Mayor Kenney should sign controversial construction tax bill … and keep looking for a better solution | Editorial

Mayor Kenney has less than two weeks to decide if he is going to exercise his veto power for the first time since taking office. A controversial construction tax bill that City Council passed in a 9-8 vote has been sitting on Kenney's desk all summer, awaiting his signature — or his boot. The mayor hasn't made his decision yet, but time is running out — the bill must be signed, vetoed, or recalled by Council by Sept. 13.

The bill imposes a 1 percent tax on all new construction and major renovation projects. All revenues from the tax will go to the Housing Trust Fund. The proponents of the bill — including Council President Darrell Clarke and Council member Maria Quiñones-Sánchez — argue that since new constructions and major renovations are subjected to the 10-year tax abatement, the construction tax is nothing more than a reform to the abatement — a tax on the tax abatement. Council estimated that the tax will generate $22 million annually. The mayor's office — which has opposed the tax since it was proposed —  is not as optimistic. It estimates that when accounting for the cost to collect the tax, the city will actually lose money.

Some opponents of the tax — such as John Dougherty of the International Brotherhood of Electrical Workers — argue that the tax will curb development and end the growth that the city enjoyed thanks, in part, to the tax abatement. Others — such as Council member Allan Domb — think that taxing the abatement doesn't make sense when instead the abatement can be reformed.

While the tax is not the best way to address housing affordability issues in the city — according to a Pew report , 56 percent of houses are unaffordable to the Philadelphians who live in them — right now, it's the only thing on the table.  Not for lack of trying.

The construction tax is the second approach proposed to increase revenue for affordable housing without dipping into the general fund. About a year ago Quiñones-Sánchez introduced a mandatory universal inclusionary housing bill that required developers to either build affordable units or contribute money to the Housing Trust Fund. That proposal never got a vote in Council (a voluntary version of the bill passed unanimously in June).

If Kenney doesn't want a tax on construction, he should offer an alternative source of revenue.

But time is running out on coming up with something better. Any new proposal that the mayor's office will put forward will need to be dissected and debated, making it unlikely to start generating revenue in 2019. In a time when there are fewer resources from the federal government for housing, lawmakers have a duty to act sooner rather than later.

The bill on Kenney's desk is not the best bill — the Editorial Board has made the case for adjusting the 10-year tax abatement — but it is the best that Philadelphia could come up with. Unless the mayor has a magic trick up his sleeve that can bring revenue to Philadelphia in a different way, he should sign the bill into law … and then keep searching for a better solution that could get enacted later.