-- real estate tax that we'd like to address, that might result in one person's real estate tax burden going up; one person's real estate tax burden going down. Is that what we're trying to get at?
Well, I think that that is part of it, Brett. I know that the taxation of the land and the one hundred percent -- The one hundred percent assessment, that way.
If I could throw it to Kevin Gillen, who did the research for our real estate panel, to give you an idea very quickly of why that's necessary, I'd be thrilled if you'd find that helpful, and 391 Whole - 5/10/04 - Bill 040313 give an example.
As I understand the question, you're asking whether it's -- why it's necessary to go to the hundred percent assessed value.
What is the... Right now most of the properties are not assessed at a hundred percent value.
Correct. But we pay property tax, we pay Wage Tax. Some of the business people pay Business Privilege Taxes. But right now I'm just looking at plain old ordinary citizen that doesn't have to pay any Business Privilege Tax. So, we pay a three point whatever Wage Tax, and... at least those of us that are working. But we also pay... Is it 50 percent of the property, of the assessment? Or it fluctuates? 392 Whole - 5/10/04 - Bill 040313 UNIDENTIFIED VOICE: It varies.
If we go to a hundred percent assessment of the -- one hundred percent assessment of the value of our property, then that will be for some people a substantial increase, correct?
Not quite. The purpose of going to a hundred percent assessment isn't necessarily to make more accurate per se as it is to remove another layer of complexity of the real estate tax process. Currently, if you want to figure out whether or not you're paying too much or too little in real estate taxes, you take the value of your property, multiply that times point 7, multiply that number times point 32 to get your assessment, and then multiply that number times 8.264 which is the property tax rate. So removing the point 7 step makes it a two-step process.
So why don't 393 Whole - 5/10/04 - Bill 040313 you just take --
Excuse me. Why don't you explain about the millage rate going down?
Well, if you go to full assessment and you want that to remain revenue neutral, then you would presumably have to lower either the mill rate or the property tax rate to compensate.
The Chair recognizes Councilman Nutter for a point of 394 Whole - 5/10/04 - Bill 040313 order.
I'd like to amend that. It's actually a point of information, Madam Chair.
I want to ask for the right thing. Thank you, Councilwoman. Mr. Gillen, this may seem like semantics; but I think, you know, words have meaning. Aren't we really talking about going to one hundred percent of market value?
And you're going to now then be assessed on the true market value --
-- of their home? I want to make sure that we're using the correct terminology. And you're also familiar that if we moved away from the artificial 70 percent 395 Whole - 5/10/04 - Bill 040313 number, which God only knows why we have that number -- but we can put that argument aside -- isn't it, in fact, true that if the BRT could actually figure out what the true market value of a home is, and then we'd have all the other numbers that you just ran through -- Don't take me back through that. One of the immediate results is that the citizen would actually have some reason to believe the numbers on the notice that they get, traditionally now during the summer, that the market value of their home was correct. It will be the responsibility of this City Council -- And there's a piece of legislation in front of us to try to deal with this. We would under any scheme, wouldn't we, in order to have, from a revenue standpoint, revenue neutrality on what's actually raised by the real estate tax. Wouldn't we have to then commensurately lower the present millage rate to match up 396 Whole - 5/10/04 - Bill 040313 with whatever the new assessments are? Isn't that correct?
Okay. So, for the moment -- and I'm sorry, Councilman. It was a long point of information. For the moment we have only half of the information out to the public. If we tell someone that the City is going to go to a hundred percent market value, and all they know is the .824 or the .3125 or whatever that other... .32, rather, those numbers, all they can do presently is take those numbers and multiply them by whatever they believe a hundred percent of market value is, which would then give you an astronomical potential increase in your real estate taxes.
And the reason we can't give people the other half of the question is is because we've not done a 397 Whole - 5/10/04 - Bill 040313 full City-wide assessment. We do not know what one hundred percent market value means City-wide, let alone for the 500,000 some-odd residential properties in the City, and we have not figured out what the appropriate millage rate is, based on the new total assessment for the City, and which would result in a revenue neutral millage rate. Isn't that correct?
So we have one piece of information. We propose to go to a hundred percent market value. And we can not tell people any of the other significant three or other four critical pieces of information that would tell you what your new tax bill is going to be. Right.
Well, that's actually the answer I was looking for. I felt like it would cost people more money. 398 Whole - 5/10/04 - Bill 040313 I thought it would cost our citizens more money. And I just wanted to know if it would or if it wouldn't; and if it would, how much more it might. So, thank you, Councilman Nutter, for answering my question.
Thank you. The Chair recognizes Councilman Ramos.
Thank you, Madam Chair. I have a few questions, but I'm only going to attempt this one on this round here. Again, if you -- I believe all of you were here this morning. I am very pleased with the work of the Tax Reform Commission, that you have taken now an activist role engaging the City, the people of Philadelphia in the great tax debate. I think that's a very 399 Whole - 5/10/04 - Bill 040313 positive thing. I'd like to refer to a group of men that I saw last summer playing dominoes up in North Philadelphia. And when I came up to them, they wanted to talk taxes. And I said, well, that's fine. Because for many years the tax issue of the City seems to have been just discussions that we would have here in Center City, and it was more of the affluent and certain stratas of the middle class, but never -- And I didn't hear people in our poorer communities talking about taxes. So I think it's a good thing. I think that this tax debate is not going to stop on May the 30th, that this tax debate is going to be an ongoing healthy talk among all Philadelphians. The renowned bond rating company, Moody's Investors Services, just put out a special report last week which described Philadelphia's fiscal financial outlook as negative. This is after being on the stable 400 Whole - 5/10/04 - Bill 040313 category, and also that most major cities are on the stable category. Philadelphia again has now shown up as a negative. And we saw that in the early '90s. Now, why is that, in your opinion? Is this because we haven't approved your tax reform package this budget? Or I mean, what do you make of it as tax reformers?
Well, I have not read the Moody's report. But knowing a bit about financial analysis, there are many variables that they take in consideration when they measure the health of the City. They take... One of the intangibles happens to be leadership over time. They evaluate what direction that leadership is taking the City itself. I think they look, obviously, at the charts we brought there. And the City that has the... is the costliest city to do business in. And they look at its potential, in terms of how we generate and attract new business. They look at the business 401 Whole - 5/10/04 - Bill 040313 environment that exists, labor relationships, and others. And that there's many, many, many factors to come to the conclusion of how they project the future health of the City. We look at it a little more myopically. We look simply at it -- And I don't mean simply at all, but we look at it from a tax perspective. We believe very clearly that if we don't do something, and to show others outside of Philadelphia, even the financial institutions, that we are making an attempt to make Philadelphia more competitive and to retain its business, then we think that that outcome that you have just talked to us about becomes more dire.
They state in this article that there are two factors that have given Philadelphia a negative outlook. It says, one, our currently strained financial position; and, two, declining reserve levels. 402 Whole - 5/10/04 - Bill 040313 So let me just ask you this: Isn't it fair to say that enacting the full tax reform package, without figuring out how to pay for it, is just the kind of thing that could negatively affect the City's bond rating?
Because they will want to see, you know, where is revenue going to come from so that we can -- And this process -- I'm not a financial expert like you guys are. But for us to go back to stable, that's a steep climb. And what I am concerned about is, if all these tax reform bills are passed -- again, I've looked at them very favorably -- are we then going to be in a position where we're going to be affected negatively with our City's bond rating?
The credit rating agencies care about one thing primarily: Will we be able to pay our bills.
What they see in the foreseeable future is that we're a City that is declining, and we are trying to spend still a lot of money. If we try to spend a lot of money in decline, it makes it difficult for to us pay our bills.
Are you saying that if we enact all the tax reform bills, that this would not impact negatively on the City's bond rating.
Could you speak into the microphone, please, so I could hear it.
Certainly. The credit rating agencies will certainly have their say, but what we suggest is that with tax reform we have a chance to grow. Short of tax reform, nothing in the City's recent history, nothing in the City's prior history suggests that we are going to grow.
But in the 404 Whole - 5/10/04 - Bill 040313 equation -- And you've made this very clear, that you depend on other factors to make that happen. Let's say that those factors -- Let's say slot machines never -- slots never come to be or they'll come to be maybe later on. And you have taken that under consideration. Doesn't that -- And if that doesn't happen, doesn't that impact negatively on our bond rating?
It could, certainly. There's no mystery to our problem. Right now we're trying to spend a lot of money that perhaps we don't have. We're not growing enough to spend the revenues that we would like to. We can either grow and spend that money into the future or continually find ways to cut and cut and cut as we decline. If we are disciplined right now, we believe the tax reform will allow to us grow into the future. If we are not disciplined to do tax cuts, then we'll have to continue to be disciplined every year 405 Whole - 5/10/04 - Bill 040313 and look at new things to cut.
Yeah, but there's no assurances of that in the bonding, and our bond rating is going to depend a lot on assurances on real dollars that they can pin that and say, well, this City is now moving out of this hole. And that's -- You know, that's -- that's a concern, after taking a look at this report, that I -- that I -- that I -- that I read this weekend, that I didn't see how you took any of this -- You didn't take this scenario, with our bond rating, into consideration. I think maybe this should be something that you guys can take a look at, and see if, in fact, you know, there's a positive out of this. Right now what it seems like to me is that if we do these tax reform bills, according to this report in Moody's, that our bond rating will continue to be considered negative, unless -- you know, unless all these other, you know, factors come about. 406 Whole - 5/10/04 - Bill 040313 And there's no... you know, you have not made the case enough and... or any of us here that all these things will happen. I think we will need to take a look and see hypothetically if any of the support from Harrisburg will actually come to a fact, and there we'll be able to see if we can, again, bring up our bond rating.
Councilman, let me just, if I might, respond to your question. I think it's very important to go back to the sort of the size or the magnitude, the fiscal magnitude of the Tax Reform Commission proposals in the first couple years, and I think ballpark the net difference between the Administration's proposal and the Tax Reform Commission proposal is about $7 million in the first year. Okay? And it plays out in the next couple years. And I'm sure Brett knows the number. I would suggest that these are manageable numbers in the short term. I would also reflect back to an 407 Whole - 5/10/04 - Bill 040313 earlier conversation that says, while this is a long-term strategy in investment in growth, that there is nothing -- I think the Tax Reform Commission understood well that mid course corrections or a correction after two years or after three years, depending on how the balance of revenues and expenditures looks at that time, is absolutely a possibility and certainly well within your powers in working with the Mayor. So, my take on the Tax Commission proposal is, it is a long-term plan that suggests that in order to be competitive, we have to follow the long term, but there are multiple opportunities for corrections and changes. And if the bond -- My understanding -- And I'm... My understanding is that rating agencies are very short-term focused on, essentially, the question that Brett raised: Can you pay your bills today, tomorrow or the next week, and in the short-term. 408 Whole - 5/10/04 - Bill 040313 So, I think that there's a manageable impact right now on the budget, and I think that we anticipate that those jobs and property values will rise in the short term. If those don't come as fast as the proposal estimates, I think that there's also room for mid course corrections.
Councilman Ramos, your time has been up. So, if you don't mind.
Thank you. Mr. Mandel, I believe Councilman Goode asked you some time ago about what the impact be on the three bills. Do you have that information now?
I think we're going to have to get that information to you as soon 409 Whole - 5/10/04 - Bill 040313 as we can.
I think we're going to have to get that information to you at a future date. We've already discussed with staff. They don't seem to have it on them. We'll make sure we get that as soon as we can.
Is it possible that Bill 12 will cost a hundred million dollars?
Again, I don't have any 410 Whole - 5/10/04 - Bill 040313 of the numbers in front of me. If I can recall correctly, I think that, forgetting any dynamic effect, the first-year impact was about million. That's my number. 6
I wouldn't doubt these 9 numbers. Again, I would say that they are 10 affected dynamically -- 11
That's not my 15 question. My question is, if over five 16 years it costs in revenue maybe $236 17 million, and maybe I can accept the package 18 of business tax proposal bills. 19 All I asked you to do was break it 20 out, in terms of Bill 10, Bill 12, Bill 17. If you have Bill 10 or have Bill 12, Bill 22 17, in terms of individual information, you can offer me that information. But it seems that you don't want to offer me that information. 411 Whole - 5/10/04 - Bill 040313 If you have partial information, give me partial information. I want to know the cost of those three bills. Separately; not just as a package. I play vote for them as a package. But you at least owe us that type of information of giving us the cost of those bills. And if you don't have one or two of the bills until tomorrow or Wednesday, that's fine. But if you do have the cost of Bill 12, tell me how much Bill 12 costs.
I will sick Jodi Bradwell on you, and hopefully she can give you a better answer than I can.
And I actually can't give you a direct answer right now for that information, Councilman, but I'll...
I'm sorry. You're going to have to speak into the microphone. 412 Whole - 5/10/04 - Bill 040313
I'm sorry. My name is Jodi Bradwell. I'm a former staff member of the Tax Reform Commission. And I am going to attempt to respond to Council member Goode's question, but I cannot give you the information today. The reason is that we have a lot of spreadsheets. I did not prepare them. And I'm sitting here trying to dig through them, trying to figure what the difference ones are because we have the basic spreadsheet that puts them all together. And when you do these calculations in Excel, what we had to do was, we -- we... To get you the -- To get the figure -- Now, I'm not going to dance around it. I'm going to explain to you why I can't just, like, come and look at this and give you an answer. But we had to take the revenue projections...
If it would be all right with you, can we simply respond to 413 Whole - 5/10/04 - Bill 040313 you in kind, say by Wednesday, to give you that information, rather than sort through it? I think we understand specifically what you asked, the breakdown of the cost of the individual bills.
The additional question was whether you can break down any cost of any bill, not just whether you can break down 10, and 17. 11 But if can you only break down 12 or 12 you can only break down 10, you can give me that. Can you break down anything?
Can I... Yeah, by Wednesday I can give you certain... I'll give you every blessed thing I can get you by Wednesday. I can assure you I... You know, it's...
Did you not know that I was going to ask you the cost of Bill Number 12?
I'll be honest with you. This is a conversation that we've been having since the Commission worked on these numbers: Can we break them down specifically, individually. And we have been working on them. Jodi and I have been trading e-mails. I put poor Judy through heck trying to dig through all the spreadsheets that she has. So, we've been working on it. I was crossing my fingers that we would have you an answer today.
Jodi can tell you we've been back and forth on this in e-mail form. Yes. Yes.
And you will have that breakdown for us by 415 Whole - 5/10/04 - Bill 040313 Wednesday?
Thank you. The Chair recognizes Councilman Cohen.
I just wanted to piggyback on the request of Councilman Goode because I would want to get that information as well, to see how, in fact, this impacts on our bond rating, given that Moody has classified us as negative. Thank you, Madam President.
Excuse me. Madam President, in response to your request, 416 Whole - 5/10/04 - Bill 040313 Councilman Ramos, we'll do our best as it relates to Councilman Goode. But I must add that the Tax Reform Commission has been disbanded and its staff has been released. And never at any point during our relationship was the Tax Reform Commission responsible for financial analysis, as it relates to those issues. We will certainly endeavor to make those queries. As far as Councilman Goode's question with regard to specifics in our tax reform package, we will do it as volunteers. We'll work diligently to get you that information on Wednesday.
Madam President, point of order. I understand the dilemma of the group forward. But if they're engaging us to approve all these tax reform bills and their recommendations, we need to know how much all of this is going to cost. I think it's only fair. We've pressured the Administration to give us more information. 417 Whole - 5/10/04 - Bill 040313 They finally, at least in my view, gave us a little bit more information this morning. At least I was able to understand and get a clearer sense, I think, at least for today, where they're at. I don't know. If you cannot -- If the forward group cannot provide us with that, maybe this is a point where we engage the consultant, Crawford & Company, to assist us in getting those numbers because how can we -- how can we entertain the possibility of voting on all these bills if we don't know how much it's going to cost us? I mean, the two that Councilman Goode has asked for is fine. And that will give us some kind of idea. But there's a whole lot more than two.
Yes, Madam President. We understand that, Councilman Ramos. We have a second panel that will follow us. We will then confer afterwards 418 Whole - 5/10/04 - Bill 040313 to see, to the best of our ability, that we can get your information.
Well, I wanted to say the most sense I've heard in these discussions so far has come from Councilman Rojas and Councilman Goode.
Rojas is a great ballplayer. And you are, too. Mr. Mandel, why are you called the Tax Reform Commission? What's so wonderful about the word reform? See, when you say reform, you already color your -- You want to improve something, people think. And yet I have not heard a single word as to why you would consider yourself reform. I don't know who's going to be 419 Whole - 5/10/04 - Bill 040313 benefiting and who's going to get hurt. I don't know what rich man is going to start crying in his beer because you're imposing a bigger tax on him, and what rich man may be cheering. Do we know who's going to be benefiting by these various proposals? Seems to me, from the small amount I know, is that there seems to be a shuffling of the chairs. Some people are going to benefit, but I don't see -- and some people are going to get hurt. But I don't see any gains. For example, I thought to improve housing, that would invite more people into Philadelphia, we were thinking of how do we build homes a little more like suburban homes. How do we get a little more ground around our homes so people don't feel they're living just in row houses. And then you come along with, let's have a land use tax and make land so expensive that we can't do that. So you 420 Whole - 5/10/04 - Bill 040313 upset that proposal. I don't know -- (Applause.)
I just don't know where you're going or what you hope to achieve. And I don't know what your qualifications are. And I know Councilman... I said Rojas.
You know, my children know me well enough to know if I miscall them by name one day, I'm going to call them that forever. So you're going to be Councilman Rojas forever, probably, in my memory. (Laughter.)
But tell us about who we're going to benefit, who we're going to get hurt. Where do these ideas come from? Tell us... For example, I understand that on land use tax -- Maybe I'm wrong, but I haven't heard anybody 421 Whole - 5/10/04 - Bill 040313 explain enough so I have any answers. I understand that if the land plot downtown in a giant 50-story building, if the land plot or the footprints or whatever you call it in the real estate market, are no bigger than, say, a normal house, the taxes are going to be about the same. Now, if you use land value, and you don't consider anything else important, you use the same amount of land that might be used for an ordinary home, it can be used for a skyscraper building. And your taxes, as I understand it, are going to be pretty much the same. Now, is that true or isn't it true? And if they're going to be different, how are they going to be different? What's the basis for the difference, and so forth? We're being asked to pass all kinds of things we have no understanding of. And basically I start with the first thing. I don't know why you people should be benefited by starting out by being called reformers. I don't think you're reformers. 422 Whole - 5/10/04 - Bill 040313 I think I'm a reformer. Maybe I'm a strong reformer. Maybe I'm too strong for most people. But I want to change things. And if we're going to -- If you're proposing changes, I'd like to know what the changes are and how they're going to impact on us before we vote. It's too late after we vote these bills in, and people start crying to us. We can't say in Council, gee, we didn't understand it. We were told this wasn't going to be true. Because then they'd say, well, you ought to all quit. Why didn't you find out first before you voted? That's the situation we're in. We're trying to get information and we don't have it. So first I'd like to ask any one of you to say why you think you're tax reformers. What are you reforming? What do you hope to achieve as a result of all of your proposals? And let's begin testing it. And then secondly I'd like to know 423 Whole - 5/10/04 - Bill 040313 what group of businesses are going to be helped or is it just businesses or are residences also going to be helped? And if so, I'd like to know who. And I'd like to know... Give me reasons why, the example I gave you about the bank building paying the same taxes as an ordinary residence is not true. Give us some facts so we know what we're dealing with.
I can briefly walk through the major recommendations, and who they benefit and how they would help the City. Overall the basic mission of the Tax Reform Commission was to improve the City's competitiveness, in terms of retaining and attracting jobs and residents, in a fiscally and socially responsible manner. And that's certainly the charge that we found ourselves with, and certainly the 424 Whole - 5/10/04 - Bill 040313 charge we think we accomplished.
Don't go too fast, now, because that's also the mark of, you know, people who want to cover things quickly without getting questioned too hard. You said businesses. Is there anything for people who are not businesses?
Well, let's go through the recommendations theme by theme. We talk about it being a three-legged stool. Leg one, dramatic cuts in the Wage Tax. So right now, anybody who pays the Wage Tax would see their taxes reduced as part of the material --
Wage Tax would start being reduced this year and would be cut all the way down to 3.25 percent for residents and non-residents by 20 -- 425 Whole - 5/10/04 - Bill 040313
And would rich people and poor people be treated the same way or would there be differentials? Is there any interest by your Commission in that?
As you know, due to the Uniformity Clause in the Pennsylvania Constitution, it's a proportional tax. Everybody would be cut the same rate. The Wage Tax reduction would --
So you're saying that, for example, the tax cuts by President Bush are fair because everybody gets them? Is that what you're saying?
The rich people get more benefits by tax cuts than poor people but everybody gets something. Tell me how residents get helped.
Residents of Philadelphia who pay the Wage Tax cut would see their taxes decreased dramatically. We have a little check in the materials that 426 Whole - 5/10/04 - Bill 040313 we gave you. The average working in Philadelphia would, over the next decade, save more than $3,000 in wage taxes.
Mm-hmm. Can you tell us how much he'd save each year? When you say the average wage earner, could you give us the average wage that you're computing from.
Right now the average wager earner in Philadelphia earns about $40,000.
Mm-hmm. Is there anybody here from the Revenue Department of the City? I'd like to know where you get that figure from.
It's actually the State Department of Labor and Industry number.
And you feel that it's fair that the people who are at the upper levels of income get the same kind of cuts as the lower income people?
I don't know that we debated that as a question or whether we thought that was fair or not. Legality... Or the law in Pennsylvania, by the Uniformity Clause of the Constitution, says that we can't charge a higher tax rate. We can't have a progressive tax rate in Philadelphia. So we have no choice but to be proportional.
Well, then how does the government at the federal and state level justify having these refunds of people with lower income?
The state has a program and the Federal Government has a program for tax forgiveness. One of the major recommendations of the Tax Reform Commission is that we expand funding to the 428 Whole - 5/10/04 - Bill 040313 Campaign for Working Families so that people can access --
You do what? You expand... And then I lost everything after that word.
Expand funding for the Campaign for Working Families which would help people access this tax credit money. Right now about $150 million of tax credits due to low income Philadelphians are left on the table because people don't access that money.
But that's to help get back taxes paid at the state or Federal level.
And you think it fair at the local level that we give them no refunds at all?
The suggestion was that right now because so many people are leaving this money on the table, rather than to create an additional local program to complement the state and Federal 429 Whole - 5/10/04 - Bill 040313 program, we should invest locally to go after the revenues at the federal and state level. If we invest $1 million a year locally to support the Campaign for Working Families, we have a chance to access as much as $150 million that's currently left on the table by low income Philadelphians.
What's happened to the concept of fairness and equity in taxes? Does that no longer apply? Are we agreed that the sales tax is a fair tax, a tax built on sales tax principles, like the Wage Tax is a fair tax? Because it taxes rich and poor at the same rate?
You're way 430 Whole - 5/10/04 - Bill 040313 over your time, so would you --
Madam President, I must say I think I'm much shorter than any of the time spent by any of the Council members --
Councilman, according to our chart here, you have been on for 12 minutes and 56 431 Whole - 5/10/04 - Bill 040313 seconds.
That may be, but I can say I was on maybe a third or a tenth of what Councilman Nutter has been on. (Laughter.)
I think as soon as my voice comes on, you're ready to say I spoke too much.
Come on. Councilman, seriously, you're going to have to wait for the next go-around. We have a screen full.
Well, I'd like you to just use one time limit for everybody. And then keep going around until we get a chance. I'm not --
I'm going to have to put the bell right up to the mike. I mean, you've been on for --
But I object to disproportionate uses. 432 Whole - 5/10/04 - Bill 040313
Yes. COUNCILAN KENNEY: Stop my clock. Time's running.
Madam President, I'll yield my time to my good Councilman Shapiro. (Laughter.) (Applause.)
Councilman Kenney. We have so many people that have been waiting. I think this is very unfair. Councilman Kenney.
Thank you, Madam President. 433 Whole - 5/10/04 - Bill 040313 Can we just go back a moment. Maybe Mr. Thornburgh or someone else at the table could kind of talk a little bit about what happens if we stayed the course we're on now. If we continue to spend the way we spend, if we continue to incrementally reduce the tax structure rates in the City, Wage Tax and Business Taxes, what do you project in the way of slow, bleeding death of jobs and citizens? And if that's the case, into the future, without some bold step, it's never going to be the right time to do this because we're going to continually have less and less money, and less and less people, and less jobs with which to have a tax base at all. Could you kind of like talk about the scenario of just staying the steady course and doing what we've been doing and spending the way we're spending.