On Wednesday, March 14, 2018, the Jewish Federation of Greater Philadelphia’s Real Estate affinity group (JFRE) hosted Mayor Kenney and Seth Shapiro, COO of The Goldenberg Group and Chairman of the Board of Philadelphia Gas Works, to discuss the City of Philadelphia’s 2019 fiscal Budget and its impacts on the City’s businesses and real estate industry. The event took place at the brand new luxury apartment building located at 1213 Walnut Street. Shapiro and Kenney discussed the following:
- Improving educational outcomes and workforce readiness
- Improving the Philadelphia school system and increasing wages
- Increasing Philadelphia property taxes
- Increasing Philadelphia’s realty transfer tax
To accomplish the above, Mayor Kenney proposed the following in his 2019 budget proposal:
- 6% property tax increase from 1.3998% to 1.4838% that will largely benefit the Philadelphia School District.
- 0.35% realty transfer tax increase that will generate an additional $300 million in revenue over the next 5 years, $66 million of which will directly benefit the Philadelphia School District. Currently, Philadelphia’s realty transfer tax is 3.1%, which is in addition to the Pennsylvania realty transfer tax of 1%.
- Slowing annual wage tax cuts for Philadelphia residents to 3.84% in the next 5 years. The reduction over 5 years would generate $340 million in revenue.
What does this mean for real estate owners in Philadelphia? If your property is assessed at $200,000, you would pay an additional $168 in property taxes in 2019. The realty transfer tax applies to those buying and selling real estate, long term leases of 30 years or more, life-estates, and transfers of 75% or more of interests in a real estate company. City officials have indicated that an additional increase of .35 percentage points, which would bring the total tax to 4.45%, would generate an additional $66 million over five years. In Pennsylvania, the buyer and seller customarily split the transfer tax, however, the taxing authority has the right to collect the full transfer tax from either party. This is usually negotiated in the agreement of sale. In New Jersey, however, the seller customarily pays the entire transfer tax.
Real estate owners and developers will likely oppose the aforesaid increases, as Philadelphia already imposes one of the nation’s highest realty transfer tax – a tax which was just increased in 2017. It is likely that changes will be made by and voted on by City Council before the budget goes into effect in July.
The Jewish Federation of Greater Philadelphia has existed since the early 1900s and has evolved into the Greater Philadelphia Jewish communities’ convener, fundraiser and grant maker, and its commitment to mobilizing their combined resources, making everyone feel included, and strengthening their values and traditions. The Jewish Federation Realty Group is an affinity group of the Jewish Federation of Greater Philadelphia. As a guest of their events and newly appointed member, I can attest to the quality of its programs and commitment to its mission.
Jason Guss is an associate at Kang Haggerty & Fetbroyt LLC and concentrates his practice on a wide range of business transaction matters including entity formation, drafting internal documents, drafting business agreements, real estate transactions and tax issues. He joined the Jewish Federation Realty Group in the Spring of 2018.