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Mayor Kenney finds resistance to tax increases for Philly schools

In his third budget address, Mayor Kenney makes a plea to City Council to pass a package of tax increases in order to fund a $1 billion schools deficit. He also calls for investments in public safety.

Philadelphia Mayor Jim Kenney, center, with City Council President Darrell L. Clarke standing behind him and several council members seated next to him, begins his third budget address to City Council on Thursday March 1, 2018. MICHAEL BRYANT / Staff Photographer
Philadelphia Mayor Jim Kenney, center, with City Council President Darrell L. Clarke standing behind him and several council members seated next to him, begins his third budget address to City Council on Thursday March 1, 2018. MICHAEL BRYANT / Staff PhotographerRead moreSTAFF

As soon as Mayor Kenney finished calling, in his budget address Thursday, for more taxes to cover the School District's $1 billion deficit, City Council members and the city's fiscal watchdog pushed back on his proposal, which would increase property taxes for the fifth time in nine years.

"I think raising taxes should be a last resort, especially after raising property taxes several years in a row and the soda tax and the cigarette tax and the sales tax for the School District," City Controller Rebecca Rhynhart said after the speech.

Council President Darrell L. Clarke called the mayor's proposal an "aggressive approach" that could hurt some residents.

"It's clear that there's a problem with continuing to go back to the well, which is the taxpayers, and particularly given the fact that the people who have constitutional responsibility for education, which is the state, have not met its mandate," Clarke said.

Several Council members, including Cindy Bass and Allan Domb, said they were against a property-tax increase. Others, such as Helen Gym and Blondell Reynolds Brown, lauded the proposal to fully fund the schools but did not commit to tax increases.

Kenney needs at least nine votes from the 17-member Council to pass the tax increases, and any vote would come only after weeks of budget hearings this spring.

Kenney's address to Council — pitching a $4.7 billion budget for fiscal year 2019 — focused mostly on his goal to improve the city's schools and new investments in public safety. His school-funding plan includes a 6 percent property-tax increase, an 8.5 percent increase on the real estate transfer tax, and a slowed-down reduction of the wage tax. That tax package and a $20 million increase in the city's annual contribution to the School District are projected to generate $980 million over five years.

"These are our kids, no one else's kids, and no one else is coming to the rescue. Not in Harrisburg and not in Washington, D.C.," Kenney said. "We need to pay for our kids' future because in the end, the 26 percent poverty rate we have as a city will only be reduced through education."

Education has been at the top of the mayor's agenda since he took office in 2016. During his first budget address, he proposed a controversial sweetened-beverage tax to pay in part for an expanded pre-K program and community schools — and later won passage with some tweaks to the original proposal. Council had rejected such a tax twice when then-Mayor Michael Nutter pushed it. On Thursday, Council members also suggested changes to the city's tax abatement plan instead of rate increases, signaling that a negotiation might take place over the two proposals.

"I also cannot in good conscience support a property-tax increase in our most vulnerable citizens while a 10-year tax abatement that largely benefits more affluent residents still exists," Bass said.

Clarke, who even before Kenney's proposal was targeting the abatement, said it's now time to consider changes to the program.

"The question is, can you continue to ask the residents to pay for school and all the other things associated with raising revenue when you have this very lucrative tax abatement program that's going on for years and years?" Clarke said.

Kenney, in a quick interview after his speech, said he was open to a conversation about the abatement on "higher-end properties," but didn't think limiting or ending the program would do much for the schools.

"I think if you eliminate the tax abatement today, it wouldn't bring one extra dollar into the school system," he said. "Now that may happen over the years, but you are also making a bet that the tax abatements, if removed, would spur continued growth. I don't necessarily know if that's the case."

During his speech, Kenney promised increased funding for foreclosure-prevention programs. His budget also calls for increasing the homestead exemption — which reduces the value of a property for tax purposes — from $30,000 to $40,000.

On the public safety side, Kenney said he wants to invest $100 million over the next five years to maintain a police force of 6,500. He also called for investments in the Fire Department, including financing a new training facility — at a cost still to be determined — as well as increasing staff and adding 20 emergency vehicles.

In addition, he asked for a $20 million investment over five years to address homelessness and the opioid crisis, which claimed 1,200 lives citywide last year.

The mayor dedicated the last third of his speech to his plan to fund the city's schools — and the theme of underdogs, taken from the Eagles' Super Bowl run and more specifically Jason Kelce's victory parade speech.

"I believe the real underdogs in Philadelphia are our students," Kenney said, adding that he is ready to be held accountable for the future of the city's schools.

Gym called the mayor's plan bold but said the state still needs to pay its share.

"Despite this enormous investment in our schools, we are a long way off from an adequate or fair budget for our children," she said in a statement.

Reynolds Brown said Council has been "unapologetic" in finding ways to fund the city's schools and suspects this year will be no different.

"Those who care about schools, those who care about education, know that nothing is free in America," she said.

Domb, whose main focus since he was elected three years ago has been delinquent taxes, said the city should collect more from deadbeats before raising taxes. He believes the city could get up to $40 million a year from better collections. He also suggested cutting departmental budgets by 1 percent, reducing the prison budget more aggressively, and other strategies.

Rhynhart, who was budget director under Nutter, said that the Parking Authority should be contributing more money to the schools and that the tax abatement program needs to be reexamined. She also said that the city's revenue growth has been strong.

"Whenever your tax growth is this strong, and you're still proposing to raise taxes, that's not lean," she said, referencing Kenney's description of his $4.7 billion budget, which increases spending by $220 million from the fiscal year 2018 budget estimate.