I understand that. But there is a different threshold established by virtue of that lien purchaser purchasing a lien for a set amount of dollars; right? The City of Philadelphia, we didn't purchase the lien; we own the lien. And what I am saying is that, you know, our ability to accept a lower amount, given the fact that in some instances we are not getting anything, you know, is more likely to happen. I understand you are not the 100 OPERATING BUDGET & TAX BILLS - 5/10/04 sheriff. And I understand you don't want to commit yourself
The lien servicers are in exactly the same situation that the City of Philadelphia is in. They are, at this point, taking whatever they get. Because they don't purchase individual liens; they use a portfolio of liens as security for a loan. They are now trying to recover as much as they can. So you would be surprised to find that they are in that same pool with the City of Philadelphia. And, in fact, if they got the $800 at this point, they would take the $800 because they are attempting to do exactly what we are attempting when we take them to sheriff's sale.
-- either make this your last question until the next go-around, please, or just wait until the next 101 OPERATING BUDGET & TAX BILLS - 5/10/04 go-around.
Thank you, Madam President. The Commission report says that by 2017, over 175,000 jobs will be created as a result of this recommendation. By our calculations, that would be about a percent growth in jobs. Is that a 15 reasonable conclusion? 16 It is my understanding that we would 17 need every job in Bucks and Chester Counties 18 to move into Philadelphia in order to increase 19 by that number. 20 Do you think that other cities like 21 New York, Detroit, or even D.C., can add 22 175,000 jobs in ten years? 23 And what was the impetus for making 24 this conclusion for our city? Do you think 25 this is a risky assumption, or is this one 102 OPERATING BUDGET & TAX BILLS - 5/10/04 that assumes that the national economy is going to help us?
I would rather -- I don't want to opine to the Tax Reform Commission number. I think that our expectation is that there will be an up side to all this tax reform. We are not -- you know, the city has not pursued tax reduction and tax reform without an expectation that it would have an impact on creating jobs. Whether it is 175,000, you know, something less, we don't know. That's in part why the Administration is not willing to adopt a supply side approach. We are not going to capture the revenue from those jobs before they actually occur. But I think the Tax Reform Commission people could probably respond to how they determined that number.
Thank you, Madam President. Also, again, I would really like to 103 OPERATING BUDGET & TAX BILLS - 5/10/04 deal with the whole issue of properties, since it is my area of interest, in terms of housing and properties, and how we get clear deeds, and how we raise money for businesses who are willing to pay. I would hope that it would be a real focus, so that we can do something in short order, and not have to wait months to move 10 the economy in neighborhoods forward. 11 Certainly NTI is an agenda who -- 12 that is supposed to spur economic growth. It 13 is supposed to be a leverage for neighborhood 14 development. And we hope that we can move 15 forward in that area. 16 And I'm sure that my colleagues 17 agree with me in that regard. 18 Thank you, Madam President.
You are welcome. The Chair recognizes Councilman Kenney.
Thank you, Madam President. Ms. Wilkerson, or anyone else at the table, my understanding, absent any tax 104 OPERATING BUDGET & TAX BILLS - 5/10/04 reform, that the Five-Year Plan as we speak today is at a balance relative to, I guess, the $18 million deferred payment over four years, and then the water sinking fund scoop issue, which I guess is around 95, 96 million over the Five-Year Plan? Or is there a number that you would -- what's the plan out of whack now, based on those two items?
We are considering a number of additional proposed cuts. We have not made final decision on what it is that we are going to propose to City Council. Some of the cuts are additional -- will probably end up being additional personnel cuts, but we don't have a final plan we propose yet. 105 OPERATING BUDGET & TAX BILLS - 5/10/04
Do you know when that is going to be coming to us? We are getting to get, as you know, into a time limitation issue on PICA requirements and our Charter-mandated responsibilities on passing the budget. Is there some idea when we may be seeing any of that?
I would, rather than throw out a guesstimate, we are sensitive to the fact that, you know, there are time limits, and are working now trying to identify exactly, you know, what it is that we are going to propose, what adjustments. But it will involve additional cuts.
Just to go talk philosophically a little bit about the tax reform effort and the Administration's opposition to various components of the tax reform plan. I agree with your comparison -- I agree with your analysis on the issue of federal tax cuts, which I believe were done more for conservative philosophical reasons of 106 OPERATING BUDGET & TAX BILLS - 5/10/04 the Republican party than for anything else. (Applause)
And I also believe that people generally will not -- generally, I don't think people at all will move out of the country, will change their citizenship, based on high taxes or not having tax cuts on a federal level. And I think the federal tax cuts not only have put us in a terrible deficit, but have really lost opportunities to fund things for education and other types of things, healthcare, that really the country needs. But I disagree with your comparison when it comes to supply side on the federal level and on a local level. Because, different than the United States, people may not move out, but people will move out of Philadelphia, and have moved out of Philadelphia, to a very, you know, close proximity to the city because of issues like taxes and schools. Do you really think it is a fair comparison to compare federal tax cuts with 107 OPERATING BUDGET & TAX BILLS - 5/10/04 the effort to reduce taxes here to put us in a more competitive position with our surrounding five-county or SMAS area in South Jersey? Isn't it a little bit of an apples and oranges comparison?
First let me say that this Administration embraces tax reduction and tax reform. I think that what we do differ on is the rate at which we can accomplish this in light of the city's financial resources. When we say that we are unwilling to capture supply side effect, it is because of our determination that the risk associated with that is so great. We don't have all the resources the federal government might. And I want to have Ms. Davis talk a little bit about just the cash-flow side of this, because that's some of what we look at when we decide that we are not going to recognize the supply side impact. I guess some folks said, well, put it in now. If it doesn't work out next year, you can always roll back the tax reductions. 108 OPERATING BUDGET & TAX BILLS - 5/10/04 And, Janice, if you would talk a little bit about the risks for the city.
As the city has depleted its fund balance, it has also depleted its cash reserves.
Excuse me, please. The noise level is much too high, and we are having difficulty hearing the witness. Please proceed.
As we depleted our fund balance, we have also depleted excess cash in the city's coffers. The use of speculative revenues are, the supply side impact, should it not materialize, will put tremendous strain on our ability to have cash flow. And that is a large part of our problem now, that we are at a situation where, including anything that's not a deficit, only puts additional strain on our ability to generate the cash.
I think that, just in closing with this particular comment, as we go forward with the loss of population 109 OPERATING BUDGET & TAX BILLS - 5/10/04 and the increasing numbers of problems that the city tries to deal with, and whatever happens in the national economy, it seems that at some point we may never get to a point where we could implement this kind of tax reform because things probably will not be getting better. And even though it may be difficult to do it now, I think it becomes increasingly more difficult to do it later, and, therefore -- (Applause.)
Kind of continues to send the city in the wrong direction. And while I recognize the pain associated with doing this, I think it is going to be more painful next year, the year after, the year after that, as people continue to leave, jobs continue to leave, and we still can never recoup the revenues that we need to take care of our problems. Thank you.
Thank you. 110 OPERATING BUDGET & TAX BILLS - 5/10/04 The Chair recognizes Councilman Ramos.
Thank you, Madam President. Ms. Davis or Rob, what do you say to the Tax Reform Commission's point that piecemealing the implementation or incremental implementation of their recommendations won't change the business-unfriendly regressive tax environment that exists in this city in a sufficient way to bring about positive economic results? You have proposed incremental reductions. The Commission has a more aggressive plan of doing this right now, and fairly fast.
What we would say is that, what we have proposed is what the city can afford without impacting core services. What the Tax Commission, Tax Reform Commission's programs, if taken as a whole, would do, would be, in the short run, force us to cut those essential and core services that get right to the quality of life. And that is 111 OPERATING BUDGET & TAX BILLS - 5/10/04 something, a trade-off, that we feel is dangerous. You cannot grow a city while you are taking essential services away. And full implementation, all at once, in a drastic form that's being indicated, would in fact have that impact.
You are telling the people of Philadelphia that if we are to do the recommendations per the bills that are presented here by my distinguished colleague from West Philadelphia, Michael Nutter, that you are telling the people of Philadelphia that if we dare to do this, that we are going to be seeing a decrease, a substantial decrease, and the elimination of basic city services because the city will not be able to afford these deep tax cuts; is that so?
Yes. We have already cut and cut and cut just to get this budget balanced. To layer on additional tax cuts would mean that we would go back to the drawing board to those areas that have already 112 OPERATING BUDGET & TAX BILLS - 5/10/04 been cut and demand that they give more. When we looked at just what the impact of losing PGW might mean to the Five-Year Plan, my friend and colleague Rob Dubow presented me with something that would amount to an $800,000 cut for my department alone. And that would have meant that I had to get rid of positions in order to provide 10 that 800,000. 11 16 positions in a department that is 12 all mandated services means that you then 13 start to pick away randomly at parts of the 14 service. 15 Because you can't eliminate payroll, 16 so maybe you take one or two people out of the department. And you can't eliminate the revenue department, and you can't eliminate the treasurer's office. So what you end up doing is cannibalizing every department to the point that it can't function. And what would happen in the service departments --
Point of 113 OPERATING BUDGET & TAX BILLS - 5/10/04 information.
Thank you, Madam President. Ms. Davis, isn't the cost of tax reform in the first year comparable to the cost of foregoing the PGW payment?
But you don't know what cuts you are going to make yet to forego the PGW payment. So is it the same doom and gloom for foregoing the PGW payment that it would be for tax reform in the first year?
Tax reform on top -- PGW is not -- at this point PGW is not an option. PGW is something that we have to do. It gets to the health and safety of the citizens of Philadelphia in providing heating.
I will be real brief. But the Mayor presented his budget 114 OPERATING BUDGET & TAX BILLS - 5/10/04 address to City Council, then went into a press conference and said that if Council would mess with any of those cuts, essentially, it might mean layoffs. The Mayor and the Administration are now saying that if we do tax reform, which is roughly $17 million in the first year, it might mean layoffs. But in between that time, the Administration decided to forego a PGW payment, but said nothing about layoffs. That's just not fair to this Council.
There are going to be restructurings, layoffs, or something to accommodate the full PGW impact. There is no 17 way that we walk away without an impact.
So the decision to forego the payment from PGW in and of itself is probably going to cause layoffs? That's a yes or no question.
Can you simplify that answer a bit? 115 OPERATING BUDGET & TAX BILLS - 5/10/04 The decision to forego the PGW payment in and of itself is going to force layoffs? That's a yes or no question.
I can't give a yes or no 6 answer, because there may not have to be layoffs; there just may be a reduction in the work force because we don't rehire.
So if you don't forego the PGW payment, but we do the tax reform, which costs less than foregoing the PGW payment, will there be layoffs?
If foregoing the PGW payment is not going to cause layoffs, then adopting the Tax Reform Commission's proposals in the first year will not force layoffs?
I think it may well require layoffs or we would have to adjust 116 OPERATING BUDGET & TAX BILLS - 5/10/04 what we plan to do --
It is a comparable amount of money. In the first year, tax reform costs million. The PGW payment is million. 7 Get your answer straight, then give me a yes 8 or no. 9
I think it would 14 inevitable involve a reduction in the work 15 force. 16 There are a couple of ways you can 17 accomplish a reduction in the work force. One 18 way is through layoffs. Another option that the city has is by simply not replacing as many employees who leave through the DROP program. So it may be layoffs, it may be increase in number. But at the end there will be fewer people in the work force.
I didn't ask how 117 OPERATING BUDGET & TAX BILLS - 5/10/04 you accomplish it. I asked is it a comparable amount. Is foregoing the PGW payment comparable to the cost of the first year of tax reform?
Thank you. Councilman Ramos. And we are giving you your time.
Thank you, Madam President. Concerning the wage tax, will you consider this wage tax being a regressive tax?
How much do folks working with incomes in the 14 to thousand 20 dollars per year pay each year in wage tax? Do we have a number for that, Mr. Dubow?
Can you get back to me before the day is out? We are running 118 OPERATING BUDGET & TAX BILLS - 5/10/04 out of time here in these budget hearings.
Individually. Yes, what does an individual paying wage tax, if they make anywhere between to 8 20 thousand dollars a year? 9
You are looking at the 10 high end pretty close to $1,000, the 20,000 11 person would be in that neighborhood. 12
And about how 13 many people -- do you know how many people are 14 in that wage tax bracket?
What would be the impact, you think, of eliminating the wage tax for such tax payers on the 2005 budget?
We would have to have someone do the research on that to come up with an answer. I don't have that answer.
I think we have, actually, done an analysis similar to that in 119 OPERATING BUDGET & TAX BILLS - 5/10/04 connection with a bill Councilman Cohen proposed a year ago. So I think we should be able to get that for you relatively quickly.
Would you be able to get that for me as it stretches out through the Five-Year Plan?
Can you get it to me before the day is out, let me know? We need this information right away.
The clock is ticking. (Councilwoman Blackwell assumes the Chair.)
Let's say that the hole in the budget for 2005 created by the full implementation of the tax reform is now anywhere between 242, 245 million dollars. Isn't the only way to fill that hole presently by increasing parking fees, amusement tax, and other related charges? 120 OPERATING BUDGET & TAX BILLS - 5/10/04
Well, I mean, the other option to fill that hole is to reduce costs. (Applause.)
There is a revenue side and expenditure side. But reducing costs will lead to a reduction in services.
This reference to the Tax Reform Commission, that there are no 10 problems, the recommendations are that there is nothing -- I'm not sure they are saying it verbatim in this way that I am expressing, but there is not something very, very wrong in increasing parking fees, amusement tax, and other related charges, would you go in that direction?
The Five-Year Plan recommends and includes revenue estimates for increasing fees and fines and the parking tax. So there is some of that that was discussed in the Tax Commission's report that is already included in the Five-Year Plan.
Doesn't this just shift the tax burden from, you know, relieving some taxes here, but putting the burden 121 OPERATING BUDGET & TAX BILLS - 5/10/04 somewhere else?
What it does is, it shifts the burden from the entire tax base, to focus it more specifically on the people who are using a specific service.
Are you for the Tax Reform Commission recommendation that essentially says, you can go tax these other things as a way of giving them full -- giving and implementing of the recommendations of the Tax Reform Commission?
We already include a lot of those things in the Five-Year Plan. So, yes, we endorse them, and we are already counting on them just to keep the plan where it is now.
But we are shifting tax burdens here; right? I mean, there is something -- I haven't been around here, I am not a tax expert, but I feel uncomfortable telling the people of Philadelphia that we are doing tax reductions; and what we are doing, what we could possibly be doing is reducing taxes in certain set 122 OPERATING BUDGET & TAX BILLS - 5/10/04 categories, and then increasing them somewhere else, where it still hits the pockets of the people.
In fairness to the Tax Commission, it does propose some additional revenue measures. It proposes some supply side. But at the end of the day, it acknowledges that you may be shifting the tax burden. And it tries to be strategic in recommending where the tax burden ought to end up. It would, you know -- it says you have to be willing, you know, to recognize more revenue coming off of your real estate taxes. It does propose increasing the parking tax, and we have captured that.
And the amusement taxes. And those tend to be taxes that are viewed as being paid also by people who don't live in Philadelphia, the amusement tax and the parking tax; that the preponderance of those taxes are paid by people external to the City of Philadelphia. 123 OPERATING BUDGET & TAX BILLS - 5/10/04 So it is a way of shifting the burden. Not only allowing real estate to pick up more of the burden, but also to shift more of the burden to nonPhiladelphians who use Philadelphia facilities.
I heard the clock. I will come around again another time, unless I will keep on going.
Thank you, Madam Chair. I just wanted to follow up on something that Councilman DiCicco mentioned, something about the selling of Camp William Penn. Very interested if you have any additional property or assets that you would think of selling off just to put -- get us out of this hole? For instance, the Councilman mentioned something about $10 million that that property might be worth. If we receive 124 OPERATING BUDGET & TAX BILLS - 5/10/04 $10 million, we could probably restore all the funding for our cultural and arts institutions of this city. We can also open our libraries on Saturday. We would also probably keep some recreation centers open. We could do a lot to make this city better, and, of course, to get people interested in coming into our city. Because right now I think all of us here, all of us here, are interested in one thing, and we should be interested in one thing, and that's the increased growth of our tax revenue or economic development, are the two things that are going to generate money and to put us and get us into, I think, a more stable economy
This five-year financial plan already includes over $30 million in revenue from sale of city assets. And, so, that is a part. But the Administration would caution against using the proceeds from a one-time sale in order to support ongoing expenses, like ongoing support that will be needed for 125 OPERATING BUDGET & TAX BILLS - 5/10/04 the Art Museum, like the ongoing annual support that will be needed for the recreation department. The question is, what are you going to sell next year? How are we going to fund these activities next year and Year of the plan and and 5?. COUNCILMAN DiCICCO: Point of information.
Yes. COUNCILMAN DiCICCO: I understand that selling an asset this year is not going to get you out of the hole. But my question or my comments were, in addition to the sale of it, we know that we are spending at least $500,000 a year for 500 people to go to that facility for 29 days of the year. So --
And your point is well taken. We are doing the appraisal. COUNCILMAN DiCICCO: I understand you can't sell a building this year, and eventually there won't be any buildings. 126 OPERATING BUDGET & TAX BILLS - 5/10/04
We appreciate when recommendations come forward. COUNCILMAN DiCICCO: I am looking to see how we can reduce some of our costs in order to get the budget to where it should be, but not necessarily for the sake of selling properties or buildings. (President Verna resumes the Chair.)
The point is well taken, And we are doing the appraisal. We had not considered the sale of William Penn. We are doing the appraisal on that. You are right. If we ended the camping experience outright, it is a $500,000 annual savings. And in the context of our financial situation, that's significant. COUNCILMAN DiCICCO: And I look at overall the recreation department's situation today. And you are talking about possibly closing pools. And I have about 10 or 12 rec centers in my district that are on that list. Where we wind up at the end of the day, I don't know. But in just simple terms, that would 127 OPERATING BUDGET & TAX BILLS - 5/10/04 keep ten pools open every year for the next five years. Thank you, Councilman Kelly.
Thank you, Councilman. I just want to follow up on that again. Because if we do sell some property or assets off, at least we can take some action on the recommendations of the Tax Commission. For instance, the most, probably, negative tax that we have today, there are two of them. One of them, of course, is the wage tax, and the other is the business privilege tax. (Applause.)
If we can reduce them in any way, in any way, I think it sends a signal out to everyone that we are going to be business friendly in this city and we are also going to get people who want to work in Philadelphia. And that's the growth. We have it really keep our eyes focused on the growth of this city. And I think that's one of the 128 OPERATING BUDGET & TAX BILLS - 5/10/04 things we have to do. Sometimes we do have to bite the bullet. And that would be maybe selling off an asset that we normally wouldn't think of. But I think if we do that, and if we send out the right signal to people that we are going to get serious about reducing our wage -- and a lot of these taxes to me are very regressive. The worst tax in the world, in my opinion, is the gross receipts tax. That's totally unacceptable.
I think it is important to keep in mind that, while the Administration is not doing everything that the Tax Reform Commission proposes, in very difficult times we are still virtually the only jurisdiction that is reducing the wage tax, reducing the business taxes. We have adopted the recommendation on single-factor apportionment. This is a city that has embraced the need for tax reform, and we are doing it at a substantial rate. 129 OPERATING BUDGET & TAX BILLS - 5/10/04
And I believe you are on the right track, at least in reducing that wage tax. It really is. And I want to commend the Tax Commission for giving us this report. I think it has a lot of room for thought, and I think that some of them absolutely have to be enacted.
I think it is important that the proposed state tax reform get the same kind of support. If what the Governor has proposed at the state level actually comes to pass, we will have a real opportunity to make major reductions in the wage tax.
Thank you very much. I just want to go back to your position on these various bills, because I 130 OPERATING BUDGET & TAX BILLS - 5/10/04 haven't had the benefit of the discussion to why you all are not supportive of the bills. There are three bills that are revenue neutral. No. 14, which is establish two estimated payment dates for paying the business privilege tax. Taxpayers no longer have to pay their full obligation in one day.
The reason the Administration is opposing that bill is that, in the initial year of implementation, it disrupts the cash flow because we would then be able to recognize only that revenue that had been recognized within the fiscal year, or within the 60 days immediately after the end of the fiscal year. So that one is a cash-flow impact, and that's why the city does that support the implementation of that bill, at least not at this point.
If the city were in a better financial state, implementing that bill 25 would not be as problematic. 131 OPERATING BUDGET & TAX BILLS - 5/10/04 It is that we can't take that cash flow and revenue hit at this point. Because it would be roughly half of the BPT for a year, about $50 million.
The phasing in, there is no way to phase in something that relies on a date-specific implementation. So we would have to take the full hit in whatever year we did it. So, that's our reason for opposing that one.
Okay. The next revenue neutral, establish discounts for early payers and penalties for late payers necessary to enact quarterly real estate tax payments.
That one also has the timing of revenue recognition as the issue. We would be foregoing roughly 50 percent of our real estate tax in the initial year of implementation. So your hit would be a cash flow, and also a fund balance hit, in the first year that it was implemented. 132 OPERATING BUDGET & TAX BILLS - 5/10/04
Apply tax payments to current year's liabilities so taxpayers who are making tax payments but may still owe some back taxes are no longer excluded from participating in the state's property tax rebate program. It is Bill 20.
That one is also -- we are opposed to that one because of the quarterly billing. The portion you recommended about applying it, the way it would be applied, the bill payment would be applied, is not problematic, as I understand. It is simply the quarterly installments that create the problem. And because they are part of one bill, we opposed it.
Okay. And another bill which you oppose that's not, probably, revenue neutral is Bill 17, extend net operating loss carry-forward so that the city's relatively short carry-forward period no longer makes Philadelphia an unattractive place to start a business that may begin with 133 OPERATING BUDGET & TAX BILLS - 5/10/04 years of losses before becoming profitable.
That one is just because it is not revenue neutral, because there is a cost to it.
I know. I said it wasn't. Okay. No. 18, establish quarterly real estate tax payments so that nonmortgage paying taxpayers no longer have to pay their full obligation on one day. That's Bill No. 18. It also requires, eliminate need for the city to borrow against future real estate taxes which would save the city money.
This one in its initial implementation would have a cash-flow impact. Because, again, you would get half of the year's revenue, and then you would go without it until the next year. You would be okay in subsequent years. But in your year of implementation, you suffer from the quarterly payment. You can't recognize it.
And I just have one more, then I will be finished with mine. 134 OPERATING BUDGET & TAX BILLS - 5/10/04 Bill 21, unify refund and assessment period so that the city and tax payers have equal rights for auditing and seeking refunds.
On the audit -- we are okay with the bill except for one section. So we are generally okay with it. We want it to be amended. So we don't oppose that bill.
Yes. There is a Section 14 19-501(A)(2)(b) which we would want to amend so that there would be a written statement that went with the form. That's how we would want it to be amended.
All right. I would like to remind my colleagues, we have approximately 69 witnesses. We will go on this round with the Administration. We can always call them back on Wednesday. But I think we have to move forward. At this time the Chair recognizes 135 OPERATING BUDGET & TAX BILLS - 5/10/04 Councilman Clarke.
I would ask you -- it is your turn. I would ask you to be brief.
I just want to get some clarity on what I had requested earlier. One was information on the legal aspects of the nonutilization tax. And the other, Madam President, I'm not sure if the sheriff is needed here, because I wanted to talk about the judicial sales, and essentially the success rate for lien sales versus traditional city judicial sales as it relates to the city implementing that process.
I will have the City Solicitor come back either later or Wednesday, if you prefer.
I think Wednesday would be fine. And, also, the sheriff.
He is an 136 OPERATING BUDGET & TAX BILLS - 5/10/04 independently elected official.
The sheriff or whoever runs the sheriff's sale program.
Thank you, Madam President. I just want to do a followup to Councilwoman Tasco's question regarding Bill 20 No. 18. And in that, you said that -- I have read that you have said you need to determine the impact that this will have on mortgage company escrow accounts and the way that those payments are handled. And at this time you 137 OPERATING BUDGET & TAX BILLS - 5/10/04 opposed the bill. But earlier, Ms. Davis, you did state that you needed to do further analysis. And I do understand that you said it impacts cash flow.
This bill impacts your cash flow because you would only -- in your first year, in the year that you implement it, you would only receive, roughly, 50 percent of your taxes, if it were done in two payments, depending on whether you scheduled them all within one Fiscal Year, which then would not give benefit of what you are attempting to accomplish. If we structured this bill in a way that would be beneficial to the taxpayer, the city would be foregoing roughly 50 percent of its revenue in the initial year of implementation. Subsequent to that, revenues would come in for payments, or two payments, whatever was decided, in a year. So you would be okay after the first year. But your initial year would be the year 138 OPERATING BUDGET & TAX BILLS - 5/10/04 where you took a significant hit.
Is there some way, or will you be actually analyzing a way to maybe implement this type of payment schedule without it being -- I know we are in a cash crunch at this point, but in some way that it would help? Particularly the future, if we are talking about raising real estate taxes.
We will look at ways to possibly soften the blow. But at this point it appears that any attempt to make it friendly to the real estate taxpayer puts an unacceptable burden on the city, especially from the cash-flow standpoint.
Okay. I just have one more question, Council President, then I can wait until Wednesday.
In your testimony at , under the single factor, single sales factor apportionment, there are comments about basing that income -- portion 139 OPERATING BUDGET & TAX BILLS - 5/10/04 of the business privilege tax on property, payroll and a double weighting. In that regard, can you explain how the increase in parking tax, in the parking tax, from percent to percent is going to 7 offset, or how much would it really make up of 8 the $13 million that you said you would lose 9 in revenue? 10
We project that our 11 parking tax revenues will increase by about 12 $11 million from '04 to '05. So, it would 13 make up most of that cost. 14
So just the 5 15 percent will make up 11 million? 16
You are welcome. The Chair recognizes Councilman 140 OPERATING BUDGET & TAX BILLS - 5/10/04 Nutter.
Madam President, point of information or request. That the bills where the Administration have cited that they would be -- the implementation of the bills would cause them a cash-flow problem, could we get that analysis of the cash-flow implications on the initial start-up, and then see what it does in the outer years?
Thank you. Councilman Nutter, I believe I recognized you.
Thank you, Madam President. Just two questions. I am reading from -- has the Administration produced a document on analysis of the various bills? 141 OPERATING BUDGET & TAX BILLS - 5/10/04
We have not disseminated it generally, no. We can supply that.
When we have been asked for it, we have given it out. If you would like it, we will give you a copy.
From time to time individuals asked us, individual Council Members or outside parties, will ask us for an analysis. If you would like a copy, we will give it to you.
Yes, that would be nice. Is this the document that has reference points for tax discussion, and then the tax bill summaries with more detailed 142 OPERATING BUDGET & TAX BILLS - 5/10/04 explanation of each of the bills?
Are there any provisions in any of the bills in front of us today that would result in an irrevocable decision or something that could not be changed later?
Well, there is a possibility that, yes, there are, at least on the local level. Because there is discussion in Harrisburg of amending the property tax reform legislation to lock the city into whatever tax reductions it has in place. So there is a possibility that anything we put in place here is something that we won't be able to change at the local level, depending on what happens in the discussions up in Harrisburg. 143 OPERATING BUDGET & TAX BILLS - 5/10/04
Are you suggesting that if the Governor's plan goes through, that we will never be able to change our wage tax rates again? Is that your testimony?
My testimony is that we wouldn't be able to deviate from the scheduled reductions without getting approval from Harrisburg, if the legislation, the way it is being discussed in Harrisburg now, passes.
Is it being discussed in such a way that the state legislature or the Governor is going to start setting the wage tax rate, or are they proposing to give us an amount of money such that it would require the rate go to a certain point to accommodate for that amount of money, and then we would go back to doing what we have been doing? Which is it?
It is being discussed in such a way that it would require that we not be able to change local tax law as it is in place as of a certain date. 144 OPERATING BUDGET & TAX BILLS - 5/10/04 So it is being discussed in such a way that we would not be able to change our tax laws without going back to Harrisburg.
There is another scenario where they talk -- where they would mention specific bills. But I think what they are telling us they are trying to do is, make sure that they don't give us funding, and then in later years we make other changes in our tax law that's backing off of reductions that are already in place. So if they do that, then, yes, we would be locking ourselves in.
I would like to add one other factor. It is not a legislatively mandated limitation. But from the beginning 145 OPERATING BUDGET & TAX BILLS - 5/10/04 of the city's tax reform program, back in the '90s, one of the hallmarks has been a consistent year-by-year decrease in the taxes. Philadelphia was going to be a place where businesses could rely on there being dependable tax reductions. It wasn't up one year, down the next year. And we have tried to continue that. Ms. Davis talked a little bit about how, depending, tax rates and structures matter to the rating agencies.
With every respect, and I am sure I would be pleased to hear from Ms. Davis, but the only time there was ever a guarantee of tax reduction in Philadelphia other than on a year-by-year basis was when Council passed Bill No. 020092. All the other rate reductions were on a year-by-year basis up until that time; isn't that correct?
The legislation, in fact, was year by year. However, the city's Five-Year Plan forecast what was --
I understand. 146 OPERATING BUDGET & TAX BILLS - 5/10/04 Ms. Wilkerson, but the Five-Year Plan does not set the tax rates. It does lay out a proposal for the tax rates, but it is true that the Five-Year Plan doesn't set the tax rates; is that correct?
No. I just wanted to say, in support of what Joyce said, that the rating agencies like the fact that there was a steadiness about our approach, and that there was a --
What is, I guess, in these times, a little disconcerting to the rating agencies, not only in relationship to Philadelphia, but in relationship to all municipalities and state governments -- and I think we saw it with Tennessee's downgrade -- is the unwillingness to face the economic factors that are impacting an area, and respond in a way that ensures that the municipality or state or local government will be able to meet its obligations. And that is the unwillingness to tax, even when taxes are what's called for. So on the one hand, where our steady approach was good, I think if we get into cutting taxes merely because it is the vogue of the moment, without regard to what it does with our ability to handle our obligations, we run a very real risk of a ratings downgrade.