Report: Phila. School District lost $62 million in revenue in 2017 to tax abatements

Tax abatements and other tax breaks cost the School District of Philadelphia $62 million in 2017, according to a study released Monday.

Good Jobs First, a think tank that monitors economic development subsidies, analyzed new abatement disclosure data from 5,600 school districts throughout the country and found that Philadelphia lost the second-highest amount of revenue. At the top of the list was the Hillsboro School District in the western suburbs of Portland, Ore., which lost $97 million in potential revenue to tax breaks last year.

Lee Whack, spokesperson for the Philadelphia schools, said it was not possible to gauge the net impact of the incentives. "Do tax breaks result in increased activity with benefits that outweigh the value of those tax breaks?" he said. "The study doesn't answer that question."

The report was compiled as the result of new accounting rules that require municipal governments and school districts to disclose for the first time the value of corporate tax breaks they grant in the name of economic development. Among its findings: Schools in 28 states lost at least $1.8 billion over the last fiscal year as a result of corporate tax subsidies; School districts in 10 states, including Pennsylvania, collectively lost nearly $1.6 billion.

The 414 school districts in Pennsylvania that were examined reported combined losses of $98 million in revenue, the majority of it in Philadelphia. Good Jobs First reported that the $98 million could have hired more than 2,000 teachers statewide at the average 2017 salary of $48,618.

Asked about the report, superintendent William R. Hite Jr. said he would comment after digesting it.

Philadelphia city government also disclosed the reduced tax revenue it gave up in 2017 as a result of its tax-abatement program and other tax breaks. In total, city tax revenues were reduced by $167.7 million, including $119 million in Keystone Opportunity Zone tax credits.

The Kenney administration, which took charge of the schools this year and has promised to give $547 million over five years to help the district avoid a financial crisis, declined to assess the findings of the study because of questions about its methodology.

In May, the Kenney administration released a study by Chicago-based real estate consulting firm Jones Lang LaSalle that found the 1997 residential construction tax abatement program is still spurring development and generating jobs in the city. Reducing or eliminating the benefit would thus reduce revenue overall, the study found.

The property tax-abatement program allows owners of newly constructed or rehabilitated properties to pay no property tax on the improvements for 10 years (they do pay tax on land value).

City Controller Rebecca Rhynhart released her own report around the same time and found that as of 2017, there were 14,345 properties with active abatements that received a tax benefit of $93 million. It also looked at records of 1,400 properties  in 2016 and found the breaks cost the city expected revenue of $10.4 million, 55 percent of which would have gone to schools.

The controller's report did not consider possible reductions in development activity from eliminating the breaks.

Dunn said Tuesday that the administration has commissioned a separate study of business attraction and retention incentives and tax credits, expected to provide an analysis of the return on investment of existing economic development programs and provide recommendations.

"We remain committed to further discussions with our colleagues on City Council about the future of the abatement, including proposals that would see it modified," Dunn said.