Pew: Raising taxes and cutting costs helped Phila.recover

PHILADELPHIA When it comes to postrecession recovery, Philadelphia is in the middle of the pack of large cities, according to a Pew Charitable Trusts report released Monday.

While the city was almost near full recovery in 2011 - the last full year of data used for the report - Pew researchers warned that Philadelphia's unfunded pension and retiree health benefits posed great threats to the city's available revenue in years to come.

The report, "America's Big Cities in Volatile Times," was based on data from 2007 through 2011 and looked at how the country's 30 most populous cities fared in the aftermath of the recession, which ended in June 2009.

By 2011, Philadelphia was nearly at its prerecession revenue peak. Philadelphia and Baltimore were both 2 percent below their 2007 peaks. Sacramento, Calif., was the lowest of the 30 cities, at 75 percent recovery from its 2007 peak, and Portland, Ore., was the highest, at 110 percent recovery by 2011.

"That more than two-thirds of these cities hit their revenue lows in 2010 or 2011 after the recession's end suggests that their fiscal challenges could continue in the years to come," according to the report.

Philadelphia was able to better recover by raising taxes and cutting costs in 2010, according to the report.

"Still, underfunded retirement obligations remain a concern for city finances," the report says, citing $1.8 billion in retiree health-care liabilities and $7 billion in pension funds as of 2010.

The Nutter administration has been saying the same thing for years.

The city's 2012 Comprehensive Annual Financial Report, released in February, says "the largest and fastest growing expenditures in the city's budget include employee health and pension benefits." Employee benefits and pensions accounted for 29 percent of proposed budget expenditures in 2012.

City Controller Alan Butkovitz said Monday that the city's tax and business revenues were steadily increasing and that the city was doing well.

"It looks like Philadelphia is robustly recovering from recession," he said.

While he did not have exact figures, Butkovitz said, the city has increased its revenue in recent years.

Butkovitz, who has criticized a five-year plan that projects a cushion of only $8.5 million, said he was confident city officials were making smart decisions to fund the pension. He cited the mayor's plan to sell off the Philadelphia Gas Works and Council President Darrell L. Clarke's plan to use half of the extra 1 percent sales-tax revenue to go toward the pension fund, an idea that still awaits approval from Harrisburg.

"The underfunded pension crisis has moved to the front burner this year," Butkovitz said.

In a news conference call Monday, Pew's director of state and local fiscal health, Kil Huh, offered this advice to all cities still recovering from the recession: "First step is to pay your bills each year."

By 2011, Philadelphia was

2%

below 2007 pre-recession revenue peak vs.

25%

below for Sacramento, Calif.

10%

above for Portland, Ore.EndText