What exactly is a tax increase? Does a politician have to use those exact words before the rest of us can consider paying more in total taxes to the city as just that — a tax increase?
That was the question buzzing throughout City Hall after Mayor Michael Nutter said no new tax increases will be needed to pay for his proposed 2012-2013 budget starting July 1, yet the broken school district will still get $90 million in additional funding through tax revenue created through a planned revaluation of all city properties.
Nutter is also optimistic tax revenue from traditional sources like the business privilege and wage taxes will increase on their own in the year ahead.
"Our finances have begun to stabilize, tax receipts are beginning to grow modestly again, our unemployment rate is slowing coming down and businesses — large and small — are investing and creating jobs in Philadelphia, " Nutter said.
Banking on those continued successes, the proposed spending plan includes ambitious projects like a $20 million Love Park renovation similar to the current Dilworth Plaza overhaul and a new police headquarters in West Philadelphia.
"How it's characterized by whomever to some people is not relevant," Council President Darrell Clarke said of the additional tax revenue. "I expect that the people who will have to pay cash from their pocket to City Hall will consider it a tax."
Clarke did say that he was pleased with some aspects of the budget. "It's encouraging, in a sense – it appears that there are some signs of stabilization with the fiscal situation," he said, noting the lack of deep cuts. "But some of the revenue situations will be challenging for some of our members to be supportive of."
Jeers from unions in balconies
The balconies of City Council were packed with workers from AFSCME's District Council 33, the largest union of the city's blue-collar city workers. DC33 has been locked in a stalemate with the administration over a contract for three years.
Nutter entered the chambers to boos, stomping and chants of "Keep your word!". Similar outbursts regularly interrupted his speech, at times drowning him out.
During his address, Nutter identified employee health care and pension costs as one of the three major financial challenges facing the city – 68 percent of the budget goes toward worker salaries and benefits, he said, and the costs are growing at an unaffordable rate.
"I cannot sign a contract that does not deal with the long-term employee benefit challenges that threaten this city's future," he said. "We're in this position now because the can has been kicked down the road too many times. Well, I'm not going to kick it any further."
"We had a negotiation within the past couple of weeks and it didn’t go anywhere," DC 33 president Herman "Pete" Matthews said. "We saved the city quite a bit of money – hundreds of millions of dollars over past few years and the mayor doesn't want to put any of that money back into the budget for contraccts. The mayor wants concessions and we’re not ready to do that. ... We will be present at all budget hearings for different departments."
Here's a look at some of the other budget points:
- Major financial challenges: The school district budget gap, with $26 million left to close this fiscal year and an anticipated $150 to $400 million gap next year; state funding; and the salaries and benefits of municipal employees, which account for 68 percent of the city budget and are growing at an unaffordable rate, with the pension fund still only 50 percent funded
- Public safety overhaul: Hiring nearly 400 new police officers by the end of the next fiscal year; spending $6.6 million to renovate six police stations and 11 firehouses; and opening a new, state-of-the-art police headquarters that will be co-located with the city morgue and health offices at 4601 Market Street
- Business incubation: restart reductions in wage and business taxes that were suspended during the economic downturn next year; and enact the package of tax cuts and business-friendly measures passed by City Council in November
- Quality of life investments: $8.7 million to improve recreation centers; $7 million for neighborhood branch libraries over three years; $20 million for the renovation of LOVE Park to connect Dilworth Plaza with the Parkway; and creating a Traffic Operations Center to monitor traffic flow and adjust signals to respond to real time traffic movements.