Last week, three seemingly unrelated pieces of news came floating down the Schuylkill: The 2010 Census results revealed that Philadelphia had actually grown by .6 percent in the past decade; that Gov. Corbett unleashed an unbridled assault on public education; and that Councilman Bill Green announced his candidacy for re-election. Taken together, the three events paint a picture of a city perched on the knife’s edge between prosperity and dropping back over the dam of despair.
The Census results show that we grew by 8,456 people since 2000 for a grand total of 1,526,006. It’s the first decade the city hasn’t shrunk in population since the 1950s. We’re finally growing, which means a broader tax base and more opportunities for economic expansion. However, mostly thanks to the recession, we have nearly 40,000 fewer jobs than 10 years ago. Do the math—people aren’t going to continue to settle if there aren’t any jobs.
Then there’s the governor. Besides doing his best to euthanize our cancerous public school system by bleeding it dry to the tune of $292 million, Corbett’s budget also drains money away from the state’s public universities, including longtime North Philly anchor Temple. The proposed cut would take more than $90 million from the university, reducing state assistance from $178.5 million to $82.5 million.
David Elesh, professor of sociology and co-investigator for Temple’s demographic mapping database Metropolitan Philadelphia Indicators Project, saw the writing on the wall. In an interview with PW two weeks before Corbett’s drastic budget proposal, Elesh warned of what was on the horizon. “The question is not whether Penn State, Temple and Pitt will raise tuition, the question is how much?” Elesh asks, noting that state support for public universities has already been on the decline for decades. But the implications go beyond just tuition raises and program cuts for current students. It also means fewer jobs in the education industry, one that has long kept the city afloat as jobs in other industries drifted away to the other side of the ocean. Manufacturing alone saw a 60 percent drop in jobs, from 70,000 to 25,000 since 1990, the earliest year numbers are available from the Bureau of Labor Statistics.
What’s more, funding for federal medical entitlement programs is likely to take a hit as well, which would put a dent in the earnings of the region’s many hospitals. “Both at the state and federal level, there are increasing pressures to try to do something about Medicaid and Medicare,” Elesh says. Again, less money equals fewer jobs. Simply put, the eds and meds industries that have provided jobs and growth for the city may not continue to sustain the city’s employment rates. “Those have been the areas that have really grown in the last decade or two,” he says. “How long that’s going to continue is up in the air.”
In other words, Philadelphia has to diversify. The city has made strides in the hospitality industry, but to make a bigger, more general impact we need to encourage the growth of businesses small and large in any field. But as any contractor or business owner filling out 1099s this time of year can tell you, the city’s tax structure does everything it possibly can to discourage entrepreneurship.
Confiscatory business taxes along with the dreaded wage tax are an enormous disincentive to locate a business here, says John Kostenbauder, partner at the Philadelphia branch of the accounting firm WeiserMazars LLP. Kostenbauder says many of his business clients make a point to avoid locating inside the city. “There’s a perception of taxes, taxes taxes and the city needs to deal with that,” he says. “The city has this structure that says we’re not open for business.”
“Philadelphia has everything,” Kostenbauder says. “The problem is I can locate in Bala Cynwyd and have [city amenities] just as available. The city has to do something to make them say, it won’t cost you any more to be in the city.”
Not everyone takes such a pessimistic view. “The Zoning Board and Planning Commission are very pro-development and pro-business and that sets the tone for a good environment,” says Bart Blatstein, president of Tower Investments, the developer behind the Piazza in Northern Liberties and other high-profile buildings. “If the administration is pro-development, that encourages developers who are anxious to create new projects.” But a recent study put Philadelphia dead last in entrepreneurial activity among the nation’s 15 largest metropolitan areas, with 150 entrepreneurs for every 100,000 people. By comparison, coming in first was the Los Angeles area, with a .62 percent entrepreneurial rate, more than four times our sad showing.
What does all this have to do with Bill Green? Last year, the councilman and fellow Council member Maria Quiñones-Snchez proposed a reform to shift the business tax burden away from local businesses and onto large corporations located outside the city (which Kostenbauder testified in favor of), but the plan was scuttled over the Nutter administration and others’ concern that it could cause job loss instead of gain. The administration and Council have promised to work together to find some kind of relief to small business this year, though Green staffers say the details aren’t ready to be revealed yet.
Otherwise, Nutter had been making a series of incremental slashes to the wage and business taxes but had to suspend the cuts due to the recession. Currently, they are scheduled to resume in 2014. Then at his campaign announcement on Thursday Green promised if reelected to eradicate the tax on business profits in the next five years.
Tax relief down the road is all well and good, but with the city growing in the present all while losing outside support for its bread and butter industries, time is of the essence. Green, Nutter and the rest of Philadelphia’s leadership need to find a way to improve the business environment sooner rather than later, or our recent, tentative gains could all be for naught. The very future of the city is at stake.
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