Council considering revenue-raising measures for the District

Members have been resistant to hiking property tax rates.

This article was originally published in The Notebook. In August 2020, The Notebook became Chalkbeat Philadelphia.

City Council is getting ready today to consider how to raise additional money for the School District, with last-minute maneuvering to find a politically palatable package that will yield close to the $770 million that Mayor Kenney has proposed.

That sum would allow the District to close a looming $660 million shortfall by 2023 and leave $110 million for new investments, including more money for upgrades and repairs on school buildings, many with dangerous conditions that could expose children to mold, asbestos fibers, and lead.

Groups across the political spectrum are weighing in, and each has different priorities. The Our City Our Schools Coalition opposes Kenney’s proposed 4.1 percent property tax rate hike, which would raise about $143 million over five years. They want an end to the city’s 10-year tax abatement for new construction, which largely benefits developers and wealthier homeowners, and they want mega-nonprofits such as universities and hospitals to make payments-in-lieu-of-taxes (PILOTs). They say these measures will raise sufficient funds – although others dispute this – and shift the burden from working people to well-heeled people and institutions.

The Chamber of Commerce, on the other hand, supports the property tax rate hike and opposes all the other measures in the mayor’s package, including one that would slow down a planned rollback of the wage tax and raise $340 million, and another that would increase the realty transfer tax. In a letter to Council members, chamber president Rob Wonderling said he also opposes a proposed 1 percent tax on construction citywide, which is also under consideration by Council.

The chamber is also against reducing the tax abatement.

Last week City Council members voted to move along the slowdown of the wage-tax reduction and the realty transfer tax. It has not taken a vote so far on the proposed property tax rate increase.

Alternative measures likely to be introduced at Tuesday’s meeting include a shift in how much of the property tax revenue goes to the School District and how much to the city. Now, the District gets 55 percent of property tax, which is its largest contribution from the city. One proposal under consideration would shift that percentage to 59 percent-41 percent, which would yield $60 million more annually for the District, more than the 4.1 percent rate hike would raise. However, that means that the city budget would have to make up for that money.

Other measures could include a slowdown in a planned reduction in the business income receipts tax and a marginal increase in the use and occupancy tax.

Councilwoman Helen Gym has also proposed legislation that would shield the District from taking a hit from the tax abatement by reducing it going forward.

Our City Our Schools led the campaign to end 17 years of state control of the District by dissolving the School Reform Commission and replacing it with a local Board of Education. But the new board, which will assume governance of the District on July 1, will not have taxing power – like the SRC and the city’s predecessor school board. The District must rely on the city and the state for most of its revenue.

Now, the state funds just over half of the $3 billion budget, and the city just under half. When Mayor Kenney decided last fall to initiate the return to local control, he promised that the city would “step up” and contribute more money to the District.

The state takeover was undertaken due to “academic and fiscal distress.” The return to local control was only made possible because the District was able to maintain balanced budgets for several years; under the takeover law, the SRC could only vote itself out of existence if fiscal stability had been achieved.

Now, however, some City Council members are using the District’s balanced budget to argue that because it is not in immediate distress, there is no need to give it more money, or at least no need to increase property taxes to find the additional dollars.

Council must act before the end of June. The SRC approved a fiscal 2018-19 budget that assumes that the District will receive the amount of additional city funds proposed by the mayor.