The city does seem to lack the kind of private investment partnerships that have proliferated in recent years as stock and bond returns collapsed. The kind of specialized firms where the State Employees' Retirement System likes to send the people's money in hopes it will multiply, so the system won't have to keep asking for higher state appropriations.
Will this work? "I'm in a Keystone Opportunity Zone," so the existing tax hasn't applied to his customers so far, says Michael Forman, boss of the Franklin Square high-yield funds, based (with Lubert's Independence Capital Partners) at Cira Centre, next to 30th Street Station. But after the KOZ breaks expire later this decade, "yes, it will be impactful, and yes, we'd stay and grow here" if the tax gets scrapped.
Aronson, boss at Aronson Johnson Ortizon South Broad Street, also welcomes the switch. He told me an investor horror story that underlined the attraction of the Green bill:
"Twenty-five years ago, a significant client, Commonfund, asked to convert its separate portfolio into a partnership account be used by other institutions and save on custody fees and stuff." He hired major law and accounting firms and prepared the partnership.
Then a Deloitte employee found, almost too late, the "dusty city ordinance where all dividends and all capital gains were subject to city taxes." Aronson would have been on the hook for the unexpected expense: "It would have meant the end of my firm and personal bankruptcy. Or, at the very least, protracted lawsuits." They had to unwind that partnership in a hurry.
Even when a business isn't directly affected, the symbolism of taxing an industry can affect companies' location decisions, tax-break backers claim. "It's no accident" that giant investment manager Vanguard Group located in suburban Malvern, not Philadelphia, says Joseph Bright, tax lawyer at Cozen O'Connor. "Philadelphia drove the financial business out of the city. The financial world organized to avoid this tax. Nobody in their right mind would have located here because it was punitive."
Nobody expects Vanguard to move its 10,000 Malvern-area workers downtown now. Lobbyist Ed Hazzouri, who pushed for the bill, said it would attract "recent Wharton grads" and other investment pros who can now start their firms here instead of someplace else.
The investment tax break looks like favoritism to Daniel Fee, ex-spokesman for Mayor Street and now head of the Echo Group consultancy. "This kind of tax cut doesn't help a single construction firm, a single baker, a single law firm, or a single small store - all the people already located here and employing Philadelphia workers," he said. "Picking winners and losers is bad policy."
But Council figures the city won't lose any current tax revenue, so if the break brings anyone here, that will be a net gain. And maybe someone will: One Philadelphia landlord told me last week that he had been talking to an out-of-town investment firm about moving to the city. The bill has brought them closer, he says. Though if it doesn't work out, he's also talking to a nice restaurant that could use the space.
Contact Joseph N. DiStefano at 215-854-5194 and JoeD@phillynews.com and @PhillyJoeD