The Cira Centre: It's Still a Tax Deal That Keeps on Taking | Inquirer | 03/30

The Economy | The Cira Centre: It's still a tax deal that keeps on taking | Inquirer | 03/30/... Page 1 of 3

The Economy | The Cira Centre: It's still a tax deal that keeps on taking

By Andrew Cassel

Inquirer Columnist

MICHAEL BRYANT / Inquirer Staff Photographer The Cira Centre towers over trees and buildings east of the Schuylkill. Not everyone likes the tax deal that made it possible. The economists whom Brandywine Realty Trust hired say I was wrong about Cira Centre.

They say the 29-story skyscraper, which now sits handsomely above the railroad tracks next to 30th Street Station, wasn't a giant tax boondoggle after all.

In a study they prepared for the developer, economists from the consulting firm Econsult say Cira has actually been a good thing for Philadelphia's economy, bringing jobs to the city and adding to the tax base.

That's as opposed to what some people, me included, said back when Cira was going up two years ago.

At that time, I noted that the Cira project was made possible by a special tax deal in which tenants of the new office tower wouldn't have to pay city or state levies until 2018.

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The tax break - labeled a "Keystone Opportunity Zone" - was billed as a way to lure business to the city. But the office building's first and biggest tenants were a couple of local law firms, whose partners cut their own personal tax bills by millions when they relocated to Cira from other Center City buildings.

I said at the time that, while Cira made a nice addition to Philadelphia's skyline, it made no sense to subsidize the tower's construction with other people's tax dollars.

I also doubted that the city would see any real economic benefit, since Philadelphia's problem isn't a lack of infrastructure, but high taxes and other costs that repel entrepreneurs.

Others - mainly the owners of older Center City office buildings - were even more critical of the project than I was.

They said that the state and city were essentially paying Brandywine to lure away their tenants and that the result would be lower rents and property values.

But Brandywine's economists now say we all were wrong.

They point out, for instance, that not all the people working at Cira moved from elsewhere in Center City. Only 58 percent of them.

In addition, the Econsult study says the building "has had a significant positive impact on the local real estate market."

There's more, but what was most impressive to me, in the copy of the study that I received, was actually the cover letter that came with it.

In it, the writer laments Philadelphia's inability to attract or grow jobs, even at times when other large urban centers are booming.

That lack of job growth keeps the demand for office space weak, compared with the suburbs or with downtowns such as Washington's, Boston's or Chicago's. And that translates directly into the price of office buildings, the writer points out:

"In a period of unprecedented pricing for commercial real estate, Philadelphia remains one of the only major cities in the United States where downtown office buildings typically sell for less than the cost to build them."

The reason, he goes on, "is primarily a function of Philadelphia's high cost of doing business, which results in our inability to generate net job growth."

That's well put, and points to why I think deals such as the one that produced Cira are so wrongheaded.

Rather than attack the costs that are sinking the city's economy, special tax breaks and "opportunity zones" simply rearrange the deck chairs (or the law firms) for show.

Rather than encouraging real reform, they provide cover for politicians, bureaucrats and union

bosses who profit from the current arrangement and don't want it to change.

So I was glad to see that, while Brandywine's economists insist otherwise, some people still agree with me that Cira hasn't solved Philadelphia's economic-competitiveness problem.

The author of that letter, by the way, is someone who should know what he's talking about.

He's a respected local real estate executive who has wide experience doing business in Philadelphia and elsewhere.

His name? Jerry Sweeney, president and chief executive officer of Brandywine Realty Trust - the folks who developed Cira Centre.

Go figure.

Find this article at: http://www.philly.com/philly/business/columnists/20070330_The_Economy___The_Cira_Centre__Its_still_a_tax_deal_that_keeps_on_tak

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