Nutter Surprised By Council's "Budget Alternatives" Announcement

We just got this press release from City Council -- an hour after their budget hearings ended for the day.

Sounds like they're actually playing hardball with the mayor over how to manage the $1.4 billion five-year budget gap. Council is suggesting that by extending the temporary sales tax hike from three years to five and by combining it with other efficiencies, the city could avoid Mayor Nutter's propsed two-year property tax hike.

UPDATE: We just spoke with Nutter, who said he was surprised by Council's announcement. Nutter said he met with Council leadership this morning to talk about their ideas, but thought they still needed to be developed. He said Council had agreed to work with the mayor's staff to figure them out.

"They talk about $25 million in efficiencies. I would love to work with Council on more efficiencies than we've found, but there's no detailed list of what these efficiencies would be," Nutter said. "There are just a lot of questions that no one really has any answers for."

Nutter added that he had serious doubts about the sales tax proposal.

"Anything with the sales tax needs state approval and this idea pretty much violates every known tenant of municipal finance, to do long term borrowing for operating expenses," Nutter said.*

*CORRECTION - The original version of this post quoted Nutter questioning the sales tax plan, saying it would include borrowing for  capital expenses. He actually was referring to city operating expenses. PhillyClout apologizes for the error.

Here's Council's press release:

CITY COUNCIL PROPOSES ALTERNATIVES TO ADMINISTRATION'S PROPERTY TAX HIKE

Alternatives Include Temporary Changes to Sales Tax,
$25 million in Savings and Efficiencies

PHILADELPHIA, PA – Philadelphia City Council's leadership team met with Mayor Nutter today and presented alternative proposals for solving the City's fiscal crisis. Council is proposing a sales tax alternative to the steep property tax increases proposed by the Nutter Administration, along with a variety of spending reductions and efficiency savings. City Council staff will be meeting with Administration staff to review the revenue and savings proposals.

"It's important to find increased efficiencies in the operation of government before we raise citizens' taxes, especially in times when most families are suffering," said Council President Anna Verna, pointing to over $25 million in efficiencies and savings identified by Council and presented to Mayor Nutter today.

Philadelphians already pay higher effective property taxes than residents and businesses in 211 of the 240 townships and boroughs comprising Bucks, Chester, Delaware, and Montgomery counties. Because the property tax is not tied to income or ability to pay, the proposed increase would fall particularly hard on low-income or fixed-income homeowners, including senior citizens.

"We understand that the double-digit property tax increase proposed by the Administration will have a devastating impact on many homeowners and we have developed fiscally responsible alternatives that are tailored to working families," said Majority Leader Marian Tasco after today's meeting.

The sales tax alternative extends the 1% sales tax increase from three years to five years and borrows against the FY13 and FY14 receipts to provide an additional $200 million in FY10 to address the current fiscal crisis. In combination with the efficiency savings identified by Council, the alternative generates as much revenue as the Administration's proposal.

Summarizing Council's alternative proposals regarding the sales tax and efficiencies, Minority Leader Brian O'Neill noted that "the sales tax is a more equitable solution than the proposed property tax increase – it is paid by residents and visitors alike and Pennsylvania is one of the few states that exempts food, clothing and medicine from the sales tax. Furthermore, it is incumbent on City government to drive down spending during this fiscal crisis."

Noting that Council has presented viable alternatives to the Administration's proposal, Majority Whip Darrell Clarke emphasized that "it is important for City Council and the Administration to work together to explore all options for addressing the City's budgetary challenges."

City Council looks forward to working with the Nutter Administration to develop a response to the current budget crisis that is fair, fiscally responsible, and tailored to Philadelphia families.