Mayor Michael Nutter has bad news: the city finances are in trouble. Problems in the national economy have come home to roost and now we face some tough choices. The city is projecting a $34 million deficit for 2008 and a $450 million shortfall over the next five years.
Here is a quick guide to the budget meltdown:
National economy.
Job growth has slowed and costs for food, fuel, and other essentials are rising. Everyone is feeling the pinch and local government is no exception. Less business means less revenue from taxes. In addition, havoc in the stock market has hurt the city's investments. Like cities everywhere, Philadelphia is facing lean times.
Pension Nightmare.
The city pension fund is losing money. The fund has posted a 3.7% loss for this fiscal year. That means the city will have to contribute more money to the pension system. In addition, Nutter's plan to borrow $3.5 billion to fully fund the pension system will have to be delayed until 2011. Taxpayers won't see savings from the deal until then. Nutter officials estimate the total price tag for pension problems is $150 million.
Business Privilege Tax.
Dubbed "the most complicated tax I have ever seen" by Budget Director Steve Agonstini, missing revenue from the Business Privilege Tax is the largest hole in the municipal budget. Tax receipts produced $408.2 million, $34.6 million below the projected amount of $438.2 million. Nutter officials say the complexity of the tax-- which includes levies on both gross receipts and net profits-- makes it extremely hard to project revenues.
Nutter and his team have taken a number of steps to deal with the budget crunch. Heads of city departments will be given new target numbers for their budgets. Some could face cuts as big as 10%. City officials will spend the next four to six weeks figuring out a strategy and then present their plan to the public.
Here is a quick guide to the budget meltdown:
National economy.
Job growth has slowed and costs for food, fuel, and other essentials are rising. Everyone is feeling the pinch and local government is no exception. Less business means less revenue from taxes. In addition, havoc in the stock market has hurt the city's investments. Like cities everywhere, Philadelphia is facing lean times.
Pension Nightmare.
The city pension fund is losing money. The fund has posted a 3.7% loss for this fiscal year. That means the city will have to contribute more money to the pension system. In addition, Nutter's plan to borrow $3.5 billion to fully fund the pension system will have to be delayed until 2011. Taxpayers won't see savings from the deal until then. Nutter officials estimate the total price tag for pension problems is $150 million.
Business Privilege Tax.
Dubbed "the most complicated tax I have ever seen" by Budget Director Steve Agonstini, missing revenue from the Business Privilege Tax is the largest hole in the municipal budget. Tax receipts produced $408.2 million, $34.6 million below the projected amount of $438.2 million. Nutter officials say the complexity of the tax-- which includes levies on both gross receipts and net profits-- makes it extremely hard to project revenues.
Nutter and his team have taken a number of steps to deal with the budget crunch. Heads of city departments will be given new target numbers for their budgets. Some could face cuts as big as 10%. City officials will spend the next four to six weeks figuring out a strategy and then present their plan to the public.
Comment removed.
Also, don't forget that Nutter's budget included $750,000 in raises for city council.— Ben Waxman- Oh come on, he spent more on the junket to Denver than he did on city council raises. Maybe he should get rid of some of those Deputy Mayors who do so very little. Or maybe he should cut his staff since he doubled his communications office and other staff when he took office. Does it really take six people, rather than three? Maybe he should lower the salaries of those he hired at rates higher than their predecessors. Maybe he shouldn't have hired quite so many police, given city council everything it asked for in this budget, allowed his managing director to start her second renovation of the same space since she didn't like it...the warning signs have been there, the city and fiscal staff were warned by PICA about the flaws in the revenue projections, and they turned a blind eye as they went through with tax cuts and undisciplined spending, while opposing casinos, and now they say it's the national economy, not their inept management and planning? Not only did they squander their inheritance of the highest surplus in the history of the city, they've managed to dig a really huge whole. Ridiculous, really.— Brenda Truth
- Nutter is top heavy with payroll. Start firing some Deputy Mayors, they are directly under his thumb. A no hassle start.— FJG JR
- Deputy mayors are not the source of the so called budget meltdown. It's bad planning, the kind Nutter has railed against for years. The city always does best case planning for its budget if the previous year or so was good. As we all know, that is idiotic. Just because the previous few years were fat, doesn't mean the next won't be lean. The people who run businesses for a living or the get fired know that you have to have a back up plan, and in our case, that means doing tough things that no one in politics or even the media want to even consider -- collecting overdue property taxes owed the city for years is one item. There are $568 million in uncollected overdue property taxes, but the city doesn't want to sell the holdings it owns, some several thousand properties, or the vacant, blighted properties the RDA owns, also some several thousand properties at auction on the open market. This would raise millions, and bring these properties back into the annual property tax paying market, which primarily funds schools. Other cities collect property taxes, and all owners know what the rules are -- pay up or your property enters foreclosure. Most properties that enter foreclosure end up paying off the back taxes. But the city is too timid to enforce. Property tax payment can't be optional anymore. Nutter campaigned on this issue, but suddenly, there's no discussion of using this to assure revenue now and in the future. Why? We need to stay on course with wage tax cuts to bring jobs back to Philly.— CleanupPhilly
- The city cannot be all things to all people, cradle to grave. There are programs that should be state and federal (or are) that the city also tries to fund, but we just right now. PHA is one example. Not a single PHA owned house pays property taxes, and the recent PHA construction owned by LLPs owes property taxes that the city has not collected property taxes for. There are other high profile owners who owe property taxes that the city has not collected who stopped paying when they realized that they could, like Drexel, the U. of Penn., Amtrak, Septa, and others. The city created this climate of nonenforcement to get votes, but they've created a monster that owes the city hundreds of millions in back taxes, with some zips posting half of all owners owing city property taxes. Rendell created the surplus under his administration by allowing a private collector to do its work, buying old debt, and assertively selling it at auction. This paid of years of "bad debt" and put the city in the black for the first time since pre-WWI. We can't blame the "national" economy for our bad planning and bad management. We budget blindly, with no thought to outcomes, or results, we just fund based on a pet idea. We tax without collecting with a clear set of rules and expectations to pay or forfeit. We don't update property tax assessments annually, forfeiting hundreds of millions in fair, objective property taxes that would then be based on real home values. Is having this broken system really just?— CleanupPhilly
- We just can't afford all this right now. We have too much duplication. How many city funded (even in part) agencies have the words "housing" or "redevelopment" in them? Seven? Come on. Are they funded based on results? If they were, they wouldn't have back logs of thousands of vacant properties. We don't need NTI to fix these properties, we just have to sell the properties to the highest bidder and let the renovation work. I suspect this would upset some of City Council, which is why it we stay stuck in limbo. Change, indeed. If this is Democratic change, give me McCain, who will cut the fat.— CleanupPhilly
7 comments
About It's Our Money
Every year, city government spends slightly more than
$4 billion. Where does all that money come from? More importantly,
where does it go? Are we getting the most bang for our tax buck?
“It's Our Money” is a joint project between
Philadelphia Daily News and WHYY, funded by the William
Penn Foundation, designed to answer these questions.
MONEY AND JUSTICE DON'T MIX
WILL THE NEW COUNCIL GIVE YOU A SAY?
MONEY AND JUSTICE DON'T MIX
Imagine you're appearing in
court, about a matter that's very important to you. You've never seen
the judge before. But the attorney for the opposition has given his
Honor thousands of dollars in campaign donations, which helped the
judge become a judge in the first place.
WILL THE NEW COUNCIL GIVE YOU A SAY?
On this week's It's Our
Money podcast, we talk with Zack Stalberg, president of government
watchdog Committee of Seventy, about public comment in Council.
Tips? Comments? Questions?
Contact:
Doron Taussig:
215-854-5307
doron.taussig@gmail.com
@dorontaussig
Holly Otterbein:
215-854-5809
hm.otterbein@gmail.com
@hollyotterbein
Juliana Reyes:
215-854-5855
juliana.f.reyes@gmail.com
@juliana_f_reyes
 | Follow on Twitter |
- Philly Clout
- Metropolis
- Attytood
- Heard in the Hall
- Commonwealth Confidential
- Philebrity
- Phawker
- Young Philly Politics
- OurPhiladelphia
- Capitol Ideas
- Grassroots PA
- PA Policy Blog
- Media Mobilizing Project
- The Notebook
- Dave Davies Off Mic
- Committee of Seventy
- The Independent
- Naked City
- Plan Philly
Blog Roll
Get it now
- February
- January
- December 2011
- November 2011
- October 2011
- September 2011
- August 2011
- July 2011
- June 2011
- May 2011
- April 2011
- March 2011
- February 2011
- January 2011
- December 2010
- November 2010
- October 2010
- September 2010
- August 2010
- July 2010
- June 2010
- May 2010
- April 2010
- March 2010
- February 2010
- January 2010
- December 2009
- November 2009
- October 2009
- September 2009
- August 2009
- July 2009
- June 2009
- May 2009
- April 2009
- March 2009
- February 2009
- January 2009
- December 2008
- November 2008
- October 2008
- September 2008
Archives
Philly.com Promotions
- News | Sports | Business | What's Happening | Restaurants & Food | Entertainment | Living | Marketplace | Jobs
Site Services:
Classifieds:
Partners:
Local Services:
