Penn looks to city for theater funds

In an attempt to find funding to complete the halted 40th Street theater project, University officials have approached City Hall for help. Since General Cinemas and Sundance Cinemas pulled out of the project last year, University officials have been investigating the possibilities of obtaining tax increment financing. TIFs transfer the bulk of additional property tax revenue generated by new development back toward the project itself, money which otherwise would have gone into city and school district coffers. "It's one of the mechanisms that we are considering to close the financial gap because of the bankruptcy of General Cinemas," University President Judith Rodin said of the TIF option. General Cinemas was Sundance's partner in the theater venture, but filed for bankruptcy in October and pulled out of the project in November. Nationally, several major theater chains have gone belly-up in the last year as a result of overexpansion. The University is currently in negotiations with theater-industry giant National Amusements, which is reportedly considering taking over the project. However, even if the Dedham, Mass.-based National Amusements signs a deal with Penn, the company might not bring in enough money to complete the construction -- and that's where the possibility of a TIF comes in. Since the state legislation that enabled TIFs was enacted in 1990, about 26 developments in Philadelphia -- including such top projects as the Pennsylvania Convention Center and the retail complex being built at Penn's Landing -- have been approved for TIFs, according to Robert Fina, senior vice president of the Philadelphia Industrial Development Corporation. The PIDC, an arm of city government, is in charge of analyzing TIF requests for City Council. "Our responsibility isn't to give anybody a TIF who wants a TIF -- our responsibility to the public is to provide jobs and taxes," Fina said. "But we're more than willing to talk to Penn because we think [the theater project] is an important location." City Councilwoman Jannie Blackwell, who represents West Philadelphia, supports public subsidies for the project, saying that she spoke to Mayor John Street about a TIF last December. City Council approval is necessary for a TIF to go through. "We don't want the project to be in jeopardy -- we want the project done," Blackwell said. Part of the selectivity related to approving TIF districts is because they must be located in areas deemed "blighted," a term which can be applied to almost all of Philadelphia. "Over the last 50 years, the planning commission has declared large portions of the city blighted at times," Planning Commission Deputy Director David Baldinger said. "Once they're blighted, we leave them blighted, there's no procedure to... unblight them." A frequent criticism leveled against TIFs is that they allegedly siphon funds away from the cash-strapped Philadelphia School District. But school board member and Penn Vice President for Budget and Management Michael Masch said he recently researched this matter and found the claim to be untrue. "The school district is actually collecting several million more in taxes as a result of the TIF districts," Masch said, since a small portion of the extra tax revenue is still earmarked for the city and school district. "It's a win-win situation." The TIF is only one of several economic development instruments open to the theater project. Other methods include a 10-year tax abatement on all new commercial construction and renovation, as well as reduced cost loans. These cannot be used in conjunction with TIFs. Robert Inman, a Penn professor of finance and economics, said that TIFs are generally "not a good idea," but added that a successful retail project at the former Sundance site could be the tipping point for restoring the whole area. "If you were going to do this kind of financing at Baltimore at 58th, I'd say it's crazy," Inman said. "But if you do it at 40th and Walnut when you have a community of 10,000 students around, suddenly there's potential." Because TIFs are approved once but can last for up to 20 years, Temple Professor of Geography and Urban studies Carolyn Adams said she believes that this type of funding stream needs more accountability. "It's an easier way with less public scrutiny -- that's why developers like it and that's why politicians like it," Adams said. Councilman-at-Large David Cohen, a frequent critic of public subsidies, said he believes that whether TIFs provide the intended economic stimulus is debatable. "That's the question every city government wrestles with, whether these developments really need this assistance or if it's just businesses seeking government aid to increase their profit," Cohen said. However, Masch, who was also the city's budget director in the mid-1990s, considers such government intervention essential. "People think that we have a choice, but we don't actually have a choice at all," he said. "Other jurisdictions are already offering tax incentives for new development. Philadelphia has to either compete on the same terms, or it's not in the game."