Council budget deal would delay Nutter property-tax overhaul

School-service workers offer support to George Ricchezza, a union official, before Council yesterday. ELISE WRABETZ / STAFF PHOTOGRAPHER
School-service workers offer support to George Ricchezza, a union official, before Council yesterday. ELISE WRABETZ / STAFF PHOTOGRAPHER
Posted: June 22, 2012

OVER LAST-MINUTE objections from Mayor Nutter, City Council Thursday all but finalized a budget deal to delay Nutter's proposed property-tax overhaul for a year and provide $40 million in new funding to the school district, far less than the $94 million sought by the mayor.

"We were fortunate we were able to get support for the school district from the city of Philadelphia," said Council President Darrell Clarke. "It was something of a difficult challenge. There was a lot of lobbying against this particular vote, but members of Council stepped up to the plate and we'll be able to send some revenue over to the school district."

Nutter wanted to move the city to a tax system based on market values, known as the Actual Value Initiative (AVI), collecting $94 million for schools in the process. But Council was wary of making that move before assessments were finished. Its plan for the 2012-13 fiscal year keeps the current tax system for another year, includes a 3.59 percent property-tax hike to generate $20 million in revenue for schools and gets another $20 million for schools through an increase in a business tax known as the use-and-occupancy tax. The plan also memorializes two temporary property tax hikes.

Due to some technical changes, the property-tax bill won't get final passage until next week, but by an 11-6 vote Council gave final approval to the use-and-occupancy tax hike, a levy the business community had lobbied heavily against, saying it would hurt small businesses.

Hours before the vote, Nutter held a press conference, saying he wanted more money for education.

"For a school district that is struggling, those numbers are going in the wrong direction," said Nutter. "Of course I would like to see more, because the district desperately needs those dollars."

School Reform Commission member Feather Houston said the district — which has a $218 million projected shortfall in its 2012-2013 budget — will have serious problems without the full $94 million from the city.

"Anything over what we have already planned to borrow for this coming year will be a bigger hole that we will have to overcome," Houston said. "The goal is structural balance. It's the only way forward."

Council members said they had to juggle competing interests.

"It's not just the issue of the money for the schools," said Councilwoman Marian Tasco. "You hear from business owners on use-and-occupancy, homeowners on property."

Council is seeking legislation in Harrisburg to help avoid costly appeals due to a ruling by the State Equalization Board (STEB) that deemed the city's assessments were inaccurate. Sources said the request is likely to get approval.

Nutter has reportedly been advocating in Harrisburg for a measure that would allow the city to reopen the budget in the fall to set new tax rates and use the new assessments for the 2012-13 fiscal year. Nutter said that idea had been raised by a state lawmaker.

"That would be more of a backup to protect the city if the STEB relief effort was ruled a legal nullity or ruled unconstitutional," said Nutter, who said he also supported the STEB relief.

Since Nutter announced his AVI plans, residents in neighborhoods likely to see tax hikes have been vigorously campaigning against the plan. The tide seemed to turn against AVI as Council grew distrustful of the data provided to them about the impact of AVI — and as the projected tax rate grew to 1.8 percent of market value.

Contact Catherine Lucey at 215-854-4172 or at luceyc@phillynews.com.

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