Press release

State of Center City 2019: Sustaining Growth, Expanding Opportunity

Contact:
JoAnn Loviglio
T 215.440.5546
jloviglio@centercityphila.org

FOR IMMEDIATE RELEASE

Philadelphia is in the longest period of economic expansion since the end of WW2, while remaining the nation’s poorest big city. Infrastructure investment, tax reform are key to more expansive and inclusive growth 

PHILADELPHIA (April 23, 2019) – Today at the Central Philadelphia Development Corporation’s quarterly meeting, Center City District (CCD) released its annual State of Center City 2019, a data-driven compendium, organized by employment sector, that examines the latest trends in both in Center City and in the broader Philadelphia economy. 
 
Distilling a wealth of up-to-the-minute data from city, state, and national agencies; local organizations and businesses; and CCD’s own in-depth research and analysis, this 72-page report makes policy recommendations for local leaders on how Philadelphia can catch up to many of its peers. This year’s State of Center City presentation also suggests that to achieve success, Philadelphia should reframe how it views key components and challenges in our current economic landscape: 
 
Reframe how we look at Center City: Focusing on Center City as the primary place of employment in the region undercuts the “Tale of Two Cities” narrative. Downtown is an inclusive place of opportunity for residents of all Philadelphia neighborhoods: 33% of Center City’s 315,000 jobs require only a high-school diploma; another 30% require an associate degree. Nine straight years of job growth has enabled the city to add 71,100 jobs since 2009, the longest winning streak since early 1950s, and the city’s 2.3% rate of private sector job growth in 2018 surpassed the surrounding suburbs, as well as the national and large city rates. 
 
Reframe how we talk about poverty: Significant disparities remain in labor participation rates: while 90% of adults in Center City are engaged in the workforce, that number falls to 49% in North Philadelphia and 59% in the Lower Northeast. However, when we grow jobs, unemployment falls, (from more than 10% in 2010 to less than 6% in 2018) while the poverty rate dropped (from 28.4% in 2011 to 25.7% in 2017). This suggests the city’s poverty crisis is not intractable: the poverty rate is unacceptably high because our job growth is unacceptably low. The 26 largest U.S. cities grew jobs since 2009 at an average annual rate of 2.3%, compared to 1.5% in Philadelphia.  
 
Reframe how we view manufacturing decline: Philadelphians have long told themselves the story that our current problems originate from the loss of our manufacturing base after World War II. This is partly true, but job deficits are no longer the fate of all rust-belt cities. Boston and New York City also were major centers of manufacturing that, like Philadelphia, lost between 85% to 90% of manufacturing jobs they held in 1970. Today, Boston has 28% more jobs than in 1970 and New York has 16% more, while Philadelphia is still 23% below 1970 job levels.  
 
Reframe our view of recent job growth: All job growth is good; but Philadelphia’s growth has been uneven. Since the recession, Philadelphia’s job growth has been concentrated in health care, social assistance and hospitality, sectors that together account for 67% of all jobs added. The fastest growth is in home health care, individual and family services jobs, with salaries averaging around $30,000/year. In the hospitality sector, 80% of jobs are in bars and restaurants, with salaries averaging only $22,000/year. 

 In the office sector, the opening of the second Comcast tower and the retention of Aramark’s corporate headquarters help partially offset the longer term trend in which office employment in Philadelphia dropped by 13% between 1990 and 2018, while it increased in the suburbs by 46%. A slow rebound in the office sector and limited new, outside demand explain why rents are well below peer cities. While affordable rents can be attractive, they also result in lower assessed values for properties used for business purposes in Philadelphia. This is one reason why we have a diminished city real estate tax base that provides less support for our public schools.  
 
Reframe the residential success story: The population of Greater Center City, from Girard to Tasker, river to river, has grown by 22% since 2000. Growth has increased residential density, driving demand for retail and spurring housing construction in Center City and beyond, particularly north of Girard Avenue. In Greater Center City, 75% of elementary school children attend public schools; currently, demand has now exceeded capacity in four catchment areas and two more schools are reaching capacity. 
 
Despite success downtown, 63,000 more residents citywide decamped to the suburbs since 2010 than moved from the suburbs into the city – and 81% of households that left between 2010 and 2017 do not have children. A likely explanation is that 40% of the workforce in neighborhoods outside Greater Center City reverse commute to suburbs each day. Philadelphia’s wage tax means that city residents who relocate near their suburban jobs get an automatic raise. The continuing loss of working-class and middle-income families is one reason our median household income ($39,759) falls behind peer cities like Chicago ($55,295), New York ($60,879) or Boston ($66,758).  
 
Reframe the discussion of affordability: As detailed in CCD’s recent housing report, there are important differences between “affordability” for working class, middle income and recent college graduates and “affordability” for lower income households. Despite the attention paid to expensive condominiums, between 2010 and 2018, just 1% of 158,863 citywide residential sales were over $1 million. One international study found that of 91 global metro regions, Philadelphia is the 15th most affordable.  
 
Philadelphia does have a significant affordability challenge for lower income residents, with over 200,000 costburdened households making less than $50,000/year paying more than 30% of income on housing costs. However, this challenge stems not from the high cost of local housing, but from very low incomes. Absent more federal funds, this affordability gap is best addressed by faster job growth and rising incomes. The recent commitment of $46 million from expiring abatements is an effective local way to fund for affordable housing.  
 
A Path Forward for Stronger Growth 
 
At the core of the State of Center City 2019 report is a call for placing greater priority on job growth citywide since it provides the foundation to address so many of Philadelphia’s lingering problems.  The City should continue to invest in education to prepare students for 21st-century jobs and invest in job training for adults to connect them with the opportunities that exist in the city. An expanding real estate tax base from faster job growth is essential to provide sufficient local funding for schools.  Philadelphia should embrace an expanded definition of “equitable growth.” We lack the higher incomes to support the redistributive policies that cities like Seattle and San Francisco are putting in place in the absence of federal funding for social needs. Philadelphia cannot simply re-slice the pie; we must grow the pie through new investment and expanding jobs.  A strategy for growth starts with reforming Philadelphia’s outdated tax policy, which creates powerful incentives for workers and businesses to leave the city as their incomes and business revenues rise. 

“Fundamentally, local growth is what’s necessary to create opportunities to retain young professionals in the city; to enable small and minority businesses to expand; to reduce poverty and unemployment; to create more opportunities for neighborhood residents to work within the city; and to generate more funding locally to support public services and schools. Tax reform is one important path to faster, more expansive and inclusive growth. Other panelists will focus on the role of infrastructure investment and business marketing,” Levy said. 

 To read or download the report in full, or by chapter, visit centercityphila.org/socc.

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The Central Philadelphia Development Corporation is a membership organization of more than 100 leading businesses with a stake in the future of Center City and the region. Its purpose is to strengthen the vitality and competitiveness of Center City Philadelphia as the vibrant 24–hour hub of the Greater Philadelphia region, through planning, research and advocacy.