Property taxes would be increased, along with parking and non-resident wage taxes, in a new budget proposal unveiled by Mayor Kenney's administration.
The tax hikes would be part of a broad attempt to close a $600 million budget deficit that has ballooned amid the coronavirus pandemic. It's a 180-degree turn from Mayor Jim Kenney's initial budget proposal in early March before the virus struck.
The expected revenue from taxes and other funding is $500 million less in the new budget, a catastrophic dropoff in less than two months. There will also be "several hundred" layoffs of city employees, officials said.
The budget proposal now goes to City Council, which gives final approval on the spending plan that is set to begin July 1. The Council is often loathe to raise taxes, but one of Kenney's top policy officials said the proposal tried to balance tax increases with savings from reductions in services and personnel costs.
"We tried to take a really balanced approach," Deputy Mayor Jim Engler said. "We tried to propose minimal tax increases with an equity lens."
The three taxes that would be increased are: property taxes (4%), the parking tax (4.5%) and the non-resident wage tax (an incremental increase less than 1%).
Engler also said there will be a "substantial" -- at least "several hundred" -- layoffs of part-time, seasonal and full-time city employees. He and other finance officials would not elaborate further.
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Among other reductions in costs are: a hiring freeze, a decrease in overtime across all city departments and reduced funding for city prisons due to a substantial decrease in the inmate population.
Notable cuts to programs include the shuttering of all city pools this summer, no expansion of Kenney's signature pre-K program, the cancellation of a street sweeping program and a halt to virtually all upgrades of city buildings.
Before the virus, Kenney had been enjoying the fruits of a robust economy. The city’s various revenue streams increased each year and the mayor maxed spending right along with it.
In his first four years, Kenney increased city spending by $1 billion, or 25%. A big chunk of that money went to cover bargained raises for the city’s workforce, and skyrocketing pension and healthcare costs.
His administration set aside $34 million last year for its first deposit into a Rainy Day Fund. In addition, it kept $55 million reserved for any federal funding cuts. Both of those reserves were expected to grow further this coming fiscal year. Instead those funds will now be reduced.
Despite economists predicting a recession this year or next, city officials had a positive outlook for the city’s future. The city’s initial 2021 budget proposal, released in March, predicted the wage tax and the Business Income and Recipients (BIRT) tax to both grow by 4.5%. The sales tax was also predicted to expand by 3.1%.
With that extra money in mind, Kenney planned new projects big and small such as street sweeping, establishing a new opioid response unit, and the redesign of the Municipal Services Building concourse.
Now some of those projects will be scaled back or put on hold.
Kenney’s predecessor, Mayor Michael Nutter had to make significant budget cuts in his first years in office as the city weathered the fallout from the Great Recession. He cut $270 million between the 2009 and 2010 budgets -- or $319.6 million in today’s dollars-- in part by eliminating more than 800 positions, furloughing exempt employees, and trimming his own $186,000 salary by 10 percent.
