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Guv sez: Drop Dead, Mayor sez: Keep smilin'
Sub-Headline: Sorry, Can’t Really Sugarcoat This Stuff Folks.
There’s no doubt that Philly’s in a heap of trouble from budgets being torturously made, as we speak, in Washington, Harrisburg and Philadelphia. It seems we’re assured of two years of bad news, first from service cuts, then from tax increases on working people and homeowners. With a little bit of bad luck we could face a mix of both. The moral? We’d better organize ourselves a lot better than we did in 2010 if we don’t want a third and fourth year helping of the same thing. And also, if you pass a corporate exec in the street, keep your hands in your pockets.
So here’s what’s coming. First, we have a governor who may not actively desire that Philadelphia drop dead, but doesn’t really care that much one way or another. All that counts to him is being sure the Tea Party knows the kind of tax cutting, big government hating, 19th century Republican he is. So he intends to drastically cut School District funding, and, as of now, to cut $14 million or so from funding to the City.
Second, we have a Mayor who is in full denial mode, and would like you to join him there in that happy place. But what he’s actually thinking behind his smiley face is that he has a tax increase in store for you next year – especially if you’re a person of modest means - and he expects that you’ll learn to love it.
Let’s look at some details, starting first with what dear Governor is sending our way. According to the Inky, Corbett’s proposed cuts for the next fiscal year look like this:
• $7.5 million less for the city's Department of Human Services, specifics to be determined.
• A $2.4 million cut in the Human Services Development Fund for homelessness.
• A $2.3 million reduction in Human Services Development Fund money for HIV prevention, lead abatement, and services at city health centers.
• $1.9 million less for after-school and summer youth programs.
The projected School District cut is $202 million, or fully 10% of its budget. Temple is facing a 50% cut in state aid, and Community College 10%, mild only by comparison with Temple. The rumor mill has it that the General Assembly may cut state welfare funding further as a way to limit Corbett’s proposed cuts to state-related colleges. That would hit the City’s Department of Human Services hard (though it might soften the blow to Temple.) At the federal level, the budget that passed the U.S. House a few weeks ago would impose 148.9 million in cuts to Philadelphia including a $36.5 million reduction in CDBG funding.
So that’s the tsunami that’s headed our way from Harrisburg and D.C. for the upcoming fiscal year. On the local front, the Mayor has had virtually nothing to say on how the City will deal with the challenges coming from the capital city twosome. And we have a new problem coming in the following fiscal year, the one starting July 1, 2012, to which he’s also applying the silent treatment. That’s when the “temporary” 10% real estate tax hike passed last year by City Council will expire. That tax increase is worth about $86 million per year. Overall City tax revenues have been growing, but not enough to compensate for the loss of $86 million. A loss of $86 million starting next year translates into a loss of about $345 million over the life of the new Five Year Plan. But in the face of that shortfall, the Mayor delivered a budget address to Council that was all smiles. A no tax increase budget proposal he actually called it.
Why all the happy talk? Well, first he has his Finance Director talk about the cuts coming fom other governments the way Charlie Manuel first talked about Chase Utley's leg problem. It's just a little thing, we'll handle it. Next subject. (Oh, and subtext: Temple, the School District, Community College, they will all have to take care of themselves.)
Then the Mayor quietly let's it be known that he’s found a way to raise money “painlessly” to make up for the real estate tax problem. His method is a previously tried and tested one: have the body that sets property values (previously the court appointed Board of Revision of Taxes, but now the Office of Property Assessment (OPA), headed by a mayoral appointee) simply raise the assessed value of real estate in the City. Higher assessments equal higher revenues if the tax rate is not changed.
The Administration’s view is that regardless of whether this practice was a bit sleazy in the past, there’s nothing wrong with it now. In its opinion, assessments have been essentially frozen over the past half decade or so due to chaos at the Board of Revision of Taxes. So now it’s simply time to catch up. Furthermore, the Mayor plans to ditch the arbitrary old assessment system, and put a scientifically valid, new system in place that will be fair to everyone. As a bonus, this system will find real estate values have gone up so much they will not only replace the City revenues lost from the expiring tax increase; they will also produce another $120 million annually for the School District.
Now all of that may have you scratching your head because you’ve been hearing something about a housing crash which has actually cut housing values in the City. But apparently the City Finance Director, Rob Dubow, disagrees, and he says values are way up. Since the Mayor appoints both Dubow and the OPA Director, you probably have a pretty good idea whose idea of property values is going to be reflected in your future tax bills. Get ready for a 10% increase in 2013 on top of the one you started paying this year.
Real estate taxes aren’t the only ones that are poised for what you might call an “adjustment.” A bill has also been introduced on behalf of the Mayor that would rescind the wage tax cuts that are now scheduled to phase into effect over the next few years. And that same bill would postpone for three years the larger wage tax cuts that are now slated to go into effect for low wage workers in 2014.
So taxes on workers and homeowners will go up under the Mayor’s proposed budget, and rents probably as well. But guess whose taxes the Mayor would still cut while the already financially stressed-out would be asked to pay more and more? Sure enough, it’s business. Before the bottom fell out, the Business Privilege tax –- a two part tax on net income and gross receipts -- had been amended to provide for the phase-out of its gross receipts portion. That was postponed in 2009. But now the Mayor says those cuts will go ahead as currently scheduled.
So here’s the deal. No smiley face here. The State’s planning to whack us. The feds are planning to whack us. And the Mayor, well he’s getting ready to slap us on both cheeks. First he’s going to pretend that there is no fed/state funding problem. Just a few little cuts here, friend; the band aids are comin’. Then he’s gonna increase your real estate tax, and not cut your wage tax. And at the same time, he’s gonna see to it that corporations, big and small alike, do get to pay less. With luck the pain won’t be so bad because all of this will result in preserving whatever City services are left this year in later years. Hopefully, you’ll still have enough after taxes to keep your lights on. And, if nothing else, maybe Comcast will send you a thank you note for paying its taxes with its next rate increase.