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City Council Accepts Mayor Kenney's Alternate Proposal To Construction Tax

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Philadelphia Mayor Jim Kenney, speaking at Philadelphia's Amazon HQ2 pitch reveal event

The controversial 1% construction tax has been withdrawn by Philadelphia City Council after a last-minute compromise with Mayor Jim Kenney.

The tax passed the council by a narrow majority of 9-8 on the last day of its spring session, short of the 12 votes needed to protect against a mayoral veto. Proceeds from the tax were set to be paid into the city's Housing Trust Fund and estimated by the bill's sponsor, Councilwoman Maria Quiñones-Sanchez, to total $25M. That number was disputed by a report released by the mayor's office.

Kenney had been openly critical of the tax, and the day before council was set to resume for its fall session — which also was the deadline for Kenney to either veto the bill or sign it into law — his chief of staff, Jim Engler, held a press briefing introducing a new proposal to fund affordable housing.

The proposal takes all the tax revenue from properties coming off the much-discussed 10-year tax abatement and pays it into the fund. Over the next five years, the city says that amount will be nearly $53M, including $19.1M this year. While 55% of property taxes must go to the city's schools, the city will pay the equivalent amount out of the general fund.

“This is the best way to fund [affordable] housing without implementing an added tax or a new tax, which would be difficult to implement and may not hit funding goals,” Engler told reporters yesterday.

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Philadelphia City Hall

Though Engler and Kenney didn't say whether the 1% tax would be vetoed if City Council refused to accept the new proposal and withdraw the bill of its own accord, the threat was acknowledged by multiple members of council in previous weeks.

Discussions between the mayor's office and council lasted through this morning, delaying the start of the fall session into the early afternoon. But they eventually came together to withdraw the construction tax and accept the mayor's plan, in concert with a new version of the voluntary inclusionary housing bill that first appeared in one iteration of Sanchez's shape-shifting proposals, according to PlanPhilly's Jake Blumgart.

 

Under this sort of bill, multifamily developers can gain height bonuses to the zoning code for their buildings if they set aside a certain percentage of units as affordable housing or if they pay $25 to $35 per SF of their development into the Housing Trust Fund, Blumgart reports — a departure from the previous form of the bill, which would have had the fee be a percentage of total construction cost.

“I am pleased to have reached a resolution with all of our colleagues in City Council on a proposal that significantly increases funding for affordable housing without imposing a new tax on construction," Kenney said in a statement. "Every participant worked in good faith and with the best interests of Philadelphians at heart. All of us share the same goal — ensuring that residents have access to housing options no matter what their financial situation. This new revenue will be a reliable way to achieve that goal.”

The next step for the city will be the fall release of the first-ever Philadelphia Housing Action Plan, which will be a comprehensive set of guidelines and directives aimed at preserving housing affordability across all residence types, handed down by the Department of Planning and Development.