The Manhattan Institute’s
Center for Rethinking Development
Ideas that shape the city’s planning, housing, and development
A Monthly Newsletter by Julia Vitullo-Martin, MI Senior Fellow

Will Philly be the Next Great City?

Julia Vitullo-Martin, October 2006

(©Julia Vitullo-Martin)

"Why isn't Philadelphia Boston?" I asked in a recent piece for the Wall Street Journal. "Why does Boston prosper, people and businesses outbidding one another to get in, while Philadelphia languishes, with acres of vacant and underused property announcing the lack of local demand?"

I subsequently received over a hundred denunciatory emails, notes, and calls, mostly but not entirely from Philadelphians, along with several dozen responses from visitors and ex-Philadelphians concurring with me. Philadelphia "boasts the third largest downtown population of any American city and is number one in residents who walk to work (37 percent)," wrote Paul Levy, President of the Center City District.

(©Julia Vitullo-Martin)

"Center City has as vibrant of a downtown as any city in the US (OK, putting New York and Chicago aside)," emailed lawyer Jack Kenney. The Philadelphia Daily News accused me of having seen Eraserhead (I hadn't, but now I will) and of having never gone to Center City, "where Comcast is adding a new HQ to the skyline, condo builders are getting $4 million for apartments, and real estate has appreciated 71% in five years and even a parking spot will cost you $30K."

A Bostonian who lived in Philly for six years, John Patrick Dougherty, wrote, "Between Boston and Philadelphia, which city do I prefer? Hands down, Philadelphia. Boston may well be Hollywood's vision of a hip, fabulous place to live. It's clean, it's comfortable, has nice old architecture, and they have it gussied-up to give the tourists a cute city experience. And like any Hollywood set, much of it feels disgustingly fake to me. It provides culture on a mass-production scale that is easily digestable. Nothing much feels organic or bohemian....there are no rumblings of something new bubbling up. Yes, it's brainy and the economy is very strong, but Boston is perhaps the least 'edgy' city I have ever lived in—a shame when our country is overrun by a monotony of sameness and the cities seem the last bastion of creativity."

MANHATTAN IN THE 70S?
Out-of-towners, however, found Philadelphia to be a ghost of cities past. "A recent visit to downtown Philadelphia was like being thrown into some sort of a time warp," wrote Jack Rich of Alexandria, Virginia. "Once again, it seemed to be Manhattan of the early 1970s: a failed dystopolis, nothing but bums and vagrants and the occasional scared-looking tourist. And lots of uncollected trash. And that was downtown, within easy walking distance of the Liberty Bell."

(©Julia Vitullo-Martin)

Part of the problem is expectations. Those who live in Philadelphia experience, and applaud, their city's improvements. "I've seen Philly transform itself into a rather hip and trendy city," says Larry Griffiths. Visitors, expecting that hip city—which they do indeed find—also encounter one that's often dirty, and seemingly dangerous. Perhaps Rob Hess, Philly's former deputy managing director of adult services, who is now New York's Commissioner of Homeless Services, did indeed bring down the street people population, as advertised. Yet the street people who remain seem unusually aggressive. While the tourism professionals mostly deny the problem, hotel managers patently understand its gravity. They secure their properties with immense vigilance, which is both reassuring and unnerving.

(©Julia Vitullo-Martin)

Indeed, in a message at the end of October, Hotel Association Executive Director Ed Grose urged his members to think twice before providing guests with the November issue of the usual complimentary Philadelphia Magazine. Its cover story, "Murder: One terrifying night on the streets," which followed a patrolman on the beat, highlighted some of Philadelphia’s 295 killings through September. Since only three of those murders occurred in Center City—home to some 10,200 hotel rooms that Hotel Association members operate—Grose argued that the piece, unfair to Center City as it was, might have "a negative effect on our customers."

While Philadelphia, like all major American cities, has fewer homicides today than in 1990, when the number of murder victims reached 503, the decline has been far less sharp than in New York, Los Angeles, Chicago, and other cities. Philadelphia had 330 homicides in 2004 and 380 in 2005, producing a murder rate last year of 25.85 per 100,000 people, compared to New York's 6.57. As the editors of Philadelphia Magazine noted, "The last couple of years have seen a resurgence of Philadelphia's national reputation—a resurgence that is being imperiled by the city's unwillingness to combat violent crime."

Since that admonition was made, the city has received additional bad news: homicides were up to 332 through Oct. 31, suggesting the possibility of another record year.

(©Julia Vitullo-Martin)

What's more, in some pre-Giuliani way, the quality-of-life issues that seem to accompany more serious crime—including belligerent panhandling, litter, and vandalism—give Philadelphia a neglected air. The vacant, undeveloped, fenced-in property that traps trash, and the disproportionate number of massive, concrete parking garages make this sensation worse. Neighborhoods that are well cared for, like Society Hill, emerge like oases when one arrives from a dilapidated area. The BID's clean-up patrol, manning small sanitation vehicles, miraculously transforms Center City's streets from filthy to clean—though on a windy day the trash was back by sundown, undoing the day's Sisyphean work.

A RETURN TO GLORY BY 2015?
Incorporated in 1701, Philadelphia is one of the country's oldest and most naturally beautiful cities. It has extraordinary assets: world-renowned museums, excellent colleges and universities, a dramatic waterfront, superb and diverse vernacular housing, and historic parks and public spaces. Those (©Julia Vitullo-Martin) resources should allow Philadelphia to regain its rightful spot as a top-tier city. Yet it is still struggling, convinced to offer deep tax abatements and subsidies to encourage development. For a high-tax, high-crime, high-deficit city, this is a risky strategy. Nonetheless, many Philadelphians feel it will pay off. "Exactly one year ago," admonished Art Coyle in an email, "National Geographic Traveler hailed Philadelphia as 'The Next Great American City.'"

I'd like to believe the prediction, but the road ahead is tough. All American cities suffered after World War II, but Philadelphia endured even more loss than most, as residents and jobs seemed to flee wholesale to the suburbs. Its population sank from 2.1 million in 1950 to 1.5 in 2000, and something less today. Entire neighborhoods emptied out. As Captain Jesse G of South Philly's Italian Market said recently while selling crabs, "This place was 95 percent Italian. Then the entire neighborhood moved en bloc across the river to Washington Township, New Jersey. People. Businesses. Everything. Now it's 5 percent Italian." Vacant property, perhaps waiting for development, mars the local cityscape. Down the block from Captain Jesse, a dilapidated former market stall carries a for-sale sign. Across the street, a huge Chinese restaurant has opened, signaling at least one ethnic group ready to bring new capital to the neighborhood. Right behind a sign announcing The Italian Market, a small Vietnamese restaurant does a good business, attracting customers from the Korean and Vietnamese shopping centers. Two blocks up, apartments in just-built townhouses go for $400,000.

(©Julia Vitullo-Martin)

The townhouses are in part a product of the 10-year abatement of real estate taxes on any improvement—a program former Mayor Rendell started to jumpstart development. If redevelopment alone is the measure of success, the program is successful. Tax-free construction is going on in all but the most derelict neighborhoods of Philadelphia. But the tax benefits are clearly distorting the market, as economists would predict. Hotels, for example, are converting units to condominiums that would almost surely remain as hotel rooms without the tax break. The city's bet—and it may pay off—is that the tax breaks will attract so many new residents and businesses that by the time the abatements expire, the value of the property will have increased sufficiently to placate property owners about the steep taxes they will have to pay. But what about current property owners, who now shoulder the entire tax burden? "Last year the city of Philadelphia raised real estate taxes for the building in which I live, while granting abatements to many new or to-be buildings," says business consultant Arthur Cohen, who lives in rural Pennsylvania while maintaining a condo in Philadelphia. "This tends to lower the market value of our building, and of course asks us to pay more than our share of the city's burden. The city of Philadelphia has become a desirable place to live and developers can make money without the abatement, which is a give-away."

(©Julia Vitullo-Martin)

At least some of Philly's new homeowners are empty nesters and retirees who are not looking for jobs, but will Philly have enough jobs for the others? Between 1975 and 1995, Philadelphia lost 13.5 percent of its jobs. The city controller predicts that between 1995 and 2015 jobs will increase .4 percent, from 777,155 to 780,100.

In his 2005 report, Philadelphia: A New Urban Direction, then controller Jonathan Saidel attributed Philadelphia's sluggish economy to many factors, but primarily to its high tax burden combined with excessive and cumbersome city regulations. These are likely to form the core of the substantive issues in the 2007 mayoral election—an event that will probably give everyone a good idea whether Philadelphia will be the next great American city, or not.


October 2006
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