Why the success of the Navy Yard is an economic loser for Philly

Navy Yard gate
The entrance to Philadelphia's newest and fastest growing gated community - a suburban office park at the foot of Broad Street.

The Philadelphia Naval Shipyard, now better known as The Navy Yard, was the first naval shipyard in the United States and more recently has become one of the biggest adaptive re-use projects in the country.  After the U.S. Navy reduced its activities in the early 1990s and ended most by 1995, a large portion of the yard was left abandoned and created a large eyesore along Philly’s southern edge.  But due to the site’s size, city planners saw an opportunity and soon got to work creating a new master plan for the area with the goal of transforming the yard back into something economically viable.

Over the past few years, with the help of large tax incentives, the early pieces of the master plan have taken shape. Large companies like Urban Outfitters have moved their headquarters to the campus, transforming previously unused buildings into economically viable parcels.  What great stories the Navy Yard can now tell: a new waterfront community is developing, creative adaptive reuse has taken hold, and sustainable, green building and neighborhood techniques have become the norm.   While these are no doubt positive narratives for Philadelphia to tout, it isn’t hard to argue that the overall effect of this success has actually been a negative for the local economy of Philadelphia and specifically Center City.

Simply put, the emergence of the Navy Yard as a premiere place to do business has been at the expense of Center City, the region’s largest employment center and cultural heart.  Soon after the city began subsidizing the Yard’s development, large companies like Urban Outfitters, Inc. and more recently GlaxoSmithKline have moved out of Center City, either rehabilitating unused structures or building new space within the Navy Yard.  This is bad urban planning – due to the site’s poor transit connections and overall isolation, what has already been built and what the master plan is calling for is seas of parking lots, single-use structures and single-use land use zones akin to suburban developments of the 1960s-1990s.  It really isn’t surprising the Navy Yard has taken on these characteristics, given its poor access to the rest of the city, but what doesn’t make sense is the city incentivizing such development.  Here are the two main reasons why:

car cost graphic
This illustration shows how much money could be pumped into our local economy if 15,000 residents gave up their cars. It's quite a sum.

First, it’s a loser for the city economically.  It’s a given that high-rise, high-density development, office or otherwise, is far more efficient at making money for municipalities than low-density development of the type seen in the Navy Yard.  Consider an example in Asheville, N.C., where a Super Walmart about two-and-a-half miles east of downtown brings in an impressive $20 million in tax value.  But it sits on 34 acres of land, thus yielding $6,500 an acre in property taxes.  Meanwhile, a remodeled JCPenney in downtown Asheville is bringing in $634,000 per acre due to its dense nature.  This concept is true everywhere.   In Raleigh, it would take 600 single-family homes on a 150-acre subdivision to equal the tax base of the 30-story Wells Fargo Capitol Center in its downtown. And the Wells Fargo Center sits on 1.2 acres of land.  The concept can be copied and pasted in every American city and certainly in Philly.  This is why the city should not be incentivizing low-density development in the Navy Yard at the expense of Center City’s dense, high-yield nature – acre by acre, it’s a tax base loser.

Second, it’s a loser for the City economically.  According to AAA, Americans spend, on average, about $8,500 a year on their cars.  Of that $8,500, about 85 percent, or close to $7,000, leaves the local economy, with only $1,500 remaining in the area.  If the city could invest in public transportation improvements and encourage, say, 15,000 people to get rid of their cars, the local economy would gain over $127,000,000 it otherwise would have lost.  Instead, Philadelphia is investing in the expansion of the car-dependent, suburban-style Navy Yard, to the negative consequence of the local economy, since most Yard workers are forced to own a car and drive to work.  Considering the Navy Yard has about 8,000 workers, and assuming 7,000 drive to work, that’s a loss of nearly $60 million to the local economy that could be recouped if these companies were in transit-rich, high-yield places like Center City.

Now it is fair to note that the idea behind the Navy Yard isn’t all bad, but the planning and development of it has been.  Sure, it would be great if the Navy Yard developed into another sustainable mixed-use neighborhood of Philadelphia.  But based on its current development pattern, its exceptionally suburban nature (you need a key to get onto its premises), and what the master plan is calling for in the future, don’t count on it.  It’s time the city stops incentivizing businesses to move there and starts luring them back to Center City where they belong.  Economically, and well, economically, it’s the best bet.

-By Greg Meckstroth for PhiladelphiaRealEstate.com

Navy Yard photo by the author