Yes. You could consider it to be a standing commitment of the organization that I represent to provide the expertise, individuals, candidates for commission and advisory, whatever you want to call it, to help in the endeavor to make more efficient the operation of City government. I mean, there are any number of opportunities to make that connection, and there are a number of measured steps that could be considered. Some that I know have been discussed in this Chamber that certainly bring about the efficiencies that you cite, and I do believe would serve to lower the expense pressures that make it tough to balance current revenues with current expenditures; and we'd been glad to do that. We've got plenty of thoughts. I mean, I had someone stop me in the hallway here, "Hey, talk about overtime. Talk about overtime." So it's not our intention to speak at any length about that, but that was one of those some years back observers within 144 02/16/05 - WHOLE - 05007, 05008, 040767 government said couldn't be done, but I do believe aren't we down around 122 million, I think, is what we're coming out of this operating year with? It's a reduction from 136, and I say it not so much to squabble over numbers, I'm just saying that someone said it couldn't be done. It is being done.
And I think there have certainly been a number of efforts by this Administration to deal with overtime issues. And I think it should be stated at the same time for the record that in many instances or under certain situations it is beneficial to the City to pay overtime to a worker that is already on the workforce as opposed to bringing in additional people. There's an additional cost to having a new employee as opposed to paying overtime to the person that is there.
At times. It has to be discussed categorically. There are times when it makes sense.
So at times, overtime gets the highlighted negative 145 02/16/05 - WHOLE - 05007, 05008, 040767 attention, whereas from a management standpoint, sometimes overtime is a better use of the dollars in certain situations. Thank you for the agreement to be supportive, and I'd like to follow-up with you on that.
You're welcome. The Chair recognizes Councilman Kenney.
Thank you, Madam President. Thank you for your testimony and for your continued diligence in addressing this issue year after year, and our successes have been largely in part of your help with framing the issue. Part of the philosophical issue of this tax reduction in many ways for me is government will not, as Councilman Nutter has talked about, find the efficiencies, do things 146 02/16/05 - WHOLE - 05007, 05008, 040767 differently, try to reduce the cost of government unless in some ways they're forced to do it. And reducing the amount of revenue that the government, any government, has at is disposal to spend forces the hand of the government and the community together to figure out different ways of doing things and providing services. And that's why in some way it's frustrating to listen to testimony about the support now for reducing the gross receipts portion of the business privilege tax while at the same time requesting an increase in parking taxes so that we can continue to operate in a lifestyle we've become accustomed to. Businesses don't do it that way. And I understand that government has a much different mission than business. But it's still not antithetical for government to try to work in an efficient fashion as it is in business. We have other social service needs that we have to provide for and other issues we have to deal with. But if there's no tax base left and there's no opportunity to employ people -- and when I look at that chart, it's 147 02/16/05 - WHOLE - 05007, 05008, 040767 the most frightening chart of all. And while I recognize Chamber's need to market this region, and it is a jewel of a region and probably an untapped jewel of a region, there's this problem in the middle of it. And the problem in the middle of it is the one we face every day because when we're on the same list in the '90s, as Philadelphia and Detroit are the only two major cities in the country that lost net population in that decade. I don't want to be on that list. I like being on the list where the Cezanne exhibit, the three cities, Paris, London and Philadelphia. I like being on that list better. But unless we fix this tax issue and are forced to take the necessary steps to fix the government's efficiencies because we don't have any revenue to do anything else, it's the only way the government is going to change. And we need you guys to continue. Here's what I'd like you guys to think about it. I was disappointed today from testimony from the Administration that in their tax revenue collection projection they 148 02/16/05 - WHOLE - 05007, 05008, 040767 put no factor in for job growth. None. So that the view we get in the testimony today was skewed by the fact that we're going to get less revenue in, we're going to be collecting less revenue in the next 5, 7, years but 7 never factored in any job growth at all. Is 8 there some formula or some process that you 9 could employ to try to project -- and I get 10 it's not an exact science. That try to project what job growth there would be as a result of this incremental but definite yearly tax reduction? Again, I'm not an economist. I'm not an academic. I don't really have the skills to do that and I don't think our staffs do either. But if is there some way to kind of counter the argument that this tax reduction and future tax reductions is simply continuing a negative result -- I don't think it's realistic it is a negative result. I think it's a positive result, but we need to have some type of figures to kind of bolster that philosophy.
I'm going to have 149 02/16/05 - WHOLE - 05007, 05008, 040767 Stu comment in a second. Is it possible to produce a dependable reference as far as job growth in the future? Yeah, we can do that.
I think it would juxtapose the testimony of the Administration that somehow what we're doing here is not in the best interest of growing jobs in the City. And I think it's wrong, their position. But I do think that we need something to quantify potentially what we're looking at if we take the steps that's being recommended.
Councilman Kenney, if I can just more particularly respond to your question. Two and a half years ago, the voters of Philadelphia approved an amendment to the Home Rule Charter that this Council passed creating a Tax Reform Commission I was privileged to sit as one of the Commission members on that Commission. When we go to the report that we issued in November of 2003, it was either the second or third volume of that report -- I forget which one it was -- was included a 150 02/16/05 - WHOLE - 05007, 05008, 040767 report prepared by E Consult, a group that is well-known to this Council because this Council has used them in the past to provide this type of economic data in which they analyzed the proposals of the Tax Reform Commission and looked at the type of job growth that the recommendations of the Commission would generate. So E Consult has done that kind of an analysis and is already part of the Tax Reform Commission report.
I would just say, as you began to amplify your question, what popped into mind was saying I saw on the wall halls of government by a budget director some years of some representations that said "Nothing stimulates the imagination like a good budget cut." So I think you make a fair point and probably voice the sentiments of an awful lot of people that they'd like to see more aggressiveness underlie the efforts to balance the budget and reduce taxes and want to take the prudent step that it requires to engender job growth, which I think is your 151 02/16/05 - WHOLE - 05007, 05008, 040767 point. So we'll take a stab at it. You know, we certainly -- this is not a place for deep economic discussions. We don't have the time for that and I realize that, but --
It always should be, not only because of the humanitarian dimensions of what a municipal government means to the well-being people but ultimately to the well-being of businesses and making sure that those people and residents have decent jobs and paychecks. That being said, I would only point to the chart just a few feet from Council President Verna's shoulder and see other than that stretch from '85 through about '89 this City is seeing decline in job growth after 1969. I don't think you need to be schooled in the Samuelson model of economics to know it's the wrong direction. And does anyone quarrel with the notion that there's a connection between an intimidating tax model and lack investment and a result in 152 02/16/05 - WHOLE - 05007, 05008, 040767 job growth? I don't think so.
There was today. I think some of the testimony today from the Administration was basically, you know, the only reason -- taxes are not the only reason that that line is going that way. But I think taxes is probably the primary reason the line is going that way.
You can quarrel over the factors, the loads of it as to what causing it, but the point is this is illustrative of economic decline. Now, we've got growth in some little, as Councilman DiCicco said, cottage industries and we're grateful for that. But we want to hold on to those firms. They get their shot here and are incubated, to use the fancy term, and then all of a sudden they see what it takes to be an ongoing business and they head north, south, east and west literally. And we want to keep them here, I think they want to do just that.
Just one comment on the parking tax. I liken the parking tax recommendation to what happens at SEPTA, that 153 02/16/05 - WHOLE - 05007, 05008, 040767 every time there's a fare increase, a certain segment of the SEPTA ridership decide that they no longer want to use the system and hop back in their cars. Every time we make it more inconvenient for people to come to the City and more aggravating, because there's nothing more aggravating than coming in the City, using one of our hospital facilities and being there two or three hours and come out and cost you $20 to park your car, to make that worse, to me, is absolutely nonsensical. And if you read Philadelphia Magazine and some of the other regional magazines, you see the growth of restaurant industry in the suburbs now. There are high-end, high-class, well-known restaurants, highly-rated restaurants in the surrounded counties growing every day with free parking. And whether that's coming in to a cultural event, coming on to a show, coming in to a restaurant, coming in to shop, which is hardly happening at all these days because of, again, free parking at the malls, to make it even more inconvenient and more aggravating for 154 02/16/05 - WHOLE - 05007, 05008, 040767 suburbanites and locals to come here with her car is just insane. And I see no benefit to it whatsoever other than allowing the government to continue living the life it's become accustomed to by cutting one tax and raising another.
Well, it's important that you hold that point of view. It is distressing. The math boils down to one tax versus another. And I won't labor any more what we believe is the downside associated with a higher parking tax. You know regular folks, we all do, you don't like the idea that you park somewhere for 40 minutes and you're shelling out $25 and it could go higher, so not an attractive proposition. I want you to know, though, and this is kind of my privilege and the fun of being the advocate for this region and City and its business interest, we still have a lot going for us, though. Plenty. The Barnes is coming here. And I just did an interview with a newspaper out of Paris. Because the Barnes in 155 02/16/05 - WHOLE - 05007, 05008, 040767 that collection is like visiting the Vatican to see the Pope for a very fervent Roman Catholic. They want to be there, they want to do it, they got to go. The same with the Barnes and people that appreciate art. But it isn't so much about appreciating culture, it is to say having the Barnes here is like two or three Super Bowls a year in terms of the people who come in and what they'll spend. So we've got a lot going for us. I mention one other thing, too. You know, he can't be here, but the Cancer Treatment Centers of America, they bought the Parkview Hospital in Northeast Philadelphia. They're going to spend at least $15 million ramping up out there. And it says something about the research and talented people that they want to recruit and the people they have to serve and help live. But the fact they're coming here is a direct testament to an institution like the Fox Chase Cancer Center which is out there. So we do have magnetic aspects -- you know, it's not all about an unholy story of economic decline. We've got a 156 02/16/05 - WHOLE - 05007, 05008, 040767 lot of good going on. I think it's our job -- it's your job certainly to make the tough decisions when it comes to public budgeting. It's our job to, when we responsibly can, accent the positives. By the way, I've got to go out to the Fairmount Park Commission because they are going to deal with at least the first turn on the Fox Chase Cancer Center today.
That's big time. You know, we're going to be able to -- when the people come here on June 19th from that biotech world, you know, when we can say we're going to take you to the Wistar Institute near Penn's campus where the scourge of polio and rubella were stopped in its tracks, right here in Philadelphia, that community of professionals is fascinated by that. They want to be here. But our job is not just have 157 02/16/05 - WHOLE - 05007, 05008, 040767 it end at fascination, we want commitments, come here and do business here, employ our residents. That's part of our job. And maybe you think it's Chamber speak, but sometimes we talk about the DNA of the region and the City residents changing to promote some of the stuff and be comfortable touting it because we are unique and we're a cut above. I think we deal with sometimes the propensity to be too negative and editorial pages that can't get ahold of themselves and want to keep on accenting the negatives. We've got plenty of positives. Well, you've got some tough decisions to make. I do believe that we ought not to lose sight of at least one element that was emphasized here today, and that is the chart a few feet from Council Verna's shoulder. From 1969 to 2003, you see what's going on with job growth. Other than that stretch of years between '85 and '89, it's not good. And we can improve that.
The point of information. 158 02/16/05 - WHOLE - 05007, 05008, 040767 The Chair recognizes Councilman Goode for a point of information.
I cane see it because it's far away from me, but it's right around then.
That would be the Goode Administration. Thank you, Madam President.
Thank you. The Chair recognizes Councilman Clarke.
Thank you, Madam President. Good afternoon, gentlemen. First to Mr. Pearson. I talked to earlier. For the record, until we can get a handle on this tax issue, we have a Keystone Opportunity Zone that will give you 159 02/16/05 - WHOLE - 05007, 05008, 040767 substantial incentives in my district, so if you're looking to relocate or expand your business, please give me a call and we'll make some land available to you. Real briefly, Governor, I hadn't known your position prior to now on the parking tax. There's different degrees of opinions on that. And I'm still not sure what position I'll ultimately take. But the reality is I believe that we do need to do something with the business tax. Councilman Nutter and I actually brokered a little deal a year ago that never saw the light of day. Frankly speaking, in retrospect, had we done that, we would have addressed to some degree both the business and wage tax. But we're here now. But the reality is, at least my reality, if we continue to reduce the business tax in an aggressive level, there will be some reduction in revenue as relates to the City's take. Some question the levels of supply side, but I think that we need to be in a position to have some additional revenue 160 02/16/05 - WHOLE - 05007, 05008, 040767 raised somewhere else. If you're not supportive of the parking tax, where would we get this additional revenue? As nice a story that we'd be able to tell, I don't think people are just going to come into the City in droves to increase both our workforce and both the residents. I know it's a long question, but frankly speaking, I was at a library opening this Saturday, a brand-new library in my district. We had fought for five years. And it was a great day, but around the perimeter of the people standing there, I had a bunch of people with signs complaining about cuts in libraries. So as an elected official, you have to deal with the aspect of taxes, but you also have to deal with the reality of people's lives. Talk to me about how do we have enough revenue to provide reasonable service to people so I don't get beat over the head every time I go to a ceremony.
Well, there's not a pat answer. And I say it from the standpoint 161 02/16/05 - WHOLE - 05007, 05008, 040767 of someone who's got budgets under his belt. I wasn't a legislator turned to Lieutenant Governor, become Governor. I was a municipal official, a county commissioner, and then eight budgets as Lieutenant Governor and Governor. And I've had to make the tough decisions and we've had some wonderful years too where it wasn't as tough. I certainly know there aren't pat answers. But I do know as far as the manifestation of new revenue from increased economic activity, that will unfold over the longer term. Case and point, when the Barnes begins to bring in people to this area, you're going to have tremendous increases in hotel room rentals and related collections and that kind of thing. In the short run, I do believe that I would be comfortable citing what is part and parcel of the Tax Reform Commission's work. I think I mentioned overtime, not so much am I suggesting that's the only avenue for generating savings, but there are a number of steps. How you collect real estate taxes. The ultimate impact is -- 162 02/16/05 - WHOLE - 05007, 05008, 040767
Are you saying just collections or the hundred percent valuation?
No. Instead of the once a year effort, the quarterly. But there are steps that can be taken. And with the will and I think the insistence of the Council they could be activated. I think it, in the short term, gives you some of the expense reductions to help you balance the budget.
I'm not trying to put you on the spot because you're not the elected official; we are. It's our responsibility. But there's a certain reality out there. I have issues. On the list of things that now are on the chopping block in my district, but that's a reality. I need to 163 02/16/05 - WHOLE - 05007, 05008, 040767 be in a position to talk about increasing revenue somewhere in the short term to offset some of these reductions. I'm asking you -- you've given a lot of thought to the aspects of cutting the taxes, but I'm concern that I'm not hearing similar types of responses from the other side. And actually, Councilman Nutter mentioned an issue about the Chamber. And I would, in fact, welcome that, participating in some sort of a forum. As a matter of fact, I introduced a bill last year to creat the Tax Reform COMMISSION implementation Program, and I got criticized by my friends in the Daily News Editorial Board for saying that it was simply an attempt to stop the tax reductions. But I genuinely thought that people need to sit down and talk about ways of implementing this particular program in a way that makes some sense for the City.
Well, I'll take a stab at one. And I do remember that editorial and I think their point of view was that -- I think they see the Council in tandem with the 164 02/16/05 - WHOLE - 05007, 05008, 040767 Mayor being the implementer. That's another matter. I think the more aggressive collection of fines and that kind of thing is an example that would generate -- do you know the particulars on that?
One section of the Commission report where we talked about certain proposals for replacing the revenue that would be lost by the tax reductions, one of the suggestions was increasing fines and collection and enforcement of fines. It wasn't any specific fine, it was just across the board. Many of the City fines are at well below what the statutory maximum would be for that.
Not to cut you off, but I think we just got authorization from the State to increase one of the --
There were a number of fines that were in like the $25 range and 165 02/16/05 - WHOLE - 05007, 05008, 040767 statutory maximum might be 300 at fines could be increased. The City gave the Commission a projection that by increasing fines, they would collect 2 to $5 million additional per year, which over the Five-Year Plan is 10 to $25 million over the life of the Five-Year Plan. Again, one recommendation. There was another idea that was fostered at the time about increased collection of delinquencies. The Commission talked about increasing collections by 1 percent point. The Commissioner told us that they were collecting like 90 to 93 percent of the taxes due in the first year. So the Commission if we increased that by one percentage point and collect 91 to 94 percent each year, that's $20 million a year that you're collecting additional revenue, which over the life of the Five-Year Plan is a hundred million dollars. That goes a long way to funding tax reform.
The parking tax was 166 02/16/05 - WHOLE - 05007, 05008, 040767 one of the items that was listed there, not as a recommendation -- we did not make recommendations on these issues. We gave a laundry list of potential sources. It was one of the items that was on that laundry list of potential sources. It was not a recommendation that it be raised.
Just a whole laundry list of potential sources of replacement revenue.
It comes down to this often: Where there's a will, there's a way.
I know there's a way. Again, I begged to get elected, so I'm not by any way trying to shift the focus from my responsibility, but I do have a real world situation where I'm dealing with facilities that are being closed and are going to be closed this year. I need to be in a position to adequately deal with those people because they, in fact, did vote for me so I feel some 167 02/16/05 - WHOLE - 05007, 05008, 040767 level of responsibility. I just want to say this, that while I personally take this issue very seriously, I actually have a bill in the hopper today that talks about an abatement on gross receipts for new businesses that I think, frankly speaking, makes a lot of sense. We had a very successful program. I think Councilman DiCicco actually sponsored the original tax abatement bill on real estate, and that's kind of what's keeping us alive as it relates to the transfer tax --
On gross receipts. And I think that it makes some sense to look at that particular program, particularly as it relates to new businesses because new businesses traditionally have a very difficult time the first couple of years. And the cost to the City, I'm not sure. We had earlier testimony, and the City's people gave the worst case scenario. But I think that the likelihood that if people understand 168 02/16/05 - WHOLE - 05007, 05008, 040767 it, most people concur the gross receipts and also believe the other business taxes are very onerous that if a person says, "Well, I don't have to pay this," and I've got to make a decision as to whether to go into the City of Philadelphia or whether to go outside, I may opt to go to Philadelphia so I think it will enhance the chances of us getting more business here and ultimately collecting that revenue down the line as we wind down on the longer term solution.
Let me say that it's music to the proverbial ears to hear that there is talk of a lighter tax burden for business people. I do have some concerns about that concept because if you stop and consider for a moment that 70 percent of the new jobs come from existing firms, would they benefit from that break? As defined now, no. 21 And they're -- it's existing firms growing that's 70 percent of the action. It follows with Select Greater Philadelphia. You know, our effort is not to just tell the world now attractive we are external to the region, 169 02/16/05 - WHOLE - 05007, 05008, 040767 we've got to be courting romancing the existing firms in the City and region to make the decision to grow here.
With that understanding, that's what concerns us there. Will that really lead to job growth? Because with the firms that may come in anew with a City address, they get the break. That's only 30 percent of the action.
I understand that. And similarly, the people who are building new houses are getting tax breaks and people who live in neighborhoods are not getting those tax breaks but we're not stopping that process, we're continuing to give 100 percent 10-year abatements. And I don't think anybody at this point is suggesting that we stop that because of the success we've had. But we're not -- at least I'm not talking about eliminating the small reductions on business privilege taxes that we're currently having. There's some possibility of accelerating them. I'm not 170 02/16/05 - WHOLE - 05007, 05008, 040767 talking about stopping one and creating another. I'm talking about in addition to what we're currently doing and what's being proposed to some degree, because I don't know where I'm going to shake out on the income tax bills. But creating an environment for new businesses, because at the end of the day, I think that our ability to create new businesses ultimately end up creating additional jobs. I think most people agree with that. And then we can truly get an accurate depiction of just how important this gross receipts elimination is.
Well, we hope to work with you on that. I would just, again, say that I think more a attractive tax model, lower taxes over time is going to create more activity and the prospect of the small businesses in the neighborhoods and jobs than anything we do for these crafted tax-type of inducements, and that's why we wanted to use the illustrations today. I think it will pay off. And some day perhaps your son, Councilman Clarke -- 171 02/16/05 - WHOLE - 05007, 05008, 040767
Well, your daughter then. Your daughter will sit here as Councilwoman Clarke or whatever ultimately would be her married name and look at that chart and say, "Yeah, this Council in the spring of 2005 had the moxie, along the with the Mayor, to put in place a tax model that lead to that blue line just heading up and up. And in 2045, a whole different picture." I believe it can happen.
I look forward to her being able to talk about it but no way in the world will I allow her to be a Councilperson. No way. (Laughter.)
And just a follow-up on what was said, I believe that rather recently we did increase license fees and also fines. I believe, Mr. Governor, last year we were having the same conversation, and 172 02/16/05 - WHOLE - 05007, 05008, 040767 at that time we indicated we really would appreciate if the Chamber would work along with us so that we could come up with more clever ideas on how we could generate more revenue. Sad to say that never happened, but I do hope that in the very near future many of us could sit down and see what direction we could go to make the City a much better place to live and to work and rear our children. Thank you so much, gentlemen. I appreciate your coming in. Again, I would like to reiterate what the ground rules are. I'm sure everybody's going to say, "Well, the first panel certainly had more than 15 minutes. But we are talking about the former Governor and Chamber of Commerce. The ground rules again I will repeat, five minutes for an individual, 15 minutes will be allotted to a panel. Our next witness.
The next witness is a panel of six. Brett Mandel, Ken Nealy, Sister Aisamah Mohammad, Rodney Carson, Ed 173 02/16/05 - WHOLE - 05007, 05008, 040767 Wright, and Claudia Post.
Robert Zuretsky and two associates from the Philadelphia Parking Association.
And if they could just move forward so we don't have to wait for people to approach the witness table, I think that will be helpful. Mr. Mandel, good afternoon.
Good afternoon. I have some testimony if the Sergeant-at-Arms wants it. Madam President and Members of City Council, thank you for providing this forum to discuss Bill 040767, legislation to phase out the job-killing business privilege tax. I am Brett Mandel, Executive Director of Philadelphia Forward. And with me today are a number of individuals who can speak of their experience with this awful levy. In fact, we are surrounded with them. I will condense my remarks because you have certainly heard from 174 02/16/05 - WHOLE - 05007, 05008, 040767 me before. A crucial part of the Tax Reform Commission's plan is the phase out of the job-killing business privilege tax to improve the City's ability to attract and retain businesses. Quite simply, eliminating the business privilege tax is an issue of survival for Philadelphia's small and growing businesses. You don't need to hear all this again from me, so I'll read you a few Tax Reform stories that Philadelphia Forward has collected and are available for you on our Web site, philadelphiaforward.org, and I will present a number of people who can provide their firsthand experience with the business privilege tax better than policy wonks economists ever could. One responder wrote to Philadelphia Forward, "My employer's offices are in Radnor. I live in the City and would love to work in the City too. In a conversation with the owner, I found out why he was reluctant to move his business into the City. Taxes. His small business can't afford to pay the wage 175 02/16/05 - WHOLE - 05007, 05008, 040767 tax plus the gross receipts tax plus the business privilege tax. He loves the City and would be happy to be in a location more convenient to transportation and in a bustling urban environment, but the tax burden imposed by the City is keeping this small professional consulting firm out of Philadelphia." Another wrote, "I have been exploring starting a new business, but the BPT is a killer. A friend of mine who is a financial planner advised me to move out of the city completely and start my business in the suburbs." And in fact, as a late entry, there was a young woman sitting over in the corner who I would like to ask the stand up. She is here to advocate on behalf of eliminating the business privilege tax because her baker who apparently makes the bread pudding in the City is threatening to move out of the City because of taxes. She came to support her baker.
Had the City not lost more than 10,000 jobs last year, those jobs 176 02/16/05 - WHOLE - 05007, 05008, 040767 would not only have meant food on the table for 10,000 families and vitality in the community for neighborhoods across the City, those jobs would have meant more million 6 dollars in wage tax revenues for City that 7 could be spent on expanding City services. 8 In reviewing the Tax Reform 9 Commission's report, the Mayor's handpicked 10 transition team, the 21st Century Review Forum 11 declared, "The City should move quickly to 12 adopt the major recommendations of the Tax 13 Reform Commission. The Mayor's very important 14 quality of life strategies will not have the 15 desired impacts or be sustainable in the long 16 run in the absence of fundamental tax reform. 17 Some will question whether the City can afford 18 significant tax reform at this time, but that 19 is the wrong question. Rather we should ask 20 how can we not afford to reform taxes now." I could not have said it better myself. The Tax Reform Commission estimates that its recommendations will mean 47,000 jobs for Philadelphia by 2010. If there's another plan on the table to grow 47,000 jobs in the 177 02/16/05 - WHOLE - 05007, 05008, 040767 coming years, let's debate its merits. But we cannot accept the excuse that we cannot afford to enact the tax reform package. Truly, we cannot afford not to do it. We urge you to pass Bill 040767 and reject half measures that are just not tax reform. If Philadelphia is to move forward as a City, it must break with policies that hold it back. Today, taxes hold Philadelphia back. Tomorrow, tax reform can move Philadelphia forward. Now, Philadelphia Forward is pleased to present some business people who must cope with this job killing business privilege tax every day.
Madam President, Members of City Council, thank you for the opportunity to discuss 040767 and the elimination of the job-killing business privilege tax. I'm Vincent Anthony DeFino and I am the President of the South Philadelphia Business Association. I'm here on behalf of my 150 members, and growing, all small business owners. I come before you today 178 02/16/05 - WHOLE - 05007, 05008, 040767 along with Edward J. Wright, our Executive Director on behalf of our executive board and membership and in partnership with the Philadelphia Forward in support of Bill No. 6 040767 for elimination of the City of Philadelphia's business privilege tax. As you are all aware, the business privilege tax, along with other business-related tax issues, are placing the future of the small business owner in Philadelphia in serious jeopardy. Philadelphia's business taxes create a hostile environment and unfair burden for small business owners. The working men and women have invested their valuable time, their hard-earned money and tireless efforts in the tradition of operating a small business. Due to the current business tax structure, they are facing a difficult choice to either abandon their dreams or flee to the suburbs and rival cities to livelihood. We must remove these competitive disadvantages for all business owners in our great City. The elimination of the business 179 02/16/05 - WHOLE - 05007, 05008, 040767 privilege tax along with the implementation of other recommendations of the Tax Reform Commission will enable the economically depressed business corridors throughout Philadelphia the opportunity to survive, grow and prosper. When these economically distressed business corridors are strengthened, the surrounding residential neighborhoods grow stronger. The South Philadelphia Business Association has every confidence that the members of this City Council have the knowledge, the skill and the political courage to make the tough choices that will benefit the citizens of Philadelphia and its future generations. The South Philadelphia Business Association and the community at-large enjoy outstanding representation and leadership from our Council President and Anna C. Verna, Councilman Frank DiCicco, Councilman Jim Kenney and Councilman Frank Rizzo. They are always responsive to our business and community needs. 180 02/16/05 - WHOLE - 05007, 05008, 040767 Today, we call on our neighboring District Councilwoman Jannie Blackwell, Councilman Rick Mariano, Councilman Darrell Clarke, Councilman Wilson Goode, Jr., Councilman Juan Ramos and all Members of the City Council to collectively lead Philadelphia into a position wherein we are fiscally competitive and able to maintain our business space and attract new jobs to the birth place of this nation, our great and beloved City of Philadelphia. We are counting on all of you to pass Bill No. 040767 and begin to eliminate the job-killing business privilege tax. The South Philadelphia Business Association feels that its confidence in all of City Council is well placed. I'd like to submit for the record letters of support to City Council from a sampling of our membership. And I thank you for the opportunity to address you today and all your efforts on behalf of the citizens of Philadelphia. Thank you.
Thank you. Thank you very much. 181 02/16/05 - WHOLE - 05007, 05008, 040767 Our next witness.
Good afternoon, Madam Chair representing Council. I testify today representing participating small businesses housed in the West Philadelphia Lancaster Avenue Business District. I am Sister Aisamah Mohammad. And I thank you for the opportunity to speak on behalf of a collaboration of businesses united by one voice, one strength, one association. The Lancaster Avenue Business Association East and West Community Development Corporation. This business district encompasses a section of the Council District 3 and District 4. We, the concerned businesses of this district, urge you to eliminate the business privilege tax by supporting Bill 040767. While the issue of tax reform may raise questions of supply side economics or budgetary choices for some, tax reform is nothing less than an issue of survival for our businesses. In respect for diversity and change, we are struggling with the challenge to restore the character to a business 182 02/16/05 - WHOLE - 05007, 05008, 040767 district hit hard by cultural transitioning through decades of neglect that has left this West Philadelphia community at-large economically distressed. And as much as the small businesses in this area strive to embrace the community's need, working collectively to address the revitalization and community development concerns necessary for the betterment of economic strengthening, tax reform can't be all for some and none for all. Giving tax breaks incentives and sweetheart deals to fat cats all by imposing the nation's highest local business tax burden on neighborhood businesses. While striving to meet the demands of maintaining and operating a productive business under such demanding conditions places survival as a priority, causing major distractions when having to deal with the other multitude of problems that plague our business and residential communities, such as creating cleaning streets and increasing security for our businesses, enhancing the quality of life for us as a whole. The 183 02/16/05 - WHOLE - 05007, 05008, 040767 business privilege tax threatens our ability to invest in the community, hire local workers, start new businesses and grow. In as much as the business privilege tax threatens businesses across Philadelphia, we embrace this bill personally based on the hindering process our businesses have endured by this tax throughout the years, whether we are making a profit or not. This tax causes businesses to close or simply leave the City to reduce costs. A majority of our businesses along this corridor has maintained longevity because this is the area we have selected to grow our businesses. Unfortunately, this tax hurts the ability to start new businesses and yet we ask to encourage new businesses to join our communities. Why? Because our communities will thrive if it can develop, revitalize valued residential properties and nurture and grow new businesses. However, we cannot grow jobs in the neighborhoods if this tax continues to penalize our efforts. We understand that the City faces budgetary 184 02/16/05 - WHOLE - 05007, 05008, 040767 stress today, but without tax reform, jobs and neighbors will continue to leave Philadelphia. We, the people, need you to rethink your positions on this issue in support of small businesses that help to stabilize the economy of this City. I repeat, we, the people, ask you to rethink your positions on this issue to support the small businesses that help to stabilize the economy of this City. We, the very people who have he elected that you support or best interest as we agree with the Mayor's 21st Century Review Forum Transition Team which declared the Mayor's very important quality of life strategies will not have the desired impacts to be sustainable in the long run in the absence of fundamental tax reform. The recommendations of the Tax Reform Commission represent a true plan for change that must be prerequisite for the implementation of other initiatives. The time for study is over.
The time for action is now. We, the businesses of the Lancaster 185 02/16/05 - WHOLE - 05007, 05008, 040767 Avenue Business District of West Philadelphia, are trying to survive this economic crunch and ask that you support our efforts to assist in the process of recycling community dollars back into our very communities. If we could save the money, we would invest in improving our properties, hiring neighborhood residents and building other businesses to grow in Philadelphia. We ask you, please, adopt the recommendation of the Tax Reform Commission. Vote to pass Bill 040767. Vote to pass Bill 14 040767 and phase out the business privilege tax. Thank you.
My name is Al Taubenberger. And Madam President, thank you very much for giving me the opportunity. I'm the president of the Greater Northeast Philadelphia Chamber of Commerce. We are a private business association of over 900 members dedicated to the success of our community, our membership and the free 186 02/16/05 - WHOLE - 05007, 05008, 040767 enterprise system. We represent businesses from Augustus Aerospace, manufacturer of helicopters in Northeast Philadelphia to Zack's Bakery which is a local neighborhood bakery on Rising Sun Avenue. They all have a problem with the business privilege tax. It's burdensome, it's cumbersome, and it doesn't enhance business. Most interesting, though, I've looked at some statistics in our own association. When I took over as President in 1992, out of our membership we had 60 members that resided their business outside the City of Philadelphia and surrounding suburbs. In the year 2000, we had 180 business. It still had an interest in Northeast Philadelphia. Still, members of the Northeast Philadelphia Chamber of Commerce, but these 180 businesses had their offices in Bucks County and Montgomery County and New Jersey. In the year 2005, we have 202 members that are now outside the City of Philadelphia, yet have interest in doing business in Northeast Philadelphia and consider it a good place to do business, but they do not want to be burdened with a tax 187 02/16/05 - WHOLE - 05007, 05008, 040767 burden that comes with a Philadelphia address. That represents about one-fifth of our address. And being the head of the Chamber of Commerce, we're not restricted to political boundaries so we were able to maintain their membership. But the fact of the matter is that these 202 businesses no longer pay their taxes into the City of Philadelphia; they pay them to Montgomery County, to Bucks County and to various counties in New Jersey. In 2003, I was honored and privileged to serve on the Tax Reform Commission as Vice Chairman. We very clearly spelled out some action items that needed to be taken, and recommendation No. 23 is the increment elimination business tax. Found on of that report, simply put, elimination of the business privilege tax promotes greater tax systems simplicity not only with the reform decrease, the Department of Revenue's workload enabling the Department to more aggressively enforce other taxes but will also simplify the process of running a business in Philadelphia. And that's 188 02/16/05 - WHOLE - 05007, 05008, 040767 something we must do. It has to become simple and Philadelphia must be open to do business and simplifying the tax code is the first step. I urge the elimination of the business privilege tax. Thank you very much for your time.
You're welcome. Please identify yourself for the record.
My name is Karen Gain and I'm here on behalf of Roger Harmon who is the owner of a restaurant on 47th Street in West Philadelphia. The reason I'm here and not Robert is because he's a small business owner, he woke up this morning, the deliveryman wasn't going to be able to come in so he got behind the wheel and took the sandwiches to the other restaurants that they serve. That's the margin that the small businesses live on. And one reason I was picked to come for him is that four years ago when the Redevelopment Authority was deciding who should develop the parcel that they're on, a group of neighbors 189 02/16/05 - WHOLE - 05007, 05008, 040767 got together and really supported the building of a restaurant there for two reasons: One is that all the other candidates were very worthy non-profit organizations and we wanted to change the balance, improve the balance to have more for-profit companies in the area. The other was that we wanted the amenities that they provide that help us live in the neighborhood better. We are very proud to be near Penn and Drexel and sciences, but when we want a cleaners to walk to or a restaurant that is our neighborhood place, it's not going to come from the non-profit sector. It's going to come from some people who put up their money, their time and all their energy to make a place for us. And they live by the thinnest thread that something like this tax can almost tip the balance between building something and just standing still and waiting for the possibility of going in the other direction. So I want to read Roger's statement. You'll have to imagine the beard.
Is that a typed statement. 190 02/16/05 - WHOLE - 05007, 05008, 040767
If you don't mind, if you'll submit it to the Chair, we will make copies of that for the record.
Oh, wonderful. We will give a copy to stenographer. Every Council will receive a copy, and it will be made part of the record. Thank you so much.
Good afternoon. My name Jesse Frisbe (ph), and I'm here representing South Street West Business Association, which is located on South Street west of Broad. President Anna Verna is our Councilperson and has worked very hard with us to develop west of Broad on South Street. We have loss a lot of the businesses on South Street. And before I go any further, I really wasn't prepared to testify, but I echo the same sentiments of the other speakers. I have a business on South Street and I have struggled on South Street for 36 years to survive there. While we see new people coming 191 02/16/05 - WHOLE - 05007, 05008, 040767 in and getting real estate breaks and we're not getting any breaks, as business people who have gone through the storm, we need as much tax reform as we can get. I mean, there's people building buildings for $500,000, and they are not paying taxes for years. And I hear you 9 ask, "Where can we get money? What can we 10 do?" You can tax those people instead of making us continue to carry the burden. We have not gotten any tax breaks. And I can tell you firsthand because I'm there and I've been there longer than most of the people who've been there. I've carried the burden of taxes. I cannot afford anymore taxes. I cannot afford to bring people in and employ them. What I have to do is get family members to come in to help us. We want to expand. We want to grow. We want to give neighbors jobs. When you bring your big corporations in, they do not hire people in the communities. They bring their people in. Small businesses has always built this country and small business will 192 02/16/05 - WHOLE - 05007, 05008, 040767 always be the base for business in this City. So I urgently ask you to consider the reform of the business privilege tax. Thank you.
Thank you. And I would just like to add what Ms. Frisbe has just said. I have known her for a long time. And believe me, she struggled to keep her business surviving on South Street. When most of the businesses -- buildings were vacant. And believe it or not, there wasn't even ample street lighting, but she was determined and she stayed in business. And I do hope that your business is really being very successful now because you have been very determined, and I applaud you for all that you have done. (Applause.)
At this time, the Chair recognizes Councilman Goode.
Thank you, Madam President. Good afternoon Mr. Mandel. How many recommendations were made by the Tax Reform Commission? 193 02/16/05 - WHOLE - 05007, 05008, 040767
There were 28 formal recommendations encompassed in pieces of legislation.
There were 6 pieces of legislation? 7 In your original testimony on behalf 8 of that legislation, those 13 pieces, you said 9 to us as a Council that all 13 had to be 10 considered and passed together or else they 11 would not work. Do you still hold by that. 12
The package as 13 considered by the Tax Reform Commission was considered as a package to have the best benefit. We certainly think that they should all implemented. There will be a giving up of some benefit if you implement some but not others.
So you move from 13 bills down to 3 bills and then more recently moved down to 2 bills. Have you updated your econometric analysis?
I have not done any of the analysis. E Consult provided that service for the Tax Reform Commission. I will 194 02/16/05 - WHOLE - 05007, 05008, 040767 certainly clarify that I haven't changed in my advocacy for the entire package.
But the E Consult analysis is based upon the 28 recommendations and bills; is that correct? 7
Actually, the E Consult 8 econometrics were only based on 2 of the 9 changes. E Consult could only model the 10 reductions in the wage tax and the reductions 11 in the gross receipts tax. E Consult was 12 never able to model any of the reductions in 13 the net income tax or the other changes because, frankly, there just isn't data available to make the econometric analysis. So whenever the E Consult numbers were trotted out, I would always be quick to remind people, that's very conservative. They could not figure in the impact of the net income tax elimination. They could not figure into their analysis the implementation of single factor apportionment or the shift to land value taxation.
So let me ask you the same question I asked the Administration 195 02/16/05 - WHOLE - 05007, 05008, 040767 this morning. What is the economic impact of the bill that you're supporting in terms of how many businesses and jobs it will create.
I believe that E Consult actually did formal analysis for City Council on this piece of legislation. Is that correct? I know that if you look at the third volume of the Tax Reform Commission, it outlines the benefit.
Can you state for me today what the economic impact of the bill 15 you came to support is in terms of how many businesses it will create and how many jobs it will create?
I cannot. I would refer you to the E Consult work that was done for City Council.
May I answer that as well or give you my version of that? I'm not going to say I'm going to answer it in its entirety to the satisfaction of the Councilman. But I'd like to say that it's 196 02/16/05 - WHOLE - 05007, 05008, 040767 almost like when you want to sell a piece of property. You really don't know what that property is worth until buyer and seller get together. To spend a lot of time and say, "What will this bring," well, I'll tell you what it won't bring. It's losing jobs every single day. Look at the statistics very simply put that I had with my membership.
I think the Councilman is trying to ask a question. Councilman.
My question was simply, do you have hard numbers in terms of businesses and jobs that will created? That's a yes or no question.
For this particular bill, no. For the Tax Reform Commission, yes. 197 02/16/05 - WHOLE - 05007, 05008, 040767
Next question is, do we need to eliminate the net income tax to be economically competitive.
I would echo the comments of Governor Schweiker. If you look -- the gross receipts tax, it's not uncommon for local jurisdictions to tax gross receipts. It is not common at all -- in fact, it's almost unheard of to tax net income at the local level. It's totally unheard of to do what Philadelphia does and tax both. You would ask the question of, At what point do we become competitive?
Certainly, we are competitive for some businesses now. There are still thousands upon thousands of employers, a million and a half residents who think that it's beneficial to be Philadelphia now. I'm sitting here with many of them.
Let me ask the third when question I asked Governor. In terms of small businesses owned 198 02/16/05 - WHOLE - 05007, 05008, 040767 by minorities and women, what is the biggest obstacle? Is it the tax burden. Was it actual racial, gender geographic discrimination in terms of small business lending.
If it's okay, I believe as a minority and as a woman, what we have been subjected to primarily is the tax burden. And the opportunities that are absolutely available are made available for us to be able to open new businesses. The potential of Philadelphia stands firm in that I've lived here all of my life.
Excuse me, Ms. Mohammad. My question is what is the bigger obstacle? Is it the tax burden? And I'm not asking you the question as a minority or a woman. No one's asking Brett Mandel a question as a white male. I'm asking in terms of Philadelphia, in terms of obstacles faced 199 02/16/05 - WHOLE - 05007, 05008, 040767 by businesses owned by minorities and women, what is the bigger obstacle? Is it tax burden or is it --
And what analysis did you do to come to that conclusion?
Generally just based on -- realistically, I cannot give you direct figures, sir.
I've come to that based on communication with some of our business constituents along the business corridor and other business entrepreneurs who are seeking business.
Let me ask you a question. I wasn't going to go here, but I will. When is the last time Lancaster Avenue Business Association had an election?
When is the last 200 02/16/05 - WHOLE - 05007, 05008, 040767 time you had elections?
We had elections, sir, within the last several months. But with respect to that --
How many people are members? How many are dues-paying members and how many people voted?
May I ask what that has to do primarily with the support of the fact that the participating businesses that are active on the corridor do support this bill and that this review has been covered by --
I am extremely familiar with the Lancaster Avenue Business Association and the fact it has not been a legitimate business association for several years, does not hold routine elections.
Sir, that's not true, sir. If you would like, at any time we'd be more than willing to come to your table to discuss this at your office at any time.
My last question for Mr. Mandel. Has Philadelphia Forward come 201 02/16/05 - WHOLE - 05007, 05008, 040767 up with any economic development strategy or comprehensive economic development strategy beyond elimination of the BPT?
Do you have any economic development strategy that's comprehensive in nature beyond eliminating the BPT?
We certainly have not provided any additional analysis to this beyond the work of the Tax Reform Commission.
Do you have any economic development policy or strategy that's comprehensive in nature beyond elimination of BPT?
An we don't just support the elimination of the business privilege tax. We're promoting all of the recommendations.
What other formal economic development policy do you actually support, have documented, promote beyond elimination of BPT? Was your economic development strategy limited to elimination of 202 02/16/05 - WHOLE - 05007, 05008, 040767 BPT?
No, our support is in embrace of the full package of recommendations of the Tax Reform Commission.
Beyond tax reform policy, what do you think the City of Philadelphia should be doing in terms of economic development.
Thank you. To Ms. Frisbe and to Ms. Mohammad again. Part of what Philadelphia Forward has advocated against is tax credits going to community development corporations for community-based economic development. Do you share that policy position?
I would actually correct you. Philadelphia Forward has no 21 position on that.
You don't address business tax credits for contributions to community development corporations?
Philadelphia Forward is 203 02/16/05 - WHOLE - 05007, 05008, 040767 supporting the recommendations of the Tax Reform Commission and has not taken a position on --
You've taken a position both on your Web site and the materials distributed here today.
You can tell me specifically your position on business tax credits for contributions to community development corporations for economic development purposes. You can tell me your position.
Then why do you mention it in your material, in your propaganda?
I believe what you're referring to is we're saying that tax reform shouldn't be all for some and none for all.
But shouldn't we be doing business privilege tax credits to support community-based economic development, 204 02/16/05 - WHOLE - 05007, 05008, 040767 for instance, to support SOSNA in their work on South Street West worse and Universal around that area, and for instance support People's Emergency Center CDC ON Lancaster?
But you brought people from South Street West and Lancaster Avenue, but at the same time you have spoken against business privilege tax credits to support the work of CDCs in those particular areas.
I would clarify. We haven't spoken against them. We have said that we shouldn't limit our economic development policies for some, we should extend to all.
You should clarify that position in your propaganda then.
I'd like to say that South Street West SOSNA are two different 205 02/16/05 - WHOLE - 05007, 05008, 040767 organizations. South Street West is a business association. SOSNA is South of South Street Neighborhood Association after social. They're not two of the same.
I fully understand that. SOSNA has a tax credit partnership to support South Street West.
No, no. They have a tax credit partnership to support development of that commercial corridor.
My understanding is that will start from the market on Grays Ferry Avenue and they have a hundred thousand dollars which will never come to South Street. With a hundred thousand dollars, they have asked us to partnership with them.
It's a million dollars. And Ms. Frisbe, you should do a little bit more research on it.
They did have a meeting last night and the person with me was here but couldn't stay. I was not at the meeting. But 206 02/16/05 - WHOLE - 05007, 05008, 040767 they have asked us if we would partner with them and so has Universal.
That's not what I'm referring to. Thank you, Madam Chair.
Thank you, Councilman, for your remarks. Next is Councilman Kenney. And we would note for Philadelphia Forward that it is great -- obviously, as a City-wide organization, you can invite whom you choose, but those of us who are District Councilpeople know our area, know what's going on and the community organizations and where they stand and whether or not they speak for the entire community and whether they do not. So we just ask you to keep that in mind and thank Councilman Goode for his remarks. Councilman Kenney.
Thank you, Madam Chair. Just quickly. I think a lot of times this issue is framed in regards to the 207 02/16/05 - WHOLE - 05007, 05008, 040767 Chamber of Commerce, the big Chamber's position on issues and larger-sized businesses. But I think it's important to note that at the table a very diverse group of people all over the City. And even though they only speak for their own individual business associations, it's nice to see that middle class working people who are business people in the City also support tax reform and tax reduction and it's not just the Market Street businesses and the Chestnut Street businesses and the businesses in Center City. There are businesses in the neighborhoods that feel that this kind of help in a marginal business like they have would be a bigger help to them than some of the tax breaks we've given larger companies.
I can only speak for my area when I say that when I associate with the comments from my colleague. That's why I said Philadelphia Forward should see if in fact the business associations they choose do speak for the group. In our instance, it does not. 208 02/16/05 - WHOLE - 05007, 05008, 040767
I understand. I'm just saying as far the diversity of the panel and from the areas of the City that they've come from, from the Northeast to Southwest, West Philly, South Philly, I think it's a nice mix of opinion. Even if they're only speaking for themselves, they're still citizens and business people. I think it's important that this issue be framed not just with the large companies and the Chamber of Commerce, but with small business people also. So I thank them for coming.
Thank you, Madam Chair. I just have a question Mr. Taubenberger, if I may. Being from Northeast Philadelphia, I certainly was enlightened by your testimony in which you stated that over 200 businesses, members of your Chamber, have moved to the suburbs, have moved to New Jersey, Montgomery and Bucks County. What time frame is that? Is that over five years 209 02/16/05 - WHOLE - 05007, 05008, 040767 or --
Councilman, that is from 1992 to present, so it's a little over years. Twelve years, actually. 6
How many 7 employees would you say that would effect. In 8 other words of those companies that moved out, 9 how many employees are we talking about that 10 are now working in the suburbs?
Madam Chair, this is one of the reasons why I asked the Administration today of how many businesses actually have left Philadelphia within the last five years and how many new businesses have come into Philadelphia over the last five years. I think somewhere along the line I think that the numbers will indicate that more businesses are leaving Philadelphia than coming in. I think that doing nothing is just going, I think, expedite more of them leaving the City than coming back. I think Councilman Kenney mentioned 210 02/16/05 - WHOLE - 05007, 05008, 040767 earlier that Philadelphia and Detroit are the only two major cities in this country have been losing population and businesses over the last years. I think we must do something 6 to stem the tide, and I think we want to get 7 on the right side of this issue. 8 I want to thank everyone here for 9 coming in and testifying and maybe, just 10 maybe, we'll be doing something this year. Thank you, Madam Chair.
Much emphasis has been put on what jobs will be created by passing or eliminating the business privilege tax. And I believe not enough emphasis has been put on the simple statistics of the jobs and companies that are leaving, which I think are much more important. We need to stop that. Thank you.
Thank you. 211 02/16/05 - WHOLE - 05007, 05008, 040767 Councilwoman Blondell Reynolds Brown.
Thank you, Madam Chair. I think it's important that we remember the context of our discussion and the recognition of the fact that this Administration is already engaged in reduction of taxes across the board. And part of the debate are steeper and deeper business privilege tax cuts and what that means for the City. With that said, my first question to Mr. Mandel is as follows: The Tax Reform Commission indicated that eliminating the business privilege tax will require increases in other tax revenues and estimated that property values and property taxes would rise somewhere between 40 and 50 percent. Property taxes could increase by as much as 8 to 10 percent a year. Please share with us whether or not a reduction in business taxes ultimately moves to a shift of the tax burden on a residential property tax 212 02/16/05 - WHOLE - 05007, 05008, 040767 owner.
Anything that we do as a City to make the City a preferred place to live, to work, to visit is ultimately an attempt to make this a more desirable place for people to come, for people to stay. That's going to result in values of property going up. That is a phenomenal problem for a City to have. The reverse, property values declining because people don't want to live in a neighborhood, because businesses don't want to be here. Why is it that we can only get 20-some dollars a square foot for premium office rent in Philadelphia? Because there's less demand for that. Why is it that some neighborhoods have seen their property values decline in years because there's less demand to be there. Absolutely, unequivocally, the Tax Reform Commission understood that reducing taxes in Philadelphia, reducing any of the burdens that are shared by businesses, by individuals will result in more people wanting to be here, more people wanting to stay here. 213 02/16/05 - WHOLE - 05007, 05008, 040767 That will increase property values. Certainly, it will increase property values for business, it will increase property values for individuals. And those are problems that this Council can deal with. There are mechanisms that we certainly looked in the Tax Reform Commission that make it easier for people to pay property taxes as the values go up. But those, as we said on the Tax Reform Commission, those are good problems to have. It's phenomenal some of the work that NTI has done in neighborhoods and some of the analysis that has come up, just the greening of streets, placing of trees increases property values on a street by 9 percent. That's terrific. But a lot of times we'll ring our hands a bit and say, "My goodness, property values are going up." People are going to have to pay more for the privilege of being in the City. Frankly, that's where the tax burden belongs in a locality, in value of place. Government makes this a place where people want to be and then it's important the government then realizes taxes. 214 02/16/05 - WHOLE - 05007, 05008, 040767 We tax things that don't move out. We tax land, we tax buildings; that makes more sense. Unfortunately, in Philadelphia disproportionately we tax things than can move and, we have seen, do move. We tax individuals, we tax businesses. For the gentleman who was up here who moved his business 51 feet outside of the City of Philadelphia, he's routing for the same sports teams, enjoying our whether, going to the Cezanne exhibit, just not paying our taxes.
Let me ask you this. Do you know what percentage of the City's general revenue is represented by the BPT tax?
The City's General Fund this year is planning to raise and spend about 3.4 billion. The BPT raises somewhere south of 300 million, I believe.
Does it seem risky then to eliminate that much revenue from City coffers?
Certainly not over 215 02/16/05 - WHOLE - 05007, 05008, 040767 time. That's what the Tax Reform Commission was commanded by law to be fiscally responsible. And I can ask Al or anybody else who is in the room who was part of that Committee to tell you, we took that responsibility very seriously. And that's why the analysis that we performed said, yes, over time, a phase-out of this tax, a phase-down of the wage tax would make economic and fiscal sense for the City. We are not only Tax Reform Commission members or tax reformers, we are residents of this City. We did depend on the services of this City.
So then businesses that earn a profit and business owners, when you move to ultimate phase-out and close-out of them contributing, is there not a moral obligation to support City services by paying taxes?
Oh, and absolutely they do pay taxes. Business owners pay the property tax, they pay the use and occupancy tax, they pay to the extent that it's capitalized into their sales, the sales tax. 216 02/16/05 - WHOLE - 05007, 05008, 040767 Liquor by the drink if you're that kind of business, amusement tax, parking tax, to the extent they tax the wage tax in form of either higher salaries or increased compensation; that tax is paid. Again, in our analysis of other cities, it is not common to tax the way we tax in Philadelphia. Most localities tax almost exclusively property, some sales, some other fines, fees, that kind of this.
And the record should reflect there's no dispute in that. The question continues to be how steep and deep we make the tax cuts over a period of time. I mean, there's a universal opinion upon members of this legislative body, all of us agree that the City should be engaged in tax cuts. The question and the thin line has been how deep should they be.
And we appreciate that and it's been a great discussion to have that discussion. When the tax commission looked at it, we thought that the steepness that we proposed made sense. In fact, the bill before 217 02/16/05 - WHOLE - 05007, 05008, 040767 has been tweaked by Council to make it a little less steep than the Tax Reform Commission had proposed. And so I would say that's even more measured than what we had suggested. And certainly, econometrics that were performed for us and performed for Council, I believe, bear out that over time if Council can be disciplined, if the Mayor can be disciplined in some of the short-term budgeting, that we will see growth.
The reality is, even in the current environment, we're seeing layoffs, libraries are closing, rec centers are closing. So do you think that the eliminating libraries and cutting libraries' hours and increasing fire response times qualify for taking steeper and deeper cuts, given the environment of what a year ago we were speculating and a year later we know is real.
I would not have made some of the choices that this Council and this Mayor have made in their budget. I used to work in the City Controller's Office. The 218 02/16/05 - WHOLE - 05007, 05008, 040767 City Controller's Office's business --
City of Philadelphia doesn't collect nearly as much of the tax revenue it should. It doesn't collect nearly as much as the fine and fee revenue that it should. There are wastes and efficiency throughout the government that I can point you to, numerous audits by the Controller's Office, numerous examinations by the Pennsylvania and Governmental Cooperation Authority that point out where you could save money. You have money stashed in certain places that are waiting for some rainy day. It's raining now; maybe we should tap into it. Act 71 money, you have money stuck in the Productivity Bank. The recent revelations of the City's extra cost in our government due to the pay to play system is now well documented. It's a big budget and people can disagree on where they would find money or where they'd look to find money, but I can tell you that the Tax Reform Commission looked. When we 219 02/16/05 - WHOLE - 05007, 05008, 040767 were in the Controller's Office, we put out our report and looked at it. PICA has come down and done their examinations. Certainly see that there are other choices made. Remember, the budgetary stress that we're facing now as a City is due in large to the fact that we're spending a lot more money as a City. Whether you agree with the policies or not --
And we're spending a lot more money in areas of the City's budget that seek to meet human needs. The needs of young people in this and elderly in this City are enormous, and somebody has to pay for them.
There are certainly other places that we have made room for in the City budget. The City now spends about $25 million to subsidize the building and operating and maintenance of the Eagles Stadium and the Phillies Ballpark. That $25 million per year could buy a lot of tax reform for these people in this room.
Well, I guess 220 02/16/05 - WHOLE - 05007, 05008, 040767 the only difference is the leadership is in leadership, and you had the Tax Reform Commission. Ultimately, those in leadership have to make decisions based on the information they have before them.
Thank you for your testimony. Thank you, Madam Chair.
Thank you. The Chair recognizes Councilman Cohen.