Philadelphia's City Controller on Friday called on the city's state-appointed fiscal watchdog to reject Philadelphia's recently passed five-year budget, saying it over estimates tax revenues and could lead to a deficit.

City Controller Alan Butkovitz said the budget makes flawed estimates regarding a host of taxes: the business income and receipts tax, sales tax, realty transfer tax and parking tax.

In asking the Pennsylvania Intergovernmental Cooperation Authority (PICA) to reject the budget, Butkovitz said the tax estimates are especially flawed for fiscal years 2016 and 2017, when economic conditions are predicted to be less favorable than the city's projections.

"These overly optimistic estimates significantly inflate fund balances each year of the Plan," Butkovitz said in a statement. "In reality, it could lead the city to experience annual deficits in FY2017 and forward."

Mark McDonald, Mayor Nutter's spokesman, immediately discounted the criticism, saying the city makes its estimates based on advice from outside consultants, the Federal Reserve Bank of Philadelphia and other economists. He questioned why Butkovitz did not raise his concerns during hearings on the budget.

"It is more than a little disappointing and disconcerting to see a controller make an assertion, namely that he thinks we are overly optimistic in our revenues, without any backup," McDonald said. "We firmly believe our revenue estimates are accurate and supportable and we believe that PICA will also see it that way."

City Council passed the budget June 18, and Mayor Nutter signed it the same day. Butkovitz's office said PICA received the budget on June 19 and has 30 days to review it.

Butkovitz also raised concerns about the number of property owners currently appealing their property evaluations with the Board of Revision and Taxes. He said the success rate of appeals has been about 50 percent, with many values being reduced by about 30 percent.

"If this trend continues, the remaining appeals could cost the City nearly $12 million in Real Estate Tax revenue annually," Butkovitz said. "This would unfavorably impact fund balances over the life of the Plan."

McDonald said losses from appeals have already been accounted for in the five-year plan.

The controller's full report can be found here.

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