Freind's Tax-bill Maneuver

Posted: November 24, 1986

State Rep. Stephen F. Freind (R., Delaware) has won House approval of a potentially significant amendment to the bill that would enable Philadelphia to provide tax breaks for home owners in "gentrified" neighborhoods where property values and tax assessments have risen sharply. In doing so he has raised the possibility of linkage between that bill, if it becomes law, and a future cut in state funding for Philadelphia public schools.

The city's school district benefits substantially - $130 million in the current fiscal year - from a "bonus" program in state subsidies for public education. School districts that impose taxes at or above the median state level qualify for bonus subsidy payments. Philadelphia imposes school taxes below the state median but gets the bonus automatically under a provision in the subsidy law that, quite properly, recognizes that a large city with major poverty problems has special funding requirements for both municipal services and public schools.

In House floor debate Rep. Freind raised the question of why Philadelphia should continue to get a break in state school subsidies, if at the same time it would be giving tax breaks to a selected group of resident property owners in the city. He was then successful in amending the tax-break bill to delete a provision that read: "This act shall not in any manner affect payments by the commonwealth for education purposes to which the school district is entitled."

The move could open the way for a future effort to bar the city from getting the "bonus" subsidy for its schools. The deleted provision should be restored to the bill in conference committee to make sure that doesn't happen. But points raised by Rep. Freind underscore the need to strengthen the measure in other ways as well. As passed by the House the bill would sanction either temporary tax deferrals or permanent tax exemptions to property owners who have lived for 10 years or more in neighborhoods undergoing gentrification. However, the legislation should specify that only tax deferrals will be permitted, not exemptions, and that the deferred taxes must be repaid with interest by any buyer of such a house or in settling the estate after a homeowner dies. And income limitations for applicants should be stipulated.

City Council would then have to reflect those provisions in the ordinance it must pass before the program becomes operative. It is important, in both reality and perception, that Philadelphia not be seen as forfeiting taxes on the one hand, while collecting school-subsidy bonuses on the other.

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