Economic Development - How Philadelphia Snagged Comcast without Giving Away the Farm

Comcast Innovation and Technology Center - This is the year's big real estate development news in Philadelphia. 

Comcast and Liberty Property Trust announced the plan to construct a $1.2B skyscraper at 19th and Arch in Center City, designed by Lord Norman Foster.  There will be much discussion of the design and the economic impact of such a development, but there's another important story here - Philadelphia has just caught a big - no, gigantic - fish without wading into the sordid waters of corporate relocation/retention incentive one-upsmanship, which so many cities and states seem unable to resist.  But this development is neither an accident, nor to the credit of the will if a single administration or development official; rather, it's the product of at least three decades of strategic choices and turning the tide in the City of Brotherly Love (and Sisterly Affection).

The tall building is the original Comcast Center;
the taller building is the Innovation & Technology Center
(courtesy of Comcast)

First - let's lay out what this project is.  In 2008, Liberty completed the Comcast Center, designed by Robert Stern, at 17th and JFK, next to Suburban Station ... the cable company made it its headquarters though originally planning to lease out space to other tenants, ended up occupying the whole thing. It stands 974 feet tall, cost $540M, and includes 1.4M square feet over 58 stories.  The Comcast Innovation and Technology Center (including dining and a Four Seasons Hotel at the top) will open in 2017 at 1,121 feet tall, cost $1.2B, and include $1.5M square feet over 59 stories. The building will consolidate 1000 current employees now scattered throughout other Center City buildings, but also bring 1500 in from through out the country, and most importantly, create 1500 new jobs, since this will be ground zero for Comcast getting into the software business.  The only public subsidy for the new project is $40M (ten from the City, and thirty from the Commonwealth) to connect the building to Suburban Station's concourse below - and one could argue that 3% is barely even a subsidy, and just the public's responsibility.  

Rendering of Jackson Labs in Farmington (www.governor.ct.gov)

To back up for a moment... this is a weird thing, isn't it? On the one hand, Philadelphia is often (correctly or not) thought of as a high tax place, antithetical to business growth, for which the antitdote can only be magical tax cuts at all levels to create some corporate-libertarian utopia, as suggested in the Wall Street Journal recently for Detroit.  On the other hand, when corporate recruitment isn't a Texan low tax game, aggressive cities and states often provide various other incentives in the form of financing, tax credits, forgivable loans (based on x-amount of jobs "created"), etc.  Having had its lunch eaten on this front for a few decades, for example, Connecticut is now stepping up with Governor Malloy's "First Five" program, meant to jump start business repatriation. In 2011 the State provided Cigna (which had moved its headquarters to Philly in 1982) with $50M to move 200 jobs to Connecticut, and up to $80M if that jobs number gets up to 800. Most notably, the State of Connecticut is providing nearly $600M in grants and forgivable loans to bring Jackson Labs to Farmington, a suburb of Hartford, resulting in 600 direct jobs, over 6,000 indirect and induced permanent jobs, and the repositioning of Connecticut as a center of biomedical research.

A Patient, Strategic Approach. On the other hand, Philadelphia seems to have taken a different approach. Comcast's decision to double down on and grow in the city was the result of neither tax giveaways nor direct subsidy.  So what's the deal?  

As noted above, it's the result of at least three decades of strategic decision-making (and probably owing credit to Ed Bacon before that), which I'd boil it down to three categories, run collaboratively but by different organizations - transit, placemaking, and center city living - which combine to make Philadelphia a place where people want to be, and can do high-quality, dense development.

(courtesy of planphilly.com)

Transit. - In 1984, SEPTA connected Suburban Station with the Market East Station with a tunnel so that rather serving as terminals for the routes of the former Pennsylvania and Reading Railroads, the lines were through-routed and passengers with access to each basically doubled.  For anybody unfamiliar with Philly, imagine the impact of Boston's North Station routes having access to South station and vise versa, or New York's Penn Station and Grand Central Terminal being connected. The result was a building boom in Market West in the 80s, laying the groundwork for the Comcast projects.  In fact, the Innovation and Technology Center will have a single level of underground parking - maybe room fewer than 100 cars... for a building housing 4000 people.  Without this and continued investment in SEPTA, Comcast would need to build structured parking at 20K-40K per space (and that adds up awfully quick) or find cheap, flat land in the exurbs.  But the beauty of the Center City Commuter Tunnel is that it's not a public investment that serves one project; it can be used again and again by anybody.  In short, it's a front-loaded public/private partnership.

Philadelphia International Festival of the Arts
(courtesy of phillyfoodfinders)

Placemaking. Philadelphia has a long history of great civic art, starting with William Penn's original five squares to the Parisian Ben Franklin Parkway.  But by the 70s and 80s, some of the luster had worn off and the Philly had earned a reputation as a pretty grimy place - enter Paul Levy and the Center City District.  Their work started with spit and polish to make Center City clean and safe, which is critical to just about any successful downtown.  But before long, the District collaborated with Mayor Rendell and launched an arts initiative on South Broad Street, which involved the clustering of several institutions and beautifying the street so as to capitalize on the City's assets and create a world-class destination.  Inga Saffron may say this program is now in need of a little reinvention, but it was a critical step in changing the perception of the city and what it had to offer.  The combined result has been streets that are fun during special events, and every day in between. Add this to a growing residential population, and Center City retail is making a full comeback, further energizing the streets, and this is the kind of place Richard Florida's creative class want to be.

Center City Living.  Speaking of growing residential population, Center City Philadelphia's rose by 16% between 2000 and 2010 to over 57,000 people, leading to the first overall increase in the city's total population in over sixty years.  And it's no longer a secret that a thriving residential population is key to any downtown revival, and that the option of downtown housing is appealing to many working for companies that cities around the country want to attract.  But this population rise wasn't an accident either.  In 1997, the City of Philadelphia boldly enacted a 10-year tax abatement program, triggering genuine boom in downtown residence. Though controversial, that's a tax incentive almost anybody can take advantage of, and by most accounts, it has really paid off.

Philadelphia has always been a walkable city with unbeatable historical assets but those things wouldn't have led to the development of the Comcast Center without improvements to transit, placemaking, and center city living.  This trio is certainly not the whole nor the end of the story, but it is a case study in strategic moves made to encourage growth.  Each of these improvements require a city's investment in itself, and none of them come cheap. They also don't provide the instant gratification of job creation, but such is the nature of patience.

The difference between this sort of strategy for recruitment of companies and the jobs that come with them, and one built on specific financial incentives in each "economic development" deal, is that they benefit everybody and can be taken advantage of again and again, in a virtuous cycle. If I were so bold, I might even call that sort of economic development "sustainable."

Other cities, take note.