Mayor-Council budget fight could lead to split

In the three weeks since Mayor Nutter formally proposed a budget packed with tax increases, deep fault lines have opened up between him and his former colleagues on City Council.

The rupture is conspicuous in the debate over tax policy, in Council attacks on the administration's priorities, and in sometimes angry dueling over the spending by their offices.

"This is the most divided Council and executive branch that I've ever seen," said Councilman Frank Rizzo, an at-large member for more than 13 years. "I've never seen a Council so geared up to snipe at an administration."

There have been public flashes of personal animosities between Council members and Nutter aides. But these are peripheral to the deep rifts between the mayor and many Council members on which taxes to raise and, to a lesser extent, which cuts to make to close the city's $1.4 billion budget deficit.

Some Council members now say they may write their own budget - one likely to favor raising the wage tax instead of property and sales taxes - and dare the mayor to veto it.

Others say the high-stakes negotiations risk running off the rails altogether.

At minimum, no compromise is on the horizon.

"I think the sides are very far apart, and it's getting to the point where things are a little chaotic, frankly," said at-large Councilman Jim Kenney, one of Nutter's few remaining allies on Council. "I think there is an effort to have an anti-Nutter budget at any cost."

Nutter spokesman Doug Oliver downplayed the differences, saying they were simply part of the budget process.

"One of the things we want to do is knock down the idea that this is a fight between the administration and City Council. We don't view it that way," Oliver said. "These are unusual times, and there are heightened stakes, so there is bound to be disagreement."

The administration anticipated difficult budget negotiations. Nutter's budget and five-year plan call for a temporary 19 percent increase in property taxes and a three-year penny-per-dollar increase in the sales tax.

Neither proposal is popular. But the property-tax measure has most enraged Council members, who say their constituents fiercely oppose it. Why not, they ask, raise the wage tax instead?

Not a chance, Nutter says. He argues that a wage-tax increase would cost jobs and hurt the economy when the city can least afford it.

Most Council members oppose higher property taxes just as strongly. They say the increased burden would fall too heavily on those who can least afford it, such as poor and elderly homeowners living on low or fixed incomes.

"This budget really socks it to our most needy, and we want to find a way to have everybody share in the pain," said Councilman Bill Green, a Nutter critic.

A clear Council majority would prefer a budget that instead raised wage or business taxes, saying that would spread the burden more broadly.

Nutter has numerous studies and academic research backing up his contention that raising the wage tax is a bad idea.

But Council isn't buying it. A temporary wage-tax increase would do no more economic damage than a temporary property-tax hike, members contend.

"You can get experts to say whatever," Councilman Darrell Clarke said. "You can talk to an expert who'll say the wage tax should be on the table."

The Nutter administration has also made the case that raising the wage tax would damage the city's relationship with state legislators.

Philadelphia's share of state gambling revenue is, by law, dedicated to reducing the wage tax. Raising that tax might lead lawmakers to take away the city's share, Nutter officials said.

Council calls that a red herring.

Members note that the gaming law authorizes municipalities to raise taxes when revenue dips more than 2 percent. They say Harrisburg does not care which tax Philadelphia raises, as long as the casinos are built.

Now that Nutter has thrown his support behind casino construction, many on Council say they think state lawmakers will drop their objections to a wage-tax increase.

State lawmakers have said little publicly. Last week, however, Sen. Jay Costa (D., Allegheny), minority chairman of the Senate Appropriations Committee, released a statement that a wage-tax increase would not be "good public policy."

That struck Council as a fairly tepid remark.

State lawmakers "understand this is a local political issue. If they thought Philadelphia would be in real jeopardy if we raised the wage tax, in my view they would say so clearly," Green said.

On top of the substantive disagreements over tax policy and spending, many on Council are annoyed at Nutter's attacks on their perks, specifically their city-issued cars and the controversial retirement program, DROP.

As he introduced his budget, Nutter asked each Council member with a city car (several do not have one) to turn it in. He also proposed legislation to ban elected officials from participating in DROP beginning next year.

"I think the fact that he challenged us and threw us under the bus so many times around these petty issues has really united Council," Councilwoman Maria Quiñones Sánchez said.

Though she says she remains hopeful a good budget will emerge from the process, Quiñones Sánchez said she thought Nutter had adopted a high-handed tone in his public negotiations.

"I have never been called immature so many times in my life as I have in the last four months by my mayor," she said.

Nutter never meant to "incite this type of furor" when he raised the issue of Council's cars and DROP, Oliver said.

He said the mayor had sharply reduced take-home vehicle use in his own office and at the city departments he controls directly.

It remains early in the budget process, and a compromise is certainly possible. But Council members are not optimistic.

"It's going to get a lot worse before it gets better. If it gets better," Rizzo said.

In a first, Council President Anna Verna is looking to hire professional budget consultants. And next week, Council is expected to introduce a resolution directing the city to verify that tax collections have dropped more than 2 percent, meeting the threshold set by state gaming law to raise the wage tax.

Several Council members called those moves initial steps toward creating a rival budget.

"If they go down that road, then it's their budget," Kenney said. "They'll own it."