PhillyDeals: More taxes on worn buildings, vacant land?

LAURENCE KESTERSON / Staff Photographer
LAURENCE KESTERSON / Staff Photographer
Posted: October 17, 2010

Landlord Sam Rappaport's been dead 16 years, but federal and state litigation continues to resolve what's left of the property still controlled by his executor, New York real estate multimillionaire and former Times Square smut merchant Richard Basciano.

A story by my colleague Sam Wood and me in last Saturday's Inquirer about the fight provoked a string of calls from builders complaining they've been trying to buy Basciano-controlled properties for years - from the parking garage at Sixth and Market to the porno Forum Theater at 21st and Market - only to be rebuffed by an owner they say wants to charge New York prices for Philadelphia lots.

One of Basciano's attorneys, Kevin Kent of Conrad O'Brien P.C., tells me his client's been part of the solution, not the problem, to the mess Rappaport

left: "a plethora of code violations" on his "notorious" properties, which were "strangling" in debt. On Basciano's watch, Rappaport's estate (and his heirs, led by son Wil Rappaport) sold the derelict Victory Building (to Philadelphia Management Co.), the Blum buildings and other properties around 13th and Chestnut (now controlled by retail landlord Tony Goldman), St. James Place, and others, for renovation and reoccupation.

Kent sent me a sheaf of letters from Ed Rendell and other notables praising Basciano's role in helping, as Rendell once put it, to "revitalize and rejuvenate Philadelphia's economy."

But the newest of those letters is 10 years old. Today, as Center City District chief Paul Levy notes, Basciano still controls "a number of strategically located parcels along the Market Street corridor that could contribute far more to the revitalization of Center City."

If Basciano can afford to hold the properties in search of higher profits, what's to stop him?

Maybe Philadelphia's tax assessment system, which is very much in transition. "There are a series of parcels on Market Street that have sat vacant or undeveloped for a long period of time. The city's not maximizing their value," Levy told me.

"What could their value be, if they were reused for new hospitality or residential or office use?" he asked. Higher taxes push landlords to build or sell.

It's no longer a hypothetical question: "Now that the city has regained control of the tax-assessment process," since the suppression of the archaic Board of Revision of Taxes, Levy says he thinks it's time to tax attractive properties at what they ought to be worth on the market - not some fraction of their current low-use value.

It's a very old idea: that towns should tax land, not buildings, ensuring that property owners feel pressure to erect buildings as valuable as their neighbors' instead of leaving them speculatively vacant.

Or, as City Councilman Frank DiCicco told me, "Shouldn't we assess property at closer to the asking price?"

"A shift in the property-tax structure that taxed land capacity, land square footage - as opposed to land improvements, building square footage" would "dramatically incentivize" newer, larger buildings," even at today's bargain-basement property prices, since "the taller the building, the lower the tax per floor," says reader John Scott, a Fishtown-based IT consultant who's been studying the question since Mayor Wilson Goode quixotically promoted flat land taxes in the 1980s.

He notes the Philadelphia Water Department's new, controversial pavement-drainage fee "has the same effect: It hits big parking lots really hard, and tall buildings easier. That sets a precedent."

Isn't using tax policy to press investors to sell kind of socialistic?

"We're as capitalist as you can get. But I have a fundamental issue with someone saying, 'For tax purposes, it's worth $1 million, but when I want to sell, it'll be $20 million," said Garrett Miller, partner with Hill International Inc., of the Center City surface parking lot where they dream of building the 1,500-foot American Commerce Center tower someday.

"There should be a 'flipper's tax' " on passive property investors, Miller argues. Why should people who improve a property pay a lot more tax, compared to someone who "just buys and holds?" he asks. "If you just want to let a property rot, there's a cost to society."


Contact columnist Joseph N. DiStefano at 215-854-5194 or JoeD@phillynews.com.

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