Phila.'s economic schizophrenia

Posted: September 22, 2012

What to make of this week's dueling economic headlines?

Somehow, Philadelphia is growing both more impoverished and more competitive.

The Pew Philadelphia Research Initiative is out with a new study revealing that the suburbs, not the city, have raised residential taxes most rapidly over the last decade. Philadelphia hasn't achieved tax parity - not by a long shot - but the Pew report suggests strongly the city is moving in the right direction.

Encouraging.

And yet The Inquirer's Alfred Lubrano reports that Philadelphia's poverty rate jumped 6.4 percent in a year, solidifying Philadelphia's status as one of the nation's poorest big cities. Citywide, the poverty rate stands at 28.4 percent. Forty percent of the city's children live in poverty. And in some North Philadelphia zip codes, the poverty rate tops 50 percent.

Alarming.

Taken together, the picture is confusing. Getting a fix on Philadelphia's trajectory these days is a fickle business. I find myself veering between buoyancy and cynicism, often in the same day.

Wednesday evening marked the grand opening of First Round Capital's new headquarters in Philadelphia, a big business coup for Philadelphia first reported by The Inquirer's Joseph N. DiStefano. Hundreds of people turned out, bedecked in expensive Silicon Valley casual, and listened to Mayor Nutter, First Round CEO Josh Kopelman, and University of Pennsylvania president Amy Gutmann enthuse about Philadelphia's direction.

Their zeal was infectious.

Later that night at home, just a few blocks from First Round's fancy new digs, I read the daily digest of the neighborhood listserv, and learned that a neighbor had been mowed down by robbers on bikes. They dislocated her shoulder as they ripped her bag away. At the time, she was posting fliers advertising the monthly meeting between residents and officers from the local police district.

Two narratives are battling it out in Philadelphia. One is the Center City story, all optimism and growth, in which Philadelphia is clearly on the rise. The other is the neighborhood story, the familiar old tale of decline and generational poverty.

What makes Philadelphia such a bewildering city these days is that, by and large, both narratives are accurate.

On one level, this has long been the case: Rittenhouse was Rittenhouse in the 1980s, and Mantua was Mantua. But it's not just my imagination that the chasm between the two is widening.

Last year, the Census Bureau calculated income inequality in the 25 most populous counties in the nation. Philadelphia ranked third. The gap between rich and poor here is now larger than in any other urban setting in the nation except Manhattan and Brooklyn.

The declining tax burden that Pew documented appears to be working exactly as intended - for part of Philadelphia, that is.

Going strictly by out-of-pocket tax spending - which means overlooking the quality of public services and schools - it makes a lot more sense for those who work in Philadelphia to live in the city as well. (Commuters who live in the 'burbs and work in Philadelphia get soaked.)

That shifting economic reality may help explain the rise over this last decade not just of Center City, but also of many neighborhoods on its periphery. Tax-cutting advocates have long said Philadelphia could compete if only the financial disincentive to live here wasn't so huge.

In a peculiar way, the city's own ineptitude has worked to keep Philadelphia's tax burden in check. Property assessments have lagged badly behind appreciating property values, whereas in the suburbs higher home prices have reliably translated into bigger tax bills. And the city's most rapidly gentrifying neighborhoods benefited the most from the city's incompetence. (That artificial break on property tax revenue is slated to end next year, however, with an overhauled assessment system.)

For much of the rest of the city, though, it appears that the benefits of marginally lower relative tax rates for residents cannot stop the spread of poverty. Shocker, right?

Some would argue that's because the city and schools are starved of revenue, and thus less able to invest in services such as police protection and quality public schools, which could be long-term cures for generational poverty. Others would make the case that the real fix is to cut business taxes to spur job creation (Pew did not examine changes in the business tax burden).

Philadelphia's prosperity is not entirely within City Hall's control. Poverty ebbs and flows along with the national economy, and there's reason to think Philadelphia's rate might recede a bit if the economy ever picks up again.

But I suspect that even once that happens, there will be a few more Philadelphians trapped in poverty than there were before the recession struck. And that means those two Philadelphia stories - one that reflects Nicetown's reality, the other Northern Liberties' - will grow harder and harder to reconcile.


Patrick Kerkstra is a freelance journalist and former Inquirer staff writer. He can be reached at Patrick@PatrickKerkstra.com or on Twitter @pkerkstra.

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