A Few Squeeze Through Unscathed Transition Rules Benefit Key Phila. Development Projects

While fat-cat investors and CEOs all over the country are wistfully preparing to fire a 21-martini salute next to the Tomb of the Unknown Loophole, a few lucky Philadelphia companies and developers quietly are celebrating tax reform.

They're celebrating because they've escaped the brunt of the new tax package under the auspices of special transition rules, thanks to some hustling by Philadelphia's congressional delegation.

The special transition rules cover several local real estate developments, city projects and area companies. Here, according to the office of U.S. Sen. John Heinz, R-Pa., is a partial list of the lucky few:

* The Frankford Arsenal. The investment tax credit for historic rehabs has been effectively "clobbered" under the new law, one developer said. That would pose a real threat to the redevelopment of the arsenal, a collection of century-old buildings. However, the transition rules will permit arsenal developer Mark Hankin to sell investment partnerships using the 25 percent rehab credit that existed before tax reform. And, he'll be able to use heftier depreciation allowances.

* The Bellevue Stratford Hotel. Richard I. Rubin & Co. also will get to retain the 25 percent rehab tax credit for its planned $80 million conversion of the former landmark hotel into a combination of hotel rooms, offices, restaurants and shops.

* 30th Street Station. The 25 percent rehab credit will be restored for the benefit of Amtrak, which is negotiating with real estate developers on the renovation of the train station. The transition rules also will permit Amtrak to issue tax-exempt bonds through the city irrespective of new federal caps limiting the number of such city bonds.

* Days Inn at the Philadelphia Airport Hotel. The transition rules will permit developers of the Days Inn to issue tax-exempt bonds through the city to help fund a 100-room expansion of the hotel. The bonds would be exempt

from new federal caps.

* Philadelphia Electric Co. The tax package has knocked out investment tax credits for research and shaved depreciation allowances, but PECO will be permitted to use the old investment and depreciation rules in connection with $113 million worth of investment tied to its Limerick nuclear power plant.

The transition rules probably saved the life of the Frankford Arsenal, Hankin said.

"The project may not have gone forward, because the new tax law is about 100 percent different than the one in existence when our investors contemplated joining us," he said.

The transition rules also will protect the financing packages associated with two city projects: the trash-to-steam plant and the convention center. In addition, three city universities, Lincoln, Temple and Penn, were granted special tax treatment that will make it easier for them to finance new construction and expansion.