It's Alive!

Oh God, Council made its own budget.

by Isaiah Thompson

Ryan Casey

[ councilmanic ]

CORRECTION: The print version of this article contains an error. The Board of Revision of Taxes is not currently under investigation by any federal authority. City Paper apologizes for the mistake.

It was a gloomy Tuesday afternoon when word got out: Deep within the gothic corridors of City Hall, Council leadership had created its own budget to counter the mayor's.

The city, as you've probably heard, is in the midst of a fiscal crisis: The administration predicts a five-year, $1.4 billion budget shortfall. To fill it, without cutting too many services,the mayor has proposed raising taxes — specifically the sales tax (by 1 percent for three years), and the property tax (by about 19 percent this year and 14.5 percent next year).

Council's plan, on the other hand, calls for no increase in the property tax — or the wage tax, or the business tax.

Like the mayor, Council proposes that we raise the sales tax by 1 percent, but for five years instead of three. Of course, without the property tax hike, the plan falls about $270 million short. Council's plan? To borrow. From the future.

Nutter's finance team expects Philadelphia's economy to start recovering in about three years. Council took that premise a step further: Why not extend the hike to five years — which would, in theory, bring in extra money for the remaining two years —and borrow now against the difference?

Nutter's reaction was swift. He characterized the plan as reckless: There's always the danger that Philadelphia's economy won't get better three years from now, and we'll wind up even deeper in the hole. Then there's the cost of the loan itself, which Finance Director Rob Dubow says could be as much as $100 million (Council leadership expects something more like $40 million).

The proposal's advocates on Council —especially Councilmen Bill Green and Brian O'Neill, the two chief authors —aren't fazed. O'Neill cites, somewhat gleefully, the support of economic consultants Fairmount Capital Advisors and Econsult (the same company that backed the mayor's stance against wage and business tax). Last week, O'Neill told the Inquirer that the consultants had "informally" supported the plan; this week, Council hired them.

But here's the thing about Council's budget. Despite being presented as a unified proposal, it was born out of reluctant compromise — pieced together by small, disagreeing groups. A kind of Frankenbudget. At least three members of Council say they had nothing to do with it.

"We were not included in whatever meetings were scheduled," says Brian Abernathy, chief of staff to Councilman Frank DiCicco. "We found out at 4 o'clock the same day that document was released to the press."

Councilman James Kenney, so far a staunch supporter of the mayor, was not invited, confirms an aide; and Councilman Wilson Goode, who acknowledges walking out of a recent budget meeting among Council members, says, "The details of this proposal were not hammered out while I was in the room."

People outside the mayor's circle continue to have concerns about the plan.

"This has gotten traction because it seems so easy," says one City Hall source. "We raise a tax no one cares about, we borrow against the future. There's a chance this could work, but there's a good chance that it won't. ... I would prefer a fiscally sound decision."

And therein lies the rub. The closer you look at this mess, the harder it is to see what on earth that alternative might be. There are only so many ways the city can generate revenue. And there appear to be just enough members of Council or the administration against all of them to make anything work.

Take the mayor's property tax plan. It's been rejected by almost everyone in Council because they've heard complaints about it from upset constituents (it hardly helps that the troubled Board of Revision of Taxes — BRT — was the subject this week of a lengthy Inquirer investigation). The property tax, several members of Council have recently suggested, is probably off the table.

Then there's the wage tax. For a while, it seemed like Council might get the votes to hike the wage tax, hated as it is. But state law says that the city can't raise the wage tax unless our revenues drop more than 2 percent and, last week, Dubow projected the decline at 1.94 percent — no dice. What's more, Nutter has opposed raising the wage tax with all his might. Council would probably need a supermajority of 12 votes to pass, and sources say the votes just aren't there. All three Republicans are likely out, as is Joan Krajewski, as is Jannie Blackwell, who steadfastly refuses to raise the wage or property tax, or cut any service.

Finally, there's the business tax. There may be some room here, but it's not clear whether anyone in Council could cobble together enough votes. Even if they did, it's hard to imagine Council raising just that tax enough to plug the hole.

Which brings us back to the Frankenbudget, the only proposal so far that's managed to get any momentum within Council. Its attractions are obvious: The tax hikes are low, relatively unobtrusive and spread out among a wide base. And, unlike other proposals, this one might be able to pass. O'Neill almost certainly brings with him the two other Republican votes; it's likely that at least a few members who were unwilling to support wage or property taxes will be warmer to this proposal. Council may be close to the 12 votes needed to override the mayor's veto, a position which might force the mayor into taking their plan seriously.

But it's not that simple. Even if Council can control the Frankenbudget, it can't necessarily overpower the mayor.

"Even if all of Council supports this, the mayor can't be forced to issue this bond," says the City Hall source mentioned earlier. "It's a game of chicken. If one side doesn't back down, the stalemate could result in draconian service cuts much worse than the mayor's Plan B proposal."

Ah yes, the infamous "Plan B." When Nutter presented his budget in March, he actually offered up two budgets. Plan A — the one most of us have been paying attention to — assumed he'd get the sales tax and property tax increases.

Plan B was very different: Nearly 500 police positions, the plan said, would go unfilled, and 256 recruits would be laid off; one health center would close; the fire department would lose three engine companies, two ladder companies and three medic units ... the list goes on.

But even that plan counted on a property tax increase. If Council rams its proposal down Nutter's throat, and he refuses to borrow anyway, we may be talking about something even worse.

No one, not in Council, not in the mayor's office, says they want that to happen. But no one's backing down yet, either.

(isaiah.thompson@citypaper.net)