On a 38-9 vote, the Republican-controlled Senate approved a bill that would allow the city to increase the sales tax from 7 percent to 8 percent, and also to defer $230 million in employee pension costs for two years.
Mayor Nutter, speaking to reporters atop a marble staircase in the Capitol, made it clear he didn't like everything in the bill (H.B. 1828), which differs from a measure passed by the Democratic-run House about three weeks ago.
But he declined to criticize the Senate's version, saying any objections he might have were offset by the city's need to begin to collect the $700 million in extra revenue the bill would provide over the next five years.
"My focus and my goal is making sure we get our $700 million in financial relief," he said. He urged House Democrats to concur with the Senate version and move the bill quickly to Gov. Rendell's desk.
Without the tax increase, Nutter said, the city within weeks would have to lay off 3,000 workers, close courts and two health centers, and cut back on trash collection. He said that every month of delay in getting the sales-tax hike costs the city $10 million.
Rendell, speaking later to reporters, said he agreed that any further delay in the bill's passage would only hurt the city.
The House isn't in session this week, but Rendell said: "We will ask the House to come in as quickly as possible - time is running out for Philadelphia."
House Democratic leaders indicated that House action was unlikely until next week. But no firm plan appeared to have been hatched as of last night.
Given the Democratic backing in the Senate and the support of Nutter and Rendell, House passage seems likely.
But Rep. Mark Cohen of Philadelphia, chairman of the House Democratic caucus, said he had serious doubts about the bill. "I don't think it's a very good bill, and I hope the bill would change before it passes," he said.
Leaders of the unions representing city workers have been unanimous in opposing provisions that might tie the city's hands in bargaining with them for new contracts, especially in terms of pension rights.
Senate GOP leaders, who had been negotiating with Nutter and his staff over the bill, insisted on the mayor's written approval of their version before taking their vote just before 5 p.m. yesterday.
In a letter to Senate Majority Leader Dominic Pileggi, a Delaware County Republican, Nutter wrote that "even though the bill now contains amendments that I neither requested nor advocated . . . I support this bill."
Pileggi said the previous House bill was only a short-term fix for the city's struggle to meet the mounting costs of workers' pensions.
The Senate version, he said, is a comprehensive plan that calls for the city to significantly cut the costs of pensions. If the city fails to act, it could lose cash it stands to gain from the tax hike, which expires in 2014.
Unlike the House bill, the Senate measure also addresses the underfunding of many municipal pension plans across the state. Some communities would also be allowed to impose new taxes. Some plans would be taken over by the state.
In Philadelphia, of the eight cents per dollar charged in sales tax, six cents would go to the state and two cents to the city. Philadelphia currently charges one cent per dollar above the state rate.
Nutter refused to discuss the specifics of pension provisions in the bill. He said he couldn't do so while the city was negotiating contracts with workers who would be affected by the bill, which orders a freeze of pension benefits for current employees.
Rob Dubow, the city's finance director, who accompanied Nutter to the Capitol, said he understood the freeze as preventing Philadelphia from granting new benefits to its workers. He said it didn't mean that workers would stop accruing benefits from additional years of service.
The bill says that by June 30 the city must devise a separate pension plan for new hires. The cost of this plan must be 80 percent or less of the current plan's cost. (A draft of the bill on Monday would have required a reduction to 75 percent of current costs.)
Most municipal workers in Philadelphia are permitted to strike. Police and firefighters are not. City contract disputes with those workers often end up in the hands of arbitrators. The Senate would require the city to go to court to fight any arbitration ruling that conflicts with the financial goals required in their bill.
Though the city would get to defer $230 million in contributions to pension funds over the next two years, it would have to pay the money back in 2013 and 2014 at a high annual interest rate - 8.25 percent.
Dubow said interest charges would cost the city $65 million in total. The extra cash from the sales tax would be used to cover it.
The city would be required to put money into pension funds to cover underfunding from many past years. But it would be given 30 years to do so, not the 20 years planned at present.
The bill also requires that future elected officials be excluded from the controversial Deferred Retirement Option Plan.
See how senators voted at http://go.philly.com/pasenatevote
at 610-313-8205 or tinfield@phillynews.com.
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