Tax Reform Commission Committee, June 17, 2024

TAX REFORM COMMISSION COMMITTEE Room 400, City Hall Philadelphia, Pennsylvania Monday, June 17, 2024 10:05 a.m. PRESENT: MATTHEW STITT, CO-CHAIR RICHARD VAGUE, CO-CHAIR FORMER COUNCILMEMBER ALLAN DOMB FORMER COUNCILMEMBER DEREK GREEN FORMER COUNCILMEMBER DANIEL McELHATTON FORMER COUNCILMEMBER DAVID OH VICTOR GARRIDO JOVAN GOLDSTEIN JENNIFER KARPCHUK PAUL LEVY FOLASADE OLANIPEKUN-LEWIS GREG SEGALL JERRY SWEENEY ZACH WILCHA ALSO PRESENT: COUNCILMAN JIM HARRITY COUNCILMAN NICOLAS O'ROURKE - - -

Good morning, everyone. Thank you all for joining us today for the Philadelphia Tax Reform Commission public hearing. By the way, my name is Matthew Stitt. I'm the Co-chair of the Tax Reform Commission and I'm joined here by my fellow Commission members. Back in late February, City Council overwhelmingly approved Resolution No. 240108 sponsored by President Johnson to reconvene the Philadelphia Tax Reform Commission. The Commission is tasked with conducting an updated comprehensive analysis of all taxes imposed in Philadelphia, including by the Commonwealth of Pennsylvania and to make recommendations concerning tax reforms. The Commission consists of 15 members, four members each are appointed by Philadelphia Mayor Cherelle Parker and Council President, one member appointed by City Controller Christy Brady, and remaining members one each are selected by various local Chambers of Commerce in Philadelphia. We want to acknowledge and thank the Tax Reform Commissioners for being here today and note for the record that we have a quorum present. We also want to acknowledge and thank the members of the Tax Reform Advisory Committee that are here with us today whose members are appointed by various community organizations, ensuring a broad representation of Philadelphia's diverse community interests. The group is tasked with offering an additional viewpoint to the 15 Commissioners. We are here today to hear public testimony regarding how changes to the tax code could better support equitable and inclusive economic growth and stability in Philadelphia. To ensure that there is an opportunity for all who are present to testify and be heard, certain ground rules have been established as follows: Your testimony should pertain to the taxes imposed in Philadelphia. Once your name is called, you will have up to three minutes to speak. Again, to be fair to all those who wish to speak, we will hold firm to that time. Once your allotted time has passed, you will be asked to conclude your remarks. Also, if you are here and wish to testify and have not signed up yet, please do so at the table on our left over here. Now, we will begin with our first two panelists. So when I call your names, just please come to the table. And the first two panelists signed up to testify are Jeff DeVuono and Thomas Young. (Witnesses approached Witness table.)

Good morning. MR. DeVUONO: Good morning.

Good morning.

Please state your name for the record and proceed with your testimony. MR. DeVUONO: Jeff DeVuono.

Thomas Young.

Go ahead, Jeff. You go first. MR. DeVUONO: Good morning. Thank you for the opportunity to participate in today's hearing. My name is Jeff DeVuono. I'm an executive with Brandywine Realty Trust. Brandywine is a company founded by Jerry Sweeney and the largest owner of commercial real estate in both the City and Philadelphia -- the city of Philadelphia and the surrounding suburbs for the last two decades. My testimony is focused on the topic of business attraction and retention, specifically the BIRT and the wage taxes. In regard to my qualifications, they are unique and I hope can be helpful to your discussions today. I started my career in real estate in Philadelphia in 1987 as a market researcher for Cushman & Wakefield, a real estate brokerage and services firm. In this role I was tasked with collecting, analyzing and reporting on data involving the office real estate market specifically. At the time, the CBD consisted of approximately 40 million square feet and the surrounding suburbs consisted of approximately million square 24 feet. Today 37 years later, the 25 size of the CBD has not changed materially and is still roughly 40 million square feet. The surrounding suburbs however has increased dramatically, by approximately 35 million square feet and now totals 60 million square feet in total. As that stat shows, the suburban markets grew by approximately 1 million square feet since 1987 each year. At full occupancy, this 35 million square foot increase in inventory houses over 150,000 employees, an amount similar to the total population of the Center City office workers today. In my subsequent role as the market lead for Brandywine Realty Trust, my job was to oversee the leasing effort for both the City and the surrounding suburbs for the last years. As a 24 result, I was on the front line 25 watching the migration out of the City. I was involved in over 3,000 transactions, the aggregate square footage of which totaled more than 30 million square feet and $4 billion in lease value. I witnessed companies like AAA, AmeriHealth, Arkema, CDI, Equus, EwingCole, LBC, Lincoln Financial, Radian, Spring EQ, Sunoco and Urban Engineers, just to name a few, who made the financial decision to relocate from the City to the suburbs and beyond. These companies alone occupy almost 2 million square feet of office space in the suburbs or the equivalent of two buildings the size of One Liberty Place. The negative impact however goes well beyond the particular building that is vacated. These decisions to move out of the City also eliminate the money spent by their employees, visitors and vendors in neighboring retail establishments. It eliminates the demand for hotel and meeting space and the labor associated with these enterprises. It also dramatically reduced the number of workers needed to build, furnish, maintain, clean, secure and operate these properties. These secondary jobs numbered in the several thousands. It also reduced the potential for residents in the City. The collective result is that since 1970 Philadelphia has experienced a percent climb in 15 the overall economy while the 16 surrounding suburbs have realized 17 double digit increases. Why is 18 that? The answer is pretty simple. 19 The cost of occupying office space 20 in the City versus the suburbs is 21 more than double, $30 per square 22 foot plus more. So if the cost of renting space in the suburbs is $30 per square foot, it's $60 in the City. If it's $40 in the suburbs, it's $70 in the City. Here's the breakdown: $17 per square foot in BIRT taxes; $12 in wage tax; $3 in U&O taxes; $3 in real estate taxes. And this does not address the impact of the increased cost of building a building in the City. The cost of building an office building in the suburbs is approximately $500 a foot.

The cost of building an office building in the City is $700 a foot, assuming a 10 percent return investment would require an additional $20 per square foot in rent in the City versus the suburbs just to cover the increased cost. All this, and the city of Philadelphia has the highest local personal income tax in the country. In its simplest form if you want less of something, tax it. The federal government imposed taxes on cigarettes in an effort to reduce smoking, cigarette use went down 30 percent. The City of Philadelphia itself imposed a tax on sugar and soda in an effort to reduce consumption, consumption of sugared soda subsequently dropped by over percent. The BIRT and wage tax 9 model did the same for business and 10 residents. It reduced consumption. 11 Hence, this 22 percent drop in 12 overall economic performance I 13 mentioned earlier. 14 So if the City wants to 15 continue to see a decline in its 16 population, workforce and overall 17 economic vitality, leave the BIRT 18 and wage tax unchanged. But if it 19 wants to increase the number of 20 people living, working and growing 21 within its borders, it must reduce 22 or better yet eliminate the BIRT 23 and the wage tax. Thank you for 24 your time and consideration. 25

Thank you for testimony. Thomas.

Good morning, members of the Commission, and thank you for having me here today. My name is Thomas Young and I'm the CEO of the World Trade Center Greater Philadelphia. I appreciate the opportunity to speak today on the critical issue of business attraction and retention, particularly in the context of the Business Income & Receipts Tax and wage tax. Philadelphia has the potential to grow into a global business hub, attracting innovative companies and fostering economic growth. Currently Philadelphia's taxes, particularly BIRT and wage tax, are higher than the national average which can deter businesses from establishing and expanding their operations here. I commend Mayor Parker and Council President Johnson for their commitment to economic development in their efforts to create a more business-friendly environment. Their focus on tax reform to reduce burdens on businesses is a step in the right direction and one that we must support and amplify. To attract new businesses, Philadelphia must ensure that our tax rate are competitive with our major cities. Reducing the BIRT and wage tax rates to be closer to the national average will encourage existing businesses to stay and expand in Philadelphia. I believe it would also make us more competitive and attractive for potential investors and entrepreneurs. More businesses mean more job opportunities for our residents, leading to higher income levels and improved quality of life. High tax disproportionately impact small- and medium-sized businesses making it difficult for them to survive and thrive. And as we know, small- and medium-sized businesses are the backbone of our local economy and play a crucial role in job creation and innovation. By lowering the BIRT and wage tax, we can provide much needed relief to these SMEs enabling them to grow and contribute to our economic development. This strategy should include investment in infrastructure, education and workforce development to create an environment where businesses can flourish. Collaboration between government business leaders and community stakeholders is essential to implement these reforms effectively. In conclusion, reforming the BIRT and wage tax is critical to attracting and retaining businesses in Philadelphia. 2026 is a very big year for Philadelphia in terms of the international scene. This year we are in the process of hosting our global business forum which there are 323 World Trade Centers in 92 countries around the world and every year we get together in one city to highlight that city for business but to also bring businesses from our respective parts of the region. 2026 we're looking to host this event in Philadelphia, and I believe this will give us a great opportunity to show businesses from around the world that Philadelphia is a place to do business. I urge the Commission to take bold steps toward tax reform making Philadelphia a more attractive destination for business and setting the stage for a prosperous future. Thank you for your time and consideration. I look forward to helping our city move forward with a safer, cleaner and greener city with economic opportunity for all Philadelphians.

Thank you for your testimony. Next two panelists, Jack Soloff, Tom Ginsberg. Also, like to recognize the presence of Councilmember O'Rourke. Thanks for joining us. (Witnesses approached Witness table.)

State your name for the record and then proceed with your testimony.

Jack Soloff. I am a Senior Managing Director at Savills here in Philadelphia, which is a commercial industrial office brokerage firm. I have been involved both living and working in Center City, Philadelphia for the past 30 years in both brokerage concentrating primarily on the CBD, Central Business District, as well as University City. So Jeff DeVuono stole most of my thunder here, basically the stats that he had mentioned. But I'd like to talk a little bit more off the cuff about what it means, the office market to Center City, Philadelphia and to the City in its entirety. I mean, the office market really is if not the, one of the main engines of the City in so many ways, vibrancy, obviously taxes, jobs, small businesses and so forth. And the office market not only brings people from within the City but also suburban workers to Center City to spend their money, whether it's, as I had mentioned, on restaurants, on retail and on entertainment, and it is a tremendous engine that creates all kinds of taxes, whether we're talking about drink taxes, we're talking about sales tax and so forth. And despite the many advantage over the suburbs, including transportation, proximity to workforce, world-class amenities, the City continues to struggle attracting, retaining companies because of the enormous additional tax burdens that companies have to absorb. These taxes include, as has been mentioned, BIRT, wage tax and also the Use & Occupancy tax, which is really a tax that's unique here to Philadelphia as well. In addition, there are indirect taxes such as parking taxes, I believe we're if not the highest, one of the highest parking taxes in Philadelphia, so the workers who don't take advantage of public transportation have to spend money, significant costs on that. I'm reading through all this and Jeff really caught most of what I was about to say, but I think you can also see we've had a fantastic advantage here in Philadelphia. You know, for 7 years I heard about the brain 8 drain. That's the folks that would 9 graduate from our great 10 universities and then leave to go 11 to cities such as Boston, 12 Washington D.C. and New York. 13 And Philadelphia, one of 14 the advantages we have besides our 15 fantastic housing stock, third 16 largest, Center City here in 17 Philadelphia, it's a much less 18 expensive city than the ones I just 19 mentioned. So these folks were 20 leaving. And as amenities happened, as more came, we saw more and more of these young folks staying here in Philadelphia. And it did help the office market and there were certain companies that were opening up satellite offices, not a tremendous amount of employees and not a tremendous amount of square footage, but that was helpful. But we are just talking about a drain. If you ever try to go west on the Schuylkill Expressway in the morning, you're seeing all these workers instead of coming into the City, going out and spending an hour-plus trying to get out to their suburban jobs. And the reason is very simple. The tax burden that these companies have to absorb here in Philadelphia, they're going out to the suburbs. So I think if we had a much more level playing field, I genuinely believe that we would get more than our fair share and expand the office market. As Jeff had said, there's about 45 million square feet of office space here in Philadelphia. When I started in 1987, there was 40 million square feet and that says quite a bit. Thank you very much.

Thank you for your testimony. Thomas.

Good morning. Thank you very much for the opportunity to testify today. My name is Thomas Ginsberg. I represent the Pew Charitable Trust. We're a private nonprofit, nonpartisan organization that provides data-driven research and engages with policymakers and the public on key fiscal issues facing Philadelphia, which is Pew's hometown. Pew has done research on Philadelphia public finance and tax policy for more than 15 years. We have two recent pieces of research that are relevant to this Commission's work. One analysis last year looked at Philadelphia taxes on households and the other, just released this morning actually, looks at businesses. Both focus on tax burden using something called the effective tax rate. The effective tax rate tries to measure how taxes affect the payers, not how they affect government revenues. One of our topline findings I'm going to explain here is that the City's tax exemptions exclusions have had a big, almost decisive impact on the tax burdens on both households and businesses, although to very different degrees in each. First, with respect to households we looked at four local taxes: the wage tax, the school income tax, property tax and sales tax, and their burden on different kinds of hypothetical households who are renters or homeowners. We assume the renters in this research received no subsidies and they shouldered the property tax indirectly through the rent that they pay. We had two main findings: Philadelphia's household tax burden was the lowest on low-income homeowners and it was the highest on low-income unsubsidized renters. That assumes similar income levels for those groups. In both of those cases the main reason is the City's Homestead tax credit -- tax exemption, excuse me. Homeowners can get it. Unsubsidized renters cannot. The Homestead Exemption was the main differentiator in the tax burden on these two groups. Point two, for homeowning households that claim the Homestead Exemption, Philadelphia essentially has a progressive tax structure. That means their tax burden goes down as their income and property value goes down. And conversely, it goes up as their incomes and property values go up. That is not otherwise the case in Philadelphia or Pennsylvania. Under Pennsylvania law, that mandates that tax rates be uniform or flat for all payers. Flat uniform taxes without any major exemptions result in a regressive tax structure and that is where Philadelphia renters live, in a regressive tax environment. On businesses, we looked at how different sectors, sizes and structures of businesses with sales in Philadelphia are affected by just two of the local taxes that we looked at in this case: The BIRT, the Business, Income & Receipts Tax, which is an unusual tax nationwide in that it taxes both gross and net that falls on a business. We also looked at the net profits tax, which is levied on businesses, mainly on partnerships and sole proprietorships. We did not look at state tax. We did not look at wage tax in this analysis. For this study we did not also create hypothetical taxpayers. We used actual BIRT and NPT tax returns, almost a million of them. We looked at four different years, 2017 to 2021. 5 percent at the median. 5 percent of their net income on average every year. And we emphasize that's a median. That means half the businesses pay less or shouldered less and half shouldered more, some cases a lot more. Point two, the smaller a business in terms of gross receipts, the lower its tax burden. 8 percent of net income at the median for small compared to percent at the median for large companies. A major reason for this is difference is the $100,000 gross receipts exclusion. That provides disproportionate significant relief to smaller businesses, but that exclusion provides no meaningful relief for large companies. We found that 94 percent of BIRT revenues are owed by large corporations -- large companies, I'm sorry, as we group them.

Three-quarters of the businesses in the City, that's about 72,000 businesses on average, did not have enough taxable income even to incur a BIRT liability. One-third of businesses that did have enough sales, that was about 12,000 companies, reported being unprofitable but still owed the gross receipts tax. Point three, the BIRT tax burden varied in notable ways across industry sectors from around percent to percent. Each sector, and I'm talking about retail, wholesale, manufacturing, whatever sector grouping that there may be, each sector also had different level of exposure to gross or net sides of BIRT, those two prongs. Consequently, each sector would feel the effect of any changes in the system differently. Sectors are going to be affected differently one way or the other. And separately fourth point, we looked at NPT, the net profits tax. The median tax bill for those who had to pay the net profits tax was $360 a year. Doesn't sound like much. In fact, it is not much compared to the BIRT. But the net profits tax touches a lot more businesses, small businesses. On average over the period we looked at 56,000 have to pay that compared to about 35,000 paying the BIRT or liable for the BIRT I should say. In conclusion, we found that Philadelphia's tax exemptions have a lot of impact on the tax burdens that homeowners and small businesses face, especially since the City cannot vary those underlying rates due to the uniformity clause of the Constitution. Those are my topline findings. I'm happy to take any questions and address them as best I can and I appreciate the work that you all are doing here. Thank you.

Thank you for your testimony. Next two speakers are Stan Shapiro and Chad Williams. Also would like to recognize the presence of Councilmember Jim Harrity. Welcome. (Witnesses approached Witness table.)

Good morning.

Good morning. Please state your name for the record and proceed with your testimony.

Good morning, Commission members. My name is Stan Shapiro and I'm here as Vice- chair of Philly Neighborhood Networks and a member of the Philly Revenue Project. I'd like to offer a brief review of the mandate that this Commission is charged with at Section 4-900(a) of the Home Rule Charter. I'm doing this not just as an observer but as someone who was on the legal staff of City Council at the time that this was proposed to be adopted by the voters. " Parsing this section makes clear that there are four separately stated tests that any recommendations of this Commission must pass: First, they should promote growth. We already know that various representatives of big business will ask the Commission to conclude that across-the-board tax cuts will satisfy that test. I don't believe those arguments are valid. But even if they are, that would only get a proposed cut one quarter of the way to the finish line. Second, any suggested tax cuts must be found to be fiscally responsible. I know that there are fancy econometric models that have time to time suggested that tax cuts actually produce more revenue, not less. That theory was famously described by a former Republican President as voodoo economics, but contrary to theory we know what tax cuts definitely bring before the magic sets in, if it ever does, and that's austerity. They bring reductions in basic services that support people in their neighborhoods and that make them safe and prosperous. We know what these services are. I'm not going to detail them here. Others probably will, but magical tax cuts, especially ones that mostly benefit big business will not pay for those services. " In other words, they must contribute to a more just, equitable and sustainable society. So any tax cut idea that suggests it will attract jobs must be separately evaluated regarding how many unemployed and underemployed Black and Brown folks who've been subject to systemic discrimination in this city, country and world, how many of those will get those jobs, what the pay rates for those jobs will be, whether companies assisted will respect labor, civil rights and environmental laws, how they will affect the viability of existing neighborhood businesses and whether they will as a package benefit those most disadvantaged in our city or instead those who are already doing really well. So, for instance, if tax cuts mostly benefit the bottom line of big law firms and national hotel chains and real estate companies, they won't pass muster. " So, for example, if the Commission were to consider a 1 percent wage tax cut, it would have to reckon with the fact that very low-wage workers already are exempt from all but the PICA portion of that tax, a portion that cannot be reduced. They would get no benefit at all from a wage tax reduction. As the workers earning $50,000, their benefits would be $500. Anyone paid $500,000, simple math tells us would get a benefit 10 times bigger or $5,000. So you got a median-wage worker getting 500. Someone doing really well gets 5,000. That's not tax equity. Similarly, a 1 percent cut in BIRT's net income tax will disproportionately benefit big business. We've already been told that 75 percent of businesses in the City pay no BIRT. So a 1 percent cut would primarily benefit the 100 or so companies with gross receipts in the City of $100 million or more. There are about 100 of them. They would get an enormous benefit. So this is the law, members. This is not Stan Shapiro speaking for what he wants. This is in Section 4-900(a) of The Philadelphia Code. I hope and trust that the Commission will abide by your mandate. Thank you.

Thank you for your testimony. Next two speakers, William Bowie, Erin Dwyer. (Witnesses approached Witness table.)

Good morning. I'm Erin Dwyer Harvard, the Director of Public Affairs of the General Building Contractors Association. GBCA represents nearly 350 commercial, industrial, institutional general contractors, subcontractors and material suppliers throughout the Greater Philadelphia region. On behalf of GBCA and our member companies, thank you for allowing me to testify today. We commend and support the efforts of the Tax Reform Commission. As this body examines the City of Philadelphia's tax structure, we recommend a further reduction in the Business Income Receipts Tax as well as the city wage tax. Our general contractors built this city and will continue to build Philadelphia's skyline. We along with our partners in labor provide Philadelphians with a family-sustaining wage that builds our city. If the City of Philadelphia wants to continue to support its residents and grow our population, a reduction in taxes is pivotal. Each year Philadelphia loses 60,000 residents, which is 10,000 more than those moving in each year. If we hope to move our city forward, we must change what has not worked in the past. Today you will hear from individuals from small businesses, larger institutions and other entities. Our members work with these groups to build Philadelphia and we must support our leaders at every level to create a sustainable Philadelphia. Thank you for your time today.

Thank you for your testimony. State your name for the record and proceed.

Good morning. I'd like to start by thanking the Council for the opportunity to speak today. My name is William Bowie and I am the owner of Empower Construction, a small yet growing enterprise located here in Philadelphia. I stand before you to share my experiences and the impacts of the current tax structure on my business and the broader community. As a business owner, I am proud of the contribution Empower Construction makes to our local economy. We employ 82 individuals with plans to expand with additional hires in the coming year. Our partnership spans across various small businesses in the City, fostering a network of local commerce that benefits us all. Moreover, we invest in workforce apprenticeship programs designed to provide opportunities and skilled development for Philadelphia residents. As a Board member of Philadelphia Works and more importantly being born in the city of Philadelphia, it is most important to me that the City I love thrives when it comes to creating opportunity. However, the economic landscape within which we operate poses significant challenges. Philadelphia's combination of business taxes adds a heavy burden on enterprises like mine. This is particularly concerning because we understand that small- and medium-sized businesses are essential for driving job creation and economic growth. Additionally, the high tax cost can deter new businesses from establishing themselves here, stifling innovation and potential employment opportunities, although we are one of the largest African American-owned utility construction companies in the Northeastern United States, that should say a lot because we have only been in business for three years and we still are considered a small business. Our largest client PECO wants us to have a presence in the city of Philadelphia because we are very intentional about being in, of and for the communities in which we serve. But the tax structure is something I always need to keep in mind when choosing areas to do work because it can have effects on the financial success of certain projects. The current tax structure not only affects my business but also those with whom we contract. The financial strain limits our capacity for expansion, hiring and reinvestment into our communities. While we are fully committed to becoming a premier contractor in Philadelphia, the pressure from the taxation framework makes the idea of keeping our projects and headquarters in suburbs more appealing and financially prudent. This situation underscores the necessity for immediate action. The recent fiscal reports as analyzed by Econsult indicate that Philadelphia has a strong position to reduce these punitive taxes. With state revenue collections exceeding projections, the City has an unexpected opportunity to implement a more aggressive and favorable tax strategy. In closing, reducing business taxes will create a more supportive environment for existing businesses and attract new ventures to Philadelphia. It's imperative that the City leverages this moment to reform the tax system for a brighter and more prosperous future, because the childhood dreams of a young boy who grew up in Germantown section of Philadelphia owning his own construction company and providing a space filled with opportunity for each and every Philadelphian to thrive is one step away. I love this city with all my heart and my mission is to have generations work for Empower Construction, and this is just moments away. I just need a little bit of help. Thank you.

Thank you for your testimony. Next two speakers Rasagna Holt and Craig Williams. (No response.)

David Simms, Jason Ray. (Witnesses approached Witness table.)

You can state your name and proceed with your testimony.

Good morning. My name is Jason Ray. I'm the founder and President of Zenith Wealth Partners, which is a local minority-owned investment advisory firm here to talk about the pressing need for business tax reform, specifically reducing or eliminating the Business Income & Receipts Tax for small businesses commonly known as BIRT. The BIRT taxes both gross and net on our business which poses a significant obstacle for small businesses like Zenith. It's particularly burdensome because it takes a portion of our revenue off the top, directly impacting our gross margin and reducing what we have to operate our business. For a small business, right, reinvestment and opportunities to invest in our further growth and our operating activities is crucial, and this tax really directly impacts our ability to not do this. Further, as we grow and achieve profitability, the assessment of net income further hinders profitability and our ability to invest in local talent to expand our services and invest in new technologies. These investments are essential for fostering economic growth and creating job opportunities for folks in our industry and for folks entering the industry. Lowering and eliminating BIRT would provide a much-needed boost for our business and for many small businesses across the City. It will enable us to retain more of our earnings. It will be critical for hiring more talent and helping reducing unemployment and stimulating development in Philadelphia, particularly for young folks that are coming out of the school system and looking for jobs in the workforce. In conclusion, reforming this would not only support our business but contribute to a more inclusive and equitable economic landscape in Philadelphia. I urge this Committee to consider these points and take an action to create a more favorable environment for our businesses, particularly those that are small, minority-owned and striving to make a positive impact on our community. Thank you.

Thank you for your testimony. State your name and proceed.

My name is David Simms. I'm the artist and proprietor of Edible Delights Catering, a small business in the Mt. Airy section in the City. I've been in business now for approximately years and the BIRT tax has definitely affected my business. And as an entrepreneur that's devoted to my business and to my community, I felt as though that it's been a stronghold. I was really looking forward in the last budget for City Council maybe to reduce the BIRT tax and that didn't happen. And that's my testimony for the day. Thank you.

Thank you both 14 for your testimony. All right. 15 The next two names are -- apologies 16 if I pronounce your last name 17 wrong -- Jonathan Sgro, Andy Toy. 18 (Witnesses approached 19 Witness table.) 20

Good morning.

Morning.

Please state your name and proceed with your testimony.

Sure. Good morning, members of the Commission. My name is Jonathan Sgro. I'm a Divisional Supervising Attorney at Community Legal Services where I represent homeowners struggling to afford their property taxes. The Tax Reform Commission is charged with evaluating Philadelphia's tax structure with a focus on fairness and equity. The 2003 Commission recommended cutting wage and business taxes and increasing reliance on property taxes. I'm here to emphasize that any recommendation of this Commission should be judged by how it impacts low-income and working-class residents of Philadelphia. And when it comes to property taxes, that means our homeowners who are most vulnerable to displacement and rising property tax bills. Philadelphia has an unusually high rate of homeownership, especially among Black, Hispanic and low-income households. Many of these homes have been in families for generations. Some believe that property taxes are a more reliable source of revenue because real estate doesn't move, but families and long-time homeowners do move when they can no longer afford their bills. In 2003, the Tax Reform Commission noted the importance of improving the accuracy of property tax assessments and providing protections to homeowners in recent years. The OPA has made significant improvements and CLS is particularly proud to have worked with the City and the Department of Revenue to create a robust safety net for homeowners. Just last week Council unanimously approved the creation of a low-income Tax Freeze program years after it was first suggested by this Commission, but there is still much work to be done to achieve fairness and equity in our property tax system to prevent displacement and preserve intergenerational wealth. Philadelphia continues to struggle with inaccuracy and regressivity in property tax assessments. A recent report co-authored by CLS and the Reinvestment Fund shows that homeowners living in majority Black, Hispanic and low-income neighborhoods are more likely to be inaccurately assessed and more likely to be overassessed compared to White homeowners living in higher income neighborhoods. This new report recommends examining the OPA's assessment methodology to increase accuracy and eliminate racial bias, increasing transparency and creating a taxpayer advocate position to help homeowners navigate the appeals process. This Commission should be sure to coordinate its efforts with the Task Force recently announced by Mayor Parker to eliminate racial bias from the assessment system. Unfortunately, the work of the Assessment Equity Task Force will take years. Meanwhile, homeowners will continue to struggle with rising assessments. The OPA will soon release new assessed values for 2025 and we expect homeowners to see significant increases. Existing tax relief programs will work for some but many will continue to fall through the cracks. While this Commission is exploring ways to generate new revenue, it must work equally hard to ensure that no Philadelphia homeowner is faced with the loss of their home because their income is outpaced by rising assessments. The Commission must also consider ways to improve administration of existing tax relief programs, which remain grossly underenrolled. Twenty years ago the Commission recommended improving access to these programs. That recommendation remains unfulfilled. For example, only 33 percent of eligible seniors are enrolled in the Senior Freeze program. It should be a priority of this Commission to make these programs more accessible through targeted outreach and automatic enrollment. Policymakers are often focused on the development of new affordable housing. We must devote equal attention to preserving homes where families already live, both their most affordable source of housing and their greatest source of wealth.

In Philadelphia, given our high rate of low-income homeownership, this Commission must be guided by the principle that property tax policy is affordable housing policy. Thank you.

Thank you for your testimony. Please proceed.

Good morning, Chairpersons Vague and Stitt and distinguished members of the Philadelphia Tax Reform Commission. My name is Andy Toy and I'm here today as a concerned and engaged citizen. My goal today is to get the often misunderstood land value tax or LVT into the discussion as a true reform. " If we were to begin moving towards a higher tax on land versus improvements, I believe we would move the needle on incentivizing development, penalize blight and speculation, help to create more housing and affordable housing, help ease the burden on some of our struggling commercial corridors and potentially enable ourselves to lower other taxes, business and wage being the biggest. As someone trained as an economist and policy analyst, my inclination is to look at how government can incentivize positive behavior and discourage negative behavior without enacting onerous and difficult -- to enforce regulations. Currently, if a property owner wants to make some improvements to their property, they may see an increase in assessment and therefore taxes, unless it is a significant improvement that warrants applying for a tax abatement. Having worked in City government, I saw many instances of owners trying to stay under the assessment radar by either not applying for permits or just not making the improvements. The biggest example of this was slumlord Sam Rappaport, many of you know, who never paid his fair share of taxes while waiting for his often blighted properties to become valuable just by their location. The increased values had nothing to do with his investment in improvements. It was always a function of the area getting better, in many ways due to the City's investment in infrastructure or promoting new development such as Liberty Place. The point here is that we ought to reward investment, not penalize it. I would recommend moving incrementally towards a slightly higher land value that could test the waters in Philadelphia, although we have seen that LVT has for years been successfully implemented across the country already and even in over a dozen municipalities in Pennsylvania. So we know it does not conflict with the state's uniformity clause. Other Pennsylvania cities that have adopted LVT include Harrisburg, Allentown, Erie City, Scranton, Altoona and even nearby Millbourne. In fact, I'm very familiar with Milbourne. Just before you get to 69th Street in Upper Darby, you may recall the old Sears site there that was demolished and vacant for many years. It wasn't until Millbourne with the leadership of my colleague Mayor Tom Kramer instituted LVT did the largest site in the borough get redeveloped. But even for a couple years before the construction, the owners were finally paying a much larger amount that allowed everyone else's taxes to be decreased. We know that the incentive works right from our own backyard experience. Around eight years ago I worked with Josh Vincent at the Center for the Study of Economics and he was able to run some simulations around what various incremental tax changes to land versus improvements would do to actual tax amounts for different types of property in different neighborhoods. This assumed that the total collection would be the same or revenue neutral, although we can easily alter that assumption. At the time the breakdown was approximately 78 percent of the City's real estate tax collection was due to improvements in 20 percent for the land values. We 21 were hoping to get the attention of 22 Mayor Kenney to do something innovative at the beginning of the term, but there was a real focus on the soda tax at that point. However, the simulation results were cool, generally lowering tax burdens on poor residents and mom-and-pop stores and multi-family dwellings. Other commercial, industrial and vacant land did go up but not by much relatively. The individual changes in the revenue-neutral incremental approach were not huge, but for lower-income folks much more positively and significant.

I believe we could certainly update the data if there is serious interest in this approach from this Commission, and there are other ways to use LVT such as using it to address currently exempt properties through pilots. Finally, like many I too was a skeptic until I went to a presentation years ago and it really did make economic sense. Today Detroit's mayor is pushing that city to implement LVT which is pretty likely to happen, which even makes more sense there. And other supporters are out there, including the National Association of Home Builders, the Congress for New Urbanism, the Lincoln Land Institute and many others, including some of this esteemed committee -- Commission. I'm sorry. Thank you for your time.

Thank you for your testimony. Next two speakers, Tim Kearney, Phil Butler. (Witnesses approached Witness table.)

Good morning. Please state your name for the record and proceed.

Thank you. Good morning, Chairman Stitt and Chairman Vague and members of the Commission. My name is Tim Kearney and I was appointed to the Tax Advisory Commission Committee by Nicole Lawrence, Executive Director of TURN. I'm here to represent TURN. TURN stands for the Tenant Union Representative Network, and its mission is to educate, advocate and organize for residential tenants in Philadelphia. Roughly 46 percent of all Philadelphia households are residential tenant households. TURN has a Tenant Rights Unit that sees Philadelphians that have bad residential landlords. TURN also under contract administers numerous rental assistance programs for Philadelphia City government. TURN originally began in 1973 as a special project of Community Legal Services working with residential tenants in some troubled buildings in Germantown. TURN works predominantly with Philadelphians with low incomes. It is from their perspective that I make suggestions for the Commission this morning, and my written testimony I gave copies, each of you should have those with you. Historically, in the United States local taxation has been more regressive than state and federal taxation. Rent and rent increases bestow no equity in the property for residential tenants despite the fact that rents cover everything. When you pay the rent, 46 percent of all Philadelphia households when they pay their rent, they're paying for the repairs, they're paying for the taxes, they're paying for the insurance on the property, they're paying for the landlord licensing fees, they're paying the mortgages that the landlords have and they're paying the profits that the landlords get from their business. One of the things that TURN teaches is that housing is a civil right. TURN teaches civil -- I'm sorry, that housing is a human right, that TURN is teaching human rights, that we have to move beyond just civil rights that most of us have spent -- if you're as old as I am, spent your whole life dealing with so many different civil rights issues. But in the United States we don't move as much as we should to concentrate on human rights as we do on civil rights. Housing is in the International Declaration of Human Rights. And in general, we should not be raising taxes on apartments and houses. We should be subsidizing them. Housing is a human right. My testimony this morning is one of some preliminary thoughts and conclusions. As the process continues, I will have some further input through the Advisory Committee as we learn more details about current and possible policies for municipal taxes and fees. We should -- anyway, I'm going to -- I want to -- because you can read my testimony, I'm not going to read it and go over it. I want to touch on two main parts of it. I think one of the biggest and best reforms that we can do, and I appreciate some comments from Jack and his coworker from the Revenue Department who informed me that the old tax elimination wage tax for low-income workers was implemented in some form and I was unaware of that. But it was a bill that was passed and repealed when City Councilman David Cohen was in City Council back in the 1990s and early 2000s. And I think that one of the ways that we can make the taxes more progressive in Philadelphia, and I think that should be our goal and the goal of the Commission, is twofold, that we should cut the wage tax taxes for low-income folks, that whatever the City law is that's in place should be beefed up so that it equals the level and the impact of the state tax-back program and the federal earned income tax program.

Now, going along with this, I would like to say because there's been a lot written about the Greater Philadelphia Urban Affairs Coalition program, to get people to sign up for tax back in EITC and estimates that if everybody participated and took advantage of it, that the City would reap $150 million of federal and state money that's just lying on the table would come back into our economy and be spent here. I think $1 million to beef up that program is very, very small and that we should put in enough money until we can get a very, very high percentage of the folks who are eligible for all three tax-back refunds to be able to get it. Now, dovetailing or balancing the wage tax cut for low-income workers for the working poor would be pushing Councilwoman Kendra Brooks' wealth tax, and the estimates are that that's going to bring in $200-something million a year. And so, I think those two things together are very important. The other thing, because we're looking at possibly building an arena in Center City, I would recommend to the Commission and to our current City Council to look very carefully at what happened back at the turn of the century. I've written more in my written testimony, but the City Council lost some enormously good revenue streams. We lost some enormously good revenue streams when we tore down Vet Stadium, a deal for the football and the baseball team that was average for them was going to get worse, which is one of the big reasons why it got torn down and we got two new stadiums. But the loser in the process was the City. The Philadelphia taxpayer, all the citizens of Philadelphia, pay for four brand new stadiums, which we never had to do, and it's essentially the greatest amount of corporate welfare and our tax money goes to something that two of the richest entities in our country never needed any subsidy for, but we shouldn't be subsidizing pro sports stadiums, and we need to be very careful with this new arena, that taxpayers aren't left on the hook for paying something that people are so wealthy, the National Basketball Association is so wealthy that the citizens in Philadelphia don't need to pay for it. I also would like to add because a lot has been written -and cut me off if I'm at the minutes -- a lot has been written about the 170,000 Philadelphia citizens that voted to form the Tax Reform Commission back in 2003 to lower our taxes. And what wasn't written in that is that an awful lot of people really love to pay taxes, I mean absolutely love to pay taxes. And I don't think we should ever forget about that. But they love to pay taxes for all the things that they really benefit by in society. And one of the things that taxpayers like is they like targeted taxes because then they know what they're going to get. The way we have government today, our representative government, forms of government at each level don't always represent us. And so, if we can target taxes so people know what they're getting, that would be helpful. I'm going to stop there. I'd be very glad to answer any questions.

Thank you for your testimony. Proceed.

Good morning, Chairperson Stitt, Levy and other members of the Tax Reform Commission. I'm Phil Butler, President of NAIOP Greater Philadelphia Chapter representing owners, developers, other members of the commercial real estate in office, residential, primarily office, mixed-use and industrial product types. As the Commission considers a wide range of reform to improve current tax structure, NAIOP Greater Philadelphia believes that inclusive growth should be a top priority. The phrase inclusive growth is used these days very often so I believe it's vital to be clear about what it means. We at NAIOP see it as a continuum that starts with tax reform, thoughtful and equitable revisions to the tax code that will fuel jobs, allow Philadelphia's diverse small- and medium-sized businesses to make investments in the futures of their enterprises. Their investments lead to job growth, attract new businesses to our city creating additional revenues for the City. And those revenues, when deployed thoughtfully with intention, can enhance services, provide safe, clean and green communities which are the very priorities that Mayor Parker and City Council are focused on. That's where this comes full circle, because a safer, cleaner and greener Philadelphia will bring more residents, visitors and in turn more business. And any revenues lost through the tax reductions in the short term can be reclaimed through this growth. That in a nutshell is what we mean, NAIOP means by inclusive growth. It's growth that benefits all Philadelphians. That's why we at NAIOP Greater Philadelphia are hopeful about the new leadership in Philadelphia as evidenced by the establishment of this very committee -- this very Commission. We need to recognize that comprehensive tax reform also spurs outside capital investments. Thinking back to the 2010s, we can't forget that that our city witnessed a remarkable influx of outer market investment signaling a strong belief in our city's potential. In fact, over $20 billion has been invested from sources both inside and outside of the region in new development. Yet the momentum of such investments has waned over the recent years. It has been hindered by rising gun violence, entrenched poverty and insufficient opportunities for minority-owned businesses. These challenges have cast a shadow over Philadelphia, one that we must figure out how to dispel. The consensus among industry leaders is unequivocal. External investments is the lifeblood of Philadelphia's growth, inclusive growth. Equitable change to the code would be the precise signal that outside investors take note of as they evaluate Philadelphia alongside other major cities. Capital investors need to see the City is moving in the right direction and those types of changes would go a long way to providing that confidence to others inside and outside of the region. In short, Philadelphia is at a crossroads and the path we choose will shape our city's future for generations to come. A clear vision for growth will send the message that to the national investor community that Philadelphia deserves a serious look in the months and years ahead. NAIOP Greater Philadelphia is committed to working with Mayor Parker, City Council and this Commission to catalyze growth and prosperity for all Philadelphians. Thank you for your time today. I'm more than willing to answer any questions.

All right. Thank you for your testimony. Next two speakers are Jennifer Rodriguez and Regina Hairston. (Witnesses approached Witness table.)

Good morning.

Good morning.

Good morning.

You may proceed.

Good morning, buenos dias, distinguished members of the Philadelphia Tax Reform Commission. I am Jennifer Rodriguez, President and CEO of the Greater Philadelphia Hispanic Chamber of Commerce. Thank you for the opportunity to testify today. I am here to advocate for a significant and consistent reduction in business taxes with particular emphasis on the Business Income & Receipts Tax, the BIRT. The BIRT tax is arguably the most burdensome for small businesses in Philadelphia and it stands as a substantial barrier to economic growth and prosperity within our city. Philadelphia's high cost of doing business is well-documented and it is a significant deterrent for small business owners and entrepreneurs. Even though many small businesses are exempted from BIRT on their first $100 in receipts, the existence, the mere existence of this tax still cast a long shadow over our city's business environment and fuels Philadelphia's reputation as a difficult place for small businesses. In fact, the majority of small businesses surveyed by the Diverse Chambers of Commerce, the Diverse Chambers Coalition, would not recommend the City to other entrepreneurs as a place in which to do business. When we compare Philadelphia's tax environment to those of our peer cities and suburban counties, the disparity is striking. Philadelphia ranks unfavorable in several studies that assess the ease of doing business and the tax burden. Cities like Boston, Atlanta and Dallas, which have more favorable tax structures, are attracting businesses and entrepreneurs at rates not seen in Philadelphia in decades. Moreover, our suburban counties offer a stark contrast with their lower tax rates and more business-friendly environments. The value proposition in these collar counties extends beyond just lower taxes. They offer overall better value, which such has improved cleanliness, safety and overall quality of life. These factors collectively add to their attractiveness and make them more appealing for businesses looking to establish or relocate their operations. Continuous news about major investments and redevelopment on the Merion Township side of City Avenue is a clear and visible example of how tax, regulation and quality of life enforcement can spur economic development. According to the Philadelphia Business Journal, office occupancy in Upper Merion Township has been trending up, reaching 89 percent even as Center City, with a 10 percent vacancy rate, struggles to 11 retain tenants. 12 Furthermore, a wave of new 13 investment along City Avenue is 14 expected over the next few years to 15 provide more than 1,700 new units 16 of residential housing plus 17 commercial development, which 18 promises to develop the Merion 19 Township side of City Avenue into a 20 regional economic hub. All of this 21 is happening not on the 22 Philadelphia side of the Avenue but 23 just across the County Line. 24 Businesses are incentivized to relocate just outside City limits to avoid the tax burden, the complexity of City processes, the higher levels of crime, which leads to a loss of economic activity, jobs and potential growth within Philadelphia. Add to that the mere existence of the BIRT tax, which despite exemptions for small businesses, contribute significantly to Philadelphia's reputation as an unfriendly place in which to do business, deterring new ventures from establishing here. A reformed tax structure should aim to create an equitable environment where businesses of all sizes can thrive. The need for a significant and consistent reduction in business taxes cannot be overstated. Such a reform would make Philadelphia a more attractive and competitive place in which to do business, fostering an environment where entrepreneurs can flourish and contribute to the City's overall economic health. I urge the Philadelphia Tax Reform Commission to recommend bold action. Thank you.

Thank you for your testimony. You may proceed.

Good morning, Chairmen Stitt and Vague and members of the Tax Reform Commission. My name is Regina Hairston, President and CEO of the African American Chamber of Commerce for Pennsylvania, New Jersey and Delaware. I am here in support of further reduction of the Business Income & Receipts Tax to support equitable economic growth in Philadelphia. Philadelphia has one of the highest business tax burdens in the country with both gross receipts and net income taxes. This double taxation places a significant strain on Black and Brown businesses exacerbating existing disparities and access to capital. Studies have shown that Black-owned businesses are three times more likely to be denied loans compared to non-Black-owned businesses limiting their ability to compete, grow and hire more employees. Sole proprietorships, which make up a significant proportion of Black-owned businesses in Philadelphia, are particularly vulnerable. These businesses, often run by individuals or families, face unpredictable tax commitments due to the net income portion of BIRT, which stalls reinvestment and expansion. For instance, AACC's Vikki Lassiter, CEO of the Adtigo Group, a Black woman-owned organizational development and business advisory firm based in Philadelphia shared how the BIRT impacts her business. She states, Since 2016 we have provided tailored solutions that empower our clients to navigate both internal and external systems change. Despite our successes, we are still grappling with the lingering impacts of the COVID-19 pandemic and inflation. As a business owner, I have instilled discipline into my financial processes. Yet I still frequently confront difficult decisions regarding my workplace and my allocation of essential growth funds. She continued, Reducing the Business Income & Receipts Tax will provide a helpful piece to our financial puzzle easing some of the economic pressures. As a business owner, I am determined to gain control over my economic destiny. Every dollar saved in taxes is a dollar that can be reinvested into my business. This reinvestment is vital for maintaining high quality services and creating well-paying jobs within my community. Business owners like Vikki are acutely aware of how tax reductions can transform their capacity to invest in growth, ultimately strengthen the broader economy by fostering sustainable and inclusive development. Some may argue that reducing taxes will reduce City revenue. However, evidence from other cities demonstrates that lowering business taxes can stimulate economic growth and increase overall tax revenue through higher business activity and job creation. For example, prior to COVID-19 New York in 2015 reduced the unincorporated business tax resulting in a 5 percent increase in new business registrations within two years. Chicago 2017 lowered the gross receipts tax leading to a percent growth in small businesses and 10,000 new jobs over three years. Detroit's 2022 to 2017 phase reduction of the corporate income tax led to a percent 7 increase in diverse-owned businesses and 15,000 new jobs over five years. These reductions were enacted before the COVID-19 pandemic, which brings a unique perspective to potential tax reductions today. Post-COVID businesses are facing additional challenges, including disrupted supply chains, increased cost and shifting consumer behaviors. Therefore, tax reductions now could provide even more significant relief and support the recovery and resilience of local businesses. This context suggests that Philadelphia could see even greater benefits in terms of business growth and job creation by reducing BIRT wage tax in the current economic climate. S. economy annually.

This means more jobs and better wages for our communities and our region; improved access to capital; enhanced loan approval rates; lower taxes can improve business financial health making it easier to qualify for loans and increase non-debt capital; greater investment in innovation, with more predictable cash flows businesses can invest in new technologies and processes fostering innovation and competitiveness; community revitalization; neighborhood revitalization, thriving businesses are more likely to attract more investments, enhance property values and improve public services provided by a broader tax base; social benefits, increased employment opportunities can help reduce poverty and crime rates and improve access to health care and education. We strongly urge the Tax Commission to recommend reducing the BIRT and wage tax as a key component in a broader set of public policy initiatives aimed at supporting Black-owned businesses and other diverse and small businesses. These tax reductions are essential for helping diverse businesses grow in scale allowing them to seize new opportunities and work towards closing the Black/White wealth gap. By fostering a more equitable business environment, we can also enhance the economic viability of Philadelphia. Thank you for your time and consideration, and I look forward to working with this Commission on furthering the benefit of all Philadelphians. Thank you.

Thank you for your testimony. Next two speakers are Will Carter and Reverend Gregory Holston. (Witnesses approached Witness table.)

Good morning.

Good morning. Good morning. William Carter, Vice-president of Local Government Affairs for the Chamber of Commerce and founding member of the Inclusive Growth Coalition. I want to thank this body for having us to testify in this regard. Obviously this is something that we've been working on for some time and we look forward to working with you and the Mayor and City Council in making some of these recommendations a reality. As Philadelphia has embarked on a new era, our 100th Mayor Cherelle Parker and new City Council President Johnson faced many challenges. Our city experiences historical poverty, education shortfalls, blight, gun violence and other global economic forces that increasingly make it difficult for people to make ends meet. These are all very complex issues with proposed solutions from across the ideological spectrum. However, it seems everyone from heads of households to heads of companies agrees that increasing the number of people making a good living helps to address each. This is why the Inclusive Growth Coalition, an unprecedented effort between the City's independent Chambers of Commerce, including the African American Chamber led by Regina Hairston, as you just heard from, the Hispanic Chamber led by Jennifer Rodriguez, the LGBTQ Chamber or the Independence Business Alliance led by Zach Wilcha and the Greater Philadelphia Chambers was formed. And I just want to take this time to acknowledge the Chamber's incoming Chair Greg Deavens, President and CEO of Independence Blue Cross who is with us also. We all came together for a reason. The reason is this: All businesses regardless of demographics were saying the same thing, but we were all saying it in silos. They need a government that will invest in them as they compete against companies in other cities across the region and the nation. They are competing against other companies in other cities across the nation and we are not winning at this time. People often ask what is inclusive growth. Quite simply, it means indiscriminate growth or growth of the entire independent business eco -- interdependent, I should say, business ecosystem. Small businesses generate business -- companies generate business by serving their local communities as well as by providing services or contracted with larger businesses. When larger businesses locate within a city, their employees then in turn spend money in the local economy. With small business, it's an interdependent system. When both small and large businesses grow, what do they do? They hire. No one hires just to hire. That bears repeating. No one hires just to hire. They'll hire because they need help. When they grow, they need more help. That's why you see help wanted signs. I'm growing, I can't do it all by myself, I need more help. So it makes sense that a city would invest in entities that create more work and in turn broaden the tax base for expanded improved services in our city. And it's just good policy that a city has a sustained investment in business growth and a robust economy that leaves no one behind. To further understand why this investment is important, we should keep in mind that Philadelphia's highest among big cities poverty rate amongst other factors is a jobs issue. We simply don't have enough people working at good-paying jobs that pay good wages. C. have seen double-digit increases over the same period. Contributing to this circumstance is the fact that Philadelphia has fewer private employers of all demographics than comparable locales and very few for-profit companies at the top of the City's largest employer list. And I know that former Councilman Domb has said this many times -- how are you doing, Councilman Domb -- currently too many businesses are dissuaded from locating here due to the high cost of doing business.

Employers often cite the City's highest in the nation wage tax and the double tax from the Business Income & Receipts Tax as major factors. As a point in fact, 80 percent of respondents to a joint survey performed by Philadelphia's Diverse Chambers of Commerce indicated that reducing taxes on businesses is a primary action the City could take to help them stay, grow and hire in Philadelphia. Likewise, business owners expressed that streamlining interactions with City agencies and not adding legislative burdens provides relief as they compete with companies regionally and nationally. Support in these areas will bolster their ability to expand once again and hire locally as well as improve our ranking on national indexes that employers track when considering where to locate. The good news is that all of this can happen now. In 11 of the past 12 years, Philadelphia has been experiencing better-than- expected revenue receipts in fund balances in 11 of the past 12 years. A portion of these funds can be dedicated to growing and attracting more employers via elimination of the double tax on business and reductions to the City's wage tax and also to improving business interaction systems as we've talked about. Also, significant resources should also be dedicated to public- private collaboration and workforce development to meet the needs of our city's residents. I say this often and this is a fact and I know many of you all agree with me on this. This is not an either-or moment. It is our chance to improve economic mobility and quality of life for all Philadelphians. We look forward to working with our new City leaders and the Tax Reform Commission in advancing policies that will appropriately invest in growing businesses of all sizes and all demographics and good-paying jobs citywide. Thank you.

Good morning. My name is Reverend Gregory Holston and I am the representative of NAACP on the Tax Advisory Committee. Glad to be with you on the Advisory Committee and glad to be working with the Commissioners here and everybody here in this environment. I'm very impressed by much of the testimonies that have been shared already, the power of the work that has been done, but I want us for a moment to go beyond simply the details that were listed here and understand and look at more deeply the overall context that we're in. Four years ago George Floyd, the murder of George Floyd happened before us. And this nation and this City government and institutions all over this City promised a real racial reckoning, promised an opportunity to really look deeply at how race has created the communities we live in. We look at North Philadelphia, we look at Kensington, we look at West Philadelphia and we recognize in 1937 a redlining map was created that cut off investment in those communities. And for 100 years almost, those communities have been disinvested in. And we talked about what we're going to do about that differently now, how are we going to address it. If we're serious about racial reckoning, how are we going to address something that has created the poverty that we see, the poverty we just mentioned. The numbers of 45 percent of poverty rate for our Latino community, 38 percent poverty rate for parts of our African American community that has been systemic for the last 60 years, how are we going to address that ride from the SEPTA Regional Line that many of you take to come into the City and you see bombed- out warehouse after warehouse after warehouse after warehouse that has been sitting there empty for 60 years in those neighborhoods. I remember former Councilman Domb we had a great conversation on this a couple years ago. And I said to you, I see what you're saying, it makes sense, but you're creating jobs for who? Are you creating jobs for the people that live in North Philadelphia now? Are these jobs the kind of jobs you need such an education level that they could never apply for? If we're talking about tax cuts, how does it change the life of those living in North Philadelphia right now? So I ask you that question then and I want it to be really a part of the dialogue. I want to really hear and learn from you how do we address that fundamental question. How do we make a difference in their lives? So many of the other cities, it is all about displacement. They're changing jobs, they're creating new jobs for other people who move into those cities and they push other people, poor Black people out of those cities. What about those poor Blacks that live there now? I know -- I'm going to close because I heard the bell. Tax cuts and race have a horrible history in this nation. People have used tax cuts as a metaphor for how do I hurt Black people. Lee Atwater, the Chairman for Bush and the Reagan campaigns in the '80s talked about that specific language where he said, You can't say N-word, you can't say N-word, you can't say N-word, but you can say tax cuts and people get it. That means it's going to hurt Black people more than it's going to hurt White people. We got to deal with this whole racial context, this racial history around tax cuts if you ever want me to believe that something can work and be good for us. And so, that means we have to be honest in these conversations going forward. We have to look deeply at what we're saying. We have to look at the structures because some of the structures that may have made you money are also the same structures that are filled with structural racism. And how do you deal with even that in your own mind when you can say, hey, did I benefit off of the oppression of other people. Let's have that honest conversation. I believe all of you here, and even if I don't know you, but I know something about Councilman Domb.

You're a good person and you want the best for this City and I assume that for all of you as well. Let's have a rich conversation around all of these things and see where it really leaves us. Thank you so much.

Thank you for your testimony. Next two speakers are Mark Stier, Rob Zuritsky. (Witnesses approached Witness table.)

Good morning.

Good morning. My name is Mark Stier. I'm the Executive Director of the Pennsylvania Policy Center. I want to thank you for the opportunity to testify today. I'm going to speak very briefly and submit some longer written comments later in the day. There's really a temptation to come to a Commission like this one with a series of conclusions, a temptation most people have spoken today have already fallen into -- there's even stronger temptation to say cut my taxes and the equivalent of manner will fall from the heavens. That's a very strong temptation at a hearing like this. I'm going to resist these temptations. Instead I want to raise a series of questions about the goals of the Commission, the economic life of Philadelphia and the potential impact of various policies on our city. In doing so, I'm going to challenge some conventional ideas and urge the Commission to examine them in depth. I very much hope that this Commission can be a focal point for the serious examination of all these issues. Here are some basic ideas about Philadelphia's economy and tax code that everyone seems to know: Number one, economic growth and job creation by any means will reduce poverty and racial disparity in Philadelphia. Two, Philadelphia has been adding jobs more slowly than other big cities in this country for decades, including in recent decades. Three, Philadelphia is one of the most heavily-taxed cities in the country. Four, Philadelphia's taxes are higher than taxes in the collar counties. Five, most jobs are created by businesses moving into the City rather than by businesses starting in the City. Six, the gross receipts tax is a major factor discouraging businesses from moving into the City. Seven, tax rates are a major determent of job creation nationwide and in urban areas and in Philadelphia, and that we have some evidence for that. Eight, Philadelphia would grow more faster if it became a more normal city with greater reliance on property taxes and less reliance on wage and business taxes. Nine, we should focus on Center City when creating economic development strategies rather than the neighborhoods. In my testimony, I give some reasons to have doubts about every single one of these ideas. I believe that some of them may be true with some important qualifications. Some of them I think are pretty clearly false and on some of them, I'm just not sure at this moment. I mostly work on state tax policy. I tend to get drawn into city tax policy about once every 18 months and things change in 18 months, and I hope to delve into these issues in a lot more depth over the summer as you are doing so. So what I really want to do today is encourage the Tax Commission to have an open mind about every single one of these issues. I want to encourage you to look at the evidence. I want to encourage you to look at the academic studies, look at the studies done in Philadelphia. Seek the best evidence you can in evaluating them and then come to a conclusion. Finally, I would hope the Commission will spend some time considering other paths to equitable economic development besides changes to the tax code. Sometimes we talk about taxes and for 20 years when we were talking about economic development, we've been primarily talking about taxes because we don't really have any other ideas. But other cities have found success in creating economic growth, in creating job growth and especially in reducing poverty by other strategies, including improving K-to-12 education, which I hope our state legislature may take a giant step towards by the end of this month by expanding access to higher education, by adopting targeted workforce development policies that help both businesses and workers in communities and by embracing commercial tax strategies.

These strategies have a proven track record all over the country and it would be a very serious mistake if all this Commission looked at was tax strategies when these other strategies can be very effective, particularly in reducing poverty and when they actually cost some money and there could be a trade- off between reducing revenues and having the revenues to follow these strategies. Now, I've deliberately raised more questions than answers in these remarks because I believe that this Commission has a really great opportunity to do something very, very important and, that is, to start from the beginning, to really look at the evidence, to evaluate public policies here and in other cities and come up with thoughtful evidence-based considerations of these issues. And I want to say I would be very happy to contribute to anyone that I can to this process. Thank you for your attention.

Thank you for your testimony.

Good morning.

Good morning.

My name is Robert Zuritsky and I am representing the Philadelphia Parking Association and the 2,000 wonderful employees that work in our industry. A number of them are here today. I would ask them all to stand up and just wave to everybody. Thank you. We also have a packet that we've prepared to talk about the industry. I hope everybody has a copy of this. If you don't, we have extras here. Competitive cities offer residents businesses and visitors choice, including the choice of transportation options. Philadelphia benefits from an integrated regional transit system operated by both SEPTA and PATCO. Philadelphia has invested in improving bicycle infrastructure and remains one of the most walkable cities in America. But in the last two decades, Philadelphia has been eliminating on average 2,000 parking spaces every year largely due to tax policy. Over the last years, Philadelphia's parking industry has seen its taxes increase seven times. We are at a point at which City taxes take between 40 and 70 percent of everything we collect from our customers. This means before we pay workers our insurance, any mortgage payments or the cost of repairing our facilities, we pay 40 to 70 percent of what we collect to the City directly. This means that we have continually had to raise rates making it more expensive for shoppers, workers and visitors. Regional workers and shoppers in particular have options, free parking in suburban parking lots. The rationale for all these tax increases were due to budget deficits from SEPTA, the needs of the School District and the General Fund, but this has created this crisis for Center City, primarily where we are losing the 2,000 spaces per year. The reason we're losing these 2,000 spaces is parking garage owners cannot afford to operate or repair their facilities. New developments that are removing surface parking lots cannot afford to add or replace public parking even as they create new demand. Center City privately-owned parking facilities pay different 13 taxes, including state and federal taxes. No other industry has an industry-specific tax as high as parking. 5 percent, hotel is 15 percent, drink tax is 10 percent and amusement tax is 5 percent. None of these industries that pay an industry-specific tax is also subject to the use and occupancy tax. This situation is causing increases in rates and the convenient supply of parking to disappear, and this impacts Philadelphia residents, middle- income workers like hospital workers, hotel workers, office workers who aren't able to afford to find parking near their places of business. It prevents suburban firms from moving into the City. It deters the recovery of the City from the pandemic, creating one more reason for workers to stay remote. Parking is an integral part of the transportation infrastructure. But unlike public transportation, SEPTA, Amtrak and the airport that receive billions in government subsidies, the parking industry receives no 20 subsidy. Rather we subsidize the City to the tune of $145 million to $155 million a year in taxes. We recommend the best way to address this problem with the least impact to the City's budget is to eliminate the U&O tax from parking facilities. The most positive aspect of our suggestion is that this tax reduction only impacts 40 percent of the parking spaces which are mostly concentrated in Center City. This is because 60 percent are not currently burdened with paying real estate use and occupancy taxes or Center City District taxes. As an example, hospitals, universities, stadiums, airports and the Philadelphia Parking Authority are exempted from all of those taxes. We are seeking tax relief that I estimate to be $7 million to $9 million. The great news is the state is now contemplating an additional $250 million to the School District and $250 million more for SEPTA.

If the taxes on the business community increase when there is a crisis, then it's only fair that taxes should be reduced when new funding is received. Now is the time to grant a tax relief to the parking industry so that we can continue to serve the City. A few just little factoids about the parking industry is parking lots and garages are helping with the environment by installing electrical EV charging stations. Parking facilities help ease traffic by getting traffic off the streets. Parking supports every type of business in the City, leisure, health care, retail. Developing new parking supply takes years to develop. This is a long- term investment for the City's future. Thank you for allowing me to testify.

Thank you for your testimony. Next two speakers are L. Elaine Johnson and Daniel Grace. (Witnesses approached Witness table.)

Good morning.

Good morning.

State your name for the record and proceed.

My name is L. Elaine Johnson. I was asked to come to speak today to talk about the parking and beverage tax. However, as I've heard the many speakers before me, my direction has changed. I am truly a personal and professional example of everyone that has spoken before you this morning. One thing that I do want to point out is that the BIRT tax makes up 68 percent of the City's revenue. We're asking and everyone has asked today that the tax be reduced and/or eliminated for small businesses. And I am too one of those small businesses that is asking for you to take a look at that. My company, I'm the owner and President of LaPutt Enterprise. We are a commercial interior building company that hires Local 191 employees across the City, don't matter where they live in the City. Our partners are some of the largest primes in this City that have been doing work for more than 200 years, whether it's in this City or in other places where growth is important to our businesses. The BIRT is truly one of those challenges that not only my business face but other small- and mid-size businesses face every day. Most of us are here to ensure the new Mayor's initiative to reduce crime by putting our local men and women to work, the other part of it is that our taxes, our wage taxes are higher than those who don't even live in this City. Why is that? You can live in New Jersey, you can live in Delaware County, you can live in Montgomery County and work in the city of Philadelphia and your wage tax is not as high or higher than the people that live here, that listens and combats to the helicopters over our houses every night, the gun violence that plagues our city every single day. So I am here to ask that -- in the programs, we have the beverage tax, that according to the Mayor's town hall makes up probably 1 percent of the revenues in the City. However, our schools are struggling. We should not have to send our children -- we should not have to move our businesses to Atlanta. We should not have to move our businesses to Delaware County, Montgomery County and I live in 19122. We should have an opportunity to grow our businesses in the very city where we live, we love, we want to shop and our children and education in the City to carry on generationally, these companies that we are building generationally. So I am asking when the Commission reconvenes in your own time to think about everything that everyone has said today as it relates to reducing -- we are small businesses, but we make up a great portion of that 68 percent. You make more, you pay more. And there is no resistance in doing that, but we need an opportunity to grow our businesses so our children, our children can thrive. When I step down, my family members can succeed or when other small businesses step down, they have successors that are their family. This is what we're doing. We are creating jobs for our local children in this City, competitive jobs. I'm a union contractor, signatory to all the unions here, but the challenges that we are facing are driving us to other places to do business. Thank you for your time.

Thank you for your testimony. You may proceed.

Good morning, Chairpersons Vague and Stitt and members of the Tax Reform Commission. My name is Danny Grace and I am the Secretary Treasurer of Teamsters Local 830. Our union has proudly represented the hard- working men and women in the beverage distribution industry since June 25, 1942. Thank you for this opportunity to speak before you. For a large portion of my career, I was a transport driver for Pepsi. For the past 20 years, I've dedicated my life to ensuring that drivers like me have fair working conditions and can achieve a decent quality of life. It is unfortunate that the Philadelphia beverage tax has made that mission incredibly difficult. Although unintended, the impact of the Philadelphia beverage tax on workers and businesses in the City have been overwhelmingly negative. Since the implementation of the beverage tax, we have seen a dramatic decline in sales by as much as 50 percent. This has not only reduced income for our workers but has threatened their job security, jobs directly. Tax fundamentally change consumer behavior. Higher beverage prices drove many consumers to travel outside of Philadelphia to avoid the tax. As a result, companies decided to alter the routes and have negatively impacted local workers. Since the tax was implemented in 2017, major distributors and retailers such as Canada Dry, Delaware Valley and Brown's Super Stores have reported significant drops and revenue leading to job cuts and reduced hours. For example, Canada Dry expects a decline of at least one-third in business over the year, translating into layoffs for about 30 of their 165 employees locally. Those significant sales declines affect our members in several ways. First, reduced sales meant reduced income for our members who receive some pay in sales commissions, some seeing reductions as high as 70 percent. In many cases, routes were greatly expanded compelling our drivers to cope with longer hours. Some of our members simply left the industry because the loss in pay and increase in hours. The impact was so severe that one of our employers switched from a commission-based pay to a straight hourly rate to help retain drivers. These impacts are not isolated just to Teamster members. An Oxford Economics study found the tax in Philadelphia caused 1,200 people to lose their jobs and the GDP decreased by $80 million. Acme stores which have been in Philadelphia for 130 years said its employees lost significant work hours because of decreasing revenues from the beverage tax. On average, 150 to 250 hours per week per store in Philadelphia had to be eliminated, store management said. Acme also reported that many of the Philadelphians who crossed the border for less expensive beverages were doing all their shopping outside of the City, costing sales and jobs in Philadelphia stores. I want to be clear on one important factor. Membership numbers do not stay the same when sales migrate. Lost sales in the City result in fewer hours and therefore fewer jobs. Unfortunately, increased sales in other areas do not result in more jobs. Businesses employ the same number of people working the same hours and call it efficiency. The tax has also led to closures of small grocery stores and restaurants. The same Oxford Economics studies found a 29 percent decrease in sales inside Philadelphia city limits while beverage sales in adjacent towns increased 14 percent. That hurts local shop owners and has cost union jobs in Philly. All these job losses and sales losses also impact the City budget through lower wage taxes, lower sales tax but most significantly, lost jobs. Reduced pay and closed businesses are not just numbers. They represent individuals and families who are now facing uncertainty and hardship. Unions have always been the backbone of Philadelphia's middle class.

At a time when the Mayor is urging businesses to bring people back to work in the City when we offer tax incentives and other inducements to attract new businesses, we should look at what we can do to bring back the jobs we have lost directly because of the Philadelphia beverage tax. We understand a need for additional City revenue and support public services, but it should not come at the expense of our members' livelihoods. Philadelphia should look at sustainable and more equitable funding sources to support important programs like Rebuild and Philly PreK. Because this tax has disproportionately burdened working families and local businesses, working families are increasingly struggling to make ends meet and they cannot afford to continue to pay more than their fair share. I thank the Commission for this opportunity to testify and hope I have been able to convey some of the burden this tax has placed on working families, consumers, local businesses. I urge the City to reassess the impacts of this tax and consider alternative fairer means of raising revenue that does not disproportionately impact the single industry and its workers. Thank you, Chairperson Stitt and Vague and the members of the Tax Reform Commission, for your attention to this critical issue.

Thank you for your testimony. Next two speakers are Chris Cera and Drew VandenBrul. (Witnesses approached Witness table.)

Good morning.

Thank you very much for your time. My name is Chris Cera. I live in the Queen Village section of the City with my family and I'm also the CEO of Arcweb Technologies. We're a Philadelphia-based digital transformation and product development consulting firm. I'm also on the Board of the Chamber of Commerce. I was on the Special Committee on Regulatory Review and Reform for the City of Philadelphia in 2017, and I also served on the Transition Advisory Committee for Pennsylvania Governor-elect Josh Shapiro in 2023. I believe an important issue to resolve with tax reform is the transparency of the tax data published by the City. The Business Income & Receipts Tax and net profits tax data published on the Department of Revenue's website is not comprehensive enough in order for any of us, citizens or elected officials, their policy teams to make informed decisions on meaningful changes to tax policy. I have a proposal for the Tax Reform Commission that will increase the amount of information available to the public and will allow for a more productive discussion on who, what, where, when, why and how much we should be taxing various entities. I encountered this problem when I was on the Special Committee on Regulatory Review and Reform where we wanted to know how much revenue comprises the prepayment of the BIRT and how much of that specifically to startup companies versus an established company like Comcast or Arcweb Technologies. In 2024, we should have an open data policy that empowers everyone to crunch their own numbers. The following list of issues should be resolved in order to improve our debates on the subject: One, the net profits tax data is not published; two, the BIRT does not separate the prepaid components; three, the BIRT data does not separate out the size of the firm; four, the BIRT data does not separate out the organizational form; five, the BIRT does not report exclusions or exemptions; six, the BIRT is not published on a schedule. In the past five years, it's been published in a different month of the year or in 2022 not at all. A bonus would be if the data could be easily loaded into a modern spreadsheet software. I would like to ask our administrators at any time they're reporting on the BIRT they show it as four components instead of just, i.e., one, last year gross receipts; two, last year net income; three, current year gross receipts; current year net income. Let's get this data out there and have a more robust debate on revenue and taxes. Lastly, while it is a separate issue I support the proposal to end the double tax and eliminate the net income portion of the BIRT in five years. Thank you.

Thank you for your testimony. Please proceed.

Good morning. My name is Drew VandenBrul. I'm a CPA and a Managing Director in the Philadelphia office of Grant Thorton Advisors LLC. Along with Stew Weintraub from Chamberlain Hrdlicka, we co-chair the Chamber of Commerce's State and Local Tax Committee, and I'm testifying this morning on behalf of the Chamber and the Tax Committee. As original members of the 2003 Philadelphia Tax Reform Commission, the purpose of this testimony is to summarize the history behind the Commission which began its work believe it or not over years ago in 2003 and 14 issued its final report -- which I 15 still carry around with me -- in 16 November of 2003. 17 So the Commission was 18 charged with reviewing the City's 19 entire tax structure and 20 recommending methods to reduce the 21 taxes imposed on residents, workers and businesses. The final report provided 28 specific recommendations for changes to Philadelphia's tax structure as part of a 10-year plan to fundamentally reform the City's tax system and increase its competitiveness. The 500-page three-volume report, which I think you've all seen, outlined the Tax Reform Commission's recommendations as well as suggestions on how to pay for the recommended tax form without reducing crucial City services. While at the time the Commission's recommendations were intended to be enacted as a comprehensive tax reform strategy, subsequent legislation was only taken on certain recommendations. I think approximately half of the 28 recommendations have had City Council or Mayor's action subsequent to the 2003 Commission, and I have submitted as well a summary listing each of the 28 recommendations with an update on the action, if anything, that was taken. So I'll start with property taxes. Steps were taken to modernize and reform the assessment and appeals processes and to establish accurate land and improvement values. However, recommendations were not implemented regarding a budget- based taxation approach implementing land value taxation or seeking property tax relief from the Commonwealth. The most significant recommendation involved amending the Pennsylvania Constitution to allow variable property tax rates for land and improvements and to tax commercial and residential owners at different rates. This last proposal has been considered recently for further action. The taxes most often cited when discussing Philadelphia's competitiveness are wage tax and the BIRT, which was known as the business privilege tax when we wrote the 2003 report. The Commission then recommended accelerating wage tax reductions, but this acceleration has not been implemented and only modest rate reductions have been enacted since the Commission's report. The most sweeping recommendations were related to the BIRT, including enacting single sales factor apportionment, extending the net operating loss carry-over period beyond three years and incrementally reducing the rate for both gross receipts and net income portions of tax to 0 percent, essentially eliminating the tax over a 10-year period, which would have been accomplished by 2015. Of these recommendations, single sales factor, was eventually implemented and the NOL carry-over period was recently extended to years for losses incurred after 2022, so this has been an evolving process since 2003. Most importantly, the Commission recommended putting Philadelphia on a path to eliminate the BIRT after 2015. This kind of bold move would greatly improve the City's business tax competitiveness for existing businesses, lead to business expansions and larger scale projects. The BIRT impacts all businesses operating in Philadelphia, whether they're formed as corporations, limited liability companies, partnerships or as sole proprietors. 1415 tax on gross receipts makes the BIRT unique in that it taxes both profits and gross receipts in a globally competitive economy. S.

federal income tax and Pennsylvania's corporate income tax rate results in significant tax burdens and often a competitive disadvantage. In a more regionally competitive environment, the BIRT imposes an additional tax not found in the surrounding area or in competing states. In 2003, the Commission's study of Philadelphia's tax system demonstrated that as a city we tax what others do not. Our taxes are too high and our taxes are unfairly imposed. The Commission also found that Philadelphia compounds the problem of a high overall tax burden by relying too heavily on wage and business taxes. Those are the taxes most likely to drive residents, businesses and jobs from the City. The City's incomparably high wage and business taxes have damaged Philadelphia's economy over the past three decades, ultimately reducing tax revenue and the ability of the City and School District to finance citizens services. The Commission thoroughly analyzed the City's tax structure, provided a comprehensive set of recommendations and chartered a path towards tax reform. While the adoption of some of these recommendations has undoubtedly improved Philadelphia's tax environment, far more remains to be done before the goals of the 2003 Tax Reform Commission are met. I thank you for your interest in this and I'm happy to respond to any questions.

Thank you both for your testimony. Next two speakers are Greg Waldman, Don Haas. And then our last speaker after Don is Andrew Knox. If there's anyone else here to testify, please make your way towards the table. (Witnesses approached Witness table.)

Good afternoon, everyone. First off, apologies for being underdressed. This attire is more appropriate for a hearing later this afternoon. Good morning, members of the Tax Reform Commission. My name is Greg Waldman. I proudly served the City of Philadelphia for 10 years. C. 47, Local 2187 for over eight of those years. I speak to you today as a union member and not as a representative of the City. Philadelphia doesn't just hold the notorious title of being the country's poorest big city, but is also among its most unequally taxed. This is in part because of the state's uniformity clause, but it is also exacerbated by our local tax structure to disproportionately tax the poor, though its 2 percent sales tax and soda tax helps the rich through tax abatements and leaves the City's budget underfunded. In short, Philly is so poor in part because of its regressive tax structure. Reaganomics promised trickled-down prosperity from tax cuts on the rich, but we all know how that turned out. Instead the rich got richer, the poor got poorer and public services were slashed. While Democrats love to hate on Republicans at the federal level, they embrace this trickled-down tax policy here in Philadelphia. Since the 1980s, Philadelphia has passed across-the- board wage tax and BIRT tax cuts every year. While the average wage earner might save $80 to $100 per year from these cuts, it gives millionaire CEOs like Brian Roberts windfall savings of tens of thousands every year. Meanwhile a 2023 Pew study found that the local tax burden of Philly's lowest income renters is twice that of Philly's highest income homeowners in proportion to their income. On top of this, Philly politicians offers generous tax breaks to spur new development. According to a 2018 report from the City Controller, the median value per square foot of properties with tax abatements was $202 that year, 93 percent higher than the average Philadelphia home. And according to a 2021 study from Good Jobs First, Philadelphia schools lost $112 million in a single year, the most of any school system in the United States because of this abatement and other tax breaks. Imagine what Philly schools could buy for our kids if 76 Place was fairly taxed. Furthermore, the property tax abatement drives gentrification by subsidizing market rate development in cheaper housing markets. And without adequately funded or required deeply affordable housing or rent control, it displaces low-income renters and homeowners. This policy is a continuation of systemic racism carried out by the City in years past such as through urban renewal of Black Bottom and through decades of racist mortgage and leasing practices. Reducing taxes without finding ways to replace lost revenue also hurts Philadelphia's ability to provide critical services to youth and vulnerable populations. Our City departments are underfunded and City workers are grossly underpaid, which is the main driver of the vacancy crisis which sits at around percent and 4 rising. 5 Understaffing critical 6 public services like schools and 7 health centers worsens poverty. It 8 seems like some of the speakers 9 here, some of whom suggested 10 eliminating BIRT altogether which 11 provides 15 percent of City 12 revenue, want to shrink government 13 so it goes down the bathtub drain. 14 That might make Gerber NorQuest 15 happy but would harm majority of 16 Philadelphians. Yet even the 17 business owners and developers 18 pushing deeper tax cuts rely on 19 taxpayer-funded City services 20 through building permits, paved 21 streets, public safety, processing 22 tax credits and the need for a 23 well-educated workforce that can 24 get around on Septa. 25 Speaking of SEPTA, they all left, but I did see a lot of folks from the Parkway Corporation. Instead of trying to lure patrons and workers by lowering parking taxes that was supposedly trickled down to lower parking rates, how about we increase funding to transit. We're a city. Come on, people.

Businesses aren't just looking for highest savings when filing taxes. They're looking for a location that brings the highest value to our investment. I'd also note that the City has a lot of tools in its tool belt to help businesses besides tax cuts. The Department of Commerce and PIDC have targeted grant and loan programs for small businesses that actually need help scaling up and the Office of Business Services and other programs. Instead of deepening across-the-board tax cuts, which we all know disproportionately benefit the wealthy, the Tax Reform Commission should look at how the City could raise money equitably while lowering the burden on low- and moderate-income Philadelphians. This could be through a wealth tax, collecting pilots for mega nonprofits like University of Pennsylvania's massive endowment and limiting or eliminating the property tax abatement. Philly is poor in part because of its politicians financed by big business interests choose to keep it that way. It's past time for a tax structure that narrows the economic divide and creates prosperity for all. Thank you.

Thank you for your testimony. You may proceed.

Thank you. My name is Don Haas. I'm the General Manager of the Logan Square Office Complex. I'm here today in my capacity as the Co-chair of the Building Owners and Managers Association of Philadelphia's Government Relations Committee. I would like to thank the Tax Reform Commission for the opportunity to testify today. As many of you know, BOMA members typically operate in the commercial office, industrial and retail real estate sectors. Our member buildings define the Center City skyline. As we collectively, public and private, seek to recover from the pandemic and remote work, no doubt we are all facing some serious headwinds. You see the almost daily reports of tenant contractions as new tenants renew reducing their space anywhere between and 40 22 percent, inflationary pressures, 23 skyrocketing insurance premiums as 24 well as high interest rates. This 25 is a recipe for disaster, not just for those owners of the commercial properties, but these impacts also have a direct correlation on the assessed values and City tax revenue. The impact of our current overall tax structure is severely hampering our economic recovery and future growth efforts. High business taxes are a leading cause of Philadelphia not being able to attract corporate headquarters to our city. As you well know, most larger employees in Philadelphia are nonprofits, education and health or government agencies which do not pay business and/or real estate taxes. High Philadelphia wage tax and BIRT continue to have a chilling effect on the commercial office sector and companion businesses. Coupled with the continued absence of a robust post- pandemic return to office by employees, the economic pressures on retail and continued building service staff is exacerbated. The reduced office population translates into less building maintenance personnel, less need for restaurants and retail stores. We already have several buildings surrounding City Hall which are currently in default on their loans or facing foreclosure. Simply put, these are challenging times. Recent reduction in wage tax and BIRT have been a positive step in the right direction. While they've been small reductions, they truly matter from an optical perspective. Potential and existing businesses see the City is trying. There's hope, but we need more. Many employees who have benefited from remote work, a lot of them working in the suburbs, are using the imposition of wage tax, commuting and parking costs as an impediment to return to the office. Let's think big and bold and figure a way to eliminate those obstacles. Modifying our tax structure is positive for everyone involved. We retain and attract more businesses, which leads to job growth. More jobs provide our city residents the ability to earn a living and then pay taxes. We are truly at an inflection point. If done right, will put us on a path for significant growth. Thank you.

Thank you for your testimony. Andrew Knox. And is there anybody else whose name I did not call who wishes to testify? (No response.)

Okay. Please proceed.

Good afternoon, members of the Tax Reform Commission. My name is Andrew Knox. I work at the Free Library of Philadelphia and I'm a rank-and- file member of AFSCME District Council 33, Local 696. I'm speaking in a personal capacity. I was hired by the Free Library early last year as part of its roll-out of six-day service. I had been working a dead-end job at the time and applying to any library job I could find. And so, I was thrilled to find one that was both full-time and a union job. I'm happy to say that after years of pandemic uncertainty, the Free Library is now open Monday through Saturday at most of its branches and at Parkway Central. But even with this welcome increase in funding, we're still far from where we need to be. Members of AFSCME D.C. 33 have seen their wages stagnant and eroded by inflation and cost of living increases for over a decade. Many other City departments are still struggling with high levels of vacancy. If this Commission slashes taxes for corporations and the very wealthy, I fear we will be one recession away from the bad old days of 2008 when Mayor Nutter proposed closing library 10 branches. 11 The Free Library is one of Philadelphia's great institutions and it deserves adequate funding and its workers deserve respect as do all City workers. Thank you.

Thank you for your testimony. Last call. Anyone else here to testify? (No response.)

Hearing none, this concludes the Philadelphia Tax Reform public hearing. Thank you all for joining us today. (Tax Reform Commission Committee concluded at 12:10 p.m.) C E R T I F I C A T I O N I, hereby certify that the proceedings and evidence noted are contained fully and accurately in the stenographic notes taken by me in the foregoing matter, and that this is a correct transcript of the same. __________________________________ TANEHA CARROLL