Politics / Public Policy

Philadelphia, PA, US -- The old saying is "You can't fight City Hall." While many interest groups over the years have proven that adage to be wrong, one area where City Hall still seems to have an unbeaten record is in the area of eminent domain.

Very simply, eminent domain is the right of the government to take private property for public use, with just compensation. It is a right that has been upheld time and again in various court decisions across the country.

As Charles Seymour, Sr., president of Jackson-Cross explains: "I've never known of a case anywhere in the country where if an appropriately constituted redevelopment authority wanted to acquire property, that they were not permitted to do it."

In Philadelphia, the city's right of eminent domain -- also popularly known as the right of condemnation -- has become a very hot topic in recent months. The reasons are directly related to the boom in new commercial development which has taken hold in various parts of center city, especially the areas of the new criminal justice center, the new convention center, and Liberty Place (the "Rouse Tower").

According to Herbert Bass, an attorney with the center city law firm of Fox Rothschild O'Brien & Frankel, literally scores of commercial and industrial firms have been displaced as a result of these ambitious development projects, and the city's subsequent invocation or pending invocation of it's right of eminent domain.

TAKING PROPERTY: In typical cases, the city will undertake seizure of private property if it is for an obvious public purpose such as for a police or fire station, a public park, or some other specific project that has government funding, such as the convention center and the criminal justice center.

Another way government can take property -- though still involving a public purpose -- is to remove what is called "blight," notes Bass. "If a property in an area is blighted, then under certain circumstances, removal of that blight is considered to be a public purpose, even though after the

property is taken and demolished, it will be turned over to a private developer who will not be using it for a public purpose," Bass says.

This right is spelled out clearly by the Urban Renewal Act of the Commonwealth of Pennsylvania, PL-991, passed in 1945, explains Sandra L. Garz, director of special projects for the Philadelphia City Planning Commission. According to Garz, there is a series of seven criteria which the act establishes that must be used to determine whether or not a proposed project qualifies for seizure through the eminent domain process. Only one of these criteria must be met in order for the city to be able to exercise its right of condemnation.

These seven criteria include: 1) unsafe, unsanitary, inadequate or over-crowded conditions, 2) inadequate planning, 3) excessive land coverage, 4) lack of proper light, air and open space, 5) faulty street and lot layout, 6) defective design and arrangement of buildings, 7) economically or socially undesirable land use.

Determining whether or not existing structures are socially or economically undesirable may not be nearly as subjective as one might first think.

"For example, if you have two-story structures, or residential structures built in an area that is zoned for high intensity commercial development, you could make a strong case that such development is economically undesirable because it is not built to its full capacity," explains Garz. "So from an economic point of view, if you had a much larger building on that site, you would be generating a lot more in wage taxes, real estate taxes, and other economic spin-offs."

PUBLIC PURPOSE: The law does not say that the project has to be a public project, as long as it is for a public purpose, Garz emphasizes. Any private developer can ask the city to exercise the power of eminent domain.

"The public purpose very often also carries a very broad definition which relates to the health, safety, or welfare of the public in general," she says. "So it doesn't have to be a publicly funded project."

Based on that approach, at least one of the seven criteria then can be used to determine whether or not "blight" is existing. And if blight is defined as existing (in which case one of the criteria is met) then the law can be invoked which states that the elimination of this blight will then serve the public's health, safety and welfare.

"It will be to the public benefit," says Garz. "So that's the distinction between purely going through condemnation to build a criminal justice center or a convention center versus exercising that power for assembling land to do private office development."

ROUSE TURNS TO THE CITY: One project that seems to be gaining a great deal of media attention is the Liberty Place office tower being constructed by Rouse & Associates. Currently there is a handful of firms remaining in the parcel of land which has been designated to contain phase two of the plan. Although developer Willard Rouse appears to be trying to negotiate a fair settlement with the remaining business owners, he also has suggested that if worse comes to worse, he may ask the city to exercise its right of eminent domain so that development of the site can go on as planned.

Ned Mitinger, the Redevelopment Authority's project manager for the Liberty Place project, notes that there is nothing unusual in that suggestion.

"If we were talking about building a one-story strip commercial development there, we wouldn't be proceeding," says Mitinger. "But when we have something such as a major new hotel and office building -- that's different. When someone comes to us and asks us for assistance, the Redevelopment Authority and City Planning Commission go over the plans in some detail and then decide whether or not they comply with the state law in finding a blight, certification and so forth -- in which case we consider proceeding."

In the case of the Liberty Place project, Rouse's planned new facility would provide a better tax base and greater economic opportunity for the City of Philadelphia than what is there currently, he says.

Mitinger notes that to date, the city has exercised its right of eminent domain in only a very limited number of cases. One was in the Franklintown area, the other was at Centre Square.

"So it's not a matter of us going around town willy-nilly condemning buildings, or something like that," Mitinger says. "It's really something that gets talked about more than it actually gets used."

TAKE THE MONEY & RUN: Nevertheless, it's not a situation which can be easily fought. As Jackson-Cross' Seymour notes, the appropriate course of action for most businesses might be to simply make the best of it.

"Some of them, certainly in the convention center area, are going to take the money and run. They will get a full book price for their property and simply retire," Seymour notes. "Others will relocate and start again with the money they get from the Redevelopment Authority. But it's been my experience that people who are condemned also get just compensation as the constitution requires."

APPRAISAL TECHNIQUES: Deciding just what constitutes "just compensation" is the job of the real estate appraiser. As attorney Herbert Bass notes, there are several techniques which the appraiser can use to go about forming his opinion as to the value of a certain piece of real estate.

One technique is the market comparable approach, which basically involves going out and looking for recent sales of similar properties.

"If a property down the block sold last month for X dollars, and your building is of the same size and quality, and is of such a value, that means our property is worth about that much," Bass says.

Another approach involves capitalization of net income. For example, if the project planned for a particular site involves the construction of an office building or apartment house or some other income-producing facility, the appraiser would figure out how much net income will be thrown off as a result of this investment.

"The appraiser would next determine what an appropriate yield would be on the investment," Bass says. "There is a simple equation that says if you're looking for 100 percent yield, and you're getting $2,000 a year, then the amount of capital you would need in order to produce that return is X dollars. So you factor it back into the value."

A third approach involves reproduction costs minus depreciation. In this method, the appraiser figures out how much it would cost to build the building today in the manner in which it was built originally. Appraisers sometimes call this the "brick by brick and stick by stick" approach, Bass notes.

"If the building is 50 percent depreciated, then you knock off 50 percent of that," he explains. Appraisers don't use just one technique, but rather employ a combination of all three techniques. Once the costs are determined in those three approaches, then they make up their minds as to what just compensation for the building would be.

Other appraisers would estimate the value of compensation required for existing equipment or machinery, as appropriate.

RIGHT TO DISAGREE: But while all appraisers use the same basic techniques, the business people affected by their determinations still have the right to disagree. In some cases -- especially when businesses are dissatisfied with the city's findings -- they will hire their own appraisers. And the resulting differences of opinion can be drastic.

"With one property, you'll find one person says it's worth $300,000," says Bass. "Meanwhile, someone else says it's worth $400,000."

In one case involving the Blue Route Expressway, three appraisals were obtained on a property. One, requested by PennDOT, amounted to $500,000. The other two, which were called for by Bass's firms, amounted to $700,000, and $725,000, respectively.

"That's not unusual -- in fact, that's what I'd expect to see as a fairly common percentage difference," Bass explains. He says a normal divergence probably runs at about 50 percent, but not usually in excess of that number. And, of course, sometimes it's a lot less.

WHY THE DIVERGENCE: But what accounts for such differences? In some cases, it might depend on who is asking for the appraisal, Bass notes.

"I guess it's fair to say that the city isn't going to use an appraiser unless they are satisfied that he is looking at it conservatively," he explains.

At the same time, the property owner won't use a particular appraiser unless he can be sure he will be taking a fairly optimistic view as to the value of the property.

"Appraisers obviously know which side they are working for," Bass says. "And I have to assume that when an appraiser works for the city, he might tend to error to the low side -- and when an appraiser is working for a property owner, he'd tend to error to the high side. That will cause some divergence."

Not everyone sees it that way, of course.

"The law in Pennsylvania is very clear. It's supposed to be fair market value," says Seymour. "But as a good appraiser, I can tell you that is more of a range than a number. And the general track record of acquisitions is that they are at the very top of the range. They wouldn't be trying to buy it for any less."

APPRAISER'S POINT OF VIEW: According to Seymour, professional appraisers would not shade their estimates to favor whatever client for whom they are working. "Don't believe it for a minute. It's not true," Seymour says. "The process is firmly in place. The city hires good appraisers. The appraisers do a good job, and the people are given a fair offer. And if the property owner doesn't agree with that offer, he can appeal and hire his own appraiser and attorney, and try to get more."

According to Seymour, precedents established in past redevelopment programs prohibit such activity on the part of appraisers.

"I don't know which of the many authorities they are using here, but I know in the federally-assisted urban renewal programs, they were not allowed to. They had to disclose the amount of the appraisal to the buyer, and offer that full amount right up front -- lay the report right on the table."

LAWYER DISAGREES: Bass, however, notes that several of his clients in the convention center and criminal justice center development areas have experienced appraisal divergences that are far beyond his "normal range" of approximately 50 percent.

"We're getting divergences of up to 300 percent," Bass says. "In fact, the average divergence in those areas is closer to 200 percent."

That means, for example, if the city or Redevelopment Authority makes an offer of $300,000 based on an appraisal they received, the business owner's appraiser often will come in at twice that, if not more, he says.

There may be some logical reasons behind the divergences. For example, property values on the east side of Market Street tend to be much less established than values on the west side. This is due mainly to the extensive office building development on the west side, and the number of transactions that have gone through involving large pieces of land.

"The whole west Market Street corridor is being filled in with office buildings," Bass says. "East Market Street is not that far along."

As Bass notes, development on east Market Street tends to be far more uneven. There also are several large gaps that remain to be developed on the east side, especially in the area of Market Street from 11th to Broad Streets.

"There's no comparable stretch of land on the west side of Market Street to that three-block area on the east side between 11th and Broad Streets," Bass says. "So it could be, in part, due to the perception of appraisers as to what the real economic potential of that area is."

It also could have something to do with the fact that the Redevelopment Authority project in the case of the convention center is "hopelessly under-funded," he adds. So there could be sensitivity to the idea that the Redevelopment Authority and Convention Authority simply cannot afford to buy all this property at prevailing values.

CHALLENGE: Currently Bass is representing a number of businesses in the convention center area who are seeking to challenge their condemnations on the basis of constitutionality. According to Bass, there is some question as to whether or not the city's Redevelopment Authority has the right to certify convention center area condemnations when the state legislature already has established a separate convention center authority with the right of eminent domain specifically for that project.

In fact, legal documents taking that position have been filed and are now pending with the court, he adds. Bass notes that there might be other procedural requirements that have not been met that also could provide the basis for an attack.

"The fact is, the full requirements of the statute which creates the authority to condemn have to be complied with," Bass says. "And depending on the condemnation, you may find a particular defect that would justify a court decision setting aside the condemnation."

Until a decision is made, the businesses affected will remain in a state of limbo. If the businesses are required to move, they will need a certain amount of lead time to locate new quarters and renovate the sites to make them suitable, Bass says.

"Yet they can't find the place until they know if they are leaving -- and they won't know if they are leaving until they know how much they are going to get for their property. So they're in a Catch-22," he adds.

UNFAIR SITUATION: Meantime, the combination of schedule delays involving the convention center project on the one hand, and the wide divergences on the values of appraisals given by the government's and the private parties' appraisers is creating "an impossibly unfair situation'" on the part of the property owners, Bass says.

But according to Charles Seymour, this attempt to fight City Hall will likely mirror the age-old adage which says that situation, too, is impossible. The law has gone through a long series of test cases and is pretty well honed now, he explains.

And while the original concept of eminent domain was that the government could not confiscate private property unless it was for the public use, a long series of court cases and decisions through the 1950s, 60s, 70s, effectively has changed that definition so that it is really more of a question of public benefit rather than of public use, Seymour says.

"If the city declares it is in the city's best interest to assemble the whole block and create a new development to remove the blighted old structures and put in new structures -- take my word for it -- a strong property owner that wanted to fight could fight, and challenge, but he's going to lose in the end. I don't know of any example anywhere where they have won," notes Seymour.

Guarding the City Against Terrorists

By Thomas Derr

06/10/1987

Focus

Pg. 24

Philadelphia, PA, US -- With much of the nation's attention being focused on the City of Brotherly Love this summer and events honoring the bicentennial of the constitution celebration, the setting is ripe for some rather unbrotherly events that might be planned by unknown criminal elements and terrorist organizations.

It's that concern which has led the Philadelphia Police Department to band together with the Federal Bureau of Investigation and other law enforcement entities in hopes of thwarting any would-be terrorist attacks or major criminal activities.

According to Captain Francis P. Friel, commanding officer of the Philadelphia Police Department's organized crime intelligence unit, the major concern is to protect citizens and visiting dignitaries against the kinds of terrorist activities that at times have seemed all too common in many European countries.

COORDINATED EFFORT: Heading off any would-be bomber, kidnapper or gunman is no easy feat. It involves a carefully coordinated effort with international connections.

"Number one, we participate with the FBI in the terrorist task force," Friel explains. "And as part of that terrorist task force, we have networks throughout the United States and the world. We have international sources that can provide us with insights to key groups we might have concerns about."

In addition to that, members of the task force train periodically in mock situations that duplicate any number of possible terrorist-related incidents that might occur in Philadelphia during the bicentennial affair. The training includes work with stakeout teams and hostage negotiators.

"We also participate in an ITAG center (an acronym for Integrated Threat Analysis Group) in conjunction again with the Secret Service, the FBI, the Philadelphia Police Department, and any other law enforcement agencies that may have concerns to specific areas of responsibilities for the possibility of terrorist attack," Friel says.

Headquarters for the effort is the bicentennial command post, a joint law enforcement command post located in the basement of the fire headquarters at Third and Spring Garden Streets. According to Friel, its most important operating times will coincide with the scheduled major events of the bicentennial celebration -- especially the May 24 governors conference, the July 16 visit of the U.S. Congressional delegation, and the planned September 17 visit by President Reagan and other federal government dignitaries.

COVERING ALL BASES: Friel notes that the bicentennial command post has positions for approximately 110 representatives of various law enforcement agencies ranging from the Delaware River Port Authority to higher level federal agencies such as the Naval Investigative Services.

Anything that could possibly impact on any one of the events or any of the dignitaries is covered, Friel says. And for whatever eventuality there may be, there will be a representative within that command post, which also serves as a coordinating center.

"But primarily from an intelligence perspective, we have intelligence sources both worldwide and domestically which enable us to monitor the activities of any groups who may wish to use us as a focal point for their cause," Friel says.

James Macintosh, a spokesman for the Federal Bureau of Investigation, notes that the complete list of agencies and departments that are represented in the command center is extensive, to say the least. The agencies are listed just to point out how serious the local and Federal government are in preventing a disaster: the Secret Service; the Dignitary Protection Unit; U.S. Capitol Police; U.S. State Department; U.S. Marshals; U.S. Customs, Immigration and Naturalization; Federal Aviation Agency; Federal Bureau of Investigation; Naval Investigative Service; the Philadelphia Police Department Intelligence Division which is Frank Friel; Philadelphia Police Police Department Detective Bureau, U.S. Coast Guard; Port Authority Police; National Park Service; Traffic Division, Amtrak Police; SEPTA Police; Fire Department of Philadelphia; Staff Service Division of Philadelphia Police Department; Pennsylvania Capitol Police; Pennsylvania State Police; New Jersey State Police; Camden Police Department; Philadelphia Police Department's Stakeout Unit and Ordinance Unit; the United States Treasury's Alcohol, Tobacco and Firearms; Patrol Bureau of the Philadelphia Police Department; the VIP which is the Philadelphia Police Department and FBI, legal counsel for the Philadelphia Police Department; U.S. Attorney's office; Philadelphia Police Department public affairs; and the Philadelphia Radio Room.

"There is a combined effort here in our command center, and these are the individuals that are going to be represented," notes Macintosh. "Now any one of those departments or agencies will respond accordingly to whatever the problem or the need might be. But it is an operation that is already in place."

Still, primary responsibility for the overall direction of the effort remains with the Philadelphia Police Department, Macintosh says, although if there is anything related to the FBI, that agency "will quite naturally respond accordingly."

"But just the overall things as far as what is taking place and who the participants are that are involved in the events -- we would really be deferring to the police," he says.

PATTERNED AFTER NEW YORK: According to Friel, the service task force, which is the primary thrust of the operation's investigative capability, has been in effect prior to the bicentennial, and is patterned after the New York terrorist task force. That, too, is a blend of New York City detectives, police and FBI agents, with intelligence sources throughout the United States, and enabled New York authorities to keep tabs on potential terrorist threats at last summer's Statue of Liberty celebration.

As part of the organization's related intelligence effort, a number of sources also have been developed in groups who are not necessarily criminal, but may behave in a criminal fashion to focus their cause before public attention at the bicentennial celebration.

"It is that kind of organizational network which enables us to be proactive rather than just reactive with groups who have a history of this type of behavior," Friel explains.

Last Year's Statute of Liberty event also provided something of a training ground for Philadelphia security personnel, Friel notes.

"We participated in that from an overview perspective and were invited through the courtesy of the New York City Police Commissioner to observe not only the events themselves, but also for training exercises prior to the celebration," Friel says. "I spent the entire Fourth of July weekend up there as did members of my command. And we had members of our intelligence division u] there."

Furthermore, every one of the components of the Philadelphia command post were also represented in New York and also were present in Lower Manhattan during the time the affair was in progress.

"I feel we learned an awful lot about how to manage this type of celebration," Friel says. "And that's basically what this is. This is a celebration. It's not something we want to give or have anything that we're doing misconstrued to have people believe that we have an expectation that anything is going to be disrupted. In fact we don't."

SPECIAL SEMINAR: In March, the Philadelphia Police Department also sponsored a special anti-terrorism informational seminar in conjunction with the Mid-Atlantic Great Lakes Organized Crime Law Enforcement Network (MAGLOCLEN), a Malvern-based indexing service for law enforcement which operates on a regional concept throughout the United States.

According to Friel, the seminar, which focused on the major bicentennial events also gave law enforcement representatives from many agencies an opportunity to introduce themselves to one another, exchange information, and make acquaintances with all the law enforcement agencies up and own the Eastern Seaboard who might be able to provide invaluable intelligence as far as suspect groups who may be planning activities in Philadelphia.

"It has always been my philosophy that the collective wisdom of the group -- and in this instance we're talking about law enforcement -- is better than one agency, being the Philadelphia Police Department," Friel says. "And that was the purpose of that seminar or conference -- to get everybody together and express our concerns and the fact that we want to remain alert for any potential for any group who may want to disrupt the activities here."

By the same token, Philadelphia-based authorities could avail other agencies with benefit of their intelligence as has been developed here over the past few months.

"One of the featured speakers was Inspector Donald Moss, who is in charge of intelligence for the New York City Police Department and who helped arrange security for last summer's Statue of Liberty celebration. He was here to give us an overview of their intelligence operation for the bicentennial," explains Friel. Also included were representatives from the FBI, a representative from the Attorney General's office, and Philadelphia Police Commissioner Kevin Tucker, who previously served as part of the intelligence component of the Secret Service.

CRISIS MANAGEMENT: Other city entitles have gotten involved in their own way, as well, notes Captain Richard Delise, Public Affairs spokesman for the Philadelphia Police Department. He notes that last fall, Mayor W. Wilson Goode and several other city officials attended a crisis management seminar which was aimed at training government leaders to deal with situations such as those which might involve terrorist activity.

"The idea of crisis management is to try to identify problems even before they arise, or what possible problems could arise -- as also how to deal with specific problems themselves," says Delise. "Naturally one of the reasons that was done was the MOVE incident. But the seminar dealt with other issues as well."

But as Friel hopes that all the training and planning will not be required in the long run. There is no hard intelligence to suggest that Philadelphia will be the focal point of any terrorist attack, he says. But in the event that one does come, the task force will be prepared to deal with it.

"Of course, we have capabilities to prevent something or to react, and naturally I'm not going to divulge anything that we have done," Delise says. "And we don't want to put a black cloud over any type of celebration we're having here by even mentioning at this time the possibility of terrorist activity. But it's a fact that it is possible that it could happen any place at any time."

Further complicating security planning is the expected visit of President Reagan and other dignitaries, he continues. Reagan's security, of course, is the responsibility of the Secret Service. But Friel notes that the task force will be working closely with that agency.

"The fact that the entire congress is not coming eases some problems," Friel adds. "Probably, We the People 200 Committee would prefer that everybody came, but it diminishes our concern for security with each one of the dignitaries who declines to accept the invitation to come here."

Although the issue of security is paramount, it should not take the focus away from the fact that people will be gathering in Philadelphia to celebrate, Delise says. "So there are preparations, and we're monitoring different things and different factions. It could be a tremendous tragedy if something did occur. "We just have to protect the citizens as best we can, and the best way can do that is by building intelligence on different people who may be a threat."

THREAT RATIOS: Delise notes that there are different threat ratios which the task force looks at relating to different events and to different factions that may be a threat at any time to disrupt an event. Security was especially tight in Los Angeles during the 1984 Summer Olympics, and the reason was clear. Security officials there were looking to prevent the kind of tragedies that overshadowed the 1972 Olympics in Munich. But while there are obvious differences between the Olympics and the bicentennial celebration, there are also some important similarities.

"I think the security people at the Olympics were geared to the security of other teams coming in," explains Delise. "I think we're looking at something similar here -- if you have congressmen coming in, naturally you're going to have to make sure the facilities they stay in are swept and that certain precautions are taken prior to events."

Such security measures with respect to lodgings would include making sure the facility is secure both inside and outside, and that certain precautions are taken prior to dignitaries occupying the facilities, Delise notes. In addition, there are marked similarities that occur with respect to transportation.

"You have your sites, your routes, your actual locations where things are going to happen," Delise notes. "You also have the physical plants of the things around them, the rooftop surveillances -- these will all be taken into consideration. You have to look at an area and determine what threats possibly could be made and what would be the best vantage point to try to thwart them -- not just through the actual placement of your personnel'"

HOLDING UP STRONG: The trick is to undertake those activities and still keep a low profile such that it will not disrupt any of the scheduled events. Hopefully nothing will happen, he adds. But they are all real possibilities, and they must be addressed as such. "These things are tough to talk about, they really are," Delise says.

"Especially when you consider that the focus of this whole celebration is on the constitution which created this great country. It's a controversial document, and it has been changed a few times as the times themselves change. But it's still holding up pretty strong. And that's what we should be focusing on."

But unfortunately, some people look at those events to draw mass media attention to themselves, and that's the part that the task force really has to be concerned with.

“The major point here is that if you lose one faction, you have yourself a problem," Delise says. "And it's a fact of life that we have to deal with them.

Linkage: Golden Egg or Cooked Goose?

By Thomas Derr

04/29/1987

Focus

Pg. 18

Philadelphia, PA, US -- In recent years, a number of major cities across the nation have instituted policies whereby developers are assessed a special "linkage fee" that goes to pay for development of poorer neighborhoods, or for the creation of jobs, parks, day care centers or other amenities.

Both San Francisco and Boston have implemented linkage fee programs -- albeit for different reasons, and Chicago and Seattle are giving similar proposals serious consideration.

CHICAGO PLAN: The Chicago plan calls for the levying of a $5 per square foot linkage fee on every new building in excess of 100,000 square feet. In addition, the estimated $10 million in annual revenues derived from this plan would be divided among the city's 77 wards. Residents of the ward would then vote whether or not to support individual projects with the linkage -- derived funds.

Boston implemented such a program in 1983 to try to alleviate the apparent wide disparity between the affluent downtown area, and the less-prosperous neighborhoods. City officials there note that the program has raised more than $35 million in the last two years. In early 1986 the levy was increased by another dollar to reach $6 per square foot for all new construction over 100,000 square feet.

San Francisco first imposed linkage fees in 1981 with a two-pronged goal in mind. On the one hand, city officials sought additional revenues for concerns such as low cost housing and mass transit. On the other hand, they also sought to alleviate growing community opposition to what was seen as an indulgent attitude on the part of the city administration toward politically powerful area developers.

More recently city officials in Hartford, CN, rejected a linkage fee proposal of just $1.90 per square foot for fear of placing the city in a disadvantageous competitive position in relation to the larger metropolitan area.

DETERRANT: One person who has had a unique opportunity to observe the ramifications of such programs is Greg Byrnes, former commercial real estate writer with the Philadelphia Inquirer and now executive president of the Philadelphia Developers Alliance. According to Byrnes, just because cities such as Boston may have found some success in achieving desired goals related to the support of community programs through linkage fees, it is not fair to assume that similar success would be seen in Philadelphia.

Byrnes notes that certain mitigating factors that are unique to Boston probably contributed to the success of that city's linkage program. The office market in that city was unusually strong to begin with, he notes. In addition, there is a limited number of sites that are appropriate for the kind of development which Boston's linkage program covers. With four or five developers competing for each site, the negative aspects of the linkage surcharge would be alleviated somewhat.

In Philadelphia, where appropriate center city development sites are not at such a premium, and where suburban sites are already competing heavily with city development sites, Boston-like results are highly unlikely, he says. More likely is a result along the lines of that experienced by San Francisco, where the downtown in the city's real estate market can be traced from about the time linkage fees were first adopted.

From a high point in the early 1980s, when office space averaged above $40 per square foot (second only to New York) and the vacancy rate was near zero, the downtown office vacancy rate has soared to more than 15 percent. Apparently the cost of doing business in the city is deterring new companies from moving into downtown office space, and causing many firms to relocate outside the city.

COST OF DOING BUSINESS: It is that type of situation which is causing great concern in the Philadelphia development community -- as city council continues to investigate the possibility of instituting its own linkage program.

Developer Kevin F. Donohoe asserts that it is impossible to separate linkage from what he says is the city's much broader problem -- the fact that the cost of doing business in Philadelphia is already getting out of hand.

"What I am most concerned about is something which is tied together with the linkage issue," says Donohoe. "What is happening is that we are driving the businesses and the professions out of the city, and instead of growing the tax rolls, we are actually weakening the tax rolls."

If a linkage plan is instituted in Philadelphia, city council will only be decreasing the tax rolls even further, Donohoe says, "and then there is not enough linkage money in the world to balance the budget."

"What we see here every year is businesses taxes continually going up in one way or another," Donohoe says. "And people just don't seem to understand that the companies in today's world are very sophisticated and are not going to be taken in by claims that Philadelphia is an economical city to do business in simply because its per square footage rentals may be less than New York or Washington."

OCCUPANCY COST: In reality, the occupancy costs which a major tenant faces in occupying a downtown office building involve much more than just rent. Actual occupancy costs include rent, taxes, and any other item that a tenant has to spend money on in order to do business in the city, including wage tax -- and that is a reality which many people, including some city officials, are unwilling to face, Donohoe says.

"Wage tax is an occupancy cost. It's a cost to the company, it's a cost to the employee, and it is calculated to the extent that the company has to pay an additional salary to its employees to compensate them for being in center city versus City Line Avenue or Cherry Hill," explains Donohoe.

Donohoe points out that when his company does analyses for potential tenants of the Curtis Center, the calculations include total occupancy costs, including taxes.

"The problem is, everybody wants to stand up and tell us what a great bargain Philadelphia is because you can rent great space for $25 a foot, and it's $32 in Washington. But what they don't want to tell you is that the business taxes in Washington average about $2 or $3 a foot, and they are $9 in Philadelphia. So that gap disappears immediately," he adds.

DIFFERENTIAL DISAPPEARS: The differential for a company to be located in the suburbs versus downtown amounts to eight to ten dollars a square foot, Donohoe says. And a number of major businesses currently located in center city are finding that the advantages offered by a center city location are simply overshadowed by this inordinate cost differential. One of them, the Penn Mutual insurance company, is finally relocating to offices in Horsham after having established a 200-year tradition of being in the city.

"In the past four months, I have met with three major companies, all of which have decided to move out of center city Philadelphia because of occupancy costs, and primarily taxes," Donohoe says. "What does this mean for center city? Should be tax the companies that remain a little bit more to make up for the 3,000 jobs that are moving out? Personally, I find it enormously frustrating, and I do not understand why City Council and other government leaders do not come to recognize that we have go to do everything possible not only to attract new companies to Philadelphia, but most especially, to keep the ones we have."

MAKES NO SENSE: Like Donohoe, developer Charles W. Bushar, III, president of Bushar Corp. and SIOR, and a member of the Philadelphia Real Property Alliance, believes that the basic thought as to how the linkage-derived revenues would be used is good. But at the same time, to place the burden on only one sector of the industry or marketplace is "totally unfair."

"I think it puts a developer at a very significant competitive disadvantage," Bushar says. "Why should he or she come into the city and pay that kind of a premium when he could do it in the suburbs without paying it? We're destroying the economic climate in order to attract people. It's another nail in the coffin, and if we want to bury our city, this is a good way to continue doing it.

It makes no sense whatsoever."

That's not to suggest that the idea behind the linkage proposal is not well-intentioned, Bushar hastens to add. The problem is, the proposal simply is not properly thought out.

"This is a very selective proposal, and I think it is hitting the wrong sector," Bushar says. "After all, the developer is providing us with the environment to attract and to lure new industry into the city. And if we discourage that kind of enticement by making it economically unattractive, the advantages that would be gained to the city from increasing employment opportunities are going to go elsewhere -- looking for greener pastures."

DREADFUL MISTAKE: Interestingly, opposition to the linkage proposals is not limited solely to the development community. One of the staunchest foes happens to be Anita Summers, professor and chairman of the Department of Public Policy in the Wharton School.

"Any artificial raising of rentals for the purpose of local development will make you not competitive with other regions," says Summers. This fact is most apparent when comparing the costs of development between the city and its outlying suburban region. "If you put a subsidy on one of them to help local economic development, there is no question where developers will go, which is outward. Adopting such a linkage proposal would thus be a dreadful mistake.

There is just no ambiguity as to what would happen."

According to Summers, periodic attempts to isolate certain types of industries, and penalize them by taxation which other areas don't have, always drives them away.

"The real answer comes from a stimulation of the total economy," says Summers. "If the total economy is stimulated, more people will be employed at higher wages, and you will have less of those difficult neighborhoods. Market forces have to take the hold, because in the end you simply can't force markets, or people, to locate where it is not profitable to locate."

Thus, the ultimate danger of a poorly conceived linkage proposal is that it would actually serve to decrease the amount of money made available for local efforts by reducing the number of revenue producers.

CENTER CITY ECONOMY: In testimony before City Council in December, Barbara Kaplan, executive director of the City Planning Commission, noted that the center city economy accounts for 41 percent ($260 million) of the city's total wage tax revenues, 40 percent ($43 million) of the business privilege taxes, and 23 percent ($52 million) of the city's real estate tax revenue.

"Overall, center city-derived tax revenue contributes 31 percent ($355 million) of the total tax based of the city," Kaplan said. At the same time, only 12 percent of those local funds are spent on services provided to center city, she adds.

The fact of the matter is that center city is not taking public revenues away from the neighborhoods, Kaplan told Council -- rather, "center city is actually subsidizing services for the rest of the city since an excess of revenue over expenditures is being generated here."

Still, funding sources for neighborhood projects continue to shrink. But as city Commerce Director Charles Pizzi also testified, "We cannot allow ourselves to be comforted by the notion that revenue derived from (a linkage) program can ever hope to replace or be a substitute for the millions of dollars which our city and our neighborhoods have lost in recent years as a result of unwarranted and catastrophic cutbacks in revenue sharing and other federal funding programs which cities like ours have unfortunately come to rely on."

To view a linkage fund as being 'all things to all people' would only minimize such a program's effectiveness and further raise expectations that would go unmet, he added.

OTHER IMPORTANT FACTORS: Undoubtedly there are factors relating to neighborhood development that must be addressed if the city's economic health is to continue to progress -- especially job training and literacy, Kaplan testified. State officials estimate that 40 percent of the city's adult population is illiterate.

At the same time, the dominant portion of Philadelphia's anticipated employment gains in the next dozen years is likely to be in moderate skilled occupations that include secretaries, bank clerks, computer workers, and higher skilled professional/technical workers. To compete effectively for these jobs, adult Philadelphians must improve their job skills and educational training, Kaplan asserted.

"In the long-term our success as a city depends in large part on our ability to capitalize on the wealth that can be created downtown for the benefit of all of our residents," Kaplan said. "Yet, it is not the sole responsibility of downtown developers to rectify this situation. If there is a dissatisfaction with the distribution of tax revenues derived from the downtown economy, government must also recognize its role as the key decisionmaker in the allocation of resources through the budgeting process."

Voluntary and negotiated efforts on the part of developers seem to offer the most promise, Kaplan notes. She points to the Liberty Bell raceway redevelopment project and Bell Telephone's efforts in North Philadelphia as local examples of what can be achieved if such steps are taken.

In addition, she notes that the city of Hartford, while rejecting a set linkage plan, did adopt an incentive policy that allows developers to exceed zoning restrictions by contributing to a linkage fund or providing permanent jobs for city residents. Such ideas will be included in a task force study that city councilman Edward A. Schwartz says will focus on the broader issue of revenue enhancement for housing and community development, job training, and child care.

ETHICS & ECONOMICS: "Linkage will be one concept that we will examine along those avenues, but there may be other ideas," Schwartz says. From an ethical standpoint, Schwartz says he would support linkage, but "economically I'm not sure we can. So a lot will depend on the economic analysis of the commercial rates between center city and the suburbs."

"I'm not out to oppose development," Schwartz adds, "But if we're going to have a shared plan of development, we need to make progress in those three problem areas, and that's what I want to see if we can do."

In the meantime, the danger that linkage might discourage more companies coming into the city is definitely a worthwhile question, he says. "But to me it's a tradeoff between ethics and economics.

The task force is going to look at more than that, because I think even if linkage in some form is passed, it will not produce enough to more than just make a dent in some of those areas. And I think we are going to look at the long-term funding crisis in those areas and see what we can do to reverse it."

Enterprise Zones Seek to Revitalize the City

By Thomas Derr

03/25/1987

Focus

Pg. 167

Philadelphia, PA, US -- All too often, it seems as if governmental programs that are oriented toward business do more harm than good. Highly publicized problems involving wage taxes, high occupancy costs, and linkage fees can leave observers with the impression that the city is trying to discourage new business development in the city.

Happily, that's not always the case. At least one program seems to be working -- the state-sponsored and city-supported Enterprise Zone Program. The enterprise zone program is a $425 million public-private partnership that is aimed at businesses who choose to move into some of the state's older, run-down industrial areas and make them once again profitable. And although the program is only about four years old, it does seem to be having some positive benefit, not only for the business community in general, but for the zones' surrounding neighborhoods as well.

FOUR ZONES: In Philadelphia there are three official enterprise zones: American Street, Hunting Park West, and West Parkside. In addition, the Delaware River port area was selected in January to become the city's fourth enterprise zone. According to Michael Gallagher, who is with the Commerce Department and holds the title of administrator of the city's enterprise zones, since its inception in 1983, the program has shown some remarkable progress in making that happen.

In fact, today the three existing enterprise zones contain more than 700 businesses and provide employment to more than 30,000 people, he says. The enterprise zone program includes a variety of effective incentives to businesses choosing to locate in a designated area. Some of these include: special tax incentives, a real estate reclamation program, a PIDC mortgage loan program, a security rebate program, a zero interest participating loan program, and an employment and training program.

All the money for the enterprise zones comes from state sources, but for the most part it is administered through the Philadelphia Industrial Development Corp. (PIDC). State dollars for the Security Rebate Program are administered through the Philadelphia Commercial Development Corp. (PCDC).

Each program is oriented to meet a specific need of enterprise zone businesses, notes Gallagher. The Real Estate Reclamation Program, for example, helps industrial or commercial businesses mitigate expenses involved in reclaiming abandoned or vacant buildings, or in the demolition or clearance of obsolete or under-utilized properties in the zones. The state defines industrial firms as being companies, other than retail, commercial or recreational, that are engaged in manufacturing, warehousing or distribution activities.

Commercial firms are defined as enterprises other than industrial, recreational or retail that provide nonprofessional services, and make a majority of sales to other businesses. The state places a cap of $50,000 on the amount of money that can be loaned through the program, but it is at a zero percent interest rate and over a 10-year term -- which is much better than might be expected through traditional financial lending institutions, Gallagher notes.

JOB BANKS: Under the Employment and Training Program, the city's Commerce Department, in conjunction with the Private Industry Council of Philadelphia, Inc. (PIC), each enterprise zone has a variety of job training and placement programs coordinated by its own business association. Some of the goals of this program include customized job training, on-the-job training, and the development of job banks within each zone, notes Gallagher.

"These job banks target jobs that are created in the enterprise zone toward people who live in the neighborhood," Gallagher explains. Under this program, for example, a neighborhood resident can receive up to 20 weeks of training with no expense to the company. In this way, both the company and the community are able to benefit from the program.

LOAN PROGRAM: The Zero Interest Participating Loan Program is an economic development program which encourages appropriate industrial firms to grow and expand their operations, thereby increasing employment opportunities for low and moderate income area residents.

Funds can be used in a number of different ways, including: new construction, building rehabilitation, land and building acquisition, machinery and equipment purchases, pollution control expenditures, and to defray such costs as legal, accounting, engineering and architectural fees, moving costs, permit appraisals, etc. The maximum loan cap is $50,000 or 30 percent of eligible project cost, and a 10 percent equity participation by the firm is required. Furthermore, there is a zero percent interest rate assessed over the length of the loan's five-year term.

PIDC has similar guidelines for its Mortgage Loan Program, which is designed to increase low-rate financing for firms in the enterprise zones, and whose usefulness became readily apparent during the first year of the enterprise zone program, says Joseph Aylmer, vice president/Client Services for PIDC.

"All the initial funds that were set aside for the enterprise zones, which amounted to approximately $300,000, were used up within that first year," says Aylmer. "Now that $300,000 wasn't much, and because it wasn't much, PIDC set aside $200,000 of its own funds to be used specifically in the enterprise zones. That way, as the program got started, we didn't have to do five or six loans and then cut it off again. But even so, that $500,000 still went within a year."

Considering the fact that the state has to slice up its own pie among enterprise zones throughout the state, PIDC decided the smart move would be to add $200,000 of its own federally funded CDBG \ Community Development Block Grant} money.

Unlike several of the programs, a citywide interest rate of seven percent is currently charged, although this drops to five percent in the enterprise zones. Firms with fewer than 25 employees can borrow up to 40 percent of the total project cost, with a maximum cap of $250,000.

TAX INCENTIVES: Thanks to state legislation, tax incentives are also available to businesses through two programs. The Neighborhood Assistance Act provides direct tax credits to firms that reclaim existing property within enterprise zones. The Municipal Tax Exemption Reimbursement Act enables the state to reimburse the city for real estate tax abatement granted by the city for improvements made to deteriorated properties located within the enterprise zones.

As Gallagher notes, while the latter tax incentive may not be directly targeted at business, it still enables the city to realize up to $300,000 per zone per year for use in Community Development and Neighborhood Services.

SECURITY REBATE: Finally, there is the Security Rebate Program, administered through the Philadelphia Commercial Development Corp. (PCDC), which is designed to help firms make security improvements to their facilities by offering a rebate of up to $5,000 per firm on a one-third public, two-thirds private matching basis.

According to Aylmer, the program also offers assistance to firms fighting losses due to internal theft, vandalism, and related programs. "In that program there is a grant available of up to $5,000, and it is on a rebate situation -- once a company spends $15,000 in security or improvements to a property, such as windows or doors or alarms or mechanical devices -- that firm can get a rebate of $5,000," Aylmer says.

As a result of these programs, American Street Corridor Business Association president Tom Carbine reports "an extraordinarily wonderful" record of improvements to his enterprise zone area. Some of the improvements include improved utilities, and the construction of a six lane highway at American Street, complete with sidewalks, lighting, and improved turnoffs that enable long-bed trailer trucks to easily access the firms' warehouses. And despite some initial dire predictions to the contrary, property values in the area, as well as surrounding amenities, continue to improve, Carbine adds.

Similar sentiments were expressed by Bernard Featherman, president of the Hunting Park West Business Association. During the past year alone, his association has grown from approximately 33 firms to more than 80, and Featherman expects membership to rise to more than 100 by June of this year.

"In addition, we've been able to tap the enterprise zone neighborhood for a tremendous amount of good employees," Featherman says. "That's important because to be successful, this kind of venture needs a good source of nearby labor. I'm very optimistic that this effort will make this neighborhood more attractive to new and relocating firms, and will continue to bring new jobs into this area."

WEST PARKSIDE: Although somewhat younger than the other two zones, West Parkside also shows signs of promise, especially now that the business association has brought to the attention of the city's Commerce Department the need for additional funding for many firms in this less industrial oriented development area.

According to West Parkside Business Association president Betty P. Lindley, her enterprise zone tends to feature firms that are more service-oriented. "For example, we have the Business and Technology Center, which is a kind of incubator program for start-up businesses. We also have a number of professional and service-oriented firms," Lindley says. Lindley's business, for example, is the Kopia Dinner Theatre.

One thing which Lindley says would help her zone is if more firms would learn how to handle the applications and other paperwork which the various governmental agencies require in order to take advantage of the enterprise zone programs.

"Some businesses are still running into some problems as a result of the flood of paperwork that is needed," she says.

CITY SERVICES: Of course, it would not be fair to expect a veritable paradise in the midst of an ancient, run-down but redeveloping business zone. By far the biggest problem that business leaders in the zones seem to be facing is a shortage of city services.

As Carbine notes, keeping the area clean is a day-to-day challenge.

"Too many people are using our city streets as a dumping ground," says Carbine. "We do get excellent cooperation from the police districts, and we have an excellent relationship with the Mayor's Anti-Graffiti people. But we just have trouble keeping up with the people who insist on dumping their garbage in our streets and alleyways."

Featherman also notes that "short-dumping" -- which occurs when a hauler who is hired to remove trash illegally dumps it at a nearby, convenient location instead of taking it to an incinerator or landfill -- is a major problem.

"The problem is, it costs $400 to legally get rid of a load of trash, while the fine for illegal dumping is $25," says Featherman. "What we have to do is approach the state to let us put some teeth into the illegal dumping law -- make it a $1,000 fine, and impound the hauler's vehicle for 60-90 days. That would make someone think twice."

BENEFITS: But these problems seem relatively minor compared to the benefits that are being wrought by the enterprise zones, notes Gallagher.

In fact, the Commerce Department reports that as a result of the public-private efforts, a nearly 1,500 jobs have been created in the enterprise zones, and 4,300 existing ones that would have been lost to the suburbs or some other area have been retained. Total public investment for business development in the three zones during the past four years amounts to about $11.5 million, Gallagher says.

This public support has helped enterprise zones to leverage more than $51 million in total funding. And those figures only relate to business deals. Major special projects, such as Water Department projects, hospital expansions, and SEPTA improvements, also have been targeted by a significant amount of public-private dollars. Total public investment in these projects was nearly $43 million, with private money accounting for more than $28.5 million, Gallagher says.

City officials expect that the new Casey Administration will be just as supportive to the enterprise zone program. And a thriving Delaware River Port zone will only help Philadelphia grow even more.

Who knows? If such major public-private partnerships continue to prove successful to both businesses and surrounding neighborhoods, perhaps other more controversial revenue development programs (e.g. linkage) may prove unnecessary.

Revitalizing the City's Manufacturing Base

By Thomas Derr

02/11/1987

Focus

Pg. 21

Philadelphia, PA, US -- For several years, we have been hearing dire reports of how Philadelphia is fast becoming a service-oriented economy, while at the same time losing its base of manufacturing jobs. In keeping with the national trend, the service sector has become the dominant part of the economy. But to paraphrase Mark Twain, the reports of Philadelphia's demise as a manufacturing center may be somewhat exaggerated.

During the past two years, the City of Philadelphia, together with the Philadelphia Industrial Development Corp. (PIDC), has undertaken a coordinated effort aimed at revitalizing the manufacturing base which was lost during the hard times of the early '80s recession. Depending on the specific situation, an arrangement with a would-be manufacturer could involve a combination of start-up fund assistance and other financial incentives, as well as a tax abatement plan.

OVERTURES: That kind of program is not unique to Philadelphia, notes Robert Seader, president of City-Wide Press, a regional printing company which relocated to Philadelphia from Bucks County in 1985.

"If you look all across the country, whether it be states or municipalities -- all of them are trying to put together deals that are very financially attractive to businesses," Seader says. "When people found out we were ready to relocate, we received calls from New Hampshire, and as far away as Kansas. Of course, even though we are not a local printer anymore, we are still a regional printer, so we had to remain in this region."

Seader notes that the overtures from neighboring states, especially New Jersey, were especially strong -- as were the means of seduction employed by counties within Pennsylvania. As federal revenue sharing and other funds continue to dwindle, nearly all of the state's counties are now vying to attract new companies that will add to the local government's tax coffers.

PHILADELPHIA'S ADVANTAGES: But Seader observes that Philadelphia had two important advantages: First, Philadelphia possesses the ideal geographic location for his firm's market, which encompasses the Northeast Corridor, that runs from New York to Washington. That advantage was further sweetened by the incentives which the City of Philadelphia offered to City-Wide Press to relocate to its current site. But it wasn't love at first sight by any means, Seader adds.

"My initial feeling was -- there's no way in the world I'm going to relocate in this neck of the city. But putting personal opinion aside, and looking at it from a corporate standpoint, the offer was just too attractive not to take them up on it," he says. Philadelphia also has a labor pool from which would-be employers can draw -- a pool which potential suburban sites could never offer, he adds.

According to Seader, the main reason for the relocation was fairly typical for a growing company. City-Wide Press had outgrown its space in Bucks County.

TOO GOOD TO PASS: "We wanted to put in some much bigger equipment to expand," Seader says. "We considered buying the building we were in, but the guy just wanted too much money for it. We could build a new building for the price he was asking for the old one. At the same time, we would have had to dig up all the concrete floors, put in some reinforced concrete beneath it; add a new roof, and a new driveway -- it was just too much money to put out."

"On the other hand, in Philadelphia we had someone else come around saying we'll just about give you the ground, and you have a tax relief for five years, and we'll help you get financing for it." Seader continues. "Then you look at the labor pool, and you look at the location of the property -- it has good access here. It was just too hard to say no."

Currently, City-Wide Press has been at its present location -- just above Woodhaven Road near Roosevelt Boulevard -- for a little more than a year, and expects to see about an 80 percent growth by the end of this year.

"The newer equipment is what created all that growth for us," Seader explains. At the same time, the arrangement also has turned out well for the city. "It's a good concept they have," says Seader. "They're taking the assets they have left in the city and converting them back to long-term cash. You look at it -- real estate taxes coming back, U&O taxes coming back, the city wage tax. In my own situation, there are nearly 100 people paying city wage taxes that never paid it before."

ELECTRONICS FIRM: Next door, even more benefits were realized for the city, Seader notes. Gould, Inc., an electronics firm formerly based in Montgomery County, also relocated to that area of Philadelphia in 1984. Now, as a result of the growth which that firm has experienced, there are nearly 1,000 people who are paying city wage taxes who had not done so previously, he notes.

"The city and PIDC actually saved something like 1,000 jobs there at Gould that were going to leave," Seader says. "They were definitely moving out to Chalfont. But the city offered them this ground here which was just sitting here doing nothing -- certainly not making any money for them. Now it has been turned into revenue producing jobs."

On January 8, Lavelle Aircraft Co., a manufacturer of precision sheet metal for the aerospace industry, also announced that it would be moving from Newtown, Bucks County, to a location on Geiger Road in the Red Lion Industrial Park, bringing with it approximately 150 jobs.

According to Lavelle president Richard Ludwig, the new 86,000 square foot facility will enable the company to grow to approximately 200 employees within the next three years. The deal will also add approximately $150,000 to $200,000 annually to city wage tax coffers, Ludwig says.

Ludwig notes that although PIDC and Philadelphia city officials were able to work out a program of financial incentives that appealed to his company, those incentives were not substantially different from what Bucks County offered Lavelle to stay.

"The main thing was that we needed a larger facility. We didn't want to build a new one, and this building was already a suitable existing facility," he says.

FRANKFORD ARSENAL: Another area of the city that has proven to be a welcome home for new manufacturers is the Frankford Arsenal. According to PIDC, a number of new companies have put up shop in that location since 1984.

Among them are a silk screen printing firm by the name of Accu-Decal, which now employs about a dozen workers; Webster Springs, a manufacturer of bed springs which relocated from Bucks County in 1984 and employs more than 50 people; a point-of-sale manufacturer called Display Design, which employs 36 workers and moved from New Jersey to the Frankford Arsenal in 1985; Glass Enterprises, a glass fabricator which currently has approximately 15 employees; and C-LEC Plastics, a manufacturer of plastic parts which moved to the area from New Jersey in 1985 and also employs approximately 15 people.

According to Kevin Simmons, president of Accu-Decal, one of the major factors that made the arsenal attractive was its location.

"Obviously we are right near I-95. We can be in Jersey in minutes, we can be in downtown Philadelphia in minutes," Simmons says. "So logistically, it was also to our advantage."

In addition, there was the advantage provided by the facility itself. "The particular building we are in was very suited to our needs. When the government built these buildings, they really had a carte blanche as far as how to construct them, so they tend to be built like the Rock of Gibraltar. In addition, security in the arsenal is really no problem," Simmons says.

All these things considered, plus PIDC was offering a low-interest loan for start-up costs at that time which Accu-Decal took advantage of, apparently produced an offer that just couldn't be refused.

"I don't know what it is like for people now, but I'm sure at that time the developer had growing pains -- heaters had to be put in, and so on and so forth," Simmons says. "But anybody who can look through the smoke and see the potential, must have known that the arsenal was the place to be -- especially for a business such as mine. Silk-screen printing in Philadelphia is virgin territory."

MOSTLY SMALLER FIRMS: According to Joseph Alymer, vice president/client relations for PIDC, his organization's activities usually involve companies with fewer than 20 employees and less than $500,000 in project costs.

"Of course, the deals that get the most publicity are always Gould Electronics, IKEA, or deals of that magnitude and size," says Alymer. "Thus, a small businessman will glance at that story and say: 'Well, geez, I'm not a Gould, so why bother?'"

According to Alymer, the whole idea is that hopefully these companies will eventually grow to be important revenue producing firms for the region.

"If you look at who employs the greatest numbers of people in Philadelphia, it's not the ARCO's or the After Six's or the major people like that," says Alymer. "It's more like SBF Communications, on Ridge Avenue, or somebody like that. SBF is another good example of a company that is growing inside of Philadelphia and could have gone anywhere."

Weathertite is a company on Erie Avenue that PIDC has helped on several occasions. According to Alymer, Weathertite is another small company, employing about 50 people, which started out solely in the window replacement business.

"This group of people looked around and saw a niche they could get in," he explains. "So they started to manufacture a better product."

PIDC's role included assistance in helping the people at Weathertite find their original building, then buy the building, and eventually refurbish and expand the building to include the manufacture of vinyl windows. The vinyl windows are a new replacement type product that features better efficiency, less maintenance, and a more reliable product than the aluminum storm windows or normal replacement kinds of windows, Alymer notes.

AUTO REMANUFACTURER: One recent deal of which Alymer makes particular note involves A. J. Mancini, an automobile remanufacturer located on West Passyunk Ave. in Southwest Philadelphia.

"It's kind of a good Philadelphia story in that it is a small operation that has been around for less than ten years, but the guy has just grown continually in a very specialized field," notes Alymer. "He was a remanufacturer, first of carburetors and various engine parts, and now evidently of entire engines. And now he sells completely rebuilt engines to J. C. Penney's and others."

According to Alymer, Mancini currently is getting ready for the ground-breaking for a major facility he will be building near the Automall less than a mile from his current smaller facility. Alymer notes that Mancini will probably keep both locations -- manufacturing specific engine parts in the smaller building while utilizing the new larger air-conditioned facility for the entire engine block remanufacture operations.

Also in that area is the Wilson Safe Company, which relocated to its current location at 3031 Island Ave. from a smaller site in Lansdowne, Delaware County.

ACCESS TO MARKETS: According to Ray Wilson, vice president, of the Wilson Safe Co., the Eastwick section seemed to be "the perfect spot" to located a larger manufacturing and warehouse facility.

"It was attractive because I-95 was being connected, there was the Platt Bridge, and Island Avenue's overpass was being put in so there was a lot of traffic flow," explains Wilson. "The reasoning was that we had much more access to a lot of major highways and the Philadelphia metropolitan market, which we did not have in the suburbs."

For the future, Wilson is optimistic about the Philadelphia market.

"As far as we're concerned, we think the Philadelphia market is growing. It's not stagnating," he explains. "We really don't see why people would be moving out, especially considering how easy the city made it for us to move there -- the financing from PIDC, and the tax abatements -- I think the city puts out a big incentive for companies to move into the city."

Of course, Wilson has reason to be optimistic. When the company first moved to its new location, it had 12 or 14 employees. Now the company is up to about 20. Wilson also expects his company to double its $3 million in sales very shortly.

"We're a small business, but we're moving into Philadelphia in hopes of expanding that," he says. "We're quite pleased, our sales are up quite a bit over last year, and I think that has a lot to do with our proximity to the market now. We now have much easier access to all parts of the city and state."

"We're very happy with Philadelphia," Wilson continues. "It has been a good experience so far for us. We're going to keep growing, that's our plan, anyway."

FOOD PROCESSING: Another company which has chosen to make a strong commitment to Southwest Philadelphia is the Leonetti Corp., a food processing company located at 5935 Woodland Ave.

According to Richard DiPietro, president of Leonetti, the tax abatements and other financial incentives were only part of the firm's reasons for moving to the new location from its old site in Clifton Heights, Delaware County. Like Lavelle Aircraft, the suitability of the building was also a key point. But that wasn't all.

"All things leaned toward the question of whether or not we could come back and successfully rehabilitate this particular area," says DiPietro. "I think it's a shame to see the City of Philadelphia go down the drain like that, with companies relocating for tax purposes, moving somewhere else in the city because a neighborhood goes bad. It's nice to know that somebody will come back in and say: 'Hey, wait a minute. A lot of businessmen in the area have been sticking it out for years and years, so why can't we can take a little pride in the area and try to make a nice place where people can work and play, or a nice industrial park where we can sustain ourselves with a nice business?'"

"And that's exactly what our view-point is about," says DiPietro. "And that's why we decided it wouldn't be so much of a transition to move back in. Now of course we've redeveloped to some degree because of the tax structure, but we're making a go of it."

DiPietro notes that his company had spent approximately three years in Clifton Heights before deciding that it had outgrown its facility.

"So we looked around and there were a lot of areas, industrial parks, that we could have gone to, but this seemed to suit us," he says. "And we said 'Look, let's take a chance, move back in here, and see if we can rehabilitate, and we'll hire some people from the neighborhood. We just decided to show people that there was still something left -- that there's still some life."

THE PLACE TO BE. So despite what the doomsayers predict, Philadelphia is still holding its own in the realm of manufacturing. Not necessarily large companies, admittedly, but still active, progressive, growth-oriented ventures. And in this age of entrepreneurship, it is that kind of company which many economic development officials are betting will provide the backbone for the city's economy in the future.

As Accu-Decal's president, Kevin Simmons says: "Anyone that says it's time to get out of Philadelphia -- I don't think can handle the challenge. It may be a challenge to be in Philly because of the tax base and so forth, but in our particular line, I know there are people with the same attitude. If you are successful in the way you produce your product and you can still remain competitive, Philadelphia is the place to be as far as I am concerned."

Area's Asian Business Community Brings Old World Values to Succeed in the New World

By Thomas Derr

02/11/1987

Focus

Pg. 16

Philadelphia, PA, US -- The term "salad bowl" society is becoming an increasingly popular way of describing the way America's diverse collection of ethnic groups has come together as a nation.

Whereas the outdated term "melting pot" unrealistically implied an assimilation of different ethnic interests into a homogeneous whole, "salad bowl" welcomes those differences and provides a picturesque way of showing how those differences can come together -- with each community contributing in its own unique way to a richer, more creative, more viable community.

"Salad bowl" may be especially apt when discussing the way the Philadelphia community has changed in recent years with the growing influx of immigrants from various parts of Asia. In fact, to describe an individual simply as an Asian immigrant is something of a misnomer. Asian business people in Philadelphia typically range from well-to-do Indian professionals to curbside Korean vegetable merchants. Nevertheless, there exists a number of problems and situations that individuals in each group sometimes face.

CHALLENGES: A recent conference sponsored by the Pan Asian Association of Greater Philadelphia sought to highlight the many challenges and opportunities facing the various Asian ethnic communities that have come to the Delaware Valley. The PAA board members include representatives from groups such as the Burmese-American Friendship Association, the Cambodian Association of Greater Philadelphia, the Chinese Benevolent Association of Greater Philadelphia, the Filipino Executive Council, the Association of Indians in America, the Japanese American Citizens League, the Korean Association of Greater Philadelphia, and the Korean Businessmen’s Association. But although the groups work together like a salad bowl, they also strive to maintain their own cultural identity.

"The Pan Asian Association provides a forum for general networking, and sharing of information," explains Bo Hyun Lim, former president of the Korean Businessmen’s Association and bureau chief of Dong-A-Daily, the only Philadelphia-based daily Korean newspaper. "We can more easily find a common denominator as Asians, but at the same time, we also speak different languages and come from different cultures. So even though we are Asian we are still very different."

Lim adds that each ethnic group also does a lot of work of its own to improve the public image of its people.

"For example, when we are faced with (racist) comments, we as Korean business merchants would like to improve that public image. We don't like to be looked upon that way," Lim says. "Instead, we would like to be looked upon as service-oriented merchants -- not as Koreans, not as Orientals, but as simple businesspersons who are trying to offer good products and good service."

According to Lim, that is the primary function of the various ethnic associations -- to share information on how to provide better service, and how to communicate better with the customer.

"We do not see the Korean community as a separate entity," says Lim. "It is a part of the city, part of human beings -- perhaps the color is different, or the accent is different, but that's all. We are simply human beings, and people who came to this country for the opportunity to find a better quality of life. That's our goal. I value the city of Philadelphia, I love the city. It's the place where I make my bread and butter for my family. Without the city, or without my customers, I would have no way to live or to support my family."

STRENGTH IN FAMILY: It is that orientation to family that seems to be one of the strongest features of each group of the ethnic community.

Lim estimates that there are currently about 2,000 Korean business people operating in Philadelphia, working in operations that range from a Gallery II department store to the "Mom & Pop" neighborhood stores, many of which are strong family-run and family-operated businesses.

As Tony Hom, president of the Asian American Council of Greater Philadelphia notes, that orientation does seem to pervade most of the Asian ethnic groups.

"One of the dimensions we see in the Asian community is that the Asians basically start their own businesses here," says Hom, who is of Chinese heritage. "The Chinese, for example, often start in the restaurant and laundry businesses, but they have branched out. The Koreans in particular, are now in the green goods business. They control a lot of the city's fresh food market, and are very active players in the marketing and buying of fruits and vegetables. And they have been very strong as far as Reading Terminal -- keeping it going, keeping it surviving -- thanks in large part to Korean fish sellers, green vegetables merchants and that sort of thing."

HIGH LABOR-LOW CAPITAL: According to Dr. Hong Chu, director of the Small Business Program at West Chester State University, most Asian businesses share a common characteristic -- they are labor intensive and low capital investment.

That is why "traditional" Asian business include fruit and grocery stores, restaurants, dry cleaners, and so on, he says. And the pattern of thought that underlies the Asian immigrants' business efforts is as old as America itself.

"We as a people, and as Americans, too -- when we come over here, we're just like a fish in the ocean -- if we don't swim, we'll sink," explains Dr. Chu, "We have no one to rely upon, so we work very hard, even harder than the rest of the American people, because we have no one to rely upon except ourselves. That is our most important characteristic. The second major characteristic is that most of our businesses are family businesses. When I say family business, it means that everyone in the family works. Therefore, much of the cost of the labor can be saved."

A third important characteristic of the Asian business people is that they tend to locate mostly in low-income areas, Dr. Chu says. This is because rents of buildings are low, and if a business person should choose to buy, the cost of the property is low as well. This helps keep overhead expenses very low, as well, he notes.

"A major reason why the Asian business people go there is because there are a large number of abandoned properties, and the business people don't have much money to begin with," explains Hom. "So they will take an abandoned property and start a laundry in it, or a restaurant, or a grocery store. These places are usually pretty bad, they often don't have plumbing. But these people will fix it up and start to make it economically viable."

At the same time, many of the Asian business people feel more comfortable in that type of area because they don't face the kind of discrimination they face in a larger society. They are with other minority group peoples who are also supposedly discriminated against. Such areas also seem to provide a more comfortable environment for these people because the language problems that often separate them from the rest of the community don't seem as important, Hom adds.

INSTITUTIONAL RACISM: "These Koreans or Chinese don't just get off the boat and start jobs in City Hall or with the Daily News, or become Vice Presidents of a major corporation overnight," Hom says. "Many of those places will not hire Asians; there is a lot of institutional racism. And that's what makes these people go out to start their own businesses."

"We came over here to find a better life. But we had no money, and no one to rely upon except ourselves, so we have to work harder, even twice as hard," says Dr. Chu. "And I'm even talking about myself as a student. I came over here and had to work harder than an American student because English is not my native language."

The same thing is true for the Asian community, in general; so they, too, have to work harder. If something should happen, they have only themselves to count on, he says.

NO OLD BOY NETWORK: "We don't have an old boy network -- where if you know someone, you can get a job. We have nothing like that. We have to work harder. We have to be brighter, smarter -- otherwise they don't accept you. So no matter what we do, we have to be the best. We have no choice. I think that's the big factor for success." Dr. Chu says.

"Especially for the Mom & Pop's small businesses, there is a language barrier they face which produces quite a bit of discrimination in America," says Hom. "When (WDAS radio personality and United Black Business Association president) Georgie Woods made those comments, a lot of Korean leaders said: 'Well, look, you don't see a lot of Asian faces on the police force, in the fire department, or City Hall. We don't get jobs down there.' How many Asians do you see walking around City Hall with jobs, or with the school district? That's a different issue, but the point is that Asians have shared the black experience of discrimination, so to a certain extent we're almost forced to set up these businesses."

Dr. Chu believes that most Asian people come to this country with a different kind of orientation and training than most of their new neighbors.

"Basically, they are trained to do one thing very well," he says. "For you and me, if we can't do this then we'll do something else. But for them, that's the only thing they can do. Therefore, they have no choice but to do the best they can do. And they put every penny, every time, every energy into that business to make it successful, because they have no choice. And that's basic factor."

SUCCESS MISUNDERSTOOD: Many Asian business people feel that success-oriented drive is often misunderstood by the public at large.

"I think the general public does not understand clearly what makes these people work and makes their businesses successful," says one Vietnamese businessman. "They just look at the success and maybe make some misjudgment. I have heard many people say that maybe Asian people get special treatment from the government by borrowing at low interest rates. But that's not true."

In fact, traditionally, Asian business people tend to rely predominantly on family and friends instead of commercial institutions or government sources when they need a loan or other financial support to help them get a business started. This also helps to explain why many Asian business people are engaged in traditional small businesses, he adds.

There is some evidence that more Asian business people will be taking advantage of outside financing in the future, however, according to a spokesman for the Philadelphia Citywide Development Corporation (PCDC).

FEW FINANCINGS: Since 1975, PCDC has been involved in 561 separate financings worth a total $88 million, said the spokesman. Minority interests accounted for 339 of these financings, worth approximately $41 million. And of those minority interests, 37 financings, worth $3.7 million, went to Asian business people. A good portion of those Asian-oriented deals came within the past three or four years, he adds.

"A lot of the Asian business people we talk to come in for the first meeting, but for one reason or another don't come back after that," says the PCDC spokesman. "From what I've seen though, I would say that in a majority of situations, they tend to be very good credit risks."

According to Tony Hom, more Asian activity in this field will likely be forth-coming as Asian business people expand on their current businesses, or begin to move into endeavors that are beyond the realm of traditional markets.

"I think basically we're going to be moving from areas such as retail, restaurants, Chinese and Korean food into areas like clothing manufacturing, and to new areas like electronics," Hom says. "Many Asian Americans, for example, who reach a plateau in their corporations leave and set up their own businesses."

TWO-WAY TRADE: In addition, Hom sees the growth of Asian American businesses as being a boon to increased trade and investment money from Asian countries. That is one of the basic thrusts of the Pan Asian Association, Hom says -- to help Asian American business people use their ethnic backgrounds as a way of doing business with their former homelands.

"The idea is that Filipino American here would orient part of his business toward business in the Philippines, or toward trading with the Philippines," Hom explains. "The Koreans already do that quite a bit. They do a lot of work with overseas Korean companies. That's the orientation -- that they would use their ethnic backgrounds as ways of getting business in their respective countries.

For instance, the Chinese import a lot of products from China -- shirts, food, food products such as bean sprouts that are not grown here. And China is, in turn, looking for overseas Chinese to invest in China. So that is something which is happening in terms of the two trade areas."

This kind of business orientation is already having an impact on many parts of the country, especially on the West Coast and in New York. "You see Asian money moving into Los Angeles and San Francisco -- the pacific rim trade with China and Korea, Taiwan and Hong Kong is really going like crazy over there," says Hom. "That's why San Francisco and California is such a strong economy."

Another development brought on by this increased business activity is the rise of Asian banks.

"It is not uncommon out there in Los Angeles, to see Chinese banks -- Bank of Canton, and so on," Hom says. "New York and San Francisco and LA have very large Asian populations. And a sign of the coming of the Asian economic force is the coming of the banks."

TROUBLE WITH BANKERS: One of the problems experienced by Asian business people in Philadelphia is that they have trouble communicating with bank officials.

"A lot of these people can't relate to American banks," Hom says. "They don't have Asian tellers. But if you go out to California, they have Chinese tellers -- tellers who will speak to you in the same language and help you get a loan. They know your family and they'll help you get a loan. Here it's a little hard for them to get capital so a lot of the Asians have to set up their own credit unions internally. So that's another way of doing it."

A few area financial institutions are aware of this problem, and are beginning to take steps to remedy it. According to Dr. Bungs Kill Han, vice president and economist for the Philadelphia National Bank, his institution works closely with the Asian community to help business owners in a variety of ways: establishing lines of credit, transferring funds between nations, supplying credit information, and so on.

In addition, Dr. Han notes that PNB will be looking into the possibility of helping Asian American groups establish their own bank(s) in Philadelphia. For example, PNB could share its expertise in the training of the new bank's employees in handling check \5earing, checking credit references, extending credit in ways that minimizes risk, and other traditional bank procedures and practices, he notes.

"The Asian community naturally would be much better equipped to deal with its own customers," notes Dr. Han. "But as we help the people of the Asian community become better able to help themselves, we would also be helping the region as a whole -- and that will ultimately be good for PNB."

SECOND GENERATION: That kind of assistance will become even more important as many existing Asian American businesses continue to grow, and as more and more Asian Americans begin to branch out into other, "nontraditional" areas, notes Dr. Chu.

"I would like to see that in the future -- let Asian businesses go beyond their traditional things such as dry cleaning, laundry, restaurants and grocery stores -- and doing something maybe in the high-tech field, or imports/exports, and so on," Dr. Chu says. "And I think they will, because the second generation has more education, they know more about the business environment in this country, and they have a lot of technological know-how, and they can do it. I believe that's the way."

And that only means positive things for the economies of Philadelphia and America in general.

"Most new jobs are created by small businesses," Dr. Chu explains. "And whether they are run by Asians or not, they are still jobs for Americans."

Bringing Kodak to the Delaware Valley

By Thomas Derr

01/14/1987

Focus

Pg. 30

Philadelphia, PA, US -- Eastman Kodak Co.'s decision to locate its new pharmaceutical division in suburban Philadelphia really should not have come as a surprise to residents of the Delaware Valley. After all, over the years, the health care industry has been one of this area's most important features.

"Detroit knows that their bread and butter is automobiles and Hollywood knows that their bread and butter is movies," explains Richard Rodney, vice president for corporate technical services at SmithKline Beckman Corp. "But most people who live in the Delaware Valley don't really know what the bread and butter of the Philadelphia area is. And I would submit that the bread and butter for the Delaware Valley is really the health care industry."

Rodney's enthusiasm about the health care industry in the Philadelphia area is not mere hyperbole.

Taking together the major pharmaceutical companies that are in the Delaware Valley -- Merck Sharpe & Dohme, Wyeth, SmithKline Beckman, Rorer, and several others -- adding that to the number of major teaching hospitals the area has, the clinical laboratories, the medical instrument manufacturing operations, the elements of area universities that focus on health care -- such as the Ben Franklin Partnership at the University City Science Center -- and then adding to that the number of lawyers and support services such as printers, accountants and other fields that rely in whole or part on local health care businesses, there is a good chance that you will find no other single concentration of effort that supplies as much in the way of jobs and salary as does the health care industry to the Delaware Valley.

MORE THAN A BENEFIT: But it is much more than a mere local benefit, Rodney adds.

"More and more, Philadelphia is becoming recognized as a center for this activity throughout the nation. There just aren't many -- if any -- places in the United States that have more of it than we do. And it has grown very quietly; it's almost like a sleeping giant," he says.

According to Dr. Leo J. Thomas, senior vice president and general manager of Kodak's Life Sciences Group, the importance of the pharmaceutical establishment that existed in Philadelphia involved more than the fact that there are a number of other pharmaceutical companies in the area. "It also involved the overall infrastructure in the area, including all the teaching hospitals and the educational programs, and so forth that are available," he notes.

"All that makes a very attractive place to move, especially if you are getting started in the industry, but certainly for people who are already in it," Thomas adds.

Philadelphia's growing national reputation was also one of the major points which the Greater Philadelphia Economic Development Coalition sought to emphasize in its dealings with Kodak officials, notes John P. Claypool, executive director of the regional development organization.

"Sometime in 1985, after they determined they wanted a pharmaceutical division, Kodak began an evaluation of a large number of potential locations across the country -- I've heard of as many as 60," says Claypool. "And it's my understanding that in early 1986 they determined that Greater Philadelphia and the Washington/Baltimore corridor were probably the best two areas to place this. They also investigated Northern New Jersey but decided they didn't want to move there, even though there was a greater concentration of pharmaceutical headquarters in that section of the country. They also continued to include Rochester, NY, which is where their staff, headquarters and local concerns were located."

OTHERS NOT CONSIDERED: According to Thomas, Kodak did not consider seriously a number of other potential locales that otherwise would have been attractive to the company from a cost, environmental and ambience point of view simply because they were physically located in places which were outside the swirl and information flow in the health care industry, or because they did not have any kind of established structure to interact with or relate to.

"Those were very important things for us," says Thomas. "We did have some knowledge of the Philadelphia health care area to begin with, partly because some of the people in the pharmaceutical division who came into Kodak with knowledge and experience about the Philadelphia area were in favor of it, but also through our own interaction with the health care industry in the past. Simply through our radiological business we have had extensive contacts in the past with medical people in Philadelphia. So the area and its expertise in the whole field of health care was important to us and was, of course, a very big factor in our decision to move to Philadelphia."

Once it was established that Kodak was definitely interested in coming to Philadelphia, Claypool and his small staff served as the coordinating arm of an intensive effort of Philadelphia area health care industry officials, developers, other business people, and government officials which was aimed at actually bringing the new pharmaceutical division to the area. As most of us know by now, that effort was not without its share of trials and tribulations. Foremost among these was the availability of a site that would be suitable for Kodak's planned facility.

"That was a struggle for us in that the site requirements grew from 150 to 200 acres. The criteria kept changing along the way, but there just aren't a lot of 200-acre sites appropriately zoned with good transportation, with the large sewer capacities they needed, just sitting there -- without someone having already chopped them up or wanting some outrageous price or in a location that was attractive enough for them," explains Claypool. "So the big job early on was to find sites. The sites they are now looking at didn't even exist when we started. They weren't on the market. So in a sense, it was through a lot of public dialogue that we brought some of these sites out of the woodwork."

At one point, in fact, Kodak seemed on the verge of selecting one or two sites near Baltimore for its new facility. But thanks to some expeditious work by Claypool, developer Willard Rouse, and some state government officials, a final last-ditch effort to persuade Kodak to choose the Philadelphia area met with success. Ironically, the site which was eventually chosen -- at Great Valley, near Malvern, in Chester County -- had been viewed and rejected twice before by Kodak officials.

TURNING POINT: According to Thomas, the turning point came when Rouse persuaded Paul Baehr (Kodak's pharmaceutical division president) that "he could, in fact, meet a time schedule which we viewed to be very aggressive, but very important to our desire to be able to more this division fairly quickly."

"There are a lot of human problems involved in a move of this type," notes Thomas. "And one of our main concerns was that we be able to move at a time of the year which is convenient for people who have children in school and, as much as possible, ease the discomfort of pulling up roots and going some place else." Kodak's projected date for startup is September 1987.

Initial plans call for approximately 300 employees to come to Kodak's temporary facility at Great Valley. At the same time, however, a search is already underway for a permanent site in the Philadelphia area that will accommodate as many as 2,000 employees in a division that company officials forecast ultimately to gross approximately $1 billion in annual revenues.

Odd as it may seem, some of the most influential players in the effort to attract Kodak to the area consisted of what will probably turn out to be the new pharmaceutical company's staunchest rivals -- SmithKline Beckman, and the Rorer Group.

"If you wanted to look at it from Kodak's point of view, if you were going to a new pharmaceutical R&D operation, then you would want to put it some place where you have the kind of infrastructure that is going to be conductive to the success of your efforts," says SmithKline's Rodney. "And that means that you do have a pool of scientists and a pool of technology that support that sort of thing."

From SmithKline's point of view, the position is that it essentially rebounds to everybody's good -- at least long-term good -- to make this thing grow, says Rodney. There might be some short-term risks or downsides that SmithKline may have to accept if it is going to "bring another player into the sandbox," because all the pharmaceutical companies compete for the same employees and things like that, he adds.

"For example, SmithKline could find some of its people getting hired away by Kodak in the short term," Rodney says. "But our view is that we think we are a strong enough company that will not be a major impact, and for the long term the stronger the infrastructure is to conduct that kind of business, the more successful it is going to make our business. So we view it in that light. And the two factors taken together -- from our view, and from Kodak's view -- were one of the things that convinced Kodak to come here."

According to Robert Cawthorn, chairman of Rorer Group, his company also had a number of involvements in the Kodak deal.

"A number of our people actually have been involved. Our former chairman, for example, was involved in some of the very early stages when they were thinking about it," says Cawthorn. "We also made our helicopter available to take Kodak executives around to look at the areas to visit potential sites, and some of our personnel people were involved in a committee looking to answer questions about the area that Kodak might have."

RORER'S VIEW: Cawthorn himself says he spoke to the Kodak chairman shortly before a decision was made, essentially telling him that from Rorer's point of view, and having lived and worked in this area, if Rorer were to face the same choice they would definitely pick Philadelphia over Baltimore.

And, coincidentally, Rorer had gone through a similar decision process when it acquired Revlon's pharmaceutical group in January, 1986, Cawthorn says.

"Revlon was located up in Tarrytown, N.Y., and their research facility was in Tuckahoe, N.Y., which is near Yonkers. They had a much larger research operation than we did -- bigger facilities, a lot more people -- and when we made that acquisition our first thought was that we would move our smaller research unit to Tuckahoe, to the larger one, and consolidate everything there," Cawthorn explains. "We knew we wanted to consolidate in one location. But when we looked

at that location, it wasn't only the building, which was expensive to maintain, but perhaps more importantly, that area was not an attractive area for scientists to locate in."

In fact, as it turned out, Revlon had difficulty getting good scientists to go there partly because real estate in that area was very expensive, the commutes were long, and there wasn't the sort of good overall health care environment in the area that made it attractive to them, Cawthorn says.

"There definitely wasn't the kind of environment that there was here, where there is a lot of opportunity for interaction with other people involved in similar disciplines," he explains. "So we made what was a more difficult decision short term, but what we believe was the right decision to long term -- to move all of those people from Tuckahoe down to this area -- without anyplace to put them, so that was a problem. We scurried around, rented some space, and came up with laboratories. Now we've got everybody down here and everybody is delighted. Everybody who was moved down here thinks it's terrific."

OTHER PLANS: At the same time, Rorer is currently looking at additional sites in the Philadelphia area, much the same as Kodak is, Cawthorn says, with the ultimate intention of bringing together under one roof all the Rorer research personnel who currently are scattered around the area.

For SmithKline's part, nothing absolutely new is on the drawing board, although the company has just expanded approximately $200 million on a new facility to conduct pharmaceutical R&D at its Upper Merion campus.

"Frankly, we don't know how you can make a much bigger vote of confidence than that in the Philadelphia area for this kind of activity," Rodney says. "Our employees are being hired, our roles are expanding, our business is expanding here in the Delaware Valley and we fully expect that will continue. It's rather hard to predict how other companies would see this and how many more might follow Kodak's lead, but the degree to which we can enhance the infrastructure we have to support that kind of activity, then certainly the more attractive it becomes for anybody who is footloose and fancy-free enough to settle down with us."

Looking back, Rodney says it was especially exciting to participate in convincing Kodak to come to the Philadelphia area although "quite frankly I personally played a very small part in that," he says.

"Our CEO, Henry Wendt, was most active in that as was the people over at the economic development council and in particular, John Claypool, who I think did an absolutely amazing job. But speaking on behalf of this company, we are certainly damned glad that it turned out this way because we think that it just is a good thing for the City of Philadelphia and a good thing for the Delaware Valley.

"After all, we are a part of that community and it has to be a good thing for us."

Economic Recovery Rekindles Manayunk

By Thomas Derr

06/25/1986

Focus

Pg. 111

Philadelphia, PA, US -- COMEDIAN Bill Cosby once did a routine in which he made a feeble attempt to explain the meaning of many of the American Indian names that now identify many streets, streams and locations within Philadelphia.

"They all mean the same thing -- 'Damned if I know,'" was his puerile one-liner.

To prove his point he asked the audience what the word "Wissahickon" meant. In unison, a chorus rose from the audience: "Damned if I know."

Manayunk means "still water," describing what was once a peaceful area of the Schuylkill river which flows nearby. And for many years, "still water" seemed to offer an equally apt description of the economic condition of this old mill town area of Philadelphia.

'STILL WATER' RUNS DEEP: But today, there is nothing "still" about it. Manayunk is experiencing what many are calling a rebirth, a revitalization, even a renaissance. Old, dilapidated factory buildings and smaller, once-abandoned commercial properties are being renovated. In time they should begin to provide productive sources of income for this traditional working class neighborhood.

"It seems to me that since we bought this property, the Main Street area in Manayunk has turned around completely," says Claude B. Kershner, Jr., president of C. B. Kershner, Inc., a growing office supply and furniture company. "The whole area is becoming very attractive, compared to what it was ten years ago.

For instance, you wouldn't have wanted to walk down Main Street, which borders on the canal, because it was so dirty. Today, there are bright new restaurants and specialty shops in what was once a largely deserted and dilapidated area."

HELP FROM PIDC: C. B. Kershner, Inc. was one of the first companies to become directly involved in the revitalization movement of the Manayunk area. In March, 1983, Kershner purchased a three-story mill building and began extensive renovations. The building is under review for historical certification. Much of the financing for the building and the renovations were provided through the Philadelphia Industrial Development Corp. in the form of a low interest loan.

According to Kershner, the building had to be completely rewired; plumbing had to be installed, and the exterior walls had to be repaired in places, spackled and painted.

Historical records date the old textile building from 1876, although earlier plans and drawings relating to the building move that date even further back, to 1857. This necessitated compliance with historical society guidelines, which focused on maintaining the historic nature of the building's exterior appearance, says Kershner. To satisfy those guidelines, interior storm sashes and windows were specially constructed and installed.

"The building was originally the Kenworthy family-owned textile building," says Kershner. "The selling price was $255,000. Over the years the building had been vandalized -- almost every window was broken, and all kinds of trash were strewn around. And because it was largely inhabited by pigeons, the interior was filthy. The ceilings had about ten coats of battleship gray paint, and the original wooden plank floors were painted black. We spent nearly $180,000 cleaning off the paint, dirt, and making other improvements."

In return, Kershner was required by PIDC to produce a financial history of the company dating back five years, as well as supply business projections for the coming year that were supported by cost of materials, insurance costs and tax records. In addition, the PIDC agreement insisted that Kershner guarantee he would hire at least five additional employees after his company moved in.

JOBS: "One of the primary goals of PIDC-sponsored projects such as this one is to ensure that certain areas will be able to retain jobs -- as well as create new jobs -- and provide a healthier tax base for the city in the long run," explains James McManus, senior vice president at PIDC.

Kershner, not only lived up to its promise, but has increased its total employment from 24 in 1982 (when Kershner applied for the PIDC loan) to 84 as of June, 1986. Moreover, its sales have gone up from $2.8 million in 1983 to $4.4 million in 1984 to $5.7 million in 1985; and it projects $8 million for 1986.

A large part of that success can be attributed to some of the positive factors that are helping to stimulate growth elsewhere in the Manayunk area, Kershner says.

LOCATION OF MANAYUNK: "The location is a tremendous advantage for companies that establish themselves in this area," says McManus. "The Manayunk area is immediately accessible to the Schuylkill Expressway, and within a short driving time of most of the suburban areas and downtown. That is important for companies who must maintain an efficient distribution network for clients throughout the Greater Philadelphia area."

Joseph Alymer, who was PIDC's contact with Kershner throughout the application and approval process, notes that the company had considered other locations, including the former Van Sciver property on City Line Avenue in Bala Cynwyd before finally deciding on its current location on Shur's Lane.

"The move to this historical building afforded the company good growth potential, as well as an opportunity to have smaller tenants share some of the space, and thereby help them carry the cost of the property," says Alymer. "But more importantly, they were ahead of their time, as far as coming into this market, and going in to buy large, older, industrial space. They were even kind of ahead of the current trend, which is to buy these old, factory loft-type buildings and then fixing up and redoing the insides of these structures."

Basically, many of these older structures are in good shape, notes Alymer. If the roof is sound, the interiors of the buildings can often be renovated into some very interesting and attractive space. Often, that's the first step to boosting underemployed neighborhoods.

MORE DEALS: Alymer notes that PIDC has been involved in a number of major projects in the Manayunk area, involving Penn Distributors, Inc., Container Corporation of America, Continental Imports, and the National Milling and Chemical Co.

"In all, I would say that PIDC has been involved in 20 or so deals just within the Manayunk area over the past four or five years," says Alymer. "And that represents a pretty substantial investment for such a very condensed area. But what that investment has helped establish is a very steady rate of development within this area."

"It's really an attractive market for many of these firms," Alymer continues. "And part of the reason behind that fact is that Manayunk offers a very strong labor market. It offers a solid base of employment and it's in a very strategic position from a marketing standpoint."

Also, real estate prices are often much higher in the more "fashionable" areas of the city and suburbs -- which can also be a key factor for some firms.

PLENTY OF ORDER PULLERS: "The cost of real estate in Bala Cynwyd is just prohibitive for many companies," says Kershner. "That was one factor influencing our decision. Labor availability was another factor. We draw a large number of our employees from the immediate area and they fill a wide range of positions within the company -- not only shippers, drivers and receivers, but also clerical staff, secretaries and sales representatives."

WALKING TO WORK: At the same time, he adds, commuting is a very easy task. Kershner lives in Bala Cynwyd and drives to the Manayunk/Roxborough area in only a few minutes each morning.

"One of the big things is the number of people who are employed from this area," notes Kershner. "We've been very successful with the neighborhood people working for us, because generally speaking, the person who lives here is reliable and hard working."

Kershner indicates that a number of his employees were tired of the problems posed by public transportation and parking when they worked in center city. More than half of the people who work for his company today walk to work, he adds. And many more were born and raised within a few blocks of the building.

Moreover, Kershner picked up "a small tax benefit for hiring former welfare recipients, but it was too small to be a major factor," he explains.

"What is more important is that we took someone who was unemployed, or who had been on welfare for a long time, couldn't find a job, and we employed them.

And several of these people have really developed while they have been working here, and moved up to higher levels of responsibility and higher salaries. These are local people who are really contributing to the whole neighborhood now because they are gainfully employed."

MAIN STREET RENAISSANCE: That close integration of living and working environment is the major underlying theme of the area's Main Street renaissance, as well, says Kay Smith, vice president of the New Manayunk Corp., the recently-formed development group for the Manayunk area.

According to Smith, Manayunk's Main Street corridor (designated a National Historic District) is being developed as a regional specialty retail district focusing on hobby/repair/crafts activities, household furnishings, and factory outlet stores. These three areas of concern were identified in a 1982 marketing study by E. L. Crow, Inc. as being the three primary areas of retail strength which offer opportunity for new business development in Manayunk, notes Smith.

This development program will build on the area's historic mill town character and its traditional orientation toward the Schuylkill Canal which was opened in 1822 to bypass an unnavigable section of the Schuylkill river.

"One of the things we had to define with the marketing study was that this strip could not be supported by the Main Street neighborhood area alone, because the geography of the neighborhood leaves it with a very small neighborhood," explains Smith.

The area is enclosed by the river on one side and the cliff line on the other. As a result, the New Manayunk Corp. will be targeting a much wider market area, she says. A new brochure entitled "Manayunk Philadelphia: A Guide for Investors," released by the Philadelphia Citywide Development Corp., makes note of the enlarged retail market that is made possible by Manayunk's direct accessibility to the regional expressway network.

MAJOR MARKET: The brochure notes that Manayunk is only 15 minutes from either center city or the Pennsylvania Turnpike at King of Prussia; two minutes from the intersection of Route 1 and City Avenue, and within easy access to the higher income communities of Roxborough, Chestnut Hill/Mt. Airy, Center City, University City, Main Line, Plymouth Meeting/Whitemarsh, and Jenkintown/Cheltenham. This region represents a potential market of 160,000 households, and a $2.6 billion sales market, of which approximately $431 million is spent on clothing, furniture, household furnishings, and other merchandise which will be a focus on Manayunk's development effort.

"So we basically have to be a regional shopping center of some kind," Smith says. "And we have some things down here that are already established, such as household goods, and existing mills that date from the 19th century." Smith notes that three of the nation's remaining six wool-spinning mills are located in Manayunk. In addition, there are two major container companies representing the paper industry.

LONG RANGE INTERFACING: "Our objective is to do something that interfaces, rather than displaces these businesses," says Smith. "Because we really want to keep them. At the same time we want to build on something that is very unique -- and that's the visual thing that is Manayunk. The geography and the architecture that's on Main Street makes it perfect for something that's fairly unique."

This long range plan has gotten off to a good start, thanks to more than $500,000 in street improvements -- repaving, recurbing, new streetlights, cobblestones edging the historical district, and a "vest pocket" park, according to Elaine Black, of PCDC. PCDC has already provided thousands of dollars in the form of rebates to businesses improving their storefronts on Main Street, and in business development loans to several local firms.

PCDC's focus is on the smaller retail trade business, Black says. "In that respect we act as a conduit for information and assistance, which might include PCDC loans or modest matching grants, as well as the development of project financing from state or federal government sources. One avenue that has garnered significant interest has been federal income tax credits for the historic restoration of buildings within the Main Street Manayunk National Historic District," she adds.

RESTAURANTS: In addition, new restaurants and bars have appeared on Main Street. This, Smith says, is probably the best-known part of the Manayunk revitalization program.

"People have a preconception that the Manayunk revitalization effort consists of only the restaurant district," Smith says. "That puts too much emphasis on one aspect of the area's development. The kind of progress being made by C. B. Kershner and some of the other larger industries, such as those in textiles and paper, is a delight. They provide a solid base on which to build our long range plans."

"This area is kind of like the Fairmount section right now," says Kershner. "It's just now being discovered. There is also a great deal of money being spent locally to fix up many promising facilities. It's really coming along, and right now we're only beginning to see what the future will bring to this area."