Philly school board rejects tax break for Hilco’s redevelopment of former refinery site

In a surprise move, the Philadelphia school board rejected a proposal backed by Mayor Jim Kenney to extend an important tax break to the largest development project in the city, a former South Philadelphia refinery site that is to be rebuilt into a massive logistics hub.

The plan on Thursday night failed to muster the five votes needed to approve a 10-year extension of the site’s Keystone Opportunity Zone (KOZ) designation, which three progressives on the board opposed. Businesses in Keystone Opportunity Zones pay little to no state and local business taxes through an assortment of credits, waivers, and abatements.

Hilco Redevelopment Partners, a Chicago firm that bought the 1,300-acre Philadelphia Energy Solutions site out of bankruptcy in June for $225.5 million, pressed the city to extend the property’s KOZ status, which was granted in 2014 and was set to expire in 2023.

Hilco has said the tax breaks are important to its project, which will require hundreds of millions of dollars for environmental cleanup before the property can be rebuilt.

Kevin Lessard, a spokesperson for the city Commerce Department, said the administration was disappointed by the vote but intended to try again after talking with board members to try to address their concerns.

“We remain confident that Hilco’s plans represent an unprecedented opportunity to revitalize one of the largest and most important parcels in the city of Philadelphia, and we concur with the firm’s assessment that this Keystone Opportunity Zone designation is necessary to achieving their long-term plan, including hundreds of millions of dollars in investment and tens of thousands of jobs for Philadelphia residents,” Lessard said in an email on Friday.

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Kenney, who appoints school board members, and Councilman Kenyatta Johnson, whose district includes the property, had asked the board to approve the KOZ status. The board’s approval is required since the KOZ designation potentially impacts the School District’s revenue stream. Hilco has promised to pay a $1.25 million annual payment to the district in lieu of school taxes.

At Thursday’s meeting, students and teachers said they doubted that Hilco would faithfully clean up the site and decried tax breaks in general. Neighborhood and environmental activists around the former refinery site have opposed extending tax breaks to the project.

Board President Joyce Wilkerson, who supported the designation, reminded the board that its primary responsibility was education, and said she trusted the city to vet issues like the Keystone Opportunity Zone.

Board members Ameen Akbar, Mallory Fix Lopez, and Angela McIver voted against the plan. McIver cited Inquirer reporting about Hilco’s previous projects, including its role in the redevelopment of a former steel mill near Baltimore into a warehouse hub similar to what it envisions for South Philadelphia.

”This is not a good partner,” McIver said. “This is not a good deal.”

The city’s acting city commerce director, Sylvie Gallier Howard, and a Hilco representative presented the case for the KOZ. The measure failed to get the required five votes, with four votes in favor and three opposed. Board member Lee Huang, who is president of Econsult Solutions, abstained because his firm has been hired by Hilco as a consultant.

Hilco said Friday that it “remains optimistic about transforming the refinery into an environmentally friendly, state-of-the-art logistics hub” that will generate thousands of jobs.

“The extension of the existing KOZ for another 10 years is a linchpin in that plan and will provide vital, long-term funding for public education in the city of Philadelphia, a significant economic impact, and certainty for potential tenants in uncertain economic times,” Jasmine Sessoms, a Hilco spokesperson, said in a statement.

With one board seat vacant, Hilco could make another attempt when a full complement of board members is in place.

Hilco says it intends to redevelop the site into a “multimodal industrial park with ancillary rail infrastructure, energy infrastructure, marine capabilities and commercial uses.”

Hilco previously said the project to demolish and rebuild the site would create 8,000 union construction jobs and 10,000 permanent jobs. Ahead of the school board vote, Hilco on Tuesday boosted those numbers, saying a new economic impact study conducted by Econsult estimated the project would generate 19,000 full-time, permanent, direct and indirect jobs, and deliver an annual economic impact of about $3 billion to the region at build-out, after about a decade. It would also generate 13,000 construction jobs.

Keystone Opportunity Zones are abandoned, unused, and underused areas the state says would benefit from additional investment. The Commerce Department has designated about 500 properties as KOZs.