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Monday, May 11, 2009

Nutter Confirms Budget Deal Without Property Tax Hike

Mayor Nutter just confirmed that he has reached a revised budget deal with City Council that takes his controversial proposed property tax hike off the table. He called that result of a compromise that leaves city residents as winners.

"This budget agreement reflects the reality of the legislative process. And I’ve seen if from both sides," said Nutter, emphasizing cooperation with Council's members. "We’re not talking about winners or losers."

At a City Hall press conference, flanked by ten Council members, Nutter said the city will deal with a $1.4 billion five-year financial hole through a a five-year temporary sales tax hike by 1 cent on the dollar. And to ease immediate financial pressures, they plan to defer payments into the city pension fund for two years, paying the fund back later.

The sales tax plan and pension deferrals require state approval.

The revised deal marks a political loss for Nutter, who had insisted that a temporary property tax hike coupled with a temporary sales tax increase was the responsible way to close the budget gap without substantially cutting services.

But with time running out before an end-of-May deadline to pass the budget, Nutter simply didn’t have the votes. Seven Council members publicly stated last week that they would not support a property tax hike.

Nutter’s property tax pitch was also weakened by the recent release of a new set of “actual value” assessments that would change most homeowners’ taxes and by an investigation by the Philadelphia Inquirer into the Board of Revision of Taxes, which sets city property taxes. The stories revealed longstanding mismanagement, political patronage and inaccurate assessments.

Posted by Catherine Lucey @ 5:18 PM Permalink | 36 comments

Comments

0 like this / 0 don't • Posted 5:37 PM, 05/11/2009

It seems unlikely from what Harrisburg's response has been that they are interested in hiking the sales tax just for Philly to make Philly's sales tax higher than the rest of PA. Even the pension deferral seems like it has few supporters. The reason appears to be that the state reps are going through a painful budget process now where they don't get to raise taxes and defer decision making, so why would they do that for Philly? What's in it for them but criticism from their own constituents that they favor the Philly status quo?

— CleanupPhilly

0 like this / 0 don't • Posted 5:39 PM, 05/11/2009

Don't know if the projections will hold since the tax is almost completely avoidable. Just another reason to avoid the mayhem at the City Ave Target and go to Plymouth Meeting instead.

— MASTERNC

0 like this / 0 don't • Posted 5:48 PM, 05/11/2009

i think they should raise the sales tax 1.5% it's the most equitable and least felt tax increase - people will only feel it on big ticket purchases. it's done in other cities all the time...state needs to approve.

— wendymae1

0 like this / 0 don't • Posted 5:58 PM, 05/11/2009

No one in Harrisburg wants their name on this legislation, much less a record of them having voted yes to pass a tax increase. A budget that requires a state approval that H-burg has said it won't give is not a budget. It's just a statement that the "doomsday scenario" of cuts and layoffs must happen after they get permission from Harrisburg.

— CleanupPhilly

0 like this / 0 don't • Posted 6:04 PM, 05/11/2009

I believe that pension plan "deferrals" involve payment of interest rates. I thought only the federal government was allowed to borrow to balance budgets.

— John Scanlon

0 like this / 0 don't • Posted 6:05 PM, 05/11/2009

Forget Philly now for any big ticket items (cars, furniture, etc.) Those businesses and jobs will now leave. Forget Christmas shopping (the most important time of the year for all retailers). Why shop here when it's more expensive? This will put yet another knife into the productive businessess in this city. Wendymae1 - you are obviously not an economics student.

— Obama Robots

0 like this / 0 don't • Posted 6:07 PM, 05/11/2009

Right, Philly will have to borrow against the future sales tax revenue to meet operating costs, if Harrisburg lets them raise sales taxes and defer pension payments. It just feeds the beast. Philly will never change if Harrisburg keeps bailing it out. As other parts of the state has faced cuts and kept taxes stable, Philly wants to be the exception to that. I might be wrong -- there could be a coalition of state legislators forming to do that.

— CleanupPhilly

0 like this / 0 don't • Posted 6:08 PM, 05/11/2009

Mayor Nutter may not be talking about winners and losers, but I am, and here's the score: Winners- Home owners and landlords (especially non-Philadelphians) get a pass with no real estate tax increase. Losers- Renters (generally lower income) will feel the pain of regressive sales taxes that will hit us relatively harder. Mayor Nutter, man up and admit that you lost this battle. The poorer half of town --on whose behalf you fought for a real estate tax increase-- will be shouldering too high a share of the new sales tax. I'm disgusted. City Council sided with the monied interests, and you caved.

— WhiteWhisker

0 like this / 0 don't • Posted 6:11 PM, 05/11/2009

Economic difficulties or not, Mayor Nutter is taking this city the wrong direction. This increase in sales tax is already on top of the freezing of the wage tax reductions. It is getting more expensive to live and work in the city, not less.

— dr. know

0 like this / 0 don't • Posted 6:13 PM, 05/11/2009

MasterNC is right also -- if the taxpayer can change their behavior to avoid the tax, to what extent will they do that? A lot, probably, so what part of the revenue can the city count on? It's the same reason the city is so strapped now -- they city counted on revenue from wage and business taxes, not counting on the fact that wages and businesses would leave without tax decreases, so the net result is LESS revenue, not more from tax increases.

— CleanupPhilly

0 like this / 0 don't • Posted 6:17 PM, 05/11/2009

Not to mention that the sales tax is very downwardly sensitive to economic downturns (and the most difficult to project in terms of revenues year to year).

— bobcitydoc

0 like this / 0 don't • Posted 6:24 PM, 05/11/2009

I'd rather have paid an increase in my property taxes...

— FMT

0 like this / 0 don't • Posted 6:27 PM, 05/11/2009

This isn't Nutter's fault, that being said taxes aren't the way out of this. Most of the middle class that isn't required to live here, i.e. police/fire/teachers, have already left. Yes, the real estate taxes are higher in most suburbs but the wage tax is lower, and so are things like car insurance and sales taxes. If you total the annual tax liability of living in Philadelphia for all obligations and factor into that the increase in insurance premiums, the choice of where to live becomes pretty clear. It's time to start negotiating with city unions, negotiating with city politicians and start cutting services. Trash, schools, first responders. Other than that, I'd start looking pretty hard at everything.

— Jim7429

0 like this / 0 don't • Posted 6:28 PM, 05/11/2009

I would have endured a temporary rise in property taxes rather than have the city face the consequences of a higher sales tax. High end retail has dramatically increased in Center City, and people are coming to the city to purchase items. This will only serve to keep them away. Buying a home in the city is a lifestyle choice, and a temporary increase would only serve to deter a small number of people. Remember, the freezing of wage tax reductions is actually a TAX INCREASE, so the workers are already paying a higher price for living/working in this city. This only serves as another shot at people who are actually productively helping this city.

— StewieforPresident

0 like this / 0 don't • Posted 6:39 PM, 05/11/2009

This might not even fly with PICA as a budget. It's simply too reliant on hypotheticals, not even budget projections based on actual revenue sources. What is PICA's reaction?

— CleanupPhilly

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About The Philly Clout Team

Chris Brennan, a native Philadelphian and graduate of Temple University, joined the Daily News in 1999. He has written about SEPTA, the Philadelphia School District, the legalization of casino gambling, state government, the mayor, the governor, City Council and political campaigns.

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David Gambacorta spent a small eternity writing about cops, drug dealers and serial killers. Now he’s writing about power and politics – which sometimes reminds him of the old crime beat. He joined the Daily News in 2005. And yes, he knows you’re not quite sure how to pronounce his last name. E-mail tips to gambacd@phillynews.com

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Catherine Lucey joined the Daily News in 2002 and has written about murderous drug gangs, political protesters and Harry Potter. After covering the 2007 mayoral election, she moved over to the City Hall bureau where she has been reporting on the Nutter administration.

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Jan Ransom, a native New Yorker, joined the Daily News in 2010 after graduating from Howard University. She has since written about the difficulty of filing police complaints, tax deadbeats and life after violent home invasions. She joined the Daily News City Hall Bureau in 2011 and has plunged headfirst into reporting on administration budget battles and City Council shenanigans.

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