TESTIMONY BEFORE THE MAYOR’S TASKFORCE
ON
TAX POLICY AND ECONOMIC COMPETITIVENESS
August 13, 2009
by
Catherine G. Scott, President, AFSCME District Council 47
Good afternoon members of the taskforce. Thank you for the
opportunity to provide testimony concerning your preliminary
recommendations.
I would like to express my strong disappointment with the
failure of the taskforce to articulate the legal obligations
and responsibilities of the City to provide services to its
citizens. No where in the recommendations are the questions
asked what are the appropriate level of services needed in
the City and how do we raise the revenue to provide those
services. Instead the taskforce’s approach seems to be that
services are optional and dependent on how much revenue can
be raised. We would hope that the final recommendations
state clearly that the objective is not to cut services
provided by the City. In fact, some of your recommendations
suggest increased services to the business community e.g.
dedicating a caseworker to each business and a tax
ombudsman.
The short-term recommendations contain a short paragraph
titled “Reducing the City’s Need for Taxes by Reducing the
Cost of Government”. This paragraph is at the heart of what
is missing in your report since short shrift has been given
to these important issues which need to be addressed in any
discussion about tax policy.
As the paragraph accurately points out, the City of
Philadelphia is both a city and a county and is required to
provide both services. While it is true that the City has
lost residents, former City Managing Director Phil
Goldsmith’s well documented commentary in the Inquirer
demonstrates that it is also true that the work force of the
City providing direct
City services has been reduced by 20% while the population
has shrunk by 17% since 1975. What can be demonstrated is
that the County responsibilities have greatly increased
during that time period. Cases in point are prison
population growth, child abuse and neglect investigations
and services, mental health services and court services.
Many of these increases are either federal or state mandated
services. Since the City does not have an independent county
taxing base, these services must be part of the City taxes.
The county services portion of the budget is over $1
billion. The Philadelphia Prison budget alone is $249
million. I do not see anywhere in the recommendations where
funding those county services as separate from city services
is addressed. Contrary to the taskforce’s comment that this
“is unusual throughout the nation” it is at the heart of the
taxing issue.
The recommendations so not discuss whether Philadelphia is
the only City in the United States where this taxing
challenge exists. If it is, more discussion should be
devoted to this issue. If other large cities are both a city
and a county, some discussion should be devoted to how other
municipalities handle this challenge.
Again, this paragraph makes reference to the fact that the
City is “...required to provide greater services than some
neighboring jurisdictions because of the higher poverty
rates in the City.” The Mayor campaigned on the need to move
City residents out of poverty and to increase the rates of
both high school and college graduation in addition to
retaining those graduates. It is impossible to have a
meaningful discussion about reducing the cost of government
without first having the public policy debate about what
services the City should provide and at what level those
services should be provided. It is well documented that when
companies look to relocate they want to know about the
quality of services such as schools, arts and cultural
activities and other quality of life issues. If we are
interested in addressing your statement that “Municipal
government has a significant
opportunity to reposition the City for renewed growth...”,
the trickle down approach to taxation policy espoused in
these recommendations will doom any opportunity to do so.
Mid-term recommendations suggests “...a return to phased
reductions in the Wage and Business Privilege taxes by 2012
and shifting the tax burden from things which are mobile
(wages and businesses) to assets which are fixed (land and
property)”. We do not support either of these proposals.
Presently the City is balancing its FY 2010 and FY 2011
budgets in part by deferring $235 million of its minimum
municipal obligation to its pension plan. Clearly, there is
insufficient revenue when the City has to borrow from its
employees’ pension plan to balance its budget. This deferral
is not scheduled to be repaid until FY 2013 and FY 2014. To
suggest that taxes be reduced prior to repayment of the
pension deferral would be irresponsible and bad economic
policy. Even still there is no guarantee that the deferral
will be fully paid by 2014. No tax reduction should be
contemplated until the City’s deferral is fully repaid and a
full discussion and agreement on the level of City services
is reached.
We believe that the premise of mobile versus fixed assets is
a specious argument. To take the taskforce’s argument to its
logical conclusion, if you tax property, residents will just
move out of the City leaving us with vacant non-resident
properties. There may be taxes owed but the non-collection
rate would increase resulting in increased legal fees to
attempt to collect them. Instead everyone including business
should pay its fair share in taxes for the economic base of
the City to be strong.
Finally, your recommendations do not address the increase in
the amount of non-taxed real estate in the City and the
impact of that phenomenon on the tax base. As non-profits
acquire more property, the City loses real estate revenue.
Presently the City’s assessment for taxable real estate is
$12,206,685,402 and non-taxable real estate is
$5,145,882,398. If the City were to pursue Payments in Lieu
of Taxes (PILOT) agreements at a rate of 40% of its assessed
value with large non-profits, we estimate that the City
could raise $37.5 million more in real estate revenue each
year. The City should seek legislative approval from the
State to enable it to legally require a 40% PILOT from large
non-profits. Our calculations exclude religious and
charitable institutions.
It is important to point out that the City only receives 40%
of its real estate tax revenue; 60% is dedicated to the
Philadelphia School District. This fact raises questions as
to why the task force would suggest shifting the bulk of the
tax burden to real estate tax when the City only receives
40% of any increase.
Thank you for the opportunity to testify before the
taskforce.
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