This week, City Council began the city’s annual budget hearings. The budget process begins with the Mayor’s budget address, typically given at the beginning of March, and goes through the entire spring session of council, culminating with passage of the budget in June.
Once passed, the budget takes effect on July 1st, the beginning of the fiscal year. Each year, there seems to be certain themes that emerge throughout the process. This year, we expect to hear about the ongoing violence epidemic in the city, property assessment issues, and how the budget surplus should be used.
Budget hearings are usually held twice per week and divided into two sessions, one in the morning and one in the afternoon. This week, Monday’s hearing was dedicated generally to the Administration, and Tuesday’s hearing was the city’s financial departments.
Monday
A key concern of Council President Darrell Clarke is the continued funding of the Neighborhood Preservation Initiative, a $400 million program funded by the issuance of municipal bonds. The plan calls for the city to borrow $100 million in four successive years to fund the program. Currently, the city has borrowed $200 million.
Clarke is urging the city to borrow the third traunch of the $400 million early, so as to ensure the program remains funded regardless of how the incoming administration views the project. The drawback from the administration’s point of view is the yearly fees associated with borrowing. If the money is borrowed but remains unspent, the city will be paying between $7-9 million in fees for money sitting in a bank account.
Tuesday
Day Two of the budget hearings proved to be a little more lively, as council members focused on taxes and the Office of Property Assessment (OPA).
Regarding taxes, council seems to have a mixed opinion on the reductions proposed by the administration. Some members feel tax reductions send the right message to the business community, while others question the effect reductions have on smaller businesses.
The current Five-Year Plan calls for steady tax reductions throughout, with cuts beginning this year. City Finance Director Rob DuBow said reducing the Business Tax (BIRT) and the Wage Tax makes the city more competitive and helps attract jobs, as opposed to when the city was raising taxes.
“(Raising taxes) cost us tens of thousands of jobs,” DuBow said. “We also know the Chamber (the Philadelphia Chamber of Commerce) was really supportive of the decreases last year and said that would be really important in terms of attracting and retaining businesses.”
However, other council members were skeptical of the tax cuts having a truly positive effect.
Councilmember Kendra Brooks explained how the BIRT tax cut would cost the city over $75 million in the next five years.
“This is 75 million that we cannot spend to protect our school children from expenses to clean our streets and to combat violence in our neighborhoods,” Brooks said.
Brooks also questioned the wisdom of tax cuts that seem more likely to benefit larger corporations like Comcast, rather than smaller businesses across the city.
“But most (of the BIRT tax cut) is going to mega-corporations like Comcast who stand to gain hundreds of thousands of dollars in tax cuts, while most small businesses will only get a few dollars,” Brooks said.
Brooks also raised concerns with the Wage Tax cuts, explaining that the average worker saved 75 cents per paycheck while the wealthiest Philadelphians kept thousands of dollars per year. The proposed cuts in this year’s budget and Five-Year Plan will likely cost another $75 million in revenue.
Councilmembers Jamie Gauthier and Cindy Bass vigorously questioned the Office of Property Assessment regarding last year’s property assessments and the methodology employed to develop the assessment formula.
Gauthier raised concerns regarding inconsistent assessments in Black and Brown neighborhoods, particularly her own Third District.
“I see Third District neighborhoods of color getting assessed much higher than other comparable neighborhoods of color and other parts of the city,” Gauthier said. “My district is 75%, black, and saw the most homeowners with assessments that went up by more than 50%”
Gauthier called for identifying racial bias in the assessment process.
Councilmember Cindy Bass went a step farther, calling out OPA for not having a sense of urgency when it was realized Black and Brown communities seemed to be facing higher assessments than their non-Black and Brown counterparts.
“I want to say it’s a problem, but it’s way bigger than being a problem,” Bass said. “It’s a mindset. It’s a culture that has displaced a lot of folks in the city of Philadelphia.”
Bass called for more action on the matter, telling the Administration that all councilmembers are hearing about assessments from their constituents, inviting the Administration to go door-to-door with her in the 8th Distrcit.
The Adminstration cited relief measures available to city residents, and broke down particpation in each program:
Homestead Exemption: 234,790
LOOP (Longtime Owner-Occupant Program): 14,187
Senior Citizen Tax Freeze: 19,066
Many of the themes that developed in the first week of budget hearings figures to return throughout the process, particularly with the city revenues exceeding expectations. This will likey be a lively process. Hall Monitor will bring you the key information each week.
