We want everyone to know that we are working closely with Councilwoman Blackwell, her office, and two of the members of the Commission will be part of 358 04/21/04 - WHOLE - BILL 040255 the task force, so we're delighted.
This is in response to the legislation we introduced to kind of change a lot of the legislation, the laws regarding the setup of the Historic Commission. So we have met and have decided the best way to deal with its organization and what we should do. There have been many positive articles in the paper about me with regard to this issue, and so we decided that we would try to come up with three focussed meetings and then come back to the Council before we have a hearing. We've never had a hearing, but we wanted to work so much -- you know, the Historic Commission is all detail and no main point, so we wanted to have three task force meetings before we come back to the Council with a requested action or suggested action
Very good. Thank you. Any other questions or comments? 359 04/21/04 - WHOLE - BILL 040255 (No response.)
Thank you very much. Thank you. You've been very patient. Mr. Dubow, please don't leave. Councilman Nutter, do you want Mr. Dubow to remain? I have a feeling you have a couple questions.
Mr. Dubow, thank you for making yourself available. I just need to get some information regarding the City's budget. Now, what's the estimated deficit for FY '05?
You mean what the fund balances at the end of the year or what the operating deficit is during the year?
Well, the plan projects that it will end the year with a positive fund balance, roughly 13.6 million -- 360 04/21/04 - WHOLE - BILL 040255
Yes. Since the plan was submitted, however, we've loss million from 6 PGW for '05, which means unless we took 7 corrective actions we'd have a negative fund 8 balance of over $4 million. 9 The plan also projected that we 10 would end '04 with a $14.6 million fund 11 balance, so our operating deficit would be 12 roughly a million dollars. 13
So you're 14 expecting to basically roll over from '04 to 15 '05 $14 million? 16
That's correct. And if 17 we lose the scoop that would be another -- 18 depending of if it all went away that would be another five million.
Yes. And then the negative fund balance would be closer to 10 million.
All right. So let's go back through this. For the current 361 04/21/04 - WHOLE - BILL 040255 fiscal year, you anticipated ending the year with a positive fund balance of $14 million which you were going to roll into FY '05?
When you submitted the FY '05 budget, you anticipated having a positive fund balance of $13.6 million?
And based on the decision made within the past two weeks by the Mayor under certain circumstances, you agreed to forego million from PGW? 15
Leaving you a 17 negative fund balance of $4.6 million? 18
4.4. And then another proposed action is to take the $125 million from the Water Department Debt Reserve Fund for development, which means that you forego the interest payments on those funds often referred to as the scoop; is that correct? 362 04/21/04 - WHOLE - BILL 040255
And that decision cost the City how much money? What's the value of the scoop?
Two recent decisions made by the City Administration; is that correct?
Now, let me understand with regard to our tax strategy. A couple years ago the Mayor proposed to end the incremental cuts in the wage tax; is that correct?
And that was in January of 2002, expecting to keep the anticipating July 1, '03 cut that was already 363 04/21/04 - WHOLE - BILL 040255 in the approved Five-Year Plan but actually ending the cuts July 1, '04; is that correct?
And so the first impact of Bill 92 which established for the first time a five-year guaranteed schedule of the same incremental cuts that had always been proposed in the Five-Year Plan but were not guaranteed, the first impact of Bill 92 was in July of '04; is that correct?
What's the cost of the cut from July 1, 2003, into the present fiscal year? It's the current fiscal year.
I think roughly about 364 04/21/04 - WHOLE - BILL 040255 $30 million in years. But part of that is the impact of Bill 73.
Right. Now, 5 that was a different bill passed subsequent? 6
Was that bill 8 passed in '02 or was that bill passed in '03? 9
The Mayor let that bill 14 become law without his signature. 15
And that bill 19 was approved by this City Council unanimously; 20 is that your recollection? 21
Have you been to any other signing ceremonies for bills?
So in the budget that you've sent up for FY '05, is there a wage tax bill in that budget?
No, because the wage tax -- the wage bill that we had from last year carried forward.
Yes. I think. I don't think it was. 366 04/21/04 - WHOLE - BILL 040255
The FY '05 budget that you sent up to us is proposed to shift the date --
But in previous years, every budget would have a wage tax bill 11 because we would change the rates every year, right?
I read in the Five-Year Plan that the Administration appears to support wage tax reductions; is that right?
And if the Administration did not support continued wage tax reductions, you would send us a bill that would stop the reductions; is that right?
So the fact that you've not sent such a bill to City Council would indicate that the Administration 367 04/21/04 - WHOLE - BILL 040255 supports the continued wage tax cuts; is that correct?
And does the Five-Year Plan indicate what the impact is of those cuts on wage tax revenues to the City?
There's language in the plan that indicates, I think, the combined impact of both the wage tax and the business privilege tax reductions.
No, we're just talking about the wage tax. Council didn't really attack the business privilege tax. Why don't you go to in the Five-Year Plan?
Is it true that for every fiscal year in the plan FY '04, '05, '06 '07, '08 and 09 that the wage tax anticipated collections to City or revenues to the City grow every year notwithstanding the present schedule of proposed wage tax cuts?
Yes. It grows -- each 368 04/21/04 - WHOLE - BILL 040255 year it grows based on a combination of what we anticipate will happen with wages and earnings, what will happen with employment and then what the impact of the cut would be. So those are the three --
Since the wage tax cuts have stared under former Mayor Rendell, have there been any years where the wage tax revenues from one year to the next have been less than the previous year?
Haven't been years where it's been less than year before. There are been years where it was less than inflation but not when it was less than the year before.
So the number that we hear out in the general public, the $227 million deficit, what is that exactly?
That is the couple accumulated gap between our revenues and expenditures over time.
The fund balance really -- I mean, it's a rolling number. So it's not 369 04/21/04 - WHOLE - BILL 040255 from any particular start date.
Hold on one second. I mean, it's a hard question to answer because if the wage tax rates hadn't been cut since '95, we would have been taxing people at the higher rate, so that argument would say you would have more revenue. On the other hand, argument --
No, but your question what's the impact tax cuts on the deficit. And you'd need an econometric model to answer that question.
I guess what I'm ultimately trying to understand is --
What I'm saying is there's some loss revenue from the cut in the 370 04/21/04 - WHOLE - BILL 040255 rate, but we wouldn't be doing this if we didn't think that there was some positive impact on the economy, so there's a benefit in that we have more jobs and more wages than we would have without it.
Well, there have been a number of proposals to either reduce services, close facilities, reduce or eliminate funding to groups and organizations as a result of our difficult financial situation in the City. As a budget director, would you recommend that we end the incremental reductions in the wage tax in order to avoid the cuts in services or the closure of facilities or the ceasing of grants to groups and organizations or operating budgets?
No. That's why the Five-Year Plan which includes those proposals includes a continuance of their reduction in those rates.
Well, let me ask the question in a different way. Is it a viable strategy for the City in an effort to 371 04/21/04 - WHOLE - BILL 040255 prevent either closure of facilities, restrictions in grants, elimination of funding to groups and organizations and the like, is it a viable strategy from your perspective as a Budget Director to in the course of these budget hearings to cease the wage tax cuts that are already articulated or detailed in the Philadelphia Code as a result of Bill 92?
What we've said in the Plan is that the wage tax reductions are necessary to continue to kind of make Philadelphia more competitive because our tax rates are not competitive. And so we recommend continuing those reductions even though it means that there are in the short term lower revenues which means that we have to make painful choices which we've included in this Plan.
So lastly, if the Administration felt so strongly that continuing the wage tax cuts was detrimental to the City's ability to operate or function or provide a certain high level of services, the Administration would then send a bill up 372 04/21/04 - WHOLE - BILL 040255 to stop the wage tax cuts?
That's right. If we thought that continuing the wage tax cuts would jeopardize our service to such an extent that it would hurt our competitiveness more than lowering the wage tax rates, that's what we would have recommended?
Because you believe that cutting the wage tax is important to the future of this City?
You're welcome. Any other questions from members of the Committee? (No response.)
The Committee of the Whole will stand in recess until Wednesday, April 28th at 9:30. Thank you. (Council adjourned at 5:25 p.m.) - - - - 374 C E R T I F I C A T I O N I HEREBY CERTIFY that the foregoing proceedings of the Council of the City of Philadelphia of Wednesday, April 21, 2004, were reported fully and accurately by me, and that this is a correct transcript of the same. RE: COMMITTEE OF THE WHOLE _________________________ Lisa C. Bradley, RPR