Clarke again key to City Hall compromise

Last year, when the city was scrambling to plug a giant hole in the School District budget, Mayor Nutter proposed two unpopular solutions — a soda tax and a 10 percent property-tax increase.

Darrell L. Clarke, then Council majority whip, quietly introduced a third option with a smaller property-tax increase. Council eventually supported a version of his plan.

"Nobody paid any attention," Clarke said Thursday. "But at the end of the day, it ended up being the vehicle to get funding for the School District."

This year, the city is searching for more school money again, and Nutter has proposed another option that Council has found difficult to swallow — collecting $94 million more in the changeover to a new property-tax system.

Clarke once again has softly entered the debate with a series of tax bills that could be the basis for compromise. (It doesn't hurt that he has ascended to the Council presidency.)

"As part of the budget process, what you have to do is put as many options as possible on the table," he said. "We're approaching a real deadline. We're going to have to make a decision in the next several days."

Council has scheduled a hearing Tuesday on 16 budget bills, and members will have to begin moving them soon to make the June 30 deadline to pass a budget.

Clarke's proposals come with the added bonus of giving Council the leverage it has lacked over how the School District would spend any extra money.

The district is state-run, and the governor appoints three of the five School Reform Commission members. Although the mayor appoints two members, the city has no official authority over how the district operates.

Last year, Nutter forced the SRC to sign an "education accountability" agreement that gave the administration more information and a greater voice in how the schools would be run.

The administration now praises its working relationship with the district. Council members, however, still complain about having no authority over the schools, and several have said they felt "burned" by last year's process, when they were told the state would roll back cuts if the city kicked in more money.

Although the state restored some grant money, it did not return any basic education funding.

One of Clarke's bills would raise $40 million from real estate taxes. That money would not go directly to the schools; it would go to the city and would be passed to the district through some mechanism, most likely as grants.

That gives Council the ability to say how the money should be spent, although Clarke rejected the idea that Council would be "dictating" priorities.

Clarke said members were drafting a formal "list of concerns and measures they would like to see a commitment to."

"I would like to characterize it as having an understanding as to how [the money] was going to be spent," he said.

City Finance Director Rob Dubow had been set to give the administration's view of Clarke's proposal at a hearing Thursday. Although that hearing was moved to Tuesday, Dubow's written testimony was available.

In it, Dubow said Clarke's plan would add another budget step for the district, which "could complicate" its annual effort to borrow cash.

"Moreover, the district may not be able to formally account for the receipt of this revenue in their budget documents, which could further exacerbate their financial situation," Dubow wrote.

Clarke's other bill would raise $45 million through the use-and-occupancy tax on businesses — that money would go directly to the schools.

Councilman Bill Green also has proposed raising that tax, but he has suggested collecting $94 million more. That would allow the city to collect the same amount in property taxes this year as last and still meet the mayor's revenue goals.

Green has argued — and the administration has acknowledged — that the change to a property-tax system based on actual market value would shift some of the tax burden from commercial and industrial properties to residential properties.

The proposals from Green and Clarke would mitigate that shift to varying degrees.

The Greater Philadelphia Chamber of Commerce has not yet taken a position on either suggestion. Council members privately say they've heard displeasure from the business sector, and they're concerned that commercial landlords would raise rents to pay for any tax increase.

That could position Clarke's proposal — and its lower tax increase — as the more palatable of the two.

Taken together, Clarke's two bills would raise $85 million for the schools — less than Nutter's goal. (He introduced companion bills that would raise the same amount if the city didn't switch to the actual value property-tax system.)

Ever willing to compromise, Clarke said he was not stuck on the $85 million.

"The numbers are not necessarily fixed."