Council mutters about Nutter's tax-increase plan

On Tuesday, Philadelphia City Council will begin listening to weeks of testimony from administration officials and department heads on the mayor's proposed $4 billion budget for the fiscal year that starts July 1.

It is Mayor Nutter's eighth and final budget, and here's a heads-up for any homeowners who missed the announcement: It contains the T-word.

The most controversial issue in the budget process is bound to be Nutter's proposed 9.34-percent property tax increase, which is expected to pump $105 million in new money to the struggling school district.

Raise taxes? In an election year, when all but one of the 17 Council members are on the May 19 primary ballot?

Little wonder Council's hearing on that part of Nutter's proposal is not scheduled till May 26.

That hearing and its outcome are crucial to the school system, which has built its own budget on the assumption it will receive the full tax-increase proceeds, along with a big injection of new money from Gov. Wolf's first budget - that is, if the Democratic governor can sell it to a Republican-controlled legislature.

Meantime, Council will deliberate how the city collects money and how it spends it.

First up on Tuesday is the five-year plan, followed by the capital budget on Wednesday, both of which focus on the city's long-term goals - and not incidentally, on projections that go far beyond the end of Nutter's term next January. Hearings on various departments and agencies are scheduled to run through June 2.

If history is an indicator, Council won't change much to what has been proposed in spending.

"Typically, Council doesn't look to remove some of our initiatives . . . it's about other things they may want to add," Rob Dubow, the city's finance director, said.

Council members usually get a few million here and there for pet projects, but for the most part, the budget is likely to resemble what Nutter has sketched out.

More money is proposed for libraries, more for parks and recreation improvements, for equipping police officers with body cameras and bulletproof vests.

But not much in the dense budget briefing books is new. Payroll, pension, and health-care benefits for city employees and retirees eat up nearly 70 percent of the general fund, leaving little wiggle room.

Council President Darrell L. Clarke said he would not comment on the hearings or Council's budget goals until Tuesday.

But Clarke did issue a statement Monday afternoon promising to "challenge city departments" via what he called "a new process of making and meeting budget requests that is designed to help Philadelphia achieve its most important policy objectives."

But some Council members said they would not wait till May to grill administration officials about why they want to raise taxes now.

"I will be raising the issue during [hearings on] the five-year plan," Councilman Wilson Goode Jr. said. "Why was the property-tax increase not in last year's five-year plan? Whether they anticipated the crisis or not?"

Goode called the proposal to increase the property tax rate more than 9 percent a "drastic" change to the city's financial outlook.

He said he plans to suggest modifying the 10-year tax abatement that Philadelphia offers for new construction and to explore other potential sources of revenue that do not include raising property taxes.

The proposed tax increase would be just for the schools. The wage tax, the city's greatest revenue generator, is still on its slow but sure schedule of reductions.

So, how will the city keep up with rising costs?

The reviving economy will help, Dubow said. He predicted steady growth in Philadelphia's "labor force and salaries" - 4 percent each year for the next two years, 3.5 percent the following three years - would churn up enough revenue to make up for the trimming of the wage tax.

But former Councilman Bill Green sounded a cautionary note.

"The biggest trap Council fell into in 2008 was taking administration's word on revenue numbers," Green said, recalling how, after that budget was passed, the administration had to make all sorts of cuts because the revenue projections were not what they expected.

As for raising taxes, it's a rare legislative body, whether local, state, or federal, that takes bold steps as reelection time nears.

David Thornburgh, who heads the nonpartisan watchdog group Committee of Seventy, put it this way: "A budget on an election year is not going to have the same focus and energy as the one next year."