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Budget Process Heating Up; Bills Moving in Council

With a month remaining to pass a budget, City Council moved more bills through the legislative mill Wednesday, including Mayor Nutter's proposal to create a $2-a-pack cigarette tax to help fund the financially-struggling schools.

Council's Committee of the Whole had 20 bills on the agenda and passed six of them. Some bills were uncontroversial, such as the administration's capital budget bills. Others, such as a bill to set the Use and Occupancy business tax rate, have competing proposals and will have to be debated and resolved over the coming weeks.

The cigarette tax, as well as a mayoral proposal to raise the liquor-by-the-drink tax from 10 to 15 percent, requires permission from state lawmakers. Enabling legislation has not yet been introduced in Harrisburg, and some key state Republican lawmakers have expressed skepticism about giving those new taxing authorities to Philadelphia.

Council did not vote on the mayor's liquor bill Wednesday, but Council President Darrell L. Clarke said he expected the members to take it up in the coming days. Nutter is counting on the two taxes as part of a plan to raise $95 million to help the School District of Philadelphia close a $304 million funding gap.

The school district is hoping to get at least $180 million in new money from city and state sources, as well as millions in savings from union concessions.

The only other proposal before Council to find new money is a bill, sponsored by Councilwoman Maria Quiñones Sánchez, to increase the Use and Occupancy tax. The business community has strongly opposed that tax hike, which previously passed out of committee.

Nutter's Use and Occupancy tax bill, passed out of committee Wednesday, would collect the same amount next year as the current fiscal year – roughly $100 million.

Council also gave preliminary approval Wednesday to a bill, sponsored by Clarke, to cut the city wage tax over the next two years. Nutter has put forth a competing bill to cut the wage tax over the next five years. Clarke said there was too much uncertainty in the city's finances to commit to a five-year plan.

The last bill approved out of committee Wednesday sets reporting standards for the Office of Property Assessment and gives Council the right to hire a firm to audit property assessments.

For months, Council members have been seeking information and questioning the accuracy of the recent citywide reassessment key to Nutter's property tax reform effort, the Actual Value Initiative (AVI).

All six bills will be given their first reading at the next full Council session, on June 6. There are only three more Council meetings scheduled before the summer recess on June 20, and the members must pass a budget before the end of the fiscal year on June 30.

Among the legislation that did not get a vote Wednesday are a number of bills designed to ameliorate the affects of AVI, which has been the dominant and most controversial budget topic for two years in a row.

Also on the agenda Wednesday was a bill from Councilman Wilson Goode to alter the 10-year tax abatement on new construction – a program that was credited with sparking a real estate boom in the last decade but has become more controversial with the shifts in the tax burden from AVI.

The bill initially would have reduced the abatement to five years and phased the abatement out over those years. Goode amended the bill Wednesday to keep the abatement at 10 years, but cap the amount that can be abated at $250,000.

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