Archive: April, 2009
City Council and Mayor Nutter are still miles apart on taxes, but one option has been taken off the table: increasing the wage tax. Earlier today, Finance Director Rob Dubow sent a letter to City Council informing them that revenues hadn't fallen enough to allow an increase under state law. From Heard in the Hall:
Finance Director Rob Dubow informed Council that the city did not meet the criteria in state law that would allow Council to raise wage taxes without state approval. The law governing how state casino proceeds are distributed for tax relief states that Philadelphia cannot raise its wage tax unless revenues dropped 2 percent or more, as certified by the citys finance director.
That clause prevents the city from using state gaming proceeds to pay for government services and blocking the intent of the 2004 gaming law, which was to provide wage tax reductions to Philadelphia and property tax relief to other areas of the state. The 2 percent gives the city leeway in a financial crisis. But even in the current economy, Dubow said the expected revenues for the year ending June 30 fell by 1.94 percent, from $2.74 billion to $2.60 billion.
Link: Solicitor's review says DROP OK for Council [Inky]
Shelley R. Smith's opinion was in response to a request by the Committee of Seventy to revisit a 2006 solicitor's opinion that enables elected officials to join the program, win reelection, then retire for a day before their next term so they can cash their DROP check before returning to serve the new term.
First authorized in 1999, DROP was supposed to encourage valuable employees to stay on the job by allowing them to begin amassing up to four years of pension payments at the end of their careers. The rule state that the employees have to pick a retirement date and leave the city payroll by then.
Link: City agency offers its own spending plan [Inky]
The revised spending numbers were approved in a resolution passed by members of the Criminal Justice Advisory Board (CJAB). Composed of a panel of citywide officials, the board was created earlier this year to better coordinate a multi-agency response to fighting crime, making the courts more efficient and driving down the prison population rate.
"This isn't meant to inflict pain on anybody or punish anybody," said Common Pleas Court President Judge Pamela Pryor Dembe, who co-chairs the CJAB. "Based on information we have at the moment, we are trying to balance things better."
Link: Council proffers sales-tax increase [Daily News]
Council's plan calls for borrowing on anticipated proceeds in the later years of a five-year sales-tax increase - still at 1 cent on the dollar - to help the city balance its budget in the first two years.
Nutter said that idea "pretty much violates every known tenet of municipal finance."
It's no secret that much of City Council opposes Mayor Nutter's proposal to raise property taxes. However, it wasn't clear until today if Council could rally behind an alternative proposal. According to a press release just sent by Councilwoman Anna Verna, Council is pushing for extending the sales tax increase for all five years and borrow against the future receipts. We'll have more on this proposal in the coming days, but you can read the press release below the break.
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.
Link: Nutter visits Capitol seeking support for budget [Inky]
The mayor met with legislative leaders from both parties, as well as members of the city's delegation, in an effort to persuade them to sign off on his plans to temporarily raise the sales tax in the city and make actuarial changes to the city's pension fund.
Though Nutter has made it a point to personally meet with lawmakers in the Capitol, his trip here yesterday signified just how important it is to him - governmentally and politically - to line up Harrisburg's top political brass behind the proposals.
Cities used to be considered the problem, but now they're being talked about as the solution. That's the theme of a special section published in today's edition of the Philadelphia Daily News. Called "Metropolitan Moment", the 12-page pullout explores why this is a good time for cities and how Philly can capitalize on this new atmosphere.
Link: Rendell vows to work for Nutter tax plan [Inky]
Rendell said he would support state legislation giving Philadelphia the authority to increase its sales tax by a penny per dollar, from 7 percent to 8 percent. The tax hike would raise an estimated $342 million before being rolled back after three years.
"I'm going to work hard to get the enabling legislation. I believe Mayor Nutter and Council should have that right, if they want it," Rendell said. "It's not going to be easy, but we definitely want to help."