Philadelphia school board reverses itself and approves Hilco tax break

In a reversal of its earlier stand, the Philadelphia school board late Thursday voted to approve a tax break for the city’s largest development project, a former South Philadelphia refinery site that is to be rebuilt into a massive logistics hub.

The board voted, 7-0 with one abstention, to approve a 10-year extension of the site’s Keystone Opportunity Zone (KOZ) designation, a proposal backed by Mayor Jim Kenney. Hilco Redevelopment Partners, which bought the 1,300-acre property out of bankruptcy in June, has said the tax break is important to its project, which will require hundreds of millions of dollars for environmental cleanup before the property can be redeveloped.

The school board in August rejected the proposal when three progressive board members, Ameen Akbar, Mallory Fix Lopez, and Angela McIver, voted no. They switched course Thursday, they said, after the city detailed more information about the money the district would see and the safeguards that would be put in place to make sure Hilco fulfilled its promises.

McIver said that she changed her vote after Hilco met with district officials and promised job opportunities for recent graduates, but that she still had concerns about trade unions that often “function as private clubs" and shut out Black and brown people.

Hilco, which paid $225.5 million for the site formerly owned by Philadelphia Energy Solutions, has pressed the city to extend the property’s KOZ status, which was granted in 2014 and set to expire in 2023. According to the city’s website, KOZ status applies to six parcels totaling about 950 acres of the 1,300-acre property.

Businesses in Keystone Opportunity Zones pay little to no state and local business taxes through an assortment of credits, waivers, and abatements, but since 2016, the city also requires a payment in lieu of real estate taxes. Hilco has promised to pay $1.36 million next year in lieu of property taxes, up from $1.25 million paid by the former owner.

The city says the payment in lieu of taxes is calculated at 110% of the amount the owner would pay based on the property’s assessed value. The revenue is allocated 55% to the School District and 45% to the City General Fund, the same allocations that would be applied to real estate tax payments, said Kevin Lessard, a spokesman for the Philadelphia Commerce Department.

The Kenney administration has called the project an “unprecedented opportunity to revitalize one of the largest and most important parcels in the city of Philadelphia.”

Hilco (HRP) said Friday that it was “humbled by the Philadelphia school board’s faith in this project” and committed to working with the School District to build a Career Connected Learning system.

“HRP will engage leadership staff in advising on curriculum design, providing virtual and in-person career exposure opportunities, paid work-based post-learning experiences, and building direct pipelines to permanent employment in partnership with the Philadelphia School District,” the company said in a statement. "We are looking forward to a long and productive partnership with the School District and City of Philadelphia.”

The vote drew anger from teachers, parents, and activists who opposed corporate tax breaks and were pleasantly surprised by the board’s earlier rejection of the designation. Many of the 73 people who registered to speak Thursday night were opposed to the KOZ extension.

One, Hannah Holiday, said she was “completely appalled that you would reject a stream of revenue” from Hilco being taxed. “We all know that Hilco can afford to pay these taxes,” she said.

Hilco says it intends to redevelop the site into a “multimodal industrial park with ancillary rail infrastructure, energy infrastructure, marine capabilities and commercial uses.”

An economic impact study commissioned by Hilco estimates the project would generate 19,000 full-time, permanent, direct and indirect jobs, and deliver an annual economic impact of about $3 billion to the region at build-out, after about a decade. It would also generate 13,000 construction jobs.

Keystone Opportunity Zones are abandoned, unused, and underused areas the state says would benefit from additional investment. The Commerce Department has designated about 500 properties as KOZs.

This story was updated to include information that Hilco’s payment in lieu of taxes would increase next year to $1.36 million.