Street Fighting

At City Council session on Nov. 21, Mayor John Street called for a 10 percent reduction in the municipal workforce over the next five years in order to stave off “fiscal calamity.” Street blamed “economic events beyond our control” for the budget crunch. Arguing that the stock market crash had wreaked havoc on the city’s pension fund and rising health care costs added unforeseen millions to the new police contract, Street asked Council for a “moratorium on tax reduction bills.”

Only minutes after Street left the packed chamber, Council defied his request, passing three bills to limit the property tax increases set to take effect after New Year's.

Two of the tax reduction bills cap reassessments at 4 and 10 percent respectively. A third, sponsored by Councilman Frank Rizzo Jr., allows homeowners to defer paying increased property taxes until they sell their homes.

Councilman Brian O'Neill, the Northeast Republican who sponsored the 4 percent cap bill says he will try to adhere to the mayor's request for a moratorium on new tax bills in the future, but argues that a property tax cap of some sort is unavoidable. "The mayor injected himself fairly late into the process on this and I think, with all due respect, this is a serious issue that has to be dealt with seriously. The only discussion in Council is really about the percentage of the cap. It's really not about whether they should be capped or not," says O'Neill.

Councilman Michael Nutter, who proposed the 10 percent cap, says the issue is simple: "We already know what we have to do about the outrageous assessments that people received last summer. We have to limit the impact on homeowners."

In his address to Council, the mayor urged Council members not to tamper with the tax system until the Tax Reform Commission (TRC) has "time to do its work." But Nutter, who came up with the idea for the Commission, which was approved by voters on Election Day, says the property tax issue must be dealt with now.

"The Tax Reform Commission's purpose is to look at restructuring the tax system, [to] look at each tax we have and look at what it does, whether it helps or hurts the city," Nutter explains. "Tax reduction is not tax reform." And tax reduction, in his opinion, is necessary now to protect homeowners who were reassessed. Tax reform will begin after the TRC issues its report next November, Nutter says.

Councilman Rizzo suggests that because his measure merely makes the city wait for tax revenue but does not cap reassessments, it will be signed by the mayor. "I would assume from comments made thus far [that] mine is the one he would sign," Rizzo said.

But Street administration spokesman Frank Keel offered no praise to any of the bills. "The mayor believes, as do most members of Council, that the current property assessment system is flawed and needs to be changed [but] Council actions [on Thursday were not] the best way to go," Keel says.

According to Keel, Council's actions spring from their "desire to placate constituents. The reality," he says, "is that these Council members need to run for office again soon. The mayor is trying to look at the big picture here. He's got to look at how this affects the entire city and the city's budget. We're in a precarious financial position."

City budget director Rob Dubow explained the situation in detail, blaming the city's fiscal problems on the national economic slowdown. "Our pension costs are directly related to the economy," he said, citing the depressed stock market where city pension money was heavily invested. "The wage tax grew one and a half percent last year [due to the sluggish economy]. In earlier years you would have seen growth that was much higher."

But despite the administration's arguments, Council still passed three property tax bills, putting the ball in the mayor's court. The three bills passed by Council are mutually exclusive, each calling for a different way to address property tax reassessments. Street has the option of signing one or vetoing all three.

According to Keel, the mayor has not yet decided whether to sign any of the bills. "I wouldn't think that a decision will be rendered until the first week in December," Keel says.

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