Mayor Nutter's first budget sailed through City Council yesterday, though some of his most difficult financial decisions lie ahead.

Council approved the $4 billion budget and a five-year plan with unanimous votes on six out of seven budget bills. The five-year plan was the first approved by Council since former Mayor John F. Street's first term.

The spending plans "will start to set the city in the direction that all of us have talked about," Nutter said before signing the bills in Council chambers and personally thanking each member.

But Nutter also has decisions looming that will play a critical role in the city's long-term financial health. Those include contract negotiations with the four municipal unions, whose contracts expire June 30, and implementation of a pension obligation bond of at least $3 billion that would fortify the city's dangerously underfunded plan.

Nutter praised Council for "improving" the budget he proposed in February. Council President Anna C. Verna said budget talks were marked by "the art of compromise, which had been missing in the past." Council warred with Street during his last six years in office.

The budget includes eliminating the maligned gross-receipts tax over 10 years, reducing the net-income business tax to 6.25 percent by 2013, and cutting the wage tax to 3.6 percent for residents (3.25 percent for nonresidents) by 2013. All of the reductions were scaled back as Nutter wrestled with revenue shortfalls.

One tax will increase - the parking tax, from 15 percent to 20 percent. And a new tax of 3.9 percent is to be levied on hospitals' net revenue as a way to leverage even more federal Medicaid funding for the hospitals.

The budget includes more money for public safety, Fairmount Park, and Community College of Philadelphia.

Only one nay vote was heard on any of the seven budget bills passed yesterday. Councilman W. Wilson Goode Jr. voted against Nutter's five-year tax plan because it delayed and scaled back the working-poor tax credit championed by the late Councilman David Cohen. Nutter had proposed to eliminate the credit.

OnePhiladelphia, a coalition of community advocacy groups, criticized the changes to the working-poor tax credit and the budget in general for failing to attack "the crisis of poverty in Philadelphia."

In other business, Council unanimously passed Marian B. Tasco's resolution calling on Nutter to sue predatory mortgage lenders, following the lead of cities including Cleveland, Baltimore, Buffalo and Minneapolis. Nutter said that he had not made a decision but would work with Council and that "if you're a predatory lender out there, you need to be a little more nervous."

And Bill Green introduced a bill that would expand the powers of the Historical Commission, allowing for the designation of building interiors as historic. Such a law would allow the commission to tag the Boyd Theater, which is up for sale, with such a designation, Green said.

Contact staff writer Jeff Shields at 215-854-4565 or