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February 23, 2015 • Volume 18 • Issue 4 • A bi-weekly email news service

Employment Trends
City Needs More Jobs to Sustain Growth
Despite positive developments in downtown Philadelphia – office vacancy rates are falling and more out-of-town investors are choosing projects in Philadelphia – the city stubbornly lags far behind its Northeast peers and the local suburbs in the creation of jobs, stifling real growth, suggests Glenn Blumenfeld, Principal, Tactix Real Estate Advisors, writing in the Philadelphia Business Journal.

Drawing extensively from CPDC reports (Center City Digest, Winter 2014: centercityphila.org/docs/CCDigestWinter14.pdf [PDF] and Center City Reports: Pathways to Job Growth: centercityphila.org/docs/CCR14_employment.pdf [PDF]), Blumenfeld notes that while Washington, D.C., Boston, and New York City have created booming economies and experienced double-digit job growth since 1970, Philadelphia has lost over 25% of its jobs. For every worker in Center City Philadelphia, there are 0.7 jobs; for every worker in the suburbs, there are 1.7 jobs, forcing residents to reverse commute.

To read the commentary, please go to bit.ly/19CDeHI.

Job Growth Through Tax Reform
In the recent edition of The Philadelphia Citizen, Jeremy Nowak writes about efforts to promote job growth through tax reform, rebalancing the City's source of tax revenue.

To read the article, please go to bit.ly/1FDvtOL.

For a summary of the reform recommendations, please go to philadelphiagrowthcoalition.com.

Tech Employment Growth in City Outpaces Suburbs
While still small in overall numbers, tech employment in the City of Philadelphia increased 30% between the third quarter of 2009 and the first quarter of 2014, exceeding all metro counties in Pennsylvania and New Jersey, according to CBRE Viewpoint: "Changing employment patterns in Philly’s tech industry," released earlier this month.

The suburban Pennsylvania counties grew at 11%, while tech employment in the New Jersey suburbs declined by 11% over the same time period. Still, more than half of the region’s tech employment (57%) is found in Montgomery and Chester Counties.

Overall, tech workers prefer to live in the city, even if they work in the suburbs, the report noted. For every tech job in the City of Philadelphia, there are 1.7 tech workers available. In Montgomery County, there are only 0.7 tech jobs for every tech worker living there. The supply of tech workers in the city is expected to pull more employers into the city.

To read the report, please go to bit.ly/1zTns5c [PDF].

Tech Community Offers Ideas for Next Mayor
The next mayor of Philadelphia needs to lead the city in revamping its K-12 education system, creating more university involvement in the community, and simplifying the tax code, according to a group of about 100 representatives of the city's tech community who met on February 19 at RJMetrics' Center City office, the Philadelphia Business Journal reported.

Other ideas included improving communication about what the city is doing well in order to attract a higher level of talent, building a pool of capital for startup companies, and encouraging more venture capital firms to move here, the article noted.

The group also suggested that the next administration foster workforce development around science, technology, engineering and math, and focus on attracting new ideas, companies, and entrepreneurs.

To read the article, please go to bit.ly/1Ln7kMX.

Manufacturing Continued to Grow in February
Firms responding to February's Manufacturing Business Outlook Survey from the Philadelphia Federal Reserve Bank indicated they saw continued modest growth in the region’s manufacturing sector in February.

General business activity was up for 27.7% of the respondents, down for 22.5%, and remained the same for 49.9%.

Looking ahead six months, 42.0% of the businesses anticipated an upswing in business activity, 12.3% expected a downturn, and 37.0% foresaw no change.

To read the report, please go to bit.ly/1AcM9tj [PDF].

Development News
Royal Theater Development Advances
Dranoff Properties is preparing to apply to the Philadelphia Historical Commission for permission to demolish the rear portion of the Royal Theater in the 1500 block of South Street to make way for a $20 million mixed-use project, the Philadelphia Business Journal reported on February 11. The development will include 45 apartments, 7,000 square feet of retail space facing South Street, and an underground parking garage. The retail space will include an upscale grocery and restaurant.

The project already has received zoning approval and support from the South of South Neighborhood Association (SOSNA). Construction could begin as early as late summer, the article noted.

To read the article, please go to bit.ly/1L3ZJ3T.

Residential Market News
Housing Report Shows Vigorous Growth In Center City
Residential construction in Greater Center City maintained a very strong pace in 2014 as 1,983 new units were brought to market, including 1,358 apartments, 183 condominiums, and 442 single-family homes, with the share of for-sale units increasing from 18% in 2013 to 32% in 2014. Even at this pace, home prices were up, days on market were down substantially, and rental rates were up in nearly every neighborhood in Greater Center City, according to a new report, Center City Reports: Housing, Sustaining Momentum, released February 17 by the Center City District/Central Philadelphia Development Corporation.

To read the report, please go to centercityphila.org/docs/CCR15_housing.pdf [PDF].

Hospitality News
Democrats Coming to City in 2016
The Democratic National Committee has chosen Philadelphia as the site for the 2016 Democratic National Convention, to be held the week of July 25, 2016.

Philadelphia business and political leaders have promised to raise $84 million to support the event, including $12 million in pledged donor funds and $5 million already in an escrow account.

To read a recap of how Philadelphia won the convention, please go to The Philadelphia Inquirer’s article, “Obama approves, and Phila.'s DNC planners get to work,” at bit.ly/1Brfimf.

CCRA Will Not Oppose Hudson Hotel
The Center City Residents Association (CCRA) on February 10 voted to not oppose the construction of the $125 million Hudson Hotel at 17th and Chancellor Streets, which helps clear the way for the project to move forward, the Philadelphia Business Journal reported.

The hotel will contain 300 rooms and 40 executive suites and is being designed by DAS Architects. The penthouse floor will house an exclusive dining venue with panoramic city views, and two stories of luxury retail shops are planned. All parking spaces at the hotel will be underground.

To read the most recent article in the Philadelphia Business Journal, please go to bit.ly/1J4q2uT.

Gaming News
SugarHouse Revenue Dips in January
Revenue at SugarHouse Casino on the Delaware River decreased slightly in January, according to the Pennsylvania Gaming Control Board.

In January, the casino took in $21,459,275 compared to December’s $22,120,354. The Commonwealth's share of taxes in January was $5,613,715, compared to $5,741,403 in the previous month. The City of Philadelphia collected $703,614 compared to the $721,191 of December.

To see all casino revenues, please go to bit.ly/16izgf9.

Public Education News
SRC Approves Five New Charter Schools
The five-member School Reform Commission on February 18 voted to approve five new charter schools from among 39 applicants, The Philadelphia Inquirer reported.

The five were offered three-year charters and have until May 31 to agree on terms. The approved plans came from existing nonprofits that previously have operated successful charter schools in the city, the article noted. Currently, there are 84 charter schools with a total enrollment of 62,358 students, or 31% of the 204,358 students in the district.

The approved charters are: TECH-Freire Charter School, to open in 2016 with 300 students in grades 9-12; Mastery Charter School, Gillespie Campus, to open in 2016 with 336 students in K-5; Independence Charter School West, to open in 2016 with 300 students in K-4; KIPP Dubois Charter School, to open in fall 2015 with 280 students in grades 9-12; and MaST Community Charter School, Roosevelt Campus, K-12, to open in 2016 with 400 students.

To read the article, please go to bit.ly/1A9c5pv.

$80 Million Shortfall for School District
The Philadelphia School District faces a deficit of roughly $80 million for the coming school year, The Philadelphia Inquirer reported on February 9.

Current projections have revenue rising $13 million and expenditures rising about $100 million to maintain the current level of service, which does not allow for full-time counselors and nurses at every school.

The district would need $370 million more next year to execute Superintendent William R. Hite, Jr.'s plan for academic improvements, the article noted.

For the projected 2015 budget, charter schools are budgeted at $42 million, pension costs at $34 million, and debt service, $5 million.

To read the article, please go to bit.ly/1EUNg3E.

Governor Wolf Calls for Shale Tax to Fund Education
Governor Tom Wolf on February 11 proposed a 5% severance tax on natural gas extraction, plus 4.7 cents per thousand feet of volume on extraction, to fund public education in the Commonwealth.

Called the Pennsylvania Education Reinvestment Act, the tax is expected to generate over a billion dollars in fiscal year 2017 (prior to exemptions), and is modeled on a plan enacted in West Virginia.

The proposed tax would replace the impact fee structure favored by former Governor Tom Corbett, which generated about $630 million since the act passed in 2012, most of it going to counties and municipalities where drilling occurs, The Philadelphia Inquirer noted.

The proposal would continue the payments made to impacted communities and make reasonable exemptions for gas given away for free, gas from low producing wells, and wells brought back into production after not having produced marketable quantities of gas, the Governor’s press release noted.

Pennsylvania is the only major gas-producing state that does not impose a severance tax.

To read the Governor’s press release and text of the policy memorandum sent to legislators, please go to bit.ly/19g2e7f.

To read the Inquirer article, please go to bit.ly/17lxCRe.

Transportation News
Major Renovation of Transit System at City Hall to Be Delayed
SEPTA’s $150 million renovation of the subway complex beneath City Hall and Dilworth Park, scheduled to begin in early 2016, has been postponed until after the Democratic National Convention is over in July 2016, The Philadelphia Inquirer reported on February 12, the day the Democratic National Committee announced that Philadelphia had won the convention over Brooklyn, New York, and Columbus, Ohio.

The subways will get cosmetic improvements this summer, in anticipation of Pope Francis' visit, and will be retouched again in 2016 before the convention. The work will include resurfacing the City Hall station platform, painting the walls, and improving the lighting in the concourses and stations, the article noted.

For the Democratic convention, SEPTA will spruce up the dilapidated subway and trolley stations and concourses beneath City Hall, and the Broad Street Line between Center City and the Wells Fargo Center will have maintenance issues addressed between the Race-Vine Station and the southern end of the line at AT&T Station. Similar work, including painting and graffiti-removal, will be conducted along the Market-Frankford Line from Second Street Station to 30th Street Station.

To read the article, please go to bit.ly/16ZdPWZ.

New Flights Added at Philadelphia International Airport
Spirit Airlines will begin flights from Atlanta’s Hartsfield-Jackson Atlanta International Airport to Philadelphia International Airport on June 18, the airline announced on February 17. To read the press release, please go to bit.ly/1Jqctq3. For fares and schedules, please visit spirit.com.

The following day, Frontier Airlines announced it would begin daily nonstop flights to Houston and Minneapolis from Philadelphia on April 30. For a story from the Philadelphia Business Journal, please visit bit.ly/1FjL2aO.

Vine Street and Chestnut Street Projects Will Be Faster, Cheaper
New funding from Act 89 is allowing PennDOT and the Delaware Valley Regional Planning Commission to speed up the upcoming restoration of seven bridges over I-676 near Logan Square, and will net substantial savings in the process, PlanPhilly reported on February 13.

Construction is set to begin in March on the I-676 project. Act 89 freed up funds initially allocated to other projects and the seven overpasses crossing the Vine Street Expressway were folded into one contract, instead of the separate contracts previously expected, the article noted. The project now will be shortened by 12 to 18 months. Due to this and other unexpected developments such as cheaper prices, construction cost was lowered from about $98 million to $55 million.

Those savings are now being shifted to speed up repairs to Chestnut Street’s bridges over the Schuylkill. The Chestnut Street project was originally planned to cost a total of $89 million, beginning construction in 2018 and finishing up in 2021. Now, it is anticipated that repairing the Chestnut Street Bridge from 32nd Street to 23rd Street bridges will cost $78.5 million and construction will start in 2016 and finish by 2019. The project will be advertised at the end of the year with construction to begin in mid-summer 2016. During the first year of construction, Chestnut Street will be completely closed on the construction blocks and the detour will use Market Street.

To read the PlanPhilly article, please go to bit.ly/1Dx3H5Z.

City’s Bike Share Coming in Spring
Mayor Michael A. Nutter on February 11 announced that Independence Blue Cross will serve as the title sponsor for Philadelphia’s bike share system, Indego, which will launch this spring with a fleet of 600 professionally maintained and easy-to-ride bicycles and a network of more than 60 bicycle docking stations across the city. Independence Blue Cross will contribute about $1.7 million each year for the next five years as title sponsor. The City made a $3 million capital investment and $4.5 million came from state, local, and foundation funding.

The bikes will be available 24 hours a day, seven days a week and will serve an area from the Delaware River into West Philadelphia and from the Navy Yard to North Philadelphia and Temple University’s main campus. Bike share users can access a bike at any station and return it to any other station by using a member card or a credit/debit card.

Detailed pricing information will be announced in March. For more information on Indego, please go to RideIndego.com.

To read the Mayor’s press release, please go to bit.ly/1EhLru7.

Government News
Sick-Pay Bill Passes Council, Is Signed Into Law
Mayor Michael A. Nutter signed Bill #141026, the mandatory paid sick leave ordinance, on February 12, the same day City Council passed the legislation, The Philadelphia Inquirer reported. Councilmen David Oh and Brian J. O'Neill voted against the bill.

The Greater Philadelphia Chamber of Commerce testified against the bill citing the issue of competitiveness.

The new law takes effect 90 days after it was signed. Businesses with 10 or more employees will be required to give workers at least one hour of paid sick leave for every 40 hours worked, according to the bill introduced on December 11 by Councilman William K. Greenlee.

Employees not covered include independent contractors, seasonal workers or those hired for fewer than six months, adjunct professors, interns, government employees, and workers covered by collective-bargaining agreements, the article noted. Businesses that already provide sick pay will not need to change their policies.

To read the bill, please go to bit.ly/1AuxYx6.

Owners of Tax-Exempt Property Must Provide Proof
Philadelphia's Office of Property Assessment (OPA) has sent letters to all charitable organizations in the city that own property shown as tax-exempt. Attached to the letter is a form that must be returned to OPA by March 31, or OPA can treat the property as taxable, beginning in 2016, according to a report issued by Saul Ewing.

OPA requires a separate form for each tax-exempt parcel. Even if a charitable organization has not received a form from the OPA, it should still complete and submit a separate form for each property it owns that has been designated as exempt, the report noted.

The tax-exempt organization's IRS letter of determination is a key document to provide in the filing. In 2013, City Council mandated that OPA obtain annual certifications to verify that property treated as exempt from property tax was owned and used by the tax-exempt owner for its exempt purposes and that the owner qualified as a purely public charity under Pennsylvania law. This initial certification process focuses on the ownership and use of exempt property.

To read the report, please go to bit.ly/1AYzx9K.

Philly 311 Customer Service System Upgraded
Mayor Michael A. Nutter on February 18 announced a technology upgrade to the City of Philadelphia’s Philly 311 customer service system, a platform that includes a cloud-based community portal and improved tracking for service requests.

Through the Neighborhood Community Portal, residents can directly communicate and interact with each other and City departments and officials about their concerns.

The new service system allows service requests, access to city information, and educational opportunities by phone, the web, the app, social media, or in person.

Since the Philly 311 Call Center opened in 2008, it has received more than seven million calls from citizens and businesses with service requests, ranging from pothole repairs and cleaning graffiti, to removing drug paraphernalia from playgrounds and reporting abandoned vehicles.

The new Philly 311 service platform is part of the Mayor’s $120 million capital investment to upgrade technology infrastructure.

To read the press release, please go to bit.ly/1AoJiw2.

State Grappling with $1.85 Billion Deficit
Matthew Knittel, director of the state’s Independent Fiscal Office (IFO), recently presented the Greater Philadelphia Chamber of Commerce’s Tax Committee with an analysis of the state budget deficit. The IFO projects the state will end this fiscal year with a $171 million deficit and FY 2015-2016 with a $1.7 billion deficit, for a total deficit through FY 2016 of $1.85 billion.

The deficit is anticipated even though Pennsylvania’s General Fund Tax Revenues were up by $418 million through January 2015; Corporate Net Income Taxes came in $184 million above estimates; the state collected $100 million in unanticipated Inheritance Taxes, and Sales and Use Taxes were up $69 million, while Personal Income taxes came in at a nominal $5 million under estimates.

Driving the increase in the state budget deficit are an additional $723 million in pension expenses, an 8% or $910 million increase in costs for the Department of Human Services, and a 10% increase, or $215 million, in additional expenses for the Department of Corrections.

Governor Tom Wolf will present his first State Budget on March 3.

Upcoming Events
GPCC Issue Forum: ‘Business Attraction and Innovation’
The Greater Philadelphia Chamber of Commerce will hold its third Issue Forum, “Business Attraction and Innovation,” on Wednesday, March 4, from 8:00 a.m. to 10:00 a.m. at the University of Pennsylvania’s Houston Hall (Class of ’49 auditorium).

To register, please go to RoadmapforGrowth.com.

Creative Transformations of Abandoned Industrial Infrastructure
On Thursday, February 26, the German Marshall Fund of the United States with the support of the William Penn Foundation and in collaboration with Drexel University, will present “Creative Transformations: Lessons from Transatlantic Cities,” at Moore College of Art & Design, Stewart Auditorium, 1916 Race Street. The event is free, but RSVP is required. Doors will open at 6:00 p.m.; light snacks will be provided; and the program will begin at 6:30 p.m.

As U.S. and European cities compete on a global scale to attract and retain residents, businesses, and visitors, public assets such as parks and other vibrant public spaces become a key leverage point. Cities are increasingly looking to the reuse of abandoned industrial infrastructure as an opportunity to create new, self-sustaining recreational and economic development opportunities.

Presentations will be made by Ellen Lamberts (Antwerp, Belgium); Davis Cable (Charlotte, North Carolina); Gabrielle Muris (Rotterdam, The Netherlands); and Andreas Mueller (Essen, Germany).

A panel discussion will follow featuring Moderator Geraldine Gardner, Director, Urban and Regional Policy Program, The German Marshall Fund of the United States; Leilah Powell, Chief of Policy to Mayor Ivy R. Taylor, City of San Antonio, Texas; Nico Tillie, Landscape Architect, Sustainable Development and Smart Cities, City of Rotterdam, The Netherlands; Andreas Kauffman, Urban Planner, City of Leipzig, Germany; and Tamar Shapiro, President and CEO, Center for Community Progress, Washington, D.C..

To register, please go to bit.ly/1zqB83M.