The administration today questioned another City Council budget proposal to deal with the $1.4 billion budget gap. This week Council suggested that the city extend the temporary sales tax hike proposed by Mayor Nutter from three to five years and borrow against the against the anticipated proceeds in the later years to help the city balance it’s budget in the early years.

Council’s plan suggested borrowing $200 million to cover expenses in the upcoming fiscal year. Members said this idea had more support than Mayor Nutter's proposed two-year temporary hike to the property tax.

Finance Director Rob Dubow this afternoon sent Council members a letter saying that borrowing to pay city operating expenses could raise red flags with financial rating agencies.

“It does provide some short term relief, but rating agencies have made it clear that if you start to borrow for operating costs, there are problems with your fiscal management,” Dubow said.

Dubow also provided Council with some research on the estimated cost to the city of their plan. He said that the interest costs of borrowing $200 million to cover expenses could cost $75 to $100 million. 

Nutter last month proposed raising the city's property tax temporarily, by 19 percent in July and then 14.5 percent in July 2010. He also proposed a temporary three-year increase in the sales tax by 1 cent on the dollar. That tax is 7 cents on the dollar, with 6 cents going to the state and 1 cent to the city.

Council's plan keeps the increase at one cent on the dollar.

»  More City Questions Council Sales-Tax Plan

It looks like City Council’s suggestion that the city consider raising the wage tax to manage a $1.4 billion five year budget hole might be dead.

Several weeks ago, Council asked Finance Director Rob Dubow to confirm whether the city’s tax receipts had fallen by more than 2 percent. Because the city receives state gaming dollars for wage tax reduction, the casino law sets conditions for the city to raise the wage tax. One condition is that tax collections must drop by more than 2 percent.

But Dubow this morning sent a letter to City Council, reporting that tax revenues had dropped by 1.94 percent from fiscal year 2008 to fiscal year 2009.

Council wanted to look at the wage tax as a way to close the budget gap instead of the property tax hike proposed by Mayor Nutter. Nutter has also proposed a temporary increases to the sales tax.

Councilman Bill Green said he wasn’t concerned by the news from Dubow because Council is now actively pursuing a different plan – to extend Nutter’s proposed three-year increase of the sales tax to five. “At this point a majority of council people believe we have an alternative,” he said.

Councilman Jim Kenney, who had opposed raising the wage tax, said he was relieved. “It’s good news that tax revenues have not declined by more than two percent. It’s a close call in going down a road that we don’t want to go,” he said.

City Councilwoman Janie Blackwell today introduced a resolution calling for hearings into the swine flu pandemic. Blackwell says she has been hearing from panicked constituents about the illness.

"I've had people calling my office asking me what we're going to do, what's happening in our city, what the rules, especially people who are otherwise sick or handicapped," said Blackwell, who said she'd like to hold the hearings as soon as possible.

Following the release of "actual value" property tax assessments from the Board of Revision of Taxes to City Council and the Mayor, Councilman Frank DiCicco today plans to introduce legislation that he says could ease the the impact of new tax bills on residents.

DiCicco said he wanted to "begin a discussion on addressing what we anticipate could be a significant increase."

There are two measures DiCicco wants the city to look at. One is taxing residents based on a five-year average of their tax bills, which would theoretically ease people into their new tax rates. The other would be to base property taxes on a "floating tax rate" -- meaning the city would determine how much revenue they need from property taxes and set rates accordingly.

Both measures may require state authorization.

Also, in property tax news, Controller Alan Butkovitz is calling on the BRT to publicly release the data they provided to elected officials yesterday.

The mother of Danieal Kelly -- the 14-year-old girl who was found starved to death in 2006 -- pleaded guilty yesterday and was sentenced to 20-40 years in prison.

Two workers for city-affiliated agencies are charged with corruption.

The city is set to get an upgrade to the police radio system.

A new Pew poll shows a majority of residents favor building the casinos.

Mayor Nutter is scheduled to today sign into law a citywide ban on using cellphones while driving. According to Nutter's schedule, the signing will take place at 4 p.m. in Eakins Oval.

City Council unanimously approved the legislation two weeks ago. But lawmakers in the state House of Representatives have approved a bill that would financially penalize the city for enacting a local ban. The house measure calls for stripping the city of its portion of the gas tax and money set aside to build and maintain bridges and highways. if the city enacts a cell phone ban.

Sure Sen. Arlen Specter wants to join the Democrats now, but will his last campaign come back to haunt him? Check out this ad from 2004 which features former President George W. Bush and former Sen. Rick Santorum

Mayor Nutter has stressed since taking office last year his administration's determination to crack down on ethics violations and cooperate with federal investigators on corruption cases.  To that end, Mayor Nutter is about to host a news conference with U.S. Attorney Laurie Magid on two indictments unsealed today.

* Brenda Wilkins, a 62-year-old real estate specialist with the Philadelphia Housing Development Corp., is accused of using her job in 2005 to transfer ownership of a PHDC-owned property valued at $65,000 to a middleman for $1 who then sold the property for $1 to Wilkins' daughter.  Wilkins faces 24 to 30 months in prison if convicted.

* Dorena Kearney, 52, is accused of stealing $138,000 in government grants to The Colours Organization, a non-profit set up in the city in 1991 to establish "progressive educational advocacy and support mechanisms" for lesbian, gay, bisexual and transgendered people of color.  Kearney, of Lindenwold, N.J.,  has been the agency's executive director since 2004. The thefts apparently occured between 2004 and 2007. She is accused of using agency credit cards for personal expenses like a vacation cruise and dog grooming.  She faces 12 to 18 months in prison if convicted.

City Solicitor Shelley Smith today told a government watchdog group that she agrees with a 2006 opinion from former Mayor John Street's city solicitor that elected officials enrolled in the controversial DROP program can run for re-election, retire for one day, collect the pension payment and return to work.

"The DROP ordinance, as enacted by City Council, does not distinguish between elected officials and other City officials; does not prohibit retirement between the time of the general election and the time of retaking office on the basis of that election; does not prescribe any particular length of retirement for an official, subsequent to participation in the DROP; and does not bar any City official from returning to City office post-retirement," reads the letter from Smith to Committee of Seventy President Zack Stalberg.

The Committee of Seventy last month asked Smith to revise the legal opinion submitted by former solicitor Romulo Diaz in June 2006 that said that it was legal for Council members in the Deferred Retirement Option Program to resign for a day, collect the payment, and then return to elected office. Councilwoman Joan Krajewski did just that in 2007, winning an eighth term, retiring for one day and collecting $288,136.

Six Councilmembers are currently enrolled in DROP: Frank Rizzo, Marion Tasco, Anna Verna, Frank DiCicco, Donna Reed Miller and Jack Kelly. Rizzo and DiCicco have said they plan to run again (although DiCicco says he'll forgo a salary if re-elected), while the others have been coy about their plans.

To read the full letter click here.