If you look at the worse-case numbers, which would assume that everyone who's now taking out an L&I permit for improvements chooses to participate in the abatement program and that if they hadn't done so, Dave and his troops would have caught up with them immediately upon the completion of their improvements otherwise. The order of magnitude of the impact is about three quarters of a million dollars a year for the City and for the School District each. That is a worse-case perspective. Looking at it from the perspective of current participation in our existing five-year abatement program, there are literally only a handful of homeowners who currently take advantage of this program and the current lost revenue, as a result of the existing abatements, is -- it's de minimis, it's under $10,000 a year. So I think the actual experience would fall somewhere between those two points. It would be real and quantifiable, but it would not be a serious threat to the City's overall finances. And if it succeeds in encouraging greater 55 10/28/99 WHOLE COMM. - 970652 investment and greater retention of our residential population within the City, then it could have net benefits for all of us.
Well, why doesn't the City accept the notion of unlimited cap, based upon what you're saying?
Again, we would -- we would propose focusing the program's resources on middle-income working folks and lower-income residents of the City. Our feeling is that it may not be as necessary to provide this kind of tax break for the City's more affluent residents. It -- you know, this is sort of a public-policy perspective that, you know, reasonable people can disagree about, but that is our position.
Councilman, I want to clarify. I'm not speaking, obviously, for the Administration, but I --
I'm sorry. I'm Paul Levy with Central Philadelphia Development Corporation. I was obviously taking a somewhat different position from Mr. Nadol's. And I think 56 10/28/99 WHOLE COMM. - 970652 -- I very much respect the need to protect City revenues, but my point was that the real-estate tax accounts for only percent of locally- 5 generated revenue. And if in abating that, you 6 can attract people into the City who will be 7 paying wage tax and sales tax, then that loss of 8 real-estate tax can be more than recouped in other 9 taxes. 10 In the analysis that we have done of 11 two admittedly Center City project -- and that's a 12 different economy -- but the analysis we have done 13 of two Center City projects shows that those 14 projects in their first or second year more than 15 repay the real-estate tax abatement in wage taxes, 16 sales taxes, and other taxes that are generated by 17 bringing people into the City. 18 And so, as I think Mr. Nadol said, 19 there is reasonable grounds for disagreement, but 20 we think that a more aggressive program in the absence of a cap, which is the recommendation that I'm making, could be more successful in attracting people in, and then we could have an upside in revenue. But there is clearly reasonable grounds for disagreement here. 57 10/28/99 WHOLE COMM. - 970652
When you say that real-estate tax represents percent of the 4 revenue, do you mean the real-estate tax revenue 5 that the City gets or the amount of revenue that 6 the City plus the School District gets? 7
No, I was referring to City 8 revenues at that point, that's correct. There is 9 a separate issue that was raised earlier. 10
'Cause the School 11 District, in fact, gets more real-estate revenue 12 than the City does. 13
You're 18 welcome. 19 The Chair recognizes Councilman Kenney. 20
Thank you, Madam President. Just two comments on two things that were said during the course of that discussion. With all due respect to Mr. Nadol and to the Administration, I think that that position that 58 10/28/99 WHOLE COMM. - 970652 this program should be intended to be directed at lower-middle-income and poor people, I think is absolutely off base. I think the problem that we have is that the middle- and upper-middle-income people are the people that we're losing. And as a result of Councilman Cohen's comment about not being panicked about the number of people leaving the City, I don't know what the Administration's position would be, but I'm certainly panicked over the fact that 150,000 of our middle and upper-middle-income residents have left the City over seven, eight year, despite -- despite the improvements that this Administration and this Council has made to government and to the Administration of government, we're still losing then. And I'm going to give you a good example in my own personal life as to why I think this an effective -- and Councilmember DiCicco's levels are even higher 'cause I'm an advocate of no cap. I bought a house about 10 years ago for $80,000. I think my house now may be worth $80,000, about the same, or 85 -- certainly no 25 more $90,000. 59 10/28/99 WHOLE COMM. - 970652 I have a link to the City because of my employment. Many people who leave the City obviously don't have -- they're not police officers, firefighters, or Councilpeople, so they have the ability to move, regardless of what it is they do for a living. I'm in a position now in my house where I need a new bathroom definitely. And in order to do a new bathroom, I really would like to extend my daughter's bedroom to the back rear of the house, 'cause we have a little kitchen roof, and I'd like to extend it all the way back there in order to make the bathroom bigger so that the bedroom could become bigger. And my wife would really like to have a new kitchen too because the tiles and the floor are cracked and broken, and she don't like the cabinets. And I figure the bathroom, on a conservative basis, $15,000. In order to move my daughter's room structurally back to the back of the house, we're talking perhaps another $25,000. And if I do a really modest renovation on my kitchen, perhaps $10,000.
That's cheap. 60 10/28/99 WHOLE COMM. - 970652 (Laughter.)
That's cheap. I'm giving a low-case scenario, a low-case scenario. If you take the value of my home at $80,000 or $85,000 and you look at between $40,000 or, say, $50,000 in renovations that I need to spend to make my house comfortable, without that incentive, this middle- or upper-middle-income person could leave the City and buy a new home in Washington Township for the same amount of money. And I think that the Administration needs to recognize, and I think they probably do, but they have other concerns as it relates to five-year plans and other kinds of things, and I recognize that. But there is a need for some -- not even drastic, some innovative action. We cannot continue going on worrying about the number of low-income people we have in the City because we have a lot of them, and they're not moving to the suburbs. And the middle-income people, in many instances, are not moving to the suburbs 'cause they probably can't afford it. It's the 40-year-old's and the 61 10/28/99 WHOLE COMM. - 970652 45-year-old's with and kids who are looking at their circumstances and saying, You know what? I'd like to invest this money in this house, I'm concerned about the neighborhood, I'm concerned about the schools, I'm concerned about other things. But I also know that if I invest this money in this house, I'm going to pay an increase in my real-estate taxes, so I might as well go to Jersey. I might as well got to Jersey, pay the increased real-estate taxes there and save the $6,000 or $7,000 a year that I'm paying in private-school tuition. And I'm out of here and I'm never coming back. And I honestly believe, and I think Mr. Levy has alluded to the fact that with Councilman DiCicco's efforts on the conversion legislation he did the, road map is there that is clearly successful. We've attracted people, we've retained people, we've renovated buildings that were not useful or weren't being used to their fullest potential. And I can't believe based on the road map that was set up on that conversion 62 10/28/99 WHOLE COMM. - 970652 legislation, we could not apply the same concept here and attempt to save our middle-class taxpayers that carry the burden of the poor. They are the people who carry the burden of the poor, and they're not carrying them anymore in Philadelphia. With all due respect, I know you have a position that the Administration is taking, and you have to articulate that. But I would take back to your administration our view -- at least my view and Councilman DiCicco's view and a couple others. And that is, if we don't figure out a way to save that upper-middle-class and that middle-class taxpayer, forget it, turn the lights out, it's over. Thank you.
Thank you. Are there any other questions from members of the committee? (No further questions.)
Council President, I would like to clarify one issue that was asked about earlier during some of the other discussion. Mr. Glancy was able to help clarify the matter of 63 10/28/99 WHOLE COMM. - 970652 whether each separate improvement, if you make more than one improvement in a period, would qualify for up to the maximum cap provided under the ordinance, or whether you have to aggregate those improvements and then bump up against the cap. As explained to me, the way the program's currently administered, each separate improvement will qualify up to the amount that's specified in the ordinance, whether it's the existing cap or some future cap that's higher. So under the new ordinance, if it's set at $41,200 if you made one improvement -- if you got the new bathroom and the bedroom extension this year and did the new kitchen right in a couple of years and spent 41,000 each time, they would both qualify so long as the overall assessed value of the house stays within the eligibility cap set with that part of the ordinance. And in practice, what often happens is that as more and more improvements are made, the underlying assessed value will bump the house up above the point where it qualifies under the existing limits. So, effectively, you may not be 64 10/28/99 WHOLE COMM. - 970652 able to do improvement after improvement; but technically, you could so long as you're not caught by the other cap. And I know that's a little confusing, and I hope that helps clarify it.
Mr. Nadol, let me ask a question on that, if I may. Let's say Mr. Kenney does all of the necessary improvements.
You mean Mr. Kenney's contractor because Mr. Kenney can't do it. (Laughter.)
Okay, I know. And he's there for three years and then decides he's going to sell. I buy the property. Am I eligible for that same abatement? Doesn't that come with the property?
For the record, I wanted that to be known. Councilman Cohen?
Does that 41,000 exemption -- let's assume that to be the cap. Is that the cap enter for one year?
Or is it a lifetime cap for the property? What is the cap? How long does it extend? Suppose I do $10,000 every year?
You would be able to do that, and each improvement would be eligible separately so long as the underlying assessed value of the property itself is a result of all --
Is it because the cap is an annual cap? Within what time limit does the cap apply?
The cap applies for each improvement that is done, each application that you make. Then under the current program, the abatements that follow from participation in the 66 10/28/99 WHOLE COMM. - 970652 program lasts for five years, and it's proposed to be extended for ten years.
Is it possible that an improvement can be partially exempt because half of it fits within the cap and half of it will be ruled outside the cap? Or does the whole exemption fail?
It -- the partial amount up to the level set by the cap would be eligible for the abatement under either the existing or the proposed new program.
So the real cap is the underlying value of the property as a practical matter, isn't it? Isn't that the real cap?
That certainly can be the real cap, yes. That certainly can prohibit abatements that otherwise would have qualified under the per-improvement limit.
And the only way that you could get a whole lot of work -- I mean, the $100,000 worth of work -- would be to buy a shelf a house, you know, buy a house that's totally dilapidated, and then have a series of 67 10/28/99 WHOLE COMM. - 970652 improvements until you improve it and put it in a condition of, say, worth about $100,000. Under the Administration's policy, under Mr. Levy's recommendation, you can buy a hulk of a house and just build a whole new house and then have it all come under the cap up to the $100,000 figure, right? I'm just trying to understand what you're talking about.
Yeah. Well, I think you said it correctly before. The real limitation is the value of the property.
You could buy a house that's only -- you could put $100,000 into a house that's only worth $10,000 even after you've done it, based on other conditions, and the City can't give you an abatement for $100,000. The maximum is set by the value of the house.
Absolutely. And that's why I suggest -- I mean, I just -- if you just think through the administrative nightmare of saying, I 68 10/28/99 WHOLE COMM. - 970652 did $14,000 this year, 12,000 next, does it add up, do people start misrepresenting what they're doing? That's why I'm suggesting having no cap whatsoever. The goal is to get renovation properties, to get new construction, to retain and attract residents, and I think upside is there in wage tax, sales tax, and it just -- not to take issue with Councilman Kenney, but if you keep middle-class people in this city, you also stabilize the value of low-income homeowners' properties as well, 'cause if middle-income people are leaving, then poor people are living in houses they own see their equity evaporating. So I don't think it's an either/or choice. The more middle-income and upper-income people we have in this city, the higher the value of low-income people's property is too. So I think we're benefiting everyone in this.
Well, without respect to whether abatement is a proper procedure as a means of keeping folks, I think it's very urgent to keep every level of people in the city. I think -- and I'm very disappointed that the 69 10/28/99 WHOLE COMM. - 970652 Administration has never carried out a campaign with all the businesses that it deals with to try to bring all the executives into the city. I think we have a huge housing market that is awfully good for every level of people. I don't know why it's assumed that people have to move outside the city as soon as they come to Philadelphia or bring their businesses here. I'm all for that. I'm just dealing with the abatement question, and I would like to translate into value, I'd like to translate into value -- into dollar value what the savings is. First, do we have any statistics as to the average cost of improvements over some time period that are now being done? What's the average improvement value, say, when people take out contractors, take out permits? Don't they usually have to take out permits to do the improvement work, say, the kind that Councilman Kenney talked about?
I think that most -- they usually -- it's always required to take out the permit. 70 10/28/99 WHOLE COMM. - 970652
All right. And there must be a database available to determine what the level of expenditure for improvements is per household.
Yes. We have -- in developing the estimates of the cost impact for this program that we're submitting to you, our staff did analyze actual L&I permit data over a six-year period.
Well, I'm going to ask Mr. Glancy to translate it in terms of tax savings that would occur. I'm just trying to think in terms of specific dollars that we're talking about.
The average, as we've identified it, would be just under $15,000 for a typical improvement, but there's a great deal of variation and there are many that are much more than that, and there are --
Many that are much 71 10/28/99 WHOLE COMM. - 970652 less.
And there are, of course, many that are much less. The range -- you know, the dollar value for improvements really -- it doesn't all cluster around that $15,000 average. There are significant groups at varying levels.
Well, if we get figures from Mr. Glancy at and and 20,000, 10 wouldn't that give us a pretty good idea? 11
If we were able to 14 get from Mr. Glancy, the Chairman of the Board, 15 average tax dollars that are involved in improvement levels 10,000, 15,000, 20,000, you know, how much will that increase the real-estate tax on average? I realize that every case is an individual case. But then we can talk realistically of what we're talking about. Would that be possible, Madam Chair?
Councilman, we have done analysis working from our study of actual L&I permit data and certain assumptions about other 72 10/28/99 WHOLE COMM. - 970652 increased participation in the program as a result of changing the eligibility requirements for the program, and that information is submitted in detail in the written testimony.
Well, the way the information is submitted in detail and the ability of Councilmembers to comprehend it may be two different things. I'm asking from my ability to comprehend, and other Councilmembers may have their own questions to ask.
I'm sorry, Councilman. Having helped to author the testimony, I can tell you my ability to comprehend it is sometimes limited. The real-estate tax issues can become very complex. What specifically is your question? And we'll do our best.
Well, if someone puts in an improvement of $10,000, what increase in taxes is he likely to face now in real-estate taxes?
Councilman, you kind of threw me off 'cause I just did the $15,000 improvement, which you had talked about initially. At $15,000, assuming again, the assumption again 73 10/28/99 WHOLE COMM. - 970652 is that we capture that entire market value as a BRT market value, it's about $396 in real-estate taxes.
And, Mr. Levy, you think that kind of savings plays a large role? I can see why you think it plays a large role in a whole house at 50 to 100,000 in improvement.
What would be Councilman Kenney's illustration? What would he save? I want to see whether the amount of an expenditure, how it corresponds to the tax.
Councilman, if I could go back to a question that the Council President had asked before. You know, when the ten-year abatement was passed here in Center City, in addition to the media coverage, we certainly were 74 10/28/99 WHOLE COMM. - 970652 in the business of publicizing that as a private- sector organization. And when you shine a light on an incentive, it attracts people to use it. And I think the economic incentive is part of a telling people that incentive exists, which we're not doing as good a job on, and I think we would all recognize that that would lure people, and they'd say, Oh, I can get a break if I do that. Everyone of us will go for a sale. And I think part of what we're talking about here is that advertising these abatements will attract people even if the cash value in some cases is small, but it helps equalize those disadvantages you can see for living in the city and the advantages elsewhere. So, again, my broad point here is simply that we are losing people even from the neighborhoods that have the highest volumes of construction in the city, and I think Council is in a position to take some dramatic actions here, which I don't think cost very much money, but which could begin to turn around and stabilize neighborhoods and attract people. 75 10/28/99 WHOLE COMM. - 970652
Well, my feeling is that the Administration's public policy determination is probably a good one. It will be awfully difficult, I think, to convince people in the rowhouses that people who buy homes at 100 to 200,000, 300,000 a year ought to get abatements. You know, I think there's a real element of fairness, and I suspect that that's what concerns the Administration as a public policy matter and, therefore, they don't favor an unlimited, you know, cap. They don't favor the removal of any cap. That, I assume, is what the public policy consideration is. But I find it interesting. What would be the cost? What would be the --
Yes, Councilman, to answer your question about Mr. Kenney's example, again, assuming that all 50,000 of the value added is captured by the board, it is about $1,322 per year. And I might note, parenthetically, that we have to remember, if this legislation were to pass, that would be a 10-year benefit. Even at the $396 a year, that's a substantial benefit for someone at the $15,000 level. 76 10/28/99 WHOLE COMM. - 970652
It would not be at that level each year. It would decline by percent a 7 year. 8
That's correct. I was 9 just getting at a 10-year flat, and that was 10 incorrect.
Thank you. Just one point on the issue of recapturing the value of the improvement. And this is something that we debate when we talk about TIFs. The improvement doesn't get done, so we don't capture the value of the improvement 'cause 77 10/28/99 WHOLE COMM. - 970652 if the person -- if I, in this particular situation, decided to move as opposed to improve, you don't capture anything. What you may capture is the continuing value of the property from me selling it to someone, but you're not giving away the increased value 'cause you never got it in the first place 'cause I'm out of here. I mean, I think that that's something that the Administration hasn't acknowledged. It may understand it but it hasn't acknowledged that if I don't do that improvement, if I do my calculations and decide it's better for me to pull the plug and go, you're not giving anything to me because I wasn't going to do it anyway; I was going to be out of here. So not only do you lose me but you lose my wage taxes and sales taxes and everything else.
Well, I think we certainly acknowledge that that can happen, and in many cases, does happen, and only in the TIF example but in the conversion abatement program. I think there's very little question that that program has stimulated activity that wouldn't have happened otherwise, and it's terrific. 78 10/28/99 WHOLE COMM. - 970652 For the purpose of developing our cost analysis and for our evaluation of this program, we did look at current levels of L&I permit activity. We did not assume any increase in that activity or in improvement activity as a result of an expanded abatement. To the extent that you're right, and this kind of an abatement program does stimulate that kind of new investment in the city. It would be terrific, and it would be a net fiscal benefit to us as well. That is not reflected either way in our numbers. Our numbers assume current levels of activity.
And by the way, just on Mr. Glancy's example of $1300 that it would cost me annually to do this, I know scores of people who have moved out of my neighborhood for $1,000 saving in auto insurance. So, I mean, that is a significant amount of money for a middle-class, upper-middle-class family with kids, that $1300 means something. Thank you.
Thank you. Are there any other questions? Councilman Cohen? 79 10/28/99 WHOLE COMM. - 970652
Is there any legal opinion on it? How does this fit within the uniformity clause in the State constitution?
The program already has existed and has been in place for more than twenty years with very much the same kind of parameters. All that's being proposed today is to adjust some of the eligibility thresholds upward. So it's --
I'm not asking that, I'm not asking that. Has there been a court challenge ever. The uniformity clause is often interpreted -- for example, how some new homeowner coming in, taking a shell of a house and building a house, isn't going to pay much of a real-estate tax for ten years, as against people who, you know, pay real-estate taxes constantly.
No, they would pay what they would normally paying.
And I wonder how the courts have treated the question of uniformity. They're usually very strict in Pennsylvania on that.
You're right, they usually are. In this case, the Law Department just 80 10/28/99 WHOLE COMM. - 970652 advised me that there's a specific exemption to the State constitution that provides for this type of abatement program, so that in this case, working within certain bounds that are set at the State level, we do have the flexibility to offer and to expand this type of program.
Thank you. The Chair recognizes Councilman DiCicco.
Thank you, Madam President. Just a brief statement. In this chambers over the four years that I've been here, I have had the opportunity to introduce, support, and help pass legislation primarily for developers in Center City. We've had a lot of discussion and debate on whether TIFs are the right way to go and, obviously, I had supported those. I think this is an opportunity for this Council to give the same kind of tax relief or tax incentives to working-class folks that we do to big business and developers. I mean, I'm still 81 10/28/99 WHOLE COMM. - 970652 for development, and I will always continue probably, for the most part, to support those tax initiatives, the TIF initiatives, but this is an opportunity to do the same type of legislation at a lower level for folks who are homeowners and who are not big developers. So I mean, I would urge that --
(Inaudible, off mike.) . . . homeowners that would be pretty affluent, not just for the rowhouses.
See, just because you happen to be able to afford a quarter-of-a- million-dollar home, I don't think you should be penalized.
Well, when it comes to senior citizens' exemptions, we don't say it's for everyone; we say it's wrong that it's for everyone. Certainly somebody that can afford to pay gas bills ought to pay the full rate and ought 82 10/28/99 WHOLE COMM. - 970652 not to get the discount. So why not here?
But I think the people at the upper end of the economic ladder are the people that are paying for the people at the lower end not to have to pay gas bills. And those are the people that we need to keep here.
Well, I don't -- I'm just troubled by that dichotomy of thinking. We argue that it's unfair to have any exemption for anybody and senior citizens because maybe somebody that's affluent may get that senior-citizen discount.
But this applies to everyone; it doesn't just apply to affluent people. That's a very small percentage of the population.
Well, the senior citizen discount applied to everyone, to every senior citizen.
Point of order. 83 10/28/99 WHOLE COMM. - 970652 Didn't we recently eliminate the senior citizen percent discount on the gas?
Okay. I thought -- 7 I mean, the way Councilmember Cohen was talking, I 8 thought we had done something that eliminated that 9 and put a means test on it. And to date, as far 10 as I know, everybody collects it.
I mean but there's no means test, or we didn't change anything lately.
(Inaudible, off mike.) . . . just saying that there ought to be a means test, and I'm wondering why those folks need a means tests on a senior-citizen discount but don't require a means test here.
Well, maybe you 84 10/28/99 WHOLE COMM. - 970652 ought to ask the Gas Works about that.
You're welcome. Has the Deputy Commissioner of L&I arrived? (David Perry comes forward.)
We did have information provided by L&I. I don't believe, oh, I'm sorry, did you want to --
We do have information confirming from l L&I that indeed information about the program is included on the permits that they issue. Beyond that, there is not currently an extensive effort to promote the abatement program.
And the question is, why not? Please identify yourself for the record.
Yes. Good afternoon, Council. My name is David Perry, and I'm Deputy 85 10/28/99 WHOLE COMM. - 970652 Commissioner for Construction Services for the Department of Licenses and Inspections. Currently, there's two methods that we use to notify people of the tax abatement program. The first method is with the building permit application itself. There's a message at the bottom of the application that talks about the tax abatement program, and it has a phone number and address for additional information.
Oh, I could really see it from here. Can I see that, please?
Would I be able to read it without my glasses? Nope, I need my glasses. That is a stamp, is it not?
The new applications that we have do have it printed on there. That was an older application, and we had to hand-stamp the tax abatement notice on them.
Could they do it in bold type? I mean, I think these are things that we should be advertising. I think we need to let people know about this.
Well, certainly with the next revision of that form, we will make that message far more prominent than it is now. I do agree that it is kind of buried in the boilerplate on the permit application, and we can definitely do that. We will make it larger and more prominent. The second method that we use to notify people of the tax abatement program is on the building permit form itself. It is listed on there -- again, the same information concerning 87 10/28/99 WHOLE COMM. - 970652 address and phone number.
My question was, why are so few residents participating in the existing abatement program? And why doesn't the City actively advertise that? And I don't think this is a very good example of what we're doing.
Of all the building permit applications we get in, I would say that maybe 200 of 'em would even qualify for this particular program. There's very few that are actually processed through L&I. The typical applicant that comes in to get the building permit is not the property owner. It could be the architect, the engineer, or the contractor who. Regardless of what information we give them, that may not get back to the building owner to even realize that they have a possible tax abatement to take advantage of.
Thank you. Are there any questions from members of the committee? The Chair recognizes Councilman Kenney.
Thank you, Madam 88 10/28/99 WHOLE COMM. - 970652 Chair. I want permission to leave the chamber on personal business. If any of the bills before us come up, I would like to be recorded as voting aye and any -- and also aye on any amendments that are agreed to by the primary sponsor.
And I shall return hopefully within about an hour and a half.
Okay, thank you. Are there any other questions on this particular bill? (No further questions.)
Seeing none, I would like the record to reflect that Bill No. 22 960663 is being withdrawn at this time at the request of the sponsor. I would -- I know that everybody here is waiting to hear on the transfer tax bill, but 89 10/28/99 WHOLE COMM. - 970214 there have been a number of Councilmembers saying that they will be back very shortly, and I think in all fairness to everyone, perhaps we ought to consider that as our last bill, if you don't mind waiting. The next bill to be considered is Bill 8 No. 970214. I would like Mr. McPherson to please read the title of the bill.
Bill 970214, an ordinance amending Section 19-1303, Paragraph 4 of The Philadelphia Code, entitled "Authorization to Offer Exemption From Real-Estate Taxes on New Construction of Residential Properties," by changing the period of exemption from three years to ten years, under certain terms and conditions.
Thank you. This proposed bill would expand the City's existing exemption for new residential construction. Currently, the City provides a three-year full abatement, and this bill would seek to change this exemption period to a ten-year phased-out exemption. The one important consideration here is that under the current State Enabling legislation 90 10/28/99 WHOLE COMM. - 970214 for this type of abatement program, we do not have the authority to implement this kind of a ten-year abatement period. So any action on this bill 5 would only be the first step toward putting the actual program in place. In terms of the potential cost of this program, in terms of the incremental loss in revenues over and above the existing three-year abatement, we estimate that the cost, with current levels of construction activity, would be relatively modest. In the aggregate, once the full program rolls into effect, it would only be approximately half a million dollars per year, which would, again, as with any of these property tax abatement, be split roughly evenly, slightly more by the School District, and a little less by the City. So the cost impact of this with current construction levels would be relatively low, and the average benefits to an individual homeowner would be significant over the full ten-year phased-in period of the abatement, assuming approximately a $75,000 market value property which for new construction -- a BRT market value 91 10/28/99 WHOLE COMM. - 970214 was the basis for our analysis. This would save the participating homeowner nearly $5,000 over the ten-year period, which we think might indeed provide a significant incentive to participate in the program and to make the kind of investment that the program is designed to encourage. In addition, we do strongly support the phased-in approach proposed under this ordinance 10 because in our Revenue Department's experience, there can be an assessment shock for people who experience the current three-year full abatement and then drop off the program abruptly. Under this phased-out approach, taxpayers would be eased into paying the full freight for their real-estate taxes while still receiving a substantial incentive beyond what's currently provided. So for all of those reasons, and in recognition of many of the issues we've already talked about in connection with the earlier propose ordinance, the Administration supports Bill No. 970214, which we believe could create a powerful new tool for generating increased residential investment in the City.
What happens if 92 10/28/99 WHOLE COMM. - 970214 somebody sells the house? How many years does the new owner get? Let's get it on the record. Well, isn't there somebody from the City Solicitor's Office that can give us an answer? I'd rather not speculate.
I certainly would not want to speculate on the record. We will ask the City Solicitor to clarify that point. (Mr. Nadol confers with colleagues.)
Councilman? I apologize for the delay in answering your question, Councilman. Councilman, I apologize for the delay. To answer your question, we did just review the original ordinance being amended, and this abatement does run with the property. If the property changes hands, the abatement nonetheless continues.
With the new property owner? 93 10/28/99 WHOLE COMM. - 970214
For how many years does the new property owner have the abatement?
-- if he purchased the proper after three years of abatement?
Yes, correct. The abatement runs with the property. So that abatement is on the property for the ten-year period, and it doesn't start over if the property is sold.
Because, you know, if the language is loose, we run the possibility of creating properties that are tax-exempt 94 10/28/99 WHOLE COMM. - 970214 forever, you know, or partially tax-exempt. I'm just worried about -- incidently, is there any immediate urgency? I'm wondering why this bill, say, was scheduled for today, a week before the election, when Councilmembers are overwhelmed with all kind of commitments. Shouldn't we have had the hearing a long time ago, or is there any reason why it can't be heard right after the election? I don't hear anything about how anybody has a bank loan that has to close by October the 31st and, therefore, we've got to have the hearing this week. I mean, that's the reason we're having difficulty maintaining the --
Councilman, I think you're asking the wrong person.
These are not Administration bills; they're bills that have been introduced by Councilmembers, and I believe Councilman DiCicco would like to be recognized at this time.
Yeah, go ahead. I'd like to know why can't this bill -- 'cause there 95 10/28/99 WHOLE COMM. - 970214 seems to me -- the bill seems to have a lot of merit; it seems to also have a lot of rough edges. I'm interested in doing something that doesn't have all of these rough edges. The bill 6 seems to have some merit; I think it deserves a full hearing and not just speculative answers.
The Administration shares your feeling that this bill has an enormous deal of merit. We support this bill. The questions --
The questions that you were asking pertain to sections of the existing ordinance that have been in place for many, many years, without problems arising out of those provisions. The portions of the bill that are proposed to be modified are relatively narrow and, I think, relatively straightforward and clear in their intent.
Well, but when you raise amendments to a bill, you raise again for consideration the whole bill. It gives the legislative body an opportunity to reexamine it. There may be things that we can improve in the 96 10/28/99 WHOLE COMM. - 970214 whole bill. You don't just consider the amendments; you've got to consider what the amendments are attached to. But I find all through this that there are many answers that people aren't certain about. You know, with due respect to Mr. Levy, who is very well informed, there were areas that he wasn't sure of. I think we ought to be sure of what we're doing. If it's a good thing, we're going to want to do it, and we're going to want to do it in the best possible and most effective way. But I really raise the question of why it's being pushed through now. I don't know why it can't be considered in the month of November.
Thank you, Madam President. I have a question because I wanted to include multifamily dwellings, and I believe in the legislation, in Section b., under "Definitions," in parentheses, number 3, "Eligible dwelling unit means a dwelling unit 97 10/28/99 WHOLE COMM. - 970214 located in a single house, double house, duplex, townhouse, rowhouse, apartment building, condominium unit, or cooperative unit, where the dwelling unit is owner-occupied." My concern is -- I would like to see this legislation with Council's approval, obviously, relate to a developer for the development of multifamily apartment buildings, where the developer or the owner of the property does not have to reside in it. I mean, we do TIFs for -- we do TIFs for hotel and other high-rise developments. This is a way, I think, in which we can offer some abatement to the developer without having to go through the TIF process, and I want to make it available to developers. Now, what would need to be done in terms of an amendment?
Unfortunately, Councilman, that is an issue that I think we would need to go back and look at a little more carefully. We did do our best to analyze the bill as presented. Our 98 10/28/99 WHOLE COMM. - 970214 cost estimates did not contemplate the type of expanded coverage that you've just expressed an interest in. And without being able to really look at those costs, it would be hard for us to take a position. In addition, we would need to have the Law Department look further at the State Enabling Act to see whether there might be conflicts there. Of course, as we've already noted, we'd have to change the State Enabling Act anyway in order to put this proposal into place.
Right. I was prepared to put an amendment to that effect at the end of the hearing.
But that might be another area of the State Enabling legislation where we're constrained. I'm not sure; it's something we just would have to go back and look at further.
Thank you. At this time, I would like to make a statement. The Council will stand in recess until 2:15. So, Mr. Nadol, if you would be back then, I'm sure there are a lot of other questions that we would like to ask. 99 10/28/99 WHOLE COMM. - 970214
Thank you all. See you at 2:15. (Break taken.) - - - (Proceedings resume.)
We will now resume the public hearing of the Committee of the Whole. Mr. Nadol, you were giving testimony on Bill No. 970214.
Thank you, President Verna. I believe we concluded our formal testimony on that bill, but I would be happy to answer any questions.
I just have one question. Assuming that the State will make the amendment in the future, will homeowners who purchase a new house after our enactment of this bill, but before the date that the State does the necessary amendments, qualify for the abatement?
The Act, as I understand it, would not -- or rather, the City ordinance 25 would not become effective until the State law 100 10/28/99 WHOLE COMM. - 970214 would be changed. So the expanded abatement would not apply for the property owners that you just inquired on behalf of.
Okay, thank you. The Chair recognizes Councilman DiCicco.
Thank you, Madam President. But they still would qualify for the three years.
Sure, they would certainly still qualify for the existing abatement program.
Do any of the Councilpeople have any questions regarding Bill 16 No. 970214? (No questions.)
Let me go back to my earlier question before we recessed. Do I need to do an amendment or do I need to change the 101 10/28/99 WHOLE COMM. - 970214 language of the bill to be able to include multifamily dwellings, the entire multifamily dwelling as opposed to the unit in a multifamily dwelling? Do you have any suggestions or comments on that?
Yes. As indicated before the recess, that's something that will require more research both by the Law Department and on our part. We would like to further run the numbers to see what we think the fiscal impact of that would be. And we've not been able to do that during the brief recess that we just have had.
Again, I base my concern or my interest in possibly adding that language to the bill, or amending the bill, is that we probably could effectuate that through a TIF. However, if we make it part of this bill, it may make it a little bit simpler and easier to take advantage of an abatement as opposed to doing it by way of TIF. So it almost becomes almost a matter of right for a new development.
We'll certainly be happy to look at that. 102 10/28/99 WHOLE COMM. - 980303, 980927