Saturday, August 1, 2015

Mayor Nutter and City Council announce compromise

Flanked by ten members of City Council, Mayor Nutter announced a tentative plan to deal with the “terrible fiscal storm” that threatens to shipwreck city government. The new proposal relies on changes in the city's pension fund and a five-year sales tax. In a major victory for City Council, increasing property taxes has been removed from the budget plan. Instead of seeking a two-year increase in property taxes, Nutter will try to get state approval for a five-year increase in the sales tax from 7 percent to 8 percent. Combined with changes to the rules governing city's pension fund, the tax increase should prevent any major cuts in city services. The plan looks very similar to the alternative offered by City Council two weeks ago. However, instead of borrowing against future sales tax revenue, the city will defer a portion of the payments to the pension fund for two years. That will free up about $230 million in revenue. That money, plus interest, will be paid back into the pension fund during the final two years of the plan with revenue from the sales tax. Although the new budget plan represents a major political breakthrough, Mayor Nutter is not out of the woods yet. The state will have to authorize the sales tax increase and actuarial changes to the city's pension fund. If either is rejected by the state legislature, Nutter will be forced to make drastic budget cuts across city government. His plan also relies on $125 million in savings through contract negotiations with city workers, which is far from guaranteed. What do you think? Is this a good compromise?

Mayor Nutter and City Council announce compromise

0 comments

Flanked by ten members of City Council, Mayor Nutter announced a tentative plan to deal with the “terrible fiscal storm” that threatens to shipwreck city government. The new proposal relies on changes in the city's pension fund and a five-year sales tax. In a major victory for City Council, increasing property taxes has been removed from the budget plan.

Instead of seeking a two-year increase in property taxes, Nutter will try to get state approval for a five-year increase in the sales tax from 7 percent to 8 percent. Combined with changes to the rules governing city's pension fund, the tax increase should prevent any major cuts in city services.

The plan looks very similar to the alternative offered by City Council two weeks ago. However, instead of borrowing against future sales tax revenue, the city will defer a portion of the payments to the pension fund for two years. That will free up about $230 million in revenue. That money, plus interest, will be paid back into the pension fund during the final two years of the plan with revenue from the sales tax.

Although the new budget plan represents a major political breakthrough, Mayor Nutter is not out of the woods yet. The state will have to authorize the sales tax increase and actuarial changes to the city's pension fund. If either is rejected by the state legislature, Nutter will be forced to make drastic budget cuts across city government. His plan also relies on $125 million in savings through contract negotiations with city workers, which is far from guaranteed.

What do you think? Is this a good compromise?

0 comments
We encourage respectful comments but reserve the right to delete anything that doesn't contribute to an engaging dialogue.
Help us moderate this thread by flagging comments that violate our guidelines.

Comment policy:

Philly.com comments are intended to be civil, friendly conversations. Please treat other participants with respect and in a way that you would want to be treated. You are responsible for what you say. And please, stay on topic. If you see an objectionable post, please report it to us using the "Report Abuse" option.

Please note that comments are monitored by Philly.com staff. We reserve the right at all times to remove any information or materials that are unlawful, threatening, abusive, libelous, defamatory, obscene, vulgar, pornographic, profane, indecent or otherwise objectionable. Personal attacks, especially on other participants, are not permitted. We reserve the right to permanently block any user who violates these terms and conditions.

Additionally comments that are long, have multiple paragraph breaks, include code, or include hyperlinks may not be posted.

Read 0 comments
 
comments powered by Disqus
About this blog
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.

It's Our Money contributors

Tips? Comments? Questions?
Contact:

Holly Otterbein:
215-854-5809
hm.otterbein@gmail.com
@hollyotterbein

It's Our Money
Also on Philly.com
letter icon Newsletter