Much of this workgroups discussion again focused on the feasibility of and rational for implementation of a Single Factor Apportionment computation for the Business Privilege Tax as it applies to the manufacturing sector only. Rational for such relief was identified as:

1. a reasonable remedy for the manufacturing sector due to the concentration of its investment in equipment, land and labor in this economy. The current formula for calculating BPT actually penalizes companies which are heavily invested in the city.
   
2. a remedy which may help manufacturers better survive in an environment of foreign competition where companies are already fighting for pennies of profit.

Regarding the feasibility of implementation, it was discussed that:

1. such a change could be made administratively, confirmed by Revenue.
   
2. the loss of approximately $5.6 Million in annual revenue to the city from manufacturing could be offset by requiring businesses within the city to submit additional information about purchases made from foreign companies doing business here. This action would likely be best accomplished by an ordinance from City Council. Revenue believes that millions of dollars are lost to the city economy every year by these "raiders" who are not paying their fair share. The implementation of this process would require little to no cost to the City.

Support of these items was unanimous from the companies present.

Regarding the three outstanding suggestions from previous meetings, the discussion ended with:

• Transition to quarterly BPT payments from a single annual payment.
  
  The difficulty here is that in a change to this method, the City will initially experience either a significant shortfall or windfall, depending upon when the change is implemented. Either condition is problematic. Companies are free however to place themselves on a quarterly system, which will start off with a potential credit towards the next quarters payment.
• Potential for capital reinvestment tax credit
  
• Potential for job retention tax credit
  
  Regarding these two - After some discussion it was suggested that perhaps Philadelphia manufacturers should seek to strengthen their influence with state legislators based upon the feeling that Philadelphia is not well represented in Harrisburg. There are two reasons for pursuing tax issues with the Commonwealth:

1. The most onerous portion of tax effecting manufacturing is that imposed by the Commonwealth and,
   
2. Due to the likely hood of a complete phase out of BPT tax in the near future, it may be unfair to seek further tax remedies from the City. As a result, the UII has offered to put together exploratory meetings with local members of the House and Senate.

Remaining:

1. The UII will continue a dialogue with Council and the Mayors Office regarding implementation of a Single Factor Apportionment computation for the Business Privilege Tax as it applies to the manufacturing sector only. Companies will be kept advised of progress with written updates.
   
2. The UII will seek a mid-summer meeting between companies and state representatives. Notices will be sent out once a date has been selected.

Steve Jurash
Executive Director
Urban Industry Initiative
Phone: 215.683.2030 email: steve.jurash@phila.gov