When Philadelphia 76ers owner Josh Harris announced plans last week to build a $1 billion waterfront arena project at Penn’s Landing and pay for it with kicked-back sales, payroll, and other taxes from the surrounding neighborhood, and it was lauded as a way to create jobs, one of my first thoughts was If Harris is smart, he’ll do like Bruce Ratner did in Brooklyn and get community groups on board to say how desperately needed his development is, even if he needs to create his own community groups to do so.
Turns out, Harris didn’t need to create grassroots groups out of whole cloth:
A proposed new arena for the 76ers is earning the support of some important African American organizations in the region. The Urban League of Philadelphia, the Urban Affairs Coalition, the Black Clergy of Philadelphia and the African-American Chamber of Commerce all support the idea.
They say a new arena to be built at Penn’s Landing would bring unprecedented economic opportunity for Black and brown communities.
WHYY didn’t include any quotes from any of these groups, so it’s hard to say why they’re backing the arena deal or how strong their support is or if any of them are concerned that maybe those hundreds of millions of dollars that would be siphoned off via tax kickbacks might be more useful to Philadelphia’s 13.8%-unemployed-even-before-Covid African-American residents than a promise of a few construction jobs that may or may not come through. WHYY does note that the only other time the “Neighborhood Improvement Zone” subsidy program was used, for a Lehigh Valley Phantoms minor-league hockey arena and other development in Allentown, it left “lingering questions”:
A Neighborhood Improvement Zone resembles tax-increment financing, an arrangement in which money lent for development or other improvements to a certain area is paid down through the later realization of increased property tax revenues linked to those projects. The Allentown NIZ instead utilized a battery of potential tax revenue increases – payroll, sales, alcohol, or others – to pay down both government bonds and developers’ private loans linked to the redevelopment of a 128-acre downtown zone. That area was adjacent to a working-class neighborhood that had been growing organically largely due to an influx of Latino immigrants and businesses…
Chris Woods, a Ph.D. candidate at Brown University who studied the Allentown NIZ, found that, after paying down financing costs, the zone often returned less revenue to governments than before the development took place. And, in 2018, more than half the tax revenue raised by the development went back to the developers, according to the Morning Call.
There are still a lot of steps that need to happen before the Sixers arena can become reality: The Delaware River Waterfront Corporation has to pick Harris’s as the winning proposal for the site, then the NIZ — which is really a super-TIF — would have to be approved by the state, then there could be a city vote as well. But you only get one chance to make a first impression, and Harris is certainly doing his darnedest to make this about JOBS!!!1! and not about taking a large slice of public tax revenue and giving it to a billionaire private equity baron. Well played, sir, well played.
Wait a minute. If it’s increment tax revenues and more than half of the total tax revenues are being kicked back to the developer, doesn’t that make the project a massive success, in terms of stimulating economic activity in the area?
If your goal is getting more economic activity for those few blocks, sure. If your goal is getting more economic activity for the city as a whole, not so much, as 76ers fans were buying tickets (and hot dogs) even before this, so you’re just moving the activity from south Philly to Penn’s Landing. And at their old arena, the sales taxes on those things go to the state; at the new one, they would go straight back to Josh Harris.
The developer gets the taxes because that’s the arrangement in the law. He gets all tax revenues in the buildings he built to service his construction costs, but still pays property tax. Of course, he quickly challenged his assessment (based in part of the “value” of the buildings he touted in the press) so pays a lot less of that. Most of the taxes seem to come from his relocating a cigarette distributor to the Zone, so he gets all the excise taxes too.
The project has stimulated rather little economic activity, unfortunately. The “luxury” apartments are allegedly sold out but few seem to live there. A few high-end restaurants have given it a go, but there’s not enough traffic around there to sustain them. Retail has the challenges of retail in other places, maybe worse. Very few businesses have made the leap.
Suppose smaller cities have to “do something” but this was a huge bet that has had little return on investment. Hardly a massive success.
Well, you only have to look at what a transformative project the MLS stadium was for Chester to see this is going to be unbelievably… um… profitable for someone and not create many meaningful jobs in the new district.
Assuming this goes ahead (and I have every confidence that corruption will prevail, as it usually does), It will create roughly the same number of jobs it eliminates or reduces the hours for in the old district.
And we are back to using the money you put in the jar marked “gas bill” to pay your electric bill and declaring that a windfall/free money.
Josh Harris should’ve waited around before buying a hockey team. He bought the money losing Devils when had he waited, he could’ve bought the Flyers a few years later when they were up for sale. Had he done that, he wouldn’t be paying any rent as he’d own and control both teams under the Wells Fargo roof.