City Council To Face Off With Mayor Kenney Over Proposed $0 Land Bank Budget For 2022

A central part of the way the city of Philadelphia addresses blight and affordable housing was zeroed out in Mayor Jim Kenney’s proposed budget for fiscal year 2022, setting up a standoff with Philadelphia City Council.

The Philadelphia Land Bank was given zero dollars in Kenney’s proposed budget for next fiscal year, as first reported by PlanPhilly and confirmed by Bisnow. City council, which created PLB through legislation in 2012, is highly unlikely to allow the program to go unfunded in the final version of the budget, and the Kenney administration is well aware of that, sources in city government told Bisnow on the condition of anonymity. 

The most likely outcome for PLB in budget negotiations, which have been ongoing since Kenney released his proposal in mid-April, is that council claws back some money for its operation in exchange for a concession somewhere else, the government sources said.

Philadelphia Housing Development Corp. Vice President of Land Services Angel Rodriguez, whose department oversees PLB, reacted to the budget move with equanimity.

“I can’t say I was shocked, but I think that it’s just the first round [of negotiations],” Rodriguez said. “I think the Land Bank is connected to a lot of things in terms of operations and capacity that the city relies on, from quality-of-life issues like open spaces, gardens and side yards to affordable housing development. As with any budget negotiations, this is the process. So my attitude is that there will be multiple rounds.”

The functions performed under the auspices of the Philadelphia Land Bank include acquisition, maintenance and disposition of public land, most of which is either vacant or uninhabited. Such land is sold to applicants assembling land for affordable housing or community benefit projects at a price commensurate with their cost and the applicants’ financing, or given to residents and businesses seeking to turn vacant lots into side yards, community gardens and small expansions for nominal fees.

Between 2018 and 2020, 221 units of housing were created on land sold by PLB to developers, 166 of which were designated affordable, according to the agency’s 2020 report. The coronavirus pandemic prevented those numbers from being higher, Rodriguez told PlanPhilly in February.

As the poorest big city in the U.S., Philadelphia’s relative affordability to neighbors New York and Washington, D.C., is its advantage in attracting new residents but is still inadequate in providing enough affordable housing for those working low- to even middle-wage jobs. In the city’s many disadvantaged neighborhoods, a glut of vacant lots and blight worsens public health and safety. Both issues have been more prevalent than ever with the pandemic’s disproportionate effects on low-income communities and communities of color.

“We’re talking about the disposition of city-owned land, and without the land you can’t build anything,” said Ujima Developers founder Leon Caldwell, who has preliminary agreements in place with PLB for two lots in the city. “I think it plays a significant role with the other tools that the city has to put affordable housing together. These tools need to work together as a concerted effort to preserve affordable housing, and not to sell Philly off so it becomes the next New York or Washington, D.C., God forbid.”

Due to the inclusion of multiple development entities within the technically private nonprofit PHDC, there is no staff specifically dedicated to PLB operations, and a spokesperson for Kenney’s office promised that its proposal would not result in any PLB-related layoffs. The Philadelphia Redevelopment Authority also is nestled within PHDC, and PHDC itself has operations separate from the other two. All three bodies have separate boards of directors, and PRA and PHDC each have several capital sources in complex funding structures, Philadelphia Director of Planning and Development Anne Fadullon told Bisnow.

The bill that created PLB assumed that the properties it sold after acquiring them from sheriff’s sales would fund the department’s operations and acquisitions, but it was largely nonfunctional until 2017, when it began receiving funding from the city’s general fund, Fadullon said.

“[PLB] took longer than expected to get up and going, and by the time it really got operational, the world had changed,” she said. “The mission of the Land Bank was to provide equitable development, and the only way to provide opportunities for affordable housing in areas with strong property [values] was to sell publicly owned land below market value or for nominal fees.”

Some in the city government might still be under the impression that PLB’s land sales generate a meaningful amount of revenue, Fadullon said. 

“I don’t think there’s a full understanding of the ramifications there would be if the Land Bank shut down for a year,” she said.

Since PLB isn’t part of the city’s charter and its originally intended funding source never materialized, it has no legal protection against being rendered essentially nonexistent by getting left out of the budget. Its importance to the city’s missions of preserving housing affordability and reducing blight makes council loath to cast aside the department it created less than a decade ago, but returning to the level of funding it received before the pandemic will be a tall order.

“Even though the city got [$1.4B in] stimulus money, it hasn’t necessarily removed the city’s issues,” Fadullon said. “We’re not going to have a deficit like in FY21, but we’re looking for significant shortages for the city’s five-year plan even with stimulus dollars.”

After receiving a $7.1M budget for FY2021, pandemic conditions and the resulting budget shortfall caused PLB to cease all acquisition activity and only focus on finishing transactions already in motion as well as maintaining the properties it controls, a Sisyphean task considering its limited budget and staff. The body received only $1.9M from the city’s general fund for 2021, supplemented with just under $1M in holdover funds from FY2020 for a total operating budget of $2.85M, Rodriguez said.

“That [$2.85M] just pays for a minimal level of staff, insuring the properties in our inventory, which is not cheap, and a minimal level of maintenance,” Fadullon said. “We do not have enough dollars to maintain properties to the level that communities hope we would maintain them, but that’s been true for years. It’s an expensive proposition, and I get it. Given the other priorities in the city, it’s hard to say we’ll put a bajillion dollars into property management, even though we know that it affects those things.”

Considering the number and severity of issues facing Philadelphia right now, other initiatives for which Kenney proposed increased funding are hard to argue: $18.7M in new funding for anti-violence programs, $12.9M more for homeless services and $13.9M for mental and behavioral health crisis professionals to respond to 911 calls. 

Though Kenney’s proposal claims that the $575M in federal stimulus funding the city will spend in FY2022 will pay to restore city services, cut budget gaps and fund new initiatives like the above, the budget also includes cuts to parking, business and wage taxes.

“Numerous studies have concluded that reducing wage and business tax rates would create jobs, which is key to the future of the city’s economy and to long-term housing affordability,” a mayoral spokesperson said when asked by Bisnow for the rationale behind the cuts.

While the wage tax is directly felt by any workers living or working in the city, there is no shortage of research that contradicts the assertion by Kenney’s office that business tax cuts create jobs.

“Those types of tax deals are always based on trickle-down economics, and we know those methods are pretty faulty and not an inclusive tax strategy,” Caldwell said. “Only certain people are going to win on that.”

Cutting business taxes in the new budget would be an indirect solution to problems that can be solved directly with more funding for social programs, Fadullon and Caldwell agreed. When asked about its specific goals for reducing blight and preserving affordable housing in FY2022, the mayor’s office did not comment beyond pointing to the Housing Action Plan and Land Bank Strategic Plan, released in 2018 and 2019, respectively.

“To some extent, the Land Bank is a mechanism to promote wealth through homeownership,” Caldwell said. “So you either pay to promote wealth in a city that has a racial wealth gap, or you cut taxes for business owners who are not going to transfer savings into higher wages — only profits will go up.”