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June 24, 2013 � Volume 16 � Issue 13 � A bi-weekly email news service

Office Sector News
Office Market Improving
In the first quarter of 2013, the vacancy rate in the central business district (CBD) was 13.51%, with Class A buildings performing slightly better at 13.15%, according to Newmark Grubb Knight Frank's Philadelphia CBD Office Market Report, 2013 1st Quarter. Class B vacancy was 13.51% and Class C was 15.16%.

The CBD added 125,003 square feet (SF) to occupied inventory, with the Independence Square submarket accounting for 111,467 SF of the total absorption. Asking rental rates remained stable at $28.65 for Class A buildings, $23.69 for Class B, and $20.98 for Class C space. Newmark predicts that rates will rise slightly over the next year.

University City was the strongest submarket, with a 6.78% vacancy rate and an asking rental rate of $29.85.

Major lease transactions in the quarter included a 150,000 SF renewal by Drinker Biddle at One Logan Square, and a 180,000 SF renewal by Pepper Hamilton at Two Logan Square.

Chestnut Place Sold
SSH Real Estate on June 20 announced the $17.5 million sale of Chestnut Place, a 140,000 square-foot Center City Class B office building at the corner of 15th and Chestnut Streets.

The seller was 15th and Chestnut LP, led by general partners Peter Soens and Jeffrey Seligsohn of SSH Real Estate, and the buyer was a partnership led by Alterra Property Group, LLC. The previous purchase price was $11.38 million in 2005. Alterra found the location attractive as it is just a block away from Dilworth Plaza, which is undergoing a $55 million renovation, according to the press release.

Alterra plans to convert Chestnut Place into 175 apartments, according to the Philadelphia Business Journal. No time table has been announced.

Reliance Expands Office Space
Reliance Standard Life Insurance renewed its lease at Two Commerce Square, 20th and Market Streets, and added another roughly 15,000 square feet for a total of 137,663 square feet on floors 11 through 15, the Philadelphia Business Journal reported. Pete Talman of Jones Lang LaSalle represented the tenant.

Eds and Meds News
New Leader for Jefferson
Stephen K. Klasko, Dean of the Morsani College of Medicine at the University of South Florida (USF) and Chief Executive Officer of USF Health, has been appointed to the newly created position of President of Thomas Jefferson University and President and Chief Executive Officer of Thomas Jefferson University Hospital System. Klasko will begin the job in early September. The new position, which now combines leadership of the hospital and university, was created after the departures of University President Robert L. Barchi, and Hospital President and CEO Thomas J. Lewis.

To read the press release, please go to prn.to/13W67qB.

Penn Transforms Parking Lot Into Park
As part of a continuing effort to upgrade the quality of the public environment, the University of Pennsylvania on June 11 opened the new one-acre Edward W. Kane Park, transformed from a parking lot in front of the Hospital of the University of Pennsylvania (HUP) at 33rd and Spruce Streets.

The site now features a large central lawn, pathways made of permeable pavers, ornamental and shade trees, seasonal plantings, new benches, and lighting. The park was designed to exceed 95% stormwater surface permeability.

Urban Engineers, Inc., in collaboration with Mathews Neilsen Landscape Architects, provided the civil and traffic engineering design for the park. The project was supported by a gift from Kane, who graduated from Penn in 1971. To view a photo of the new park, please go to bit.ly/16931Ax.

Deadline Looms for Educational Improvement Tax Credit
The Center City District Foundation (CCDF) is a state-approved Educational Improvement Organization (EIO), a vehicle for businesses seeking to make contributions through the EITC program to support the public, elementary schools of Center City. For FY2014, tax credits can equal 75% of a business' contribution up to a maximum of $750,000 per year. Tax credits of up to 90% are available for businesses that contribute the same amount for two consecutive years. Contributions to the CCDF for this purpose can be used to expand arts and culture initiatives, foreign language programs and increase financial literacy and entrepreneurial skills in Center City public schools.

Applications are due Monday, July 1, and are processed on a first-come-first-served basis, until funds are exhausted. For additional information or to apply, please visit newpa.com/eitc.

In related news, the Philadelphia School Reform Commission (SRC) on June 19 voted to raise the amount of money a school can accept without getting SRC approval, from $5,000 to $20,000. Donations can be made in the form of grants for events, for scholarships, or other needs of the school.

Housing News
Dranoff to Build Near Schuylkill Banks
Dranoff Properties is proposing a 21-story, 167-unit residential building to be known as One Riverside on the space occupied by the public parking lot west of 25th Street between Locust and Manning Streets, immediately adjacent to the surface entrance to Schuylkill River Park.

Studios, one- and two-bedroom units will occupy floors 3 through 20 with five penthouse units on the 21st floor. The building will also have approximately 1,000 square feet of ground-floor retail, as well as parking. No schedule for the project has been announced.

Dranoff Properties has another apartment building immediately across the street, the 152-unit Locust on the Park, 201 South 25th Street, the first industrial building converted to loft apartments under the original 1997 10-year tax abatement.

The growth of residential properties at the western edge of the office district and adjacent to University City is a trend reported on by Inquirer architectural critic, Inga Saffron in the June 21st Philadelphia Inquirer: bit.ly/125HRTb.

Retail News
Di Bruno Bros. to Open at Ninth and Chestnut
Di Bruno Bros., which has stores in the Italian Market, at 1730 Chestnut Street, and in Ardmore, announced it will open a fourth cheese specialty shop and grocery in The Franklin Residences (formerly the Benjamin Franklin House), 834 Chestnut Street, Philly.com reported.

The store will be slightly smaller than the branch at 18th and Chestnut Streets, and will open in September. Also opening soon at the Franklin will be a new branch of the upscale Town Hall Coffee of Merion Station.

Gaming News
SugarHouse Casino Revenues Stable
Revenue at SugarHouse Casino on the Delaware Riverfront remained stable in May, dipping only slightly from April's revenue, according to the Pennsylvania Gaming Control Board.

In May, the casino took in $22,645,976, compared to $22,783,723 in April. The Commonwealth's share of taxes was $6,161,381 in May compared to April's $6,176,888. The City of Philadelphia collected $763,648 in taxes in May, compared to $765,016 in April.

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

Economic News
Manufacturing Activity Strongest Since 2011
Manufacturers responding to the Federal Reserve Bank of Philadelphia's Business Outlook Survey reported business activity in June was the strongest since April 2011.

The survey's broadest measure of manufacturing conditions, the diffusion index of current activity, increased from ‑5.2 in May to +12.5 in June. (The index has a maximum value of 100 and a minimum value of -100.) The percentage of firms reporting increased activity in June (34%) was substantially more than the percentage reporting decreased activity (22%).

New orders were higher, with 38.2% of firms reporting an increase and only 21.6% reporting a decrease. Also, 19.6% of the reporting firms saw an increase in prices, while only 4.9% reported a decrease.

However, the number of full-time employees dipped with 20.2% of the companies reporting a decrease in the number and 14.8% indicating an increase.

To read the report, please go to bit.ly/11OOwNj.

Employment News
STEM Workers Important for Economic Growth
Workers in STEM (science, technology, engineering, and math) fields play a direct role in driving economic growth, and while these jobs are higher paying that other jobs, they do not always require a bachelor's degree. These jobs that do not require a college degree help boost innovation and are associated with less income equality, according to a new report, The Hidden STEM Economy, produced by the Brookings Institution.

The Philadelphia metropolitan area (PMA), which includes Camden, N.J., and Wilmington, DE, ranked 8 out of 100 metropolitan areas in 2011 for STEM jobs, with 529,250, according to the report. Those jobs accounted for 20.7% of the workforce, which put the region at 35 out of 100.

To read the report, please go to bit.ly/12I0e28.

Transportation News
Number of Commuters to Philadelphia Increases
A new report from the U.S. Census Bureau estimates that Philadelphia's daytime population expands by approximately 106,000 (about 7%) on weekdays due to the net influx of commuters, the Philadelphia Research Update at The Pew Charitable Trusts reported.

Pew notes this increase is small compared with the daytime population change in a number of other cities with populations of 50,000 or more. New York County (Manhattan) experiences a 95% daytime population rise, Washington, D.C.'s is 79%, and Redmond, WA's (home of Microsoft) is 111%.

To view the Census report, please go to 1.usa.gov/YrOq3k.

Two-Year Airport Lease Approved
On June 20, City Council approved Bill #130455-A, introduced by Councilman Kenyatta Johnson, which authorized the Director of Commerce to enter into a two-year lease ending June 30, 2015, between the City of Philadelphia and each of the airlines servicing Philadelphia International Airport (PHL).

The extension was agreed upon earlier in the year by the City, US Airways, and all of PHL's airlines and will lead the way for $734 million in capital investments that include modernization improvements to both the airfield and terminal sides of the airport.

To see the list of improvements included, please go to bit.ly/11RKGCU [PDF].

To read the bill, please go to bit.ly/1c5dv4z.

Drexel President's Vision for Northeast Corridor and 30th Street
Drexel President John Fry's testimony before a U.S. House transportation committee, which was reported on in the June 10, 2013, Developments, appeared in a more Philadelphia-centric form in this morning's Philadelphia Inquirer (bit.ly/14SUbXU). Drexel's plans for a new mixed-use commercial, innovation and residential district around 30th Street Station was presented at the June 11 CPDC membership meeting and can be viewed on our website at
centercityphila.org/docs/FryPresCPDCMeeting061113.pdf [PDF].

I-95 Renovation Creating Congestion
PennDOT has begun reconstruction of 51 miles of Interstate 95 in Pennsylvania between Delaware and New Jersey. The work has created some congestion in and around Center City, but the project has allocated funds to alleviate some of the congestion, including $22.4 million for traffic signal upgrades to the City grid; $26.2 million for transit improvements; and $58.5 million for transportation system expansion.

A 9% increase in the use of the SEPTA Trenton line has been attributed to the construction and its inherent delays. For travel delays, advisories, and updates, please visit 95revive.com.

Website Illustrates Three State Transportation Funding Scenarios
On Friday, PennDOT Secretary Barry J. Schoch unveiled a new website, DOTDecade.pa.gov, that illustrates where and how additional transportation funding would be invested across Pennsylvania if a long-term funding solution were put into place.

The website shows projects that could be funded over the next decade through three scenarios – no additional funding, Governor Corbett's proposed level of funding ($1.8 billion) and SB 1's funding-level proposal ($2.5 billion).

Projects can be sorted by county, transportation planning partner, or state Senate and House districts.

Parks and Open Space News
ShootersINC Creates Video About Dilworth Plaza
Shooters INC, a Center City video production company whose clients include ad agencies, other production companies, filmmakers, television and cable, has generously created pro bono a short video, Transforming Dilworth Plaza, for the Center City District. The video features community and business leaders discussing the exciting features of the new Dilworth Plaza, scheduled to be completed in mid-2014.

The video invites other community and business leaders to support this project and to get involved in "Transforming Dilworth Plaza." To view the new ShootersINC video, please go to youtube.com/watch?v=BMC8-aJcB_s.

Schuylkill Banks Development Creates Jobs, Tax Revenue
Construction related to the development of Schuylkill Banks coupled with further planned building activity is responsible for 319 jobs and $780,000 in City of Philadelphia tax revenues, according to The Economic Impact of the Schuylkill River Development Corporation Investment, released on March 26, and prepared by Econsult Solutions, Inc. for the Schuylkill River Development Corporation. In addition, development has created 1,022 jobs and $3.2 million in tax revenues for the Commonwealth of Pennsylvania, the report noted.

The waterfront improvement is partially responsible for an increase of over 150% in residential property values near Schuylkill Banks since 2000, according to the report.

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

Philadelphia Tax News
AVI Property Tax Rate Set
After more than a year of intense debate, Bill #130181, introduced by Councilman Curtis Jones, Jr. on behalf of Council President Clarke, was approved, setting the new property tax rate at 1.34% of assessed value and allowing for a $30,000 homestead exemption for homeowners. To read the bill, please go to bit.ly/17tZ9gA.

U&O Tax Rate Set
Bill #130182-A, introduced by Councilmember Curtis Jones, Jr., on behalf of Council President Clarke, was approved, setting the Use and Occupancy (U&O) tax rate at 1.13%, with a $177,000 exemption that buffers small businesses in small buildings outside Center City. To read the bill, please go to bit.ly/143QVX8.

A parallel bill, sponsored by Councilwoman Maria D. Quiñones Sánchez, which would have set the U&O rate at 1.42%, did not move forward. Also held Thursday was Bill#130451, introduced by Councilman Bobby Henon, that would have excluded many manufacturing businesses from paying U&O taxes. Those included manufacturers of beverages, tobacco products, textiles, petroleum, printing, metals, chemicals, rubber, computers and electronics, and many more. That bill can be found at bit.ly/150c0Tw.

Tax-Abatement Bill Amended, Held
At the final session of City Council, Councilman W. Wilson Goode, Jr. amended Bill #120651, which changes the terms of the highly successful 10-year tax abatement. The bill narrowly made it out of committee on June 12 by a vote of 9-7. The new, proposed version of the abatement would provide for a 100% exemption in the first five years, with gradual reductions over the following five years. The amount of property value exempted would be capped at $500,000 for owner-occupied residential units, and the effective date would be January 1, 2016. But due to intense lobbying by the real estate development community, the bill has not been approved. Council has recessed until September 12, so the bill cannot be taken up again until the fall. The bill can be read at bit.ly/12p3EnY.

City Budget Bills Passed
City Council on its final day passed a $3.8 billion budget for Fiscal Year 2014 (FY14), which included a $190 million spending increase over FY13.

The budget allocates $20 million for new investments, more than $60 million for pension, debt service and rising employee costs, and about $100 million is set aside to resolve labor contracts with municipal unions. The budget did not solve the School District of Philadelphia's $304 million budget shortfall.

The budget bills are: Bill #130179, bit.ly/126ukuD, the Capital Budget for Fiscal Year 2014 (FY14); Bill #130180, bit.ly/126uvpM, an Operating Budget for FY14; and Bill #130178, bit.ly/14nIW7F, a Capital Program for the six Fiscal Years 2014-2019.

Other Tax Bills, Passed on June 13
Bill #130308-A, introduced by Councilman Mark Squilla, will allow property owners to pay the amount of the previous year's property tax if the current year's assessment is under appeal. To read the bill, please go to bit.ly/19j6f5P.

Bill #130443-A, introduced by Councilman Bobby Henon for Council President Clarke and Councilman David Oh, requires the City to post on its website "Assessment Standards and Practices Regulations" regarding assessments made in 2011. To read the bill, please go to bit.ly/143yAt5.

Bill #130446-A, introduced by Councilman Curtis Jones, Jr. on behalf of Council President Clarke, authorizes the Board of Education of the School District of Philadelphia to impose an excise tax of $2 per pack of cigarettes ($.10 per cigarette). To read the bill, please go to bit.ly/1bWVjKx.

Other Tax Bills, Passed on June 20
Bill #120340-AAAA, introduced by Councilman Curtis Jones, Jr. for Council President Darrell L. Clarke, authorizes tax exemptions to longtime owner-occupants whose property assessments experienced a threefold increase in one year and whose household income is equal to or less than 150% of Area Median Income. To read the bill, please go to bit.ly/11yPSgj.

The enabling legislation needed for this bill, HB390 (bit.ly/1086bD7), was introduced on June 19 by State Representative Michael H. O'Brien (D., Philadelphia).

Bill #130417-A, introduced by Councilman Kenyatta Johnson, will allow deferrals of real estate tax for some taxpayers who are experiencing significant tax increases and have qualifying lower household income. To qualify, the tax increase will have to be greater than 15%. To read that bill, please go to bit.ly/13It9lA.

Other Government News
Report Addresses Pension Shortfalls
Temple University's Center on Regional Politics (CORP) has released a report, "What To Do About Public Pensions: Options for Funding and Reform," produced by the Center's bipartisan Public Pension Working Group.

The report outlines a three-pronged approach to meeting the obligations of public pensions. First is to focus on finding new resources such as redirecting existing revenue toward pensions, restructuring some employee benefits, and leasing or selling assets. In the City of Philadelphia, the report suggests extending the 1% of sales tax that is due to expire in June 2014 and channel that money into pension-obligation payments.

Second, the report suggests reducing pension costs and liabilities by reducing benefits for new hires, among other ideas.

The third option is to explore innovation in negotiating labor contracts and devising legislative solutions.

To read the report, please go to bit.ly/18CWEcV [PDF].

City of Philadelphia Upgraded by S&P
Mayor Nutter on June 17 announced that Standard & Poor's Ratings Services (S&P) had raised the City of Philadelphia's long-term and underlying rating on the City's general obligation (GO) debt to A- with a stable outlook, from BBB+. It's the highest rating the City has had since 1979.

The rating agency noted the City's economic diversification and "the city's progress in restoring its general fund balance through cost containment as well as stronger revenue streams."

To read the press release, please go to bit.ly/13YUDB7.

Upcoming Events
Public Meeting on DVRPC Long-Range Plan
The Delaware Valley Regional Planning Commission (DVRPC) will hold a public meeting at DVRPC headquarters at 190 North Independence Mall West (Sixth and Race Streets), 8th Floor, from 2:00 p.m. to 4:00 p.m. The meeting will include a discussion on Connections 2040 - Plan for Greater Philadelphia, the regional long-range plan for economic competitiveness, the environment, land use, and rebuilding transportation systems. DVRPC held a series of meetings for public input on the plan during April, and the DVRPC board will vote on the report's adoption at its July 25 meeting, The Philadelphia Inquirer reported.

The public comment period will end at 5:00 p.m. on July 8.

For more information, please go to dvrpc.org/Connections2040/.

Exploring a Shift in Power Toward Cities
The Town Square Series of The Academy of Natural Sciences of Drexel University will present The Metropolitan Revolution: Philadelphia As a Model For the Nation on Thursday, July 11, from 5:30 p.m. to 7:30 p.m., at The Academy of Natural Sciences, 1900 Benjamin Franklin Parkway.

Introductory remarks will be made by Don Hinkle-Brown, President and CEO, The Reinvestment Fund.

On the panel will be Mayor Michael A. Nutter; Jennifer Bradley and Bruce Katz, Co-authors, The Metropolitan Revolution: How Cities and Metros Are Fixing Our Broken Politics and Fragile Economy; and Mark Zandi, Chief Economist, Moody's Analytics. Leading the discussion will be Moderator Diana Lind, Executive Director and Editor in Chief, Next City.

To register for this free event, please go to bit.ly/11YK4vf.