With a budget deadline looming, Philadelphia City Council is close to crafting its alternative to Mayor Nutter's proposed property-tax hike to fund the city's public schools.
In closed-door meetings this week, Council considered four potential revenue streams - building blocks that would fall at least $20 million short of the $103 million the School District has asked for, according to sources familiar with the discussions.
On the table are a sale of city tax liens; an increase in the city's use-and-occupancy tax on businesses; a hike to the parking tax; and a real estate tax increase far more modest than the 9.34 percent proposed by Nutter.
Budget talks are ongoing and fluid, and numbers floated early this week are sure to change. Sources said there is no consensus on whether to move on one option to fund the schools or create a combination.
But several said Council is looking to provide around $70 million to $80 million for the district.
"People may be for the tax liens only," said one person involved in the discussions. "Some folks may be for tax lien and U&O [Use and Occupancy] tax but nothing else. Some folks might not be for anything."
The wrangling comes as tensions between Council and the district are running high. At a heated budget hearing last week, where some on Council expressed skepticism about how school funds are spent, President Darrell L. Clarke accused district officials of wanting "all of the money all of the time, basically."
Without new funds, the district faces an $85 million deficit in its next annual budget. Superintendent William R. Hite Jr. has asked for $103 million in new recurring revenue from the city, along with $206 million he hopes to receive from the state.
When asked about the potential of receiving far less, Hite said he would reserve comment until he has "a better feel for the actual number."
"Our 'ask' is still $103 million," said Hite, who wants to use the funds to fill the deficit, then pay for things such as hiring counselors and nurses. "These investments are really important."
Nutter's proposed tax increase would net $105 million, but it has been unpopular on Council.
The chamber must approve any additional school funding by June 18, when its summer break begins. In the lead-up, several options have been raised, then pushed to the side, including a tax on sugary drinks - which twice has failed under pressure from the beverage industry.
Remaining, sources say, are four main options:
Use-and-occupancy tax: The U&O tax on commercial real estate is set at 1.13 percent. Council is considering an increase that would net about $10 million for the district.
Property-tax rate: Instead of Nutter's proposed 9.34 percent increase, sources say, Council is discussing an increase closer to 3 or 4 percent that could generate $40 million or $50 million.
Tax lien sales: Over the years, Council has urged the administration to consider this as a way to collect millions in delinquent taxes. The city has already scheduled a sale of 1,400 tax liens this month. But administration officials say it's unclear how much that sale, seen as a pilot program, would net.
Parking: A 20 percent tax is now paid by all off-street parking customers, whether they park in surface lots or structures. Council is considering an increase that would net about $10 million. This tax was raised from 15 percent in 2008.
Robert Zuritsky, who with his father heads Parkway Corp., one of the city's biggest parking companies, called the proposal a burden on a heavily taxed industry. "It's already very expensive to build parking in the city and the taxes make it almost unaffordable," he said.
As he lobbies against the measure, Zuritsky might be hard-pressed to find friends on Council. In the May primary, the Zuritskys backed Philly 3.0, a group that endorsed six Council candidates - five of them non-incumbents.
An increase to the U&O tax also has received pushback. In a letter to Council members, Philadelphia Chamber of Commerce president Rob Wonderling voiced support for a modest property-tax increase or a sale of tax liens. But he said the U&O tax - which Council raised by 18 percent in 2013 to support schools - hits a small number of taxpayers hard.
"We support a plan of shared sacrifice in which all Philadelphians support Philadelphia's children," Wonderling wrote.
Nutter spokesman Mark McDonald said the mayor "has no desire" to raise taxes but believes a stable, recurring revenue stream that doesn't need approval from Harrisburg is the best option. Raising property taxes "meets these criteria," McDonald's statement said. "He hopes that as City Council . . . reviews all the options that members will eventually come to the same conclusion."
Also Wednesday, Councilman Mark Squilla announced plans to auction about 180 city-owned lots in his district, which includes parts of South Philadelphia, Center City, and the Northeast. Revenue from the June 12 sale would go into the city's general fund - and then, he hopes, to the schools.
He said if the sale goes well, other Council members could follow suit.