businesses. years, but the dollar has depreciated by over one-half during this same period, so rents have actually decreased! To make matters worse, construction costs have risen by over 100% in the same period. As a result, the last two major commercial office buildings built have both required significant subsidies – the Comcast Center with over $40 million in state subsidy; and Cira Centre at 30th Street with its KOIZ zone, so its tenants do not pay many city or state taxes. The same dynamic is evident at the Navy Yard, where commercial development has been spurred by the tax savings offered in its KOIZ to the detriment of Center City. Over the last decade or so as these negative effects have accelerated, I’ve waited patiently for someone in city government to acknowledge that Philadelphia will never produce the jobs our citizens need under our current system of taxation, but there is only silence on this subject – leaving only a baseless hope that somehow it will happen on its own. As a result, Philadelphia is being transformed into a bedroom com-
munity that houses young and older Philadelphians who commute to work outside the city (currently at the rate of 42% of our workers), and this problem continues to grow each year. Unfortunately, a bedroom community, while enjoyable and positive in many respects, does not generate the jobs or the tax base necessary to care for the high number of under-educated and outof-work Philadelphians; only a community of vibrant businesses will create the growth in jobs and tax base necessary to enable our city to thrive. Now is the time for our business and political leaders to change how and what we tax. If we continue down the same trodden path, the city is doomed to drown in red ink. We must begin laying the fiscal foundation to attract businesses back into the city; advertising alone will not do the job. Only a wellthought out, long-term plan built around a strategic tax policy for business growth will succeed in changing the message our city sends to our country’s entrepreneurs and to the rest of the world’s businesses.