Nutter presents 2011 budget with sugar tax, trash fee
By Patrick Kerkstra
The Philadelphia Inquirer, March 5, 2010
Mayor Nutter formally proposed a $300 annual trash fee and a biggest-in-the-nation tax on sugary drinks yesterday as he told Philadelphians that "nothing worth having in life is free."
Casting himself as an unapologetic champion of city services, Nutter - who has been known as an avid tax cutter for most of his career - said the new taxes were necessary to fill a budget deficit of up to $150 million.
"The deep budget cuts required to fill the deficit would force massive layoffs and a very noticeable reduction in city services. It's a path we should avoid," Nutter said during his budget address to City Council.
The $3.87 billion budget Nutter proposed yesterday includes just $33 million in spending reductions, compared with $146.6 million in new taxes and fees, a figure that would rise to $185 million in future years.
Past budget-cutting targets, such as libraries, pools, and the Fire Department, are untouched in Nutter's latest budget offering. Indeed, most departments - with the notable exception of prisons - avoided the ax.
"So, yes, we'd pay a little more. But we'd preserve city services," said Nutter.
Many Philadelphians would shell out more than just a little if the mayor's proposals are enacted.
The $300 annual garbage fee - which would raise about $108 million - is akin to a 10 percent increase in total Philadelphia property tax collections, which stand at about $1 billion. But since the city splits that pot 40-60 with the School District of Philadelphia, the trash fee is akin to a 26 percent jump in the city's share of the tax.
The tax of two cents per ounce on sugary drinks will not prove cheap for those unable to break their soda habit, either. Drinking two 12-ounce cans of sugared soft drinks a day would add up to an additional $175 in taxes a year.
Together, the two new fees represent a 4.9 percent increase in Philadelphians' overall general fund tax and fee burden.
In Nutter's view, these sacrifices are unavoidable, in light of lower-than-expected tax collections and unforeseen expenses like the huge cost of snow removal.
"In extraordinary times, we've met the challenge of recession. We've innovated, we've reformed, and we've preserved the basic services that Philadelphians want and deserve," Nutter said.
The mayor struck a few sober notes in his 50-minute budget address, such as when he quoted Thomas Paine, "These are the times that try men's souls."
But Nutter's overall tone was far more positive than it was during last year's long-running budget crisis.
"I believe that Philadelphia is uniquely positioned for greatness in this new century. We're at the right place, at the right time, and we have what it takes to create huge economic growth and prosperity for our city, a city that is safe, smart and sustainable," Nutter told Council.
Calling his administration "battle-tested," Nutter extensively referenced the spending cuts he enacted last year, such as a $50 million reduction in overtime spending and the shedding of 800 jobs through attrition. Overall city spending in 2009-10 was $159 million below the prior year, Nutter said, excluding pension and debt-service costs, which the mayor has no short-term control over.
Given its controversial new provisions, Nutter's budget will surely be attacked from many corners in coming months.
Former Mayor John F. Street already is a prominent critic of Nutter's plan. Waving an empty two-liter bottle of Coca-Cola as a prop, Street said Nutter's proposed taxes would disproportionately hurt the poor, a criticism echoed by low-income advocates.
Street said Nutter ought to have raised property taxes instead, a course Nutter rejected given the inaccurate real estate assessments provided by the Board of Revision of Taxes.
"The real estate assessments are out of whack, I give him that. But this is an out-of-whack proposal," Street said of the soda and trash taxes.
One of Street's longtime confidants, Lana Felton-Ghee, is also lining up as an opponent of Nutter's plan. Felton-Ghee confirmed she was hired by Pepsi Bottling Group in Northeast Philadelphia to lobby against the sugary-drinks tax, making her just one of what will surely be many lobbyists hired to bring the proposal down.
Conscious of the onslaught his budget proposals will face, Nutter took care to reach out to Council during his address. He mentioned each member by name, and he praised specific accomplishments of each Council person. Nutter also praised the leaders of the city's municipal unions by name, a line that was met with applause by Council.
Toward the end of his address, Nutter called the mayor's office a "humbling place," and he acknowledged he had "made some mistakes."
Whether it is the content of the budget or the change in Nutter's tone, the mayor appears to have more allies lined up for this budget fight than he did for last year's.
For instance, two City Hall sources said last night that municipal employee unions District Councils 33 and 47 would put their full weight behind the drink tax and garbage fee to preserve city services and, thus, their jobs. Leaders of those unions did not return messages yesterday afternoon.
And Council, too, appears far more willing to hear the mayor out this year than it was last time around.
Though Councilwoman Maria Quiñones Sánchez is opposed "in principle" to a flat tax such as Nutter's proposed garbage fee (which does include a $100 discount for low-income property owners), she was heartened by his conciliatory tone.
"We will have disagreements, but I think there will be more cordial discussions this year," Sánchez said.
Councilman Bill Green, who clashed often with Nutter during last year's budget talks, agreed. He said he hoped there would be less "drama" this time around, and he praised Nutter's budget for investing heavily - $25 million next year alone - in technology infrastructure, a cause that Green has loudly championed.
In an interview after the budget address, Nutter said that he welcomed negotiations with Council, and signaled a willingness to compromise, particularly on the structure of the trash fee.
Nutter also argued that his revenue proposals were so carefully targeted that they would not thwart job creation and economic growth in the same way an increase in other taxes - like the wage or business-privilege tax - would.
That view was cautiously endorsed by James Eisenhower, the chair of the Pennsylvania Intergovernmental Cooperation Authority, which has oversight responsibility over the city's long-term financial planning.
"My immediate reaction is they don't have the same negative impact on job growth, necessarily," Eisenhower said of the new taxes. "The tax on trash pickup affects everyone, and is not just focused on business, so I don't see it having the same impact."
The outlines of Nutter's budget have been clear for several days, but the mayor's address did contain a few nuggets of news.
The mayor and senior aides who took pay cuts to save the city money in 2008 still will not have their salaries restored under Nutter's proposed budget. But unlike the last two years, they will not be required to take five unpaid-furlough days.
The five-year plan forecasts an annualized regional economic growth rate of 4.3 percent, which is lower than the Congressional Budget Office's forecast of 4.7 percent growth nationally.
All of the city's functioning pools - 69 of 72 - are funded in Nutter's proposed budget. Last year, only 46 pools were open.
Wage- and business-tax cuts, which had been tabled when the economic crisis struck, are slated to be restored in 2014. Low-income advocates objected to that, saying the new fees would end up paying for tax breaks for businesses.
The city plans to retain a consultant on a pro bono basis to seek out further efficiencies.
Nutter intends to overhaul the largely inactive Mayor's Commission on Literacy.
Street resurfacing receives a big bump in funding - $26.9 million next year, including $9.4 million in stimulus funding - which is welcome news, given the abundance of potholes created by the rough winter.
Casting himself as an unapologetic champion of city services, Nutter - who has been known as an avid tax cutter for most of his career - said the new taxes were necessary to fill a budget deficit of up to $150 million.
"The deep budget cuts required to fill the deficit would force massive layoffs and a very noticeable reduction in city services. It's a path we should avoid," Nutter said during his budget address to City Council.
The $3.87 billion budget Nutter proposed yesterday includes just $33 million in spending reductions, compared with $146.6 million in new taxes and fees, a figure that would rise to $185 million in future years.
Past budget-cutting targets, such as libraries, pools, and the Fire Department, are untouched in Nutter's latest budget offering. Indeed, most departments - with the notable exception of prisons - avoided the ax.
"So, yes, we'd pay a little more. But we'd preserve city services," said Nutter.
Many Philadelphians would shell out more than just a little if the mayor's proposals are enacted.
The $300 annual garbage fee - which would raise about $108 million - is akin to a 10 percent increase in total Philadelphia property tax collections, which stand at about $1 billion. But since the city splits that pot 40-60 with the School District of Philadelphia, the trash fee is akin to a 26 percent jump in the city's share of the tax.
The tax of two cents per ounce on sugary drinks will not prove cheap for those unable to break their soda habit, either. Drinking two 12-ounce cans of sugared soft drinks a day would add up to an additional $175 in taxes a year.
Together, the two new fees represent a 4.9 percent increase in Philadelphians' overall general fund tax and fee burden.
In Nutter's view, these sacrifices are unavoidable, in light of lower-than-expected tax collections and unforeseen expenses like the huge cost of snow removal.
"In extraordinary times, we've met the challenge of recession. We've innovated, we've reformed, and we've preserved the basic services that Philadelphians want and deserve," Nutter said.
The mayor struck a few sober notes in his 50-minute budget address, such as when he quoted Thomas Paine, "These are the times that try men's souls."
But Nutter's overall tone was far more positive than it was during last year's long-running budget crisis.
"I believe that Philadelphia is uniquely positioned for greatness in this new century. We're at the right place, at the right time, and we have what it takes to create huge economic growth and prosperity for our city, a city that is safe, smart and sustainable," Nutter told Council.
Calling his administration "battle-tested," Nutter extensively referenced the spending cuts he enacted last year, such as a $50 million reduction in overtime spending and the shedding of 800 jobs through attrition. Overall city spending in 2009-10 was $159 million below the prior year, Nutter said, excluding pension and debt-service costs, which the mayor has no short-term control over.
Given its controversial new provisions, Nutter's budget will surely be attacked from many corners in coming months.
Former Mayor John F. Street already is a prominent critic of Nutter's plan. Waving an empty two-liter bottle of Coca-Cola as a prop, Street said Nutter's proposed taxes would disproportionately hurt the poor, a criticism echoed by low-income advocates.
Street said Nutter ought to have raised property taxes instead, a course Nutter rejected given the inaccurate real estate assessments provided by the Board of Revision of Taxes.
"The real estate assessments are out of whack, I give him that. But this is an out-of-whack proposal," Street said of the soda and trash taxes.
One of Street's longtime confidants, Lana Felton-Ghee, is also lining up as an opponent of Nutter's plan. Felton-Ghee confirmed she was hired by Pepsi Bottling Group in Northeast Philadelphia to lobby against the sugary-drinks tax, making her just one of what will surely be many lobbyists hired to bring the proposal down.
Conscious of the onslaught his budget proposals will face, Nutter took care to reach out to Council during his address. He mentioned each member by name, and he praised specific accomplishments of each Council person. Nutter also praised the leaders of the city's municipal unions by name, a line that was met with applause by Council.
Toward the end of his address, Nutter called the mayor's office a "humbling place," and he acknowledged he had "made some mistakes."
Whether it is the content of the budget or the change in Nutter's tone, the mayor appears to have more allies lined up for this budget fight than he did for last year's.
For instance, two City Hall sources said last night that municipal employee unions District Councils 33 and 47 would put their full weight behind the drink tax and garbage fee to preserve city services and, thus, their jobs. Leaders of those unions did not return messages yesterday afternoon.
And Council, too, appears far more willing to hear the mayor out this year than it was last time around.
Though Councilwoman Maria Quiñones Sánchez is opposed "in principle" to a flat tax such as Nutter's proposed garbage fee (which does include a $100 discount for low-income property owners), she was heartened by his conciliatory tone.
"We will have disagreements, but I think there will be more cordial discussions this year," Sánchez said.
Councilman Bill Green, who clashed often with Nutter during last year's budget talks, agreed. He said he hoped there would be less "drama" this time around, and he praised Nutter's budget for investing heavily - $25 million next year alone - in technology infrastructure, a cause that Green has loudly championed.
In an interview after the budget address, Nutter said that he welcomed negotiations with Council, and signaled a willingness to compromise, particularly on the structure of the trash fee.
Nutter also argued that his revenue proposals were so carefully targeted that they would not thwart job creation and economic growth in the same way an increase in other taxes - like the wage or business-privilege tax - would.
That view was cautiously endorsed by James Eisenhower, the chair of the Pennsylvania Intergovernmental Cooperation Authority, which has oversight responsibility over the city's long-term financial planning.
"My immediate reaction is they don't have the same negative impact on job growth, necessarily," Eisenhower said of the new taxes. "The tax on trash pickup affects everyone, and is not just focused on business, so I don't see it having the same impact."
The outlines of Nutter's budget have been clear for several days, but the mayor's address did contain a few nuggets of news.
The mayor and senior aides who took pay cuts to save the city money in 2008 still will not have their salaries restored under Nutter's proposed budget. But unlike the last two years, they will not be required to take five unpaid-furlough days.
The five-year plan forecasts an annualized regional economic growth rate of 4.3 percent, which is lower than the Congressional Budget Office's forecast of 4.7 percent growth nationally.
All of the city's functioning pools - 69 of 72 - are funded in Nutter's proposed budget. Last year, only 46 pools were open.
Wage- and business-tax cuts, which had been tabled when the economic crisis struck, are slated to be restored in 2014. Low-income advocates objected to that, saying the new fees would end up paying for tax breaks for businesses.
The city plans to retain a consultant on a pro bono basis to seek out further efficiencies.
Nutter intends to overhaul the largely inactive Mayor's Commission on Literacy.
Street resurfacing receives a big bump in funding - $26.9 million next year, including $9.4 million in stimulus funding - which is welcome news, given the abundance of potholes created by the rough winter.