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Philadelphia expects to end fiscal year $31M in the red


City "not as deep" in fiscal woods as last year

One year after Mayor Nutter announced the closure of fire companies, pools, and libraries to fight a financial crisis of "incredible proportions," his administration announced yesterday that Philadelphia will face a $31 million deficit unless further reductions are made next year.

City Budget Director Stephen J. Agostini and Nutter's chief of staff, Clay Armbrister, outlined for City Council yesterday the ingredients for the newest alarm, which include faltering wage-tax revenues, expected state revenue that never materialized, and costs expected from new casinos.

Agostini has already asked department heads to slice their spending by 7.5 percent next year as he prepares to present a 2011 budget to Council in January or February. Agostini would not say how the city would close the deficit, though he said he was monitoring every hire, trying to avoid taking on long-term costs.

Some cuts could come before the budget is passed in June.

This mini-crisis is not as grave as the forecasts at this time last year, when the city had to erase a $108 million deficit in last year's budget.

The branch libraries were never closed after City Council members prevailed in a lawsuit. Some pools were opened this summer.

"We're not as deep in the woods as we were last year," Finance Director Rob Dubow said.

"But we're not out of the woods yet," Armbrister added.

The deficit could deepen, however, if the city does not achieve the $125 million in annual savings it projects from its employees for the next five years, including this budget year, which is more than one-third gone.

That includes the four municipal unions whose contracts are being negotiated, as well as nonunion employees.

First, the good news. Real estate transfer tax revenues - reflecting activity in property sales - are expected to exceed estimates by about $20 million. At $105 million, they would still be far down from the $236 million revenue peak in 2006-07.

Agostini said sales were coming from the high end - where buyers are scooping up luxury properties on the cheap - and the low end, where the $8,000 federal credit for first-time home-buyers is making a difference.

In addition, business taxes for the year ended June 30 came in $20 million higher. Agostini credited that to a stronger-than-expected performance by large local companies.

The city will save an additional $4.7 million in restructured debt service for the football and baseball stadiums.

But the $44.7 million in additional revenues this year is more than countered by nearly $76 million in bad news.

The factors involved are:

Wage-tax revenue is expected to fall by $50 million for each of the next two years.

The state budget provided $5 million less than the Department of Human Services planned for. The city budget also assumed the state budget would include a $10 million state police grant; it did not.

Division of Technology expenditures totaled $5 million just to keep systems functioning.

Costs of $5 million, mostly for police, for two new casinos, particularly SugarHouse Casino, which is to open next year. These costs do not factor into this year's budget woes, but are part of five-year projections. It is the first time the city has budgeted for expenses for the casinos.

Police Department spending is $4 million over budget, mostly for overtime.

A $2 million state check intended for the relocation of Fire Department Engine 38 in Port Richmond was mistakenly deposited in the operating revenue account instead of the capital account, so officials thought they had that $2 million to spend on operations.

Falling prices for recycled materials, along with a falloff in projections for the tonnage collected, reduced revenue estimates by $1.5 million this year. Councilwoman Donna Reed Miller suggested that the falloff could partly be blamed on people collecting recycling material out of bins at the curb as a way to make money.

The city needs an additional $175,000 this year and $350,000 in each of the next two years to fund staff and software costs so that it can track and pursue stimulus funding, Agostini said.

 


Contact staff writer Jeff Shields at 215-854-4565 or jshields@phillynews.com.

 

Comments   
Posted 07:18 AM, 11/10/2009
riogrande1
THE CITY CAN CUT "GOVERNMENTAL WASTE" BY ELIMINATING THE 7 COUNCILMANIC AT-LARGE SEATS..THE D R O P PROGRAM, CUT CITY COUNCIL AND ALL HIGH RANKING EMPLOYEES SALARIES INCLUDING THE MAYOR BY 25%. ELIMINATE THE USE OF ALL CITY VEHICLES AND GASOLINE FOR NON-ESSENTIAL USE.
Posted 07:40 AM, 11/10/2009
BushisGood
I would hope it's less than last year, you close pools,firehouse and cut hours at library's. Still not enough,cut more I can't pay anymore taxes,I am glad Obama is not added any new hidden taxes,that was a joke.Septa will go up, city 1% make it stop.......Vote Democrate
Posted 08:04 AM, 11/10/2009
krautmef
I'm with riogrande1, but they won't do anything that might cut their own wealth, their in politics for themselves not the people they serve.
Posted 10:18 AM, 11/10/2009
CleanupPhilly
How can one write an article about the city's fiscal status and not include property tax revenue? It's likely 20% of the city's total budget picture. Revenue from property taxes far exceeds the real estate transfer tax, or some of the business taxes to the city. There is still about $400 million left in overdue property taxes that have not been collected, and there was the suggestion that the city has gotten tough on real estate tax delinquents by certifying certain accounts for sheriff sale and forwarding others to a new private collection agency. What is the projected revenue from those efforts? We can't simply omit a whole line item in the city budget, especially when every owner pays real estate taxes every year, or is supposed to. It's a huge oversight on the part of the paper, and my question is why is this self-censorship the unstated editorial policy at the paper? It's bizarre at best.
Posted 10:18 AM, 11/10/2009
nebulus
If DHS did not get $5 million from DPW then the city should not be spending that money and making up the difference out of general funds. Based on DHS's own data the number of children in foster care is down, the number of families receiving mandatory services - those required by state rules - is down, and the number of reports of abuse/neglect is down. Why did DHS need this money from DPW? Why isn't DHS reducing staff? ---- Over half of the $31 million hole could be eliminated with some of the suggestions mentioned here plus the $5 million from DHS, plus the one measure Nutter can take without negotiation, changing the health benefit contributions from all elected officials and their staff and the city employees who are NOT represented by a union (40% of city workforce) a $25 per month increase yields about a $3 million year saving.
Posted 10:20 AM, 11/10/2009
CleanupPhilly
One of the reasons the city's fiscal health is not as poor is because it has gotten real about overdue property taxes. But the city is far from a fair, clear, transparent policy on property tax collection. Some properties are in the hands of private collectors, some are not, and what are the criteria? The public has a right to know, but first we have to persuade the press to even cover overdue property taxes. What city has two papers that simply omit that the city is owed hundreds of millions in overdue property taxes, a $1 billion in forfeit bail, and the like?
Posted 10:24 AM, 11/10/2009
CleanupPhilly
You don't have to omit the "at-large" seats to reduce City Council's size. You can consolidate districts. But this not the biggest cost or cost driver in city government. The spending the city does on social programs is by far and away the largest, and often this spending is duplicated and redundant, and very poorly accounted for. As you can see from the article above, the city can't spend stimulus money because they are wholly unable to handle the accounting required to track it. The simple softeware on every home computer the city doesn't use, so it has to get licenses to use this stuff, and then train the staff, yadda yadda. So how well do you think the city is spending what it is spending now? What the city wastes is the stuff it doesn't account for, and no one wants to ask where that spending is, and how to plug the leaks.
Posted 01:32 PM, 11/10/2009
arvcondor
A year in and still all these guys can propose is across-the-board cuts. Pathetic.
Posted 07:39 PM, 11/11/2009
PhillyS1980
HEY, the Trash Folks empty Recycle Bins into their trucks, before the recycle trucks arrive. Don't blame people on the street for picking up aluminum cans here and there.
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