Mayor John Street met the City Charter’s deadline and signed off on a five-year, $3.4-billion budget last Thursday, avoiding a citywide fiscal meltdown.
He also dealt a devastating blow to the tax-reform movement, vetoing the $110-million business tax-cut bill that some City Council members hoped would have attracted new businesses to the city.
The mayor did, however, agree to a $50-million reduction in the city’s wage tax over the next five years, dropping the tax from its current rate of 4.4625 percent to 4.169 percent by January 2009.
He has yet to decide whether to let stand the $14 million Council restored to arts, recreation centers and fire departments; even with the extra funds, seven city pools and two rec centers are scheduled to close.
The resolution to the contentious impasse between the mayor and City Council has been greeted with mixed reactions — sighs of relief from the mayor’s office, angry growls from some Council members.
"We are happy, of course, to move on from the budget situation," said mayoral spokesperson Barbara Grant.
Grant praised Street’s grace under pressure and his use of line-item vetoes to balance the budget, a move she said has not been used in years.
"People tend to forget that this mayor is one of the foremost authorities on budget items in the country," Grant said. "Using [line-item vetoes] to balance the budget was pretty remarkable."
Councilman-at-Large James F. Kenney, one of Street’s most vocal critics, had a decidedly less glowing take on the mayor’s actions.
"The mayor is a powerful person. When you have someone that powerful, who is also petty and vindictive, you end up with this situation," Kenney said, referring to the loss of the business tax cut.
The councilman said he believes the city will continue to lose out on jobs and opportunities because "businesses will look at our tax situation and decide it’s not worth coming here."
Another player in the budget battle, Brett Mandel of tax-reform advocacy group Philadelphia Forward, viewed the situation a little more positively.
"I think we had a big victory. We changed the tone of the tax-reform debate — everybody agrees it’s no longer a question of ‘if,’ but ‘when,’" Mandel said.
All sides have acknowledged that Council will pursue the business tax-cut issue again in September, when it would be removed from the context of the budget fiasco, Mandel noted.
"We can’t allow this topic to go away. It’s definitely going to be resurrected," Kenney pledged.
Mandel noted that the city took a "big step" in reducing the wage-tax.
"It’s good that we’re going to do it, and now that it’s out of the way, it might be easier" to work out the business tax-cut debate, he said.
Although the budget controversy is now settled, the mayor has to deal with labor-union contract negotiations — a task that could prove trickier, given that the mayor lost out on a $50-million parking tax increase when he vetoed the business tax-cut bill.
"These negotiations are going to be very, very difficult," Grant said. "The mayor wants to be fair to city workers, but he now doesn’t have money that he was counting on."
AFSCME District Council 33, the blue-collar union, is reportedly following the contract talks on a day-by-day basis and evaluating its strike options accordingly, Grant said. The white-collar counterparts at District Council 47 have agreed to extend their working deadline to July 14.
The president of District Council 47, Thomas Paine Cronin, said the union has divided into committees that are handling non-economic issues.
"We hope that cooler heads will prevail and that we’ll be able to get this taken care of" before the deadline, the union chief said.
The union already voted by an 800-4 margin to go on strike if the negotiations aren’t resolved by the new deadline.
"I don’t want it to come to that, but it all depends on where we are on the 14th," Cronin said.
A source close to the negotiations said the mayor’s five-year budget included a 9- percent raise for health and welfare, although there is some disagreement over how the unions will want that amount paid out.
"That figure’s been mentioned, and it’s not going to do the job," Cronin said.
The president said union workers receive $620 a month for healthcare, while police and firefighters receive $1,000.
"We’re looking for parity [in terms of healthcare]. I absolutely believe that the money is there for it to happen; the mayor just has to find it," he said.
Grant said the mayor doesn’t want to award the unions four-year contracts without at least including some modest raises.
