City controller supports public subsidy for Gallery redevelopment

Alan Butkovitz, the city controller, said those new revenues would come only if the companies redeveloping the urban mall -— Pennsylvania Real Estate Investment Trust and Macerich -— receive a proposed tax increment financing package, or what is commonly referred to as a TIF.

The city needs to sign off on the TIF, which Butkovitz will discuss Thursday when he testifies before City Council. The School Reform Commission and the Philadelphia Redevelopment Authority, which also need to approve the financing, already gave it the go-ahead.

The TIF “would allow them to revamp the mall, creating more jobs and boosting overall economic growth,” Butkovitz said in a statement.

“If the city continued to maintain the Gallery mall at its current level and provided no TIF for the renovation, it would generate $56 million in tax revenues over the 20 years, instead of $250 million with the TIF," he added later.

It is not unusual for the city to arrange tax incremental financing for construction projects, especially if the work will give an otherwise blighted area an economic boost.

However, the financing tool can be controversial since some TIFs are put in areas where development would likely have happened without the financing. TIFs are also viewed by critics as funds that could otherwise go to a struggling school district but are being diverted to a private developer.

These financing plans are essentially loans that get repaid on tax revenues that are projected to be generated from a project once it is completed and operating. But some developments fall short on the revenues they were estimated to eventually bring in.

PREIT and Macerich have sought $90.5 million in public subsidies from the state and the city. The state has already committed $15.5 million in grants and a $55 million TIF that still needs approval from the School Reform Commission and the Philadelphia City Council.

Source: Philadelphia Business Journal