A lot of trends are going Philadelphia’s way, but a crisis at SEPTA could threaten momentum

Center City District president Paul Levy doesn’t want anyone to panic, but Philadelphia needs to come up with a rescue plan for SEPTA.

“I don’t want to be an alarmist, but the biggest worry out there is SEPTA,” said Levy. “They’ve done a great job managing their recovery funds, but what happens when they run out next year if they are only at 53% ridership?”

On Wednesday afternoon, Levy and his successor, Prema Katari Gupta, delivered a lot of good news to a roomful of business and civic leaders: Center City’s population is higher than it was pre-pandemic, Philadelphia overall has more jobs than at any time since 1990, and crime downtown is 13% lower than it was in 2019.

But the presentation high above Market Street, at the BNY Mellon Center’s Pyramid Club, was laced with warnings about the status quo.

SEPTA’s ridership crisis is continuing unabated, while the weaknesses of the wage tax are being highlighted by the rise of remote working — exemplified by the $85 million in refunds given to suburban workers who decided to not come downtown in 2022.

“If there was ever a case for tax reform citywide, this is it,” said Levy. “If we’re going to continue to rely on a wage tax that there now is a clear way out of by working remotely — it is fatal to the finances of the city.”

As the national economy rebounds from the pandemic, aided by strong federal recovery programs, Philadelphia is enjoying its share.

By April of this year, the city hosted 1.6% more jobs than it did in February 2020 with industries like health care, construction, federal employment, and white-collar office professions like finance surpassing 2019 levels.

Between 2019 and 2022, wage growth annually increased by 4.2%, markedly higher than the 2.4% of the 2009 to 2019 era. The largest jumps were in lower-paid industries like leisure and hospitality, which saw a 7.4% wage increase over the past three years.

“If they’re essential workers, people need to pay them as essential workers,” said Levy.

The city’s jobs recovery lagged the region and the nation. But Philadelphia wasn’t as far behind as in previous business cycles. The metropolitan region currently enjoys 2.2% more jobs than in 2019 — merely .6% above the city itself.

“Our rate of recovery almost exactly tracks the region and nation,” said Levy. “Usually we lag by two or three points, but we are right up there at the same rate of recovery as the region.”

The Philadelphia Police Department’s Ray Evers told the crowd that the police have been focusing on areas that feel disorderly, and addressing that not necessarily by making arrests but by maintaining a visible presence.

“We wanted to make Market Street East feel much safer and we did that,” said Evers. “We really won over Market Street East. It was getting Kensington-esque. It was turning.”

Now the department is planning a similar campaign on Chestnut Street, from Broad to 19th Streets.

“Most of the stuff that we see in Center City is not a crime, but it’s bad street behavior,” said Evers.

A recent report from the Brookings Institute showed that Center City is actually one of the safest parts of Philadelphia. But many of the panelists at CCD’s event argued that they hear concerns about Center City from colleagues and compatriots — especially those who live in the suburbs.

Peter Soens of SSH Real Estate said that when he first moved downtown, before the pandemic, people in his social networks would express excitement about Center City and quiz him about what it had to offer. Not anymore.

“I go to the Philly Cricket Club to play tennis and all the people say, ‘Oh, how is it downtown, isn’t it bad?’ ” said Soens, echoing a sentiment heard from developers who cater to higher-income demographics. “It’s eight miles away, come down and check it out. It’s fine. It’s safe.”

Angela Val of Visit Philadelphia said that her agency conducted a brand study of Philadelphia and that the city is perceived to be unsafe and unclean in comparison with peers like New York, Boston, Chicago, and Atlanta. But in Center City, at least, crime is down substantially, and 13% below even 2019 levels.

Evers said he partly links that to restricting minors’ access to the Fashion District after an incident where a large crowd of teens gathered in and around the mall in April, although he notes that youth activity has simply been displaced to the Penn’s Landing area.

But Evers said the fact that large groups of young people congregate in Center City is actually further proof of how safe it is even as large crowds can unnerve business owners and older residents.

“One of the issues is this these kids have nowhere to go,” said Evers. “And why do you see this in Center City? Why do we see homelessness or panhandling? A lot of things that we see in Center City, they would not do in their own communities. But it’s safe in Center City.”

CCD’s report on Philadelphia wasn’t all good news, however. The assembled business and civic interests laid out several policy areas they hope the new mayor will focus on.

SEPTA’s troubles remain deep, even as ridership on some Regional Rail lines has been boosted by the collapse of a segment of I-95.

The agency’s ridership in April, however, gives a good sense of how bad things are. The strongest category is bus ridership, and that’s only at 61% of February 2020 numbers. Regional Rail was at 53%, despite an even worse schedule than the sluggish frequencies of 2019, while the two main inner city rail lines were both well below 50% after a well-documented public order crisis on the system.

But the city — the part of the region most dependent on transit — contributes little to maintaining it. Local funding for transit is far lower for SEPTA than its counterparts in other major northeastern cities. Per capita it’s far below even cities like Denver, Minneapolis, or even Atlanta.

“Public transportation is really important to me and it’s the backbone of any region,” said Val of Visit Philly. “We have the fifth-largest transit system in the United States, but we are one of the least funded. … We have not grown or expanded this service since I moved here 33 years ago.”

Housing could present a challenge to the next mayor, too. For now the industry is challenged by elevated construction costs and the fastest series of interest rate hikes in 40 years.

At the Pyramid Club, developers in attendance said that few new projects are in the works. The huge burst of new units that have been coming online in recent months have been rentals, but the industry now faces a pause.

“The residential market is doing very well in Center City,” said James Pearlstein, president of Pearl Properties. “For the most part, we’re back. We’re filled up and rents are maintaining. ... I’m not sure they’re quite growing at inflationary numbers, but they’re maintaining. That said, it’s extremely hard to build new right now.”

Pearlstein said that new incentives for builders would be necessary, especially if city policymakers want new construction to be more affordable. Some kind of tax-increment financing scheme, he mused, or a revamped property tax abatement for new construction.

Levy also argued with renewed passion for tax reform that would move the city away from wage taxes. Adjusted for inflation, collections are 7% below the 2019 level, despite the city’s healthy job growth. The proportion of wage tax revenues drawn from non-city residents fell from 37.2% in 2019 to 30.9% in 2021, CCD warned, with revenues declining from white-collar, remote-work-sensitive industries.

“It puts the city in a highly vulnerable position when so much of the economy is built around work that can be performed from anywhere, including the dining room table of suburban residents,” CCD’s latest report reads.