Philadelphia Council passes budget - raises business and property taxes

[Kevin]

Philly City Council passes $3.6 billion budget - without property-tax reform, but with a tax hike

[the mule]

I guess they haven't heard that consumer spending has stalled, major banks are facing major losses again, and the potential collapse of the Euro could destabilize the global economy. Go ahead and raise taxes!

And on a somewhat related note, W. Wilson Goode again displays his incompetence:

"Today we dive into where we know it's safely shallow, knowing it's still going to get dangerously deep real soon," Goode said.

Diving into shallow water can be fatal.

[Gladys]

I guess they haven't heard that consumer spending has stalled, major banks are facing major losses again, and the potential collapse of the Euro could destabilize the global economy. Go ahead and raise taxes!

And on a somewhat related note, W. Wilson Goode again displays his incompetence:



Diving into shallow water can be fatal.

In fact in most pools you aren't allowed to dive into the shallow end at all.

I thought i read somewhere that they HAD to reform the property tax set up because it was illegal.

[JakeL]

Meh, the tax increase only adds $1.80 a month to my tax bill. Honestly, 3.6% is just slightly higher than the rate of inflation. AVI is really what's going to jack my rates up.

[the mule]

In fact in most pools you aren't allowed to dive into the shallow end at all.

I thought i read somewhere that they HAD to reform the property tax set up because it was illegal.

Right but this isn't the reform. This is just a bump in taxes because cutting wasteful spending and redundancy is too politically difficult.

[the mule]

Meh, the tax increase only adds $1.80 a month to my tax bill. Honestly, 3.6% is just slightly higher than the rate of inflation. AVI is really what's going to jack my rates up.

AVI for the sake of rationalizing real estate taxes in the city should be revenue neutral, though that means taxes go up for some and down for some, even if the new assessments are perfectly accurate. I have no problem with that, but there's an additional tax increase tacked onto AVI that's not as easy to justify.

[billy ross]

AVI for the sake of rationalizing real estate taxes in the city should be revenue neutral, though that means taxes go up for some and down for some, even if the new assessments are perfectly accurate. I have no problem with that, but there's an additional tax increase tacked onto AVI that's not as easy to justify.

Says you. With real estate taxes going up for three years in a row there may be room for AVI to be revenue neutral in the fourth year. One could argue the RE taxes are 'enough' now, as opposed to 'too little' before. More importantly, the city's budget is balanced in a bust, which means it should be in surplus in a recovery, so the pressure to raise taxes should ebb. In addition, if the city gets medieval with tax collection, and I believe they are doing so, the increased revenue from shaking trees will take pressure off of raising taxes.

I think AVI will go through for 2104 real estate taxes. I don't think it'll be the train wreck you ominously allude to. Call me crazy, but I expect it to be implemented in a fair manner.

[the mule]

Says you. With real estate taxes going up for three years in a row there may be room for AVI to be revenue neutral in the fourth year. One could argue the RE taxes are 'enough' now, as opposed to 'too little' before. More importantly, the city's budget is balanced in a bust, which means it should be in surplus in a recovery, so the pressure to raise taxes should ebb. In addition, if the city gets medieval with tax collection, and I believe they are doing so, the increased revenue from shaking trees will take pressure off of raising taxes.

I think AVI will go through for 2104 real estate taxes. I don't think it'll be the train wreck you ominously allude to. Call me crazy, but I expect it to be implemented in a fair manner.

Oh don't get me wrong, I'm not jumping on the AVI fearmongering bandwagon. Our current system can't continue to exist, and I'm careful to point out that the method for assessing taxes under AVI is much more transparent and fairer than the current system and that the tax increase is a separate matter.

My gripe is that real estate taxes went up 3 years in a row as supposedly temporary increases that are now permanent (who's surprised?). Although austerity measures of any sort aren't sound economic policy during an economic downturn, they're quite clearly needed in our current situation. Permanent tax increases across the board, however, are arguably more detrimental than spending decreases that ought to happen anyway. The inevitable shuttering of one particular city agency is being delayed, while layoffs at another are being put off for another year by spending money that could be put toward better uses than just keeping people on the payroll.

I would much rather see AVI go into effect without raising overall tax revenue. Some are going to be hit harder than others, and many are likely to be the same who are being hit by the increase in U & O taxes. I think most people who have been in Philly for a number of years now can see how its been on an incredible path of revival. New, interesting businesses are popping up all over, the city is gaining population, development is moving on a scale not seen in recent history, and entire neighborhoods are being transformed overnight. Much of the population growth is fueled by the national move towards reurbanization, but one of Philly's major draws over other northeast cities is its relative affordability. The city tax rates are a bit less friendly to businesses but they've been coming here despite wage taxes and BPT. Make the city less affordable and less friendly to businesses and you've undermined two of the very cornerstones of its renaissance.

Maybe I'm more pessimistic about the outcome than I need to be but are the risks worth the reward?

[raider.adam]

Although austerity measures of any sort aren't sound economic policy during an economic downturn, they're quite clearly needed in our current situation.

Are you saying they aren't sound economic policy except when they are?

[billy ross]

Are you saying they aren't sound economic policy except when they are?

Government should be stingy during booms and generous during busts. Unfortunately our politicians are out of control and all they know how to do is to grow government. Government should shrink as the economy heals, for many reasons, but I'll give you a few. One is so that the government doesn't crowd out the private market. Two is to give the government room (affordability) to grow during the next bust as the private market contracts. It is in government's interest to iron out boom-bust cycles. This just about happened at the end of Bill Clinton's presidency.

Oh don't get me wrong, I'm not jumping on the AVI fearmongering bandwagon. Our current system can't continue to exist, and I'm careful to point out that the method for assessing taxes under AVI is much more transparent and fairer than the current system and that the tax increase is a separate matter.

My gripe is that real estate taxes went up 3 years in a row as supposedly temporary increases that are now permanent (who's surprised?). Although austerity measures of any sort aren't sound economic policy during an economic downturn, they're quite clearly needed in our current situation. Permanent tax increases across the board, however, are arguably more detrimental than spending decreases that ought to happen anyway. The inevitable shuttering of one particular city agency is being delayed, while layoffs at another are being put off for another year by spending money that could be put toward better uses than just keeping people on the payroll.

I would much rather see AVI go into effect without raising overall tax revenue. Some are going to be hit harder than others, and many are likely to be the same who are being hit by the increase in U & O taxes. I think most people who have been in Philly for a number of years now can see how its been on an incredible path of revival. New, interesting businesses are popping up all over, the city is gaining population, development is moving on a scale not seen in recent history, and entire neighborhoods are being transformed overnight. Much of the population growth is fueled by the national move towards reurbanization, but one of Philly's major draws over other northeast cities is its relative affordability. The city tax rates are a bit less friendly to businesses but they've been coming here despite wage taxes and BPT. Make the city less affordable and less friendly to businesses and you've undermined two of the very cornerstones of its renaissance.

Maybe I'm more pessimistic about the outcome than I need to be but are the risks worth the reward?

The only thing temporary about the tax increases of the past few years has been the rate, not the fact that taxes have been going up. That is, though, as it should be. If government does a good job and property values do well, the government should get an attaboy in increased tax revenues. Here in EF when the government fixed the Schuylkill Falls projects property values skyrocketed. It's only fitting that taxes should have gone up also, lest the government have zero incentive to do things right. If Apple does a great job with its next generation iphone, it deserves to get more $ for them. It's only fair.

We can't win by trying to out-Baltimore Baltimore. While you can get your foot in the door and gain business by being the low cost provider, at some point it's nice to be able to get a premium for what you offer. I think that Philly's transitioning away from being the low cost provider and becoming more of a high value provider. I believe that Nutter has decided to go in the direction of maintaining and even increasing services rather than cut to the bone, Mississippi-style, and that Philly's QOL has been going up dramatically of late. Some proof I offer for my point of view is that property values in my neighborhood used to be dramatically lower than both the national median price and the regional median price. Now properties in my neighborhood trade at a premium both to the country and to the metro. Clearly something has changed, and we're seeing it in demand. Philly's less of a wallflower than it used to be, but it costs money to provide the services like education, parks, smooth streets, bike paths, etc. that people with choices want, and that's why our city government hasn't gone into double secret austerity mode. Meanwhile our competition in the Montgomery County suburbs is lowering their QOL by facilitating gridlock-causing strip-style development which makes pedestrian- and community-unfriendly places even more pedestrian- and community-unfriendly, demolishing historic homes to build Rite-Aids and Walgreens that you can't even turn left into or out of. We build gorgeous new parks like Sister Cities and Race Street Pier and gorgeous new trails like along the Grey's Ferry Crescent while our competition in the Montgomery County suburbs can't even develop a proper trail along the Wissahickon, and can't even keep the Schyulkill River Trail open year-round (we've done both eons ago). We're winning, but it costs money, and without it people will go to places which are willing to invest in quality of life (like Camden County has done recently with the amazing stuff they're doing along the Cooper River, which of course has been great for places like Collingswood).

[2happy4u]

why don't they collect the 472 million owed in delinquent tax and millions in fines? so far this wack job mayor raised our tax 10%, 10% now 4% in three years. with a city tax of 8%.maybe he should have thought of the LOL "schools" before blowing millions on useless bike lanes. he also should repeal the 10 year tax abatement now.This city has been getting robbed for the past 15years.

[Marquis]

If there was a god we wouldn't be getting robbed like this.

[annie]

why don't they collect the 472 million owed in delinquent tax and millions in fines?

Nutter did the city a huge disservice not ramping up the tax collection sales after the end of the "amnesty" two years ago.

[the mule]

Are you saying they aren't sound economic policy except when they are?

For the sake of the prosperity of our local economy it's counterproductive. Austerity measures typically exacerbate the downturn; reducing public spending or discouraging private spending through taxation, the result is the same.

The IMF used to force countries with debt crises into severe austerity measures before giving them rescue loans, which then sent their economies spiraling downward at an even faster pace. Yes those countries needed to drastically reduce spending - but not while their economies were already reeling. The IMF eventually ended up being rightfully vilified for such policies and relaxed their stance somewhat.

The difference here is that nobody is offering Philadelphia a loan. There is no savior.

The city has unavoidable budget problems that it can't borrow its way out of, so austerity measures are the only solution to solving that budget problem. If there was another solution, that would be the road to take, but there is no choice except over which type of measures to implement. Tax increases or spending cuts, either way they're going to have short term negative effects on the local economy but the scale of those effects remains to be seen. Fortunately city spending is less than a percent of local GDP so the impact isn't nearly as large as it would be on a national level on the scale of 24% of GDP.

[AbortedWalrus]

The focus should be on cost efficiency first, not austerity. Unfortunately that is not how any department of this city government works.

[billy ross]

For the sake of the prosperity of our local economy it's counterproductive. Austerity measures typically exacerbate the downturn; reducing public spending or discouraging private spending through taxation, the result is the same.

The IMF used to force countries with debt crises into severe austerity measures before giving them rescue loans, which then sent their economies spiraling downward at an even faster pace. Yes those countries needed to drastically reduce spending - but not while their economies were already reeling. The IMF eventually ended up being rightfully vilified for such policies and relaxed their stance somewhat.

The difference here is that nobody is offering Philadelphia a loan. There is no savior.

The city has unavoidable budget problems that it can't borrow its way out of, so austerity measures are the only solution to solving that budget problem. If there was another solution, that would be the road to take, but there is no choice except over which type of measures to implement. Tax increases or spending cuts, either way they're going to have short term negative effects on the local economy but the scale of those effects remains to be seen. Fortunately city spending is less than a percent of local GDP so the impact isn't nearly as large as it would be on a national level on the scale of 24% of GDP.

There is another solution, and it's a solution that is for the entire country, not just Philadelphia. It's called imposing unilaterally changes in pensions and benefits to retirees. It was irresponsible to promise such lavish lifestyles to these people while not funding them, and it's offensive to deliver them now. Anyone who banked on unfunded promises getting paid out needs to talk to GM's retired workers. Our schools are broke while the people who used to teach for us are living off the fat of the land. That's just wrong. Fortunately, other state and local governments are in worse shape than we are and a national solution will be worked out that will really help our budget.

Ford Motor Company, which still has an unfunded retirement problem, recently came up with a brilliant scheme to help with the problem. It offered to roll out what it has saved for each retiree into an IRA/401k that the retiree can control in exchange for that person releasing FoMoCo from being responsible for that person's pension (I don't know about health care costs). Each person who goes for that deal gets off of a sinking ship, and each person who takes the deal removes pension liability, reducing Ford's liabilities. Philly should do the same thing. If 50% of the workers go for it the city will be halfway out of its hole. The city should also make it mandatory that people pick up checks, in person, sometime during the month in which they're paid out. Retirees have the time to go downtown and pick up their checks, and it would add to the city's economy. It'll get many out of state retirees off of Philly's trough. How many Philly retirees live out of state and collect pensions? There are alot of Arlene Ackermans out there.

[Giavella Water]

We're getting robbed like this because there is a devil.

[BarryG]

There is another solution, and it's a solution that is for the entire country, not just Philadelphia. It's called imposing unilaterally changes in pensions and benefits to retirees. It was irresponsible to promise such lavish lifestyles to these people while not funding them, and it's offensive to deliver them now. Anyone who banked on unfunded promises getting paid out needs to talk to GM's retired workers. Our schools are broke while the people who used to teach for us are living off the fat of the land. That's just wrong. Fortunately, other state and local governments are in worse shape than we are and a national solution will be worked out that will really help our budget.

Ford Motor Company, which still has an unfunded retirement problem, recently came up with a brilliant scheme to help with the problem. It offered to roll out what it has saved for each retiree into an IRA/401k that the retiree can control in exchange for that person releasing FoMoCo from being responsible for that person's pension (I don't know about health care costs). Each person who goes for that deal gets off of a sinking ship, and each person who takes the deal removes pension liability, reducing Ford's liabilities. Philly should do the same thing. If 50% of the workers go for it the city will be halfway out of its hole. The city should also make it mandatory that people pick up checks, in person, sometime during the month in which they're paid out. Retirees have the time to go downtown and pick up their checks, and it would add to the city's economy. It'll get many out of state retirees off of Philly's trough. How many Philly retirees live out of state and collect pensions? There are alot of Arlene Ackermans out there.

This times a thousand. I hope that you are right and the bankruptcy medium sized cities all over the country will lead us to a solution here that is politically viable and doesn't have the stigma of full-on bankruptcy. I have doubts that anywhere close to 50% of penioners here would move into a 401(k) if that option was offered.

One thing City Hall should consider is pausing cost of living adjustments for a period, or forever. That change alone would go a long way towards making the pension fund solvent. Imagine what the city would be like if 16% of the budget didn't go towards pensions... and even that amount leaves them severely underfunded.

[raider.adam]

There is another solution, and it's a solution that is for the entire country, not just Philadelphia. It's called imposing unilaterally changes in pensions and benefits to retirees. It was irresponsible to promise such lavish lifestyles to these people while not funding them, and it's offensive to deliver them now. Anyone who banked on unfunded promises getting paid out needs to talk to GM's retired workers. Our schools are broke while the people who used to teach for us are living off the fat of the land. That's just wrong. Fortunately, other state and local governments are in worse shape than we are and a national solution will be worked out that will really help our budget.

Ford Motor Company, which still has an unfunded retirement problem, recently came up with a brilliant scheme to help with the problem. It offered to roll out what it has saved for each retiree into an IRA/401k that the retiree can control in exchange for that person releasing FoMoCo from being responsible for that person's pension (I don't know about health care costs). Each person who goes for that deal gets off of a sinking ship, and each person who takes the deal removes pension liability, reducing Ford's liabilities. Philly should do the same thing. If 50% of the workers go for it the city will be halfway out of its hole. The city should also make it mandatory that people pick up checks, in person, sometime during the month in which they're paid out. Retirees have the time to go downtown and pick up their checks, and it would add to the city's economy. It'll get many out of state retirees off of Philly's trough. How many Philly retirees live out of state and collect pensions? There are alot of Arlene Ackermans out there.

I agree with just about all of this except the "have to pick up the check". That is a rather onerous requirement. It is unreasonable to require retirees to have to live within driving distance of City Hall.

[raider.adam]

One thing City Hall should consider is pausing cost of living adjustments for a period, or forever. That change alone would go a long way towards making the pension fund solvent. Imagine what the city would be like if 16% of the budget didn't go towards pensions... and even that amount leaves them severely underfunded.

City Hall had a law that said COLAs were suspended if the pension funding dropped below a certain level.

Several years ago Jim Kenney passed legislation removing that because he said it was unfair to the retirees. Of course it also means one less group that cares about pension funding.