Council advances Nutter's cigarette tax

With about a month remaining to pass a budget, Philadelphia City Council started moving a flurry of bills through the legislative mill Wednesday, including Mayor Nutter's proposal to create a $2-a-pack cigarette tax to help fund the financially-struggling schools.

Council President Darrell L. Clarke called the cigarette tax an "extremely important" part of filling the School District's $304 million budget gap.

That tax, as well as Nutter's proposal to raise the liquor-by-the-drink tax from 10 percent to 15 percent, requires permission from state lawmakers. Enabling legislation has not yet been introduced in Harrisburg, and some key Republican lawmakers have expressed skepticism about giving new taxing authority to Philadelphia.

Council did not vote on the mayor's liquor bill Wednesday. Clarke said there were concerns about how well the liquor-by-the-drink tax is collected now.

But Clarke said he would join Nutter and School Reform Commission Chairman Pedro Ramos in a letter urging state lawmakers to approve both new taxes, which he called "much-needed revenue opportunities."

Nutter is counting on the taxes as part of a plan to raise $95 million in the fiscal year starting July 1 for the School District, which is also seeking state money and union concessions.

Council's only other option to help the schools is a bill, sponsored by Councilwoman Maria Quiñones Sánchez, to increase the Use and Occupancy tax on businesses. The business community has strongly opposed that hike, which previously was passed out of committee.

Council on Wednesday also gave preliminary approval to a competing bill from Nutter that would set the Use and Occupancy tax rate to collect the same amount next year as this year - about $114 million.

In all, Council's Committee of the Whole had 20 bills on the agenda and moved six. Some bills were uncontroversial, such as the administration's two capital budget bills.

Council also gave preliminary approval to a bill, sponsored by Clarke, to cut the wage tax incrementally over the next two years. Nutter wants to slash the wage tax over the next five years, with the bulk of the reductions in the final three years.

Clarke said there was too much uncertainty in the city's finances to commit to a five-year plan.

The last bill approved out of committee Wednesday requires the Office of Property Assessment to make information available about how properties are assessed. The bill also would give Council the right to hire a firm to audit the city's work.

For months, Council members have been questioning the accuracy of the Actual Value Initiative (AVI), which is key to Nutter's property tax reform effort.

OPA's chief assessor, Richie McKeithen, said he supported "the intent of the bill," but asked for some amendments. Clarke said he was willing to work with him to make those changes.

All six bills will be given their first reading at the next full Council session, on Thursday. There are only three more regular Council meetings scheduled before the summer recess on June 20, and the members must pass a budget before the end of the fiscal year on June 30.

Among legislation that did not get a vote Wednesday were a number of bills designed to ameliorate the affects of AVI, which has been the dominant and most controversial budget topic for two years in a row.

A bill from W. Wilson Goode Jr. to alter the 10-year tax abatement on new construction was not considered. The program was credited with sparking a real estate boom in the last decade, but has become more controversial with the shifts in the tax burden from AVI.

The bill initially would have reduced the abatement to five years and phased out the abatement over those years. Goode amended the bill Wednesday to keep the abatement at 10 years but cap the assessed value that can be exempted on residential properties at $250,000.