Editorial: Philadelphia

In this economy, Philadelphia may not be able to avoid raising some taxes or fees to provide the services residents say they want. But Mayor Nutter still must make that case.

The mayor, after being pummeled in the court of public opinion for trying to close some libraries last year, can't let that experience keep him from making every logical cut before resorting to tax increases.

Philadelphia is already one of the highest-taxed cities in the country. Its tax burden is up to 30 percent higher than many major cities', including Baltimore, Detroit, and Washington. Wage, sales, and property taxes here eat up about 14 percent of household income.

Nutter deserves praise for opening up the budget process by holding public forums. He also has refused to meet privately with City Council to discuss the city's finances. But just because forum participants trying to protect a particular service or program told the mayor that they wouldn't mind higher taxes, that doesn't mean he has a mandate.

Nutter has hinted that the budget he will present this month will include a combination of spending cuts and tax and fee hikes.

Whatever the mayor proposes should address not only the current fiscal crisis but also the long-range finances of a city with a shrinking tax base and a bloated bureaucracy. The city's $4 billion budget has grown by 40 percent since 1990, even as its population has decreased.

Philadelphia has one of the highest ratios of city employees to residents in the nation. Benefits for city workers are among the most generous around, including little or no co-pay for health insurance and birthdays off for police officers.

Such expenditures must be addressed, even if the impact may not be immediate.

Nutter apparently is considering raising property taxes by as much as 11 percent. But Wharton professor Robert Inman estimates that just a 7 percent hike in property taxes would reduce the value of a typical city home by about 3 percent, or $3,300. That's on top of the drop in home values because of the recession.

By comparison, Inman's research shows that the city's tax trims over the last 14 years have preserved 35,000 jobs. As such, raising taxes could exacerbate the job losses brought on by the recession.

Granted, Nutter is in a tough spot, trying to make up for the steep drop in revenues. He went out of his way to hold public meetings that gave residents input into the budget process that no other mayor ever gave them. But even before the meetings began, Nutter signaled in a January meeting with The Inquirer Editorial Board that he was eyeing a hike in property taxes.

Given the choice between draconian service cuts or tax hikes, many who attended the meetings picked higher taxes. One wonders, though, what they would have said had more emphasis been placed on restructuring, outsourcing and using technology to streamline operations.

Perhaps the overtaxed residents of Philadelphia have developed a form of Stockholm Syndrome, in which they no longer recognize the oppressiveness of their situation.

Or maybe the silent majority was too busy working to pay their already high taxes to attend any of the mayor's budget forums.

Of all people, Nutter knows the city's heavy tax burden has been a job and population killer. As a councilman, he cosponsored a bill in 2002 to create a tax-reform commission to develop a tax structure that wouldn't drive residents and businesses out of the city.

As a candidate for mayor, Nutter ran on a platform of lowering taxes. Now that he is the mayor, he must be willing to make the unpopular but necessary spending choices that as a councilman he argued should be made to avoid raising taxes.

Last spring, before the full brunt of the economic collapse hit, Nutter's first budget increased spending, ate up two-thirds of the $182 million surplus he inherited from Mayor John Street, and scaled back planned tax cuts that had helped spark the city's renaissance.

Now, the surplus and tax cuts are gone, and Nutter appears on his way to becoming the first mayor since Wilson Goode in the 1980s to implement broad-based tax hikes. He needs to make sure every other alternative is exhausted first.