Doron Taussig and Tom Namako at the City Paper put together a cover story (as of last Thursday) that takes the form of a to-do list addressed to Mayoral presumptive Michael Nutter. Great minds think a like apparently as their article hit some of the same marks as my post about the future of Philadelphia’s economy and Michael Nutter.
One point they hit that really seems worth emphasizing is the renegotiation of city worker contracts that will occur next spring. The lines have already been drawn in that battle: the city will not have a whole lot of money to spend on all its needs and city workers don’t want to make any more concessions on health care.
The CP article describes the coming conflict efficiently:
Within five years, the city of Philadelphia will be spending more than one of every four of its tax dollars on what used to be called 'fringe benefits'" — pensions and health care. You can't afford to maintain this rate, and if you don't win some concessions, your hands will be tied by budgetary constraints for your entire first term. But the unions have said they don't intend to accept any benefit cuts — good bennies are practically the point of a public-sector job — and the last thing you want in your first half-year is a public-sector strike that shuts down the city you promised to make work better. The situation is so dire that it's been compared to what Gov. Ed Rendell faced when he first took office, when Philly was on the verge of bankruptcy...One other thing worth mentioning here: Philadelphia's public-sector employees' generous health and pension plans are not necessarily a bad thing. The City of Philadelphia is the biggest employer in the city of Philadelphia. It behooves you to keep 27,778 public employees and 33,500 retirees comfortable.
The authors go on to list a number of other important priorities including violence, addressing prison overcrowding, SEPTA, DHS, ethics, and of course tax cuts:
There are two changes to the city's tax structure that you've backed. One was reducing the business-privilege tax (BPT), a move you tried to make while on council until Street vetoed it. The other is reassessing property taxes, so that properties are assessed according to what they would sell for if a For Sale sign went up today, rather than decades ago.
Now that you're mayor, it would appear that these proposals' time has come. But two things could stand in their way: those upcoming union negotiations, and City Council. There's only so much money the city has to spend every year, and this year, the unions get a shot at it first. If they persuade you to spend more money on them, says tax advocate Brett Mandel, it might be hard to cut business taxes....Passing the BPT cuts, at least, seems doable: It takes nine votes to pass a bill, and eight of the members who voted in favor of cutting the BPT in 2004 remain on council. That means you need to persuade just one of possibly four new council members: Bill Green, Maria Quinones-Sanchez, Curtis Jones or (maybe) David Oh to back the idea. Take them to dinner, compliment their outfits, give them some money for area recreation centers — you remember how this is done, right?
I am somewhat biased in this conversation as I now dating a city worker (well, I have always been dating him, but Joel just became a Library trainee). Aside from the income he brings into our household, his job is important to me because it provides me with healthcare (yea domestic partnership!). I gotta tell you, I really don’t want him to lose his job. And I think you all know how I feel about business tax cuts.
Looking at the situation objectively though, and I guess this is what is what I was trying to articulate in my earlier post about Nutter and the economy, the contract fight is a great opportunity to dissect our collective priorities for the expenditure of city funds.
Do we as citizens and voters support job and benefit cuts for city workers if the money saved will go toward something that enhances our economy and creates a net gain of jobs? Is that really the choice that will be presented to us? What value and services do we as citizens get from city workers?
Messing with the livelihood of the largest pool of employees in the city is a BIG deal. Seems to me like we as a general populace need some tools to better understand what is going on.
As the CP article points out, and as many folks here have pointed out, Michael Nutter has a lot of problems to deal with when he becomes Mayor, and he won’t be able to address them all right away. In that context it is up to us to set expectations accordingly and begin to articulate which things are most important to deal with first, and be able to explain why.
That starts with identifying the issues that will be forced to the forefront (probably this one and and gun violence would be my guess) and all of us (on and offline) listing our priorities beyond those.
Room for compromise on the BPT
Back in February -- ah, those heady days -- I wrote this about Nutter's efforts to reduce the BPT as a councilman, and his proposals as a candidate:
Elsewhere, Councilman Goode wrote that he helped bring Nutter to his current position on the BPT, both by putting pressure on the votes and through give-and-take in conversation.
What's most likely is that a similar process will happen again. The BPT debate will largely be about the pace of the cuts. But first, Nutter will have to do three things right away. He'll have to renegotiate the union contracts; he'll have to change the policing strategy and hire more officers; and he'll have to deliver on his claim that he can produce savings/efficiencies in the existing government. (Overhauling city recycling would be a great place to start -- it's the only place where expansion can actually lead to more savings.)
The current gradual reductions in the wage and gross receipts business tax will continue -- and I think this is a good thing. But, councilmembers will be in a good position to push Nutter to work on public safety and better management before they approve any acceleration of those cuts or any cuts in the net profits BPT.
And really -- that is good for Nutter. He needs to show in the first weeks, months, years of his term that government can do more for the city. He needs both all of the revenue and every carrot or stick to show city workers that he can get.
--Tim
Oh no, not the BPT again
You know the old joke about the prisoners who got tired of telling the same joke over and over. So they numbered the jokes. Someone would shout out a number and everyone would laugh. Except one day, a prisoner shouted out 3 and no one laughed. He asked why not. And a fellow prisoner said, "because you didn't tell it right."
So my position on the BPT is 5.
But seriously folks, do we have to go there again. The best compromise, I believe, is the Brett Mandel and I both support: raising taxes that do not heavily impact on employers and jobs in order to make rapid reductions in the BPT which probably does have that impact. And the new tax revenues should be used for job creating investments in commerical corridors and education ss well as paying for other public services (and the public servants who provide them.)
I spelled it all out here.
The basic idea is to tax smarter not tax less.
The Uniformity Clause
Is anyone in the state legislature working on eliminating the uniformity clause for property taxes?
There are lots of municipalities that currently employ some version or another of the BPT that could benefit from switching to a two-tiered property tax system.
--Tim
Do we have to go there?
Yes Marc, we do. When the CP letter to Nutter instructs our likely to Mayor to take new Council people out to dinner to get them to vote on a BPT reduction, we do. If the CP framing is right that BPT cuts are one justification that will be used to get concessions on health benefits from city workers, then it's time we have teh BPT discussion again.
However, unlike other times, the BPT chat we have now is in the context of a different mayor and council as well as a more specific understanding of what budget choices are.
For the record, I pay the BPT and I am all in favor of changing the tax in a revenue neutral way. Tim's question is pertinet though, as many of the suggestions you and Brett make, so far as I can tell, require the elimination of the uniformity clause--which no one is working on.
Maybe I am not reading your blog post carefully (and land tax policy is not something I pretend to understand), so if you do have ideas on how to fix the BPT without losing revenue to deal with other priorities, i am all for it.
Again though, especially in a fight for city workers, the BPT cut advocates who have spoken so vociferously about job creation really have to prove themselves in order to justify a reduction of city jobs that feed our tax base nicely.
Yes
Senator Fumo has introduced an amendment to the constitution, I don't think it is going anywhere as long as the GOP controls the Senate.
But maybe we can change the constitution just for the purposes of local taxation. I'll suggest it to some legislators.
Perception, not reality
I think we need to remember that, when you look at the whole picture, Philadelphis is not an expensive city in which to do business. In fact, when you compare real estate costs, Philadelphia is downright cheap compared to Boston, New York, + Washington. Do the BPT + Wage Tax take a bite? Sure. But, even considering them, Philly's an inexpensive place to do business. It also has a lower tax burden than New York. It seems to me that the tax issue is really more or a red herring than a real reason for the city's troubles.
Does the city have a higher tax burden than most of its suburban counties? Here, I'll agree. But, at the same time, the City offers advantages- especially in transit + access- that suburban locations can't touch.
Perception, though, matters more than reality. And, if the perception is that Philly's tax burdens are a problem, even if they're not, that puts the City in something of a bind. Does it reduce the funds available to it to convince the people who are actually wrong about it that they should move in? And, in doing so, does it starve itself of funds which it needs to improve itself, both for businesses + residents?
Again: complicated problems, simple, wrong answers,
-Z
Apparently our buildings are going to hell, too.
From the Daily News. The PA Intergov. Coop. Authority looked at 163 of our buildings and see that they have indications of big problems to come, and the problems aren't getting solved in a timely enough manner. More looming trouble.
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Lefty Homilies
Curse the CP for doing this
Curse the CP for doing this , but eliminating the gross receipts portion of the BPT will cause a hole in our overall operating budget, 10% of which relies on the revenue generated by the BPT. So, by eliminating part of the gross receipts portion of the BPT, let’s say we now lose 6% of the revenue we now enjoy.
How do we make it up so that we don’t have to cut services or, worse, cut benefits to workers?
I’m of the opinion that while we have many excellent civil servants, overall, Philadelphia’s city government is slow and inefficient. By running our government more efficiently through the use of technology and sophisticated management tools (yes, like CitiStat), we could realize significant savings – and deliver better services -- within one fiscal year. I think it was Bill Clinton who said he wanted a “leaner, but not meaner government”. This is possible.
Now, that being said, our Mayor should work and negotiate with DC 33 and DC 47 to develop a fair contract for workers and the city at large. If that means city workers have to give up taxpayer-financed legal representation or new employees get fewer paid sick days or those workers who abuse sick leave get a reduction in paid sick time, then they should be encouraged to work through those issues to save money.
And I also think we could use the need for property tax reform to generate more revenue for the city. I believe adopting a full-valuation approach and a LVT model simultaneously could increase revenue for the city while we shield seniors and families of modest means from skyrocketing property taxes.
And I’ve also always liked Marc’s idea for an increase in the long term parking tax.
Will all of these measures, together, fill that 6% hole left by eliminating the gross receipts portion of the BPT?
I don’t know. Maybe, if we stopped using funds from prior fiscal years to balance current budgets, we might actually get a handle on the true economic state of our city. I think Bill Green Jr. has mentioned this from time to time and it makes sense. Otherwise, we continue to fool ourselves into thinking we’re passing “balanced budgets” that are anything but balanced.
Aside from the contracts , though, there are a few other big items that may eat more funding: (1) crumbling infrastructure, roads and sewer lines (2) increased costs of law and order...from additional cops to the cost to prosecute and house criminals (3) education funding per student is still too low and other things like the crumbling buildings BradyDale just mentioned. These will not be heady economic times for us, friends.
Fundamentally, though, I don’t know if cutting taxes grows the economy. That sounds pretty trickle-down to me. I do know the gross receipts tax is an unfair tax that ought to be be eliminated. Maybe Marc’s point is spot on: maybe we just tax fairer, not necessarily less.
I trust and know the next Mayor to be a fair man. That’s a good first step.
(now that I'm done with this, I HAVE to check out the throw down b/w Gaetano and Mark Cohen in another thread...wow)
The fuzziest of math (it's the budget's fault)
One of the things that drives me nuts about the BPT debates is that nobody knows how much of the BPT comes from gross receipts, how much comes from net profits, and how much comes from the other affiliated business start-up taxes, etc., that all get rolled into the BPT.
We know how much the whole BPT contributes to the overall budget, but to say that part (what part?) of the gross receipts tax amounts to 60% of that is just picking a number out of the air. Vern, this isn't your fault at all -- but we need some clarification if we're to have a serious discussion.
So somebody, anybody, with a crystal ball, an informant in the city accountant's office, or from the current or next mayor's office itself, please! Give us a breakdown of the BPT in the public city budget!
--Tim
Gross Receipts (It's in the budget)
Tim-
This is public information and can be found in the City's Five Year Plan. For FY04, the Gross Receipts portion accounted for 32.1 percent of total BPT collections. As a result of the reductions, that number was down to 24.5 percent in FY07. Because the Street Administration halted the BPT cuts starting in FY09, that percentage will hold at 21.9 percent. In nominal terms, it will account for $97M in revenue in FY07, or a little more than four percent of forecasted locally generated tax revenue.
Union Options: One big pool?
One thing Fattah-the-Candidate pointed out that seems worth discussing is the fact that all the city's different unions have their own health insurance plans. Fattah wanted to put them all into one big plan and negotiate as an even larger group. The largest group in the city, apparently. Who knew?
This has pro's and con's. Obviously, it would lead to all kinds of chaos and require a level of Labor Movement unity to make happen that might be impossible. It would also really scare people to change the way their plans get administered. It would also threaten the stability of the Unions themselves, which also really have an important role in the city.
It also wouldn't actually solve the problem. It might ease the pressure for a term or two, but unless the state does something fundamental about the cost of health insurance, it's costs just going to keep growing at an unsustainable rate, even if we do manage to negotiate as one, much larger group.
So while this idea does appeal to me, I guess what I'd really like to see is Nutter throwing his back into a statewide organizing effort to get all the mayors to come out in a big way to back the Prescription for Pennsylvania.
If we don't get the Prescription, though, it might make sense for Nutter to find a way to make one big pool work.
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Lefty Homilies
I think both things make
I think both things make sense- advocate for RX for PA, and work to streamline costs, even if it only saves us for 8 years or whatever. With a little luck, and a lot of hardwork, some kind of national healthcare plan will be in effect by then. Paul Krugman basically said the John Edwards plan was very good- and could eventually pivot into single payer, and that the Clinton/Obama plans were almost as good, too. So, getting us by for 8 years, to wait and see if something finally happens nationally, makes sense to me.
Bigger questions are 1) would that type of concession- putting everyone into one group- be enough for the City? 2)If so, what are the chances the unions accept it?
I don't know
Question 1: I dunno. I doubt it would be enough on it's own, but it would ease the pain. At least... It couldn't hurt. I wonder if anyone has ever projected any numbers on this???
Question 2: I doubt it, though, like I said... this was Fattah's idea and AFSCME DC 47 endorsed Fattah, even though a big chunk of their budget comes from managing the Health and Welfare fund. So that's encouraging. But, that's just one Union. It's a very big one, but they'd all need to buy in.
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The Russellian Incorporated Innovations Corporation
Lefty Homilies
Nutter Quote
From Heard in the Hall, Nutter responding to the Democratic debate:
Good. We need him to be an advocate for the City, and for City issues. Philadelphia will be visited a lot (again) in the Presidential election, especially if Giuliani is the GOP candidate, and PA is thought to be in play. We need to demand they refocus on what is going on in our cities. (And, of course, one of the big three is actually doing that... but, I digress.)
not a very good chance
There's not a very good chance all muni employees would be willing to accept this uniformity in health coverage and benefits. Based on what I saw when I was at the Redevelopment Authority (tho not a member of any union), the rank and file union members were very much against having the same benefits of the other personnel from the various housing and development agencies w/in the city's municipal structure.
Co-pays are different on perscriptions; some pension funds are far healthier than others; some drugs are covered under some some workers' options while others are not etc.
Rx for PA & Reining in Philly Health-Care Costs
I agree with the comments above that said we definitely need to enact more of Rendell's Prescription for PA health care plan. That would probably help hold down health care costs for the public AND private sectors.
As many of you know, thanks in part to having (AT LAST) a Democratic majority in the state House, part of Rx for PA has already become law - most notably the part about reducing hospital-acquired infections, a HUGE cost driver.
But there's a lot left to pass. My suggestion is that if you live in the suburbs or have friends or relatives who do, convincing them and then THEIR state reps and senators is more crucial to getting more of Rx for PA passed. The mostly Democratic delegation from the city ain't the problem :-)
Source: InsurePANow, "The Cost of Inaction"
(And if the city is about 12 percent of the state's population, that means about $800 million of that waste is coming out of your pockets, much of it in tax dollars, I'd bet.)