The City Of Philadelphia's Financial Problems - Framework Of The Answer! "Part One"

Mayor Nutter is a good public official who was dealt terrible cards with the City's projected billion dollar deficit but his plan to address the problem is weak as well is City Council's. Mayor Nutter in his budget is planning that city employees over the next several years won't get raises that is unrealistic and unfair, inflation will be existing during that time so employees deserve to get corresponding cost of living adjustments. The bottom line on the budget is that Mayor Nutter is going to need significantly more revenue than he has identified over the next few years to balance the City's budget.

The Mayor in his budget has proposed two new temporary revenue sources, temporarily increasing property taxes and temporarily increasing the sales tax by one percent, to raise needed revenue. These are good inititiatives but the City's plan has to be dramatically better if it will fly. First as one would expect the increase in the real estate tax idea is going over like a lead balloon in City Council. Someone in the media mentioned that the strategy the City should be taking is that the city's financial burden should be carried by all the stakeholders in a fair manner, that includes not only the residents but also the business community and the non-resident workers in the City. This should be the city's strategy.

"SEE PART TWO"

The City Of Philadelphia's Financial Problems - Framework Of The Answer! "Part Two"

The thing about this "share the burden" strategy is that the only way using historic means that the city can get nonresident workers to share some of this burden is by raising the city wage tax. Today such a move would be a disastrous idea because to non-resident workers they hate the city wage tax it involves significant amounts of money and most of these workers have debated and on occasion do debate whether to pursue employment outside the city and escape this tax; numerous experts have stated that it is a deterrent to businesses moving into the city and it has been a partial cause for businesses moving out of the city; enormous numbers of people have made Herculean efforts to get the city to put the wage tax on a reduction path and lastly the PA legislature has enacted legislation directing slot machine revenue to reduce the city wage tax and this body would be madder than hell if the city erases this reduction in any way. It is a non-starter to increase the wage tax but it is foreseeable that all the parties could accept a yearly emergency assessment for two or three years because of the recession, a charge of like .007 % of a workers yearly income levied over the first three months of the year, it could be called the emergency assessment to stabilize city finances like the federal stimulus paradigm on education funding. City residents could use the monies they pay on this emergency assessment fee as a credit on their temporary increased real estate taxes and this assessment would be a way of getting residents who live in tax abated houses to pay a share of the financial burden the city is experiencing as opposed to taking away their abatement which would be a colossal mistake because potential recipients of tax breaks from the City would then have a compelling reason not to trust the city and not pursue residing or building in the city, it would severely damage the city's reputation.

The challenge with increasing the sales tax in Philadelphia, the pension payment postponements or instituting an emergency wage assessment is that the city at least needs the tacit if not the express approval of the Pennsylvania Legislature to do it, this is a real challenge because many legislature's perceive the City of Philadelphia as always having their hand out for money and being irresponsible and schemers with respect to public monies. The state gives over a billion dollars to the Philadelphia school district per year and when it first partially takes over the school district around eight years ago it gave the city $25 million to pay for private school managers and what has the city been trying to do ever since dump the school manages and keep the $25 million not to mention all the obstructions and restrictions the city or their agents placed on these private managers which if this scheming never occurred these private managers would have definitely done a better job than the significantly helpful one they have done over the years. The list of examples of the city's poor character on this topic is truly extensive but just to name a few one could mention the City's $ 250 million Neighborhood Transformation Initiative that without question and by a large margin failed in its objectives or one could mention the millions of dollars that will be needlessly spent on an interim Youth Study Center all because City politicians didn't get the pay day they believe they were entitled to and delayed approvals on the permanent "YSC" or one could mention the pile of money spent on new trolley cars that sat idle for years because putting them in service would have rankled a powerful city politician on a parking matter.

"SEE PART THREE"

The City Of Philadelphia's Financial Problems - Framework Of The Answer! "Part Three"

If the City is to get the state's help in extricating itself from its financial crisis it has to demonstrate that it is dramatically changing its financial situation and dramatically changing the way it does business for the better. Because from Harrisburg's standpoint not only do they care about short term financial matters for the city but also long-term financial matters specifically the city needs in the long-term to get the wage tax in the low two percent range for commuters and the mid two percent range for residents and do away with the gross receipts business privilege tax and the balance of business privilege tax needs to be low so to reliably insure that people and businesses will move in and remain in the city so the city can have the money and jobs to solve their social problems and economic problems and stop looking for the state and federal government to be their financial saviors.

The given requirements for this is what an abundance of experts have been calling for with respect to the city labor agreements, that is the city needs to alter these labor agreement terms so that for health insurance it isn't run by unions which is practically unheard of across the nation but by private health insurance companies where valuable cost savings can be implemented and so that for pension terms the defined pension benefit plans are frozen and going forward "401 K" type plans are used, like most workers have, where the city makes a good and fair contribution on a yearly basis to the employees 401K plan like five percent of that employees income. Of course, with fire fighter and police contracts great consideration should be given to the fact that the jobs involved are extremely physical and psychologically demanding and take their toll on such employees over the years so that on health insurance matters very favorable adjustments should be made in co-pays, deductibles and the like and with respect to 401 K contributions, the city should still make contributions to former firefighters and former police officers 401 K plans even after they retire from their respective departments until they reach full "Social Security" retirement age discounted for any 401 K contribution their new employer would make.

See Part Four

The City Of Philadelphia's Financial Problems - Framework Of The Answer! "Part Four"

The City also needs to make profound changes in its overall costs structure. City council has seventeen members and each member has his or her own staff which is costly, probably on average costing the city a half a million dollars a year for each council member plus staff. Other large cities don't have such large city councils: Boston has nine district council members and four at large members, and Phoenix has nine council members including the Mayor who sits on the council. The city should really consider eliminating two at-large seats and save the city a million dollars a year; however, if they make such a change they absolutely must continue to reserve two of these at-large seats for the minority party it is critical for the good future of the City that it tries to eliminate the City being a one political party town because this reality causes dealing with and in the city to be too political and empowers too greatly the status quo which is sometimes very bad. The city should do away with having the Clerk of Quarter Sessions and City Commissioners elected positions this should save money and is good public policy. The Clerk of Quarter sessions office should work under a manager that is accountable to the President Judge it shouldn't involve a politician running the show, this office list cases on Judge's dockets politics shouldn't be involved on where a case is listed. The City Commissioners is also an office that should not be political obviously if one reviews the personnel who historically hold that office its usually if not always political insiders that get elected to that office; moreover, there is probably cost savings potential in that office, probably some of the work of that office can be outsourced to save the city money.

Much to do has been publicly mentioned about elected officials and the DROP program, the program where city employees get to trigger their pension and remain an active employee getting their normal pay and when they leave active employment get a lump sum payment of all their accumulated pension payments. George Burrell on an ABC news program recently said it best about what the city should do with this program when he said the city should scrap the whole DROP program for elected and non-elected officials it doesn't make economic sense. When one thinks about it the only way the city could obtain an economic benefit from such a program is like fifteen years after a person retired, maybe at that time the cumulative total of monies paid by the city in pension payments might be lower compared if there was no DROP program because the salary level on which the pension is determined is lower because the person technically retired four years early but that is really a thin justification for such a program; if one considers the unseemliness of the lump sum payments these DROP recipients will be receiving and all the financial sacrifices present and future city employees will be making because of the city's current financial difficulties it certainly doesn't seem right to have this DROP program.

See Part Five