Could Council tax hike produce less revenue, not more?

Posted: June 16, 2012

A budget plan mapped out by City Council this week, designed to produce $40 million in new revenue for the destitute Philadelphia schools, is already running into political headwinds — and could wind up reducing funding for the School District instead of helping it.

About half of the schools' $40 million was projected to come from a 20 percent boost in the city's Use and Occupancy tax that is levied on businesses.

But the city's Chamber of Commerce is lobbying aggressively against the increase. Sources in Council say it's unclear whether the proposal has the nine votes necessary to win final approval. A vote is tentatively scheduled for Thursday.

On top of that, the Nutter administration is projecting a sharp increase in real estate assessment appeals, stemming from Council's tentative decision to delay a citywide property-tax overhaul for another year.

Finance Director Rob Dubow said the city and School District combined are likely to lose $50 million on assessment appeals this year.

Without the citywide reassessment promoted by the administration, Dubow said, revenue losses due to assessment appeals will likely exceed $100 million in the year starting July 1 — and more than half that would come out of the School District's revenues.

Council President Darrell L. Clarke and several colleagues have already reached out to the city's state legislative delegation, looking for help in stemming the tide of assessment appeals, and the city's lawmakers are helping.

State Rep. John Taylor, the only Philadelphia Republican in the GOP-controlled General Assembly, said he and others were working on a proposal that would reduce the impact of a ruling last year by the State Tax Equalization Board that found the city's property-tax assessments seriously out of line with market values.

"Taxpayers will still have the right to appeal their assessments, but they'd have to do it the old-fashioned way" by comparing the assessed value of their own property with other assessments and sales in the same neighborhood, Taylor said.

He said he expected the Republican leadership of the state House and Senate would move the legislation if the city's elected officials can agree on what should be done. Presenting a united front in Harrisburg among Nutter, Council, and the state delegation has been a problem in recent weeks.

Both Nutter and members of the School Reform Commission expressed hope Friday that Council would change course before final passage of its budget proposals. Council could amend its plans and pass them as late as June 30, the last day of the current fiscal year.

The budget process has already passed the City Charter's mandated deadline of May 31 for a budget.

"This is all still, at least from my perspective, a work in progress," Nutter said Friday in Orlando, where he is slated to become president of the U.S. Conference of Mayors on Saturday.

"Everyone knows that the schools are in serious financial turmoil," Nutter said. "The district has made $700 million in cuts over the past year or so, so I mean, any further cuts will in fact damage the educational options, programs and services available to children, and I cannot imagine that any member of City Council would consciously want to do that."

By delaying the citywide reassessment, known as the Actual Value Initiative (AVI), Nutter said, "they will continue to operate with a system that is broken, that is unfair, and has many, many people clearly paying more than they should."

Pedro Ramos, chairman of the School Reform Commission, said he remained optimistic that Council will provide the full $94 million that Nutter initially requested for the schools.

"I think it's impossible to be a member of this SRC without being an optimist," Ramos said Friday. "The School Reform Commission and the district are going to continue to work with the mayor to continue our efforts to persuade City Council to provide the level of funding for the Philadelphia schoolchildren that the mayor proposed."

He added: "Normally, we'd be thrilled to be met halfway. It's just that the hole that the district is in is so deep that the effort, while appreciated, doesn't really get us out of the hole."

The $2.5 billion budget the SRC approved last month not only banked on an additional $94 million from the city but still called for borrowing at least $218 million to make ends meet.

Commission member Feather O. Houstoun said that anything short of the $94 million "and anything we fail to achieve over the course of this fiscal year just puts us on an impossible fiscal track over the next two fiscal years."

Ramos said that despite Council's "understandable concerns" about AVI, he hoped that the reality of the budget's impact on children would sway its decision.

Several Council members have questioned why the SRC has not been pressing more aggressively for additional support in Harrisburg. But Ramos, appointed by Republican Gov. Corbett, said he believed Council's actions could harm the district's chances of obtaining help from the state.

"I think the news coming out of Philadelphia does not help us in Harrisburg," he said.

Gerald Wright, one of the founders of Parents United for Public Education, however, praised Council's actions and said the district needs to take its case to the state.

"No one ever expected the entire $94 million would come from Council this year," said Wright, whose children attend J.S. Jenks in Chestnut Hill and Constitution High School, a magnet school in Center City. "Council has put $40 million on the table. Now the SRC, parents, and others need to go to the state and demand from our legislators and Gov. Corbett additional money."

Philadelphia Federation of Teachers president Jerry Jordan agreed, noting that Council had come up with new funds for the schools in each of the last two years.

Last year, he said, "Council had been led to believe that if they made the first step in providing more resources, the commonwealth would do the same, and that did not happen."

While Council passed a $53 million tax package for the school district last year, the state budget cut school funding across the Commonwealth by $1 billion.

 "It is apparent there is a willingness to support the schools in Philadelphia," Jordan said. "Unfortunately, the amount this year is not as much as the School District was asking for. But the Council could have said, nothing."

Jane Roh, a spokeswoman for Council President Clarke, declined to address the school-funding and AVI issues Friday.

"Things are still very fluid at this time," she said. "We cannot comment right now."

Contact Bob Warner at 215-854-5885 or warnerb@phillynews.com.

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