Skip to content
Link copied to clipboard

Nutter Tells Town Hall that Financial Problems Have Grown

Last night Mayor Nutter told a town hall meeting in Northeast Philly at the John Perzel Community Center that the city's budget problems have grown worse.

Nutter didn't provide a lot of new detail on the size of the budget gap -- which he originally put at $1 billion over five years. Here are his remarks, as prepared for delivery:

Citizenship isn’t just about voting and paying taxes. A strong citizenry is engaged year round, and you’ve shown your love and concern for our city by taking the time and energy to come here tonight, to offer your ideas. And so, thank you.

We’re now at the half-way point in our TOWN MEETING schedule, and I wish I could take away your anger and fear with good news that all our problems are solved.

But the truth is that since Nov. 6 when I announced that we face a billion-budget gap in our five-year plan and that we must implement a series of emergency budget reductions, our national economy has sunk deeper into what the federal government recently announced is a recession, a downturn that actually began last December.

We’re now watching the Big Three automakers with hats in hand going to Washington and asking for billions of dollars because they are within weeks of bankruptcy. Who could imagine, say 10 months ago, that these industrial giants would be on their knees?

Just last week, we learned that the unemployment rate rose to 6.7 percent – 533,000 jobs were lost in November, the largest one-month loss in 34 years, and almost 2 million in the last year. If you add in the people who’ve given up looking for work, our national unemployment rate was an estimated 12.5 percent last month.

After I first discussed the profound impact of the declining economy on city government on Sept. 11, Gov. Rendell in mid-September announced a 4.25 percent cut in spending and a hiring freeze.

Last week, as the economy continues its slide, the Governor said that the state needed an additional $128 million in cuts for a total of $439 million. While we can all applaud the governor’s prudent stewardship, let me point out that these cuts may soon impact city government.

Predicting the economic future is probably more art than science, but President-elect Obama has said that we’re going to face more bad news before we start to see a turn-around, more job losses and companies disappearing from the market place.

We can all hope for a spring surprise, but we must be clear-eyed in our estimates of future economic activity and the resources that it will provide OUR government.

So, here’s the situation on the ground, right now: the city’s economic forecast is worse than we described a month ago.

Take the real estate transfer tax: in November, it came in at its lowest level in five years. In early November, we lowered our estimate of how much we’d take in from this tax to $155 million, but now we may fall short of this much reduced level.

To give you some context, we collected $236 million in FY06 and originally thought we’d collect $187 million this fiscal year. We lowered the estimate to $155 million and now even that number is in doubt. This constitutes an enormous one-year swing in revenue and shows just how seriously the real estate market has been affected by the nation’s economic crisis.

On Pensions, the news is no better. We lost almost 12 percent of our Pension Fund’s value in October and we don’t have our November numbers yet. If the pension fund doesn’t quickly get back to where it was in September, then we’re going to have to put more scarce tax dollars into the pension fund beginning in FY11.

Finally, there is a large lag time in getting Business Privilege Tax data. Last summer, we got our final numbers in for FY08 and after years of rapid increase, we saw a $39 million reduction. We are projecting a further decline this year, but at this point we are very concerned that the decline will be even larger than we forecast.

I’ll have more to say about this later, but here’s the bottom line for all of US. The task WE Philadelphians have before US is to channel our anger, fear and disappointment into new ideas, new ways of thinking about what city government does and does not do and together to remake our government.