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PHILADELPHIA-A report, commissioned by Center City Owners Association, a newly formed group of 26 CBD office building owners, is the latest arrow slung in the controversy of granting Keystone Opportunity Improvement Zone status to two planned Center City towers. Conducted by Kevin C. Gillen, an economist at the U. of Penn’s Wharton School, the report says the impact of these buildings on the current real estate market “equates to the loss of about four million sf from the market, or the loss of Liberty One and Two, the Mellon Bank building and half of the Independence Blue Cross building.”

The targets of the dispute are Brandywine’s Cira Centre, a 28-story, 727,000-sf tower that broke ground adjacent 30th Street Station and already has KOIZ status, and One Pennsylvania Plaza, a 1.3-million-sf tower Liberty Property Trust plans at 17th Street and JFK Boulevard, to house headquarters for Comcast, the city’s major Downtown tenant. Under “the most optimistic scenario,” the report states, the KOIZ-designated properties will bring about “a $44-million loss of tax revenues yearly throughout the KOIZs’ 15-year period.”

The city’s school district, the report continues, “stands to lose at least $20 million per year, no matter how the current real estate market reacts.” This, according to the report, is because “it receives a bulk of its financial support from property taxes (those eliminated by KOIZs) and no funding from wage taxes.” Other departments and services, including police, fire, recreation, and streets, could also be harmed from the tax loss, the study contends.

“This report provides substantial evidence to support the fact that KOIZs do not belong in the heart of Center City,” says Randall L. Scott, SVP of Thomas Properties Group and current secretary and treasurer of CCOA. “Beyond tax losses, the cost of these projects will undoubtedly set back more fundamental efforts at comprehensive tax reform that would grant much-needed relief to all city residents…”

CCOA members represent almost 70% of existing downtown office space. The CCOA report, titled “The Potential Fiscal Consequences of KOIZs on the Downtown Philadelphia Office Market,” follows at least two previous reports. One, commissioned by Liberty, concludes that KOIZ for One Penn Plaza would add revenue because Comcast would grow jobs here. Another, conducted by Center City District, argues against KOIZs for these buildings and projects economic shortfalls to the city, increased office vacancies and decreased rental rates in existing properties.

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