City Hall's budget feud Acrimony is distracting - it's time to pull together

PHILADELPHIA'S budget gap - a $1.4 billion hole over the next five years - is not unlike the fiscal crisis that other cities and states across the country face. The factors driving our problems - declining tax revenues, struggling pension funds, chaos on Wall Street, soaring health-care costs - are the same factors driving other municipalities to make severe cuts.

But we have a budget gap that many others don't share: the widening chasm between the mayor and City Council.

The split between the two has grown to the point that Council took the extraordinary step last week of unveiling its own budget proposal as an alternative to Mayor Nutter's plan that he unveiled in March.

Nutter's plan calls for two big tax components: increasing property taxes by 19 percent in 2009 and by 14.5 percent in 2010, and increasing the sales tax by 1 percent for three years. By raising taxes, Nutter planned to avoid major cuts in services and mass layoffs of city employees.

Council's response was hardly welcoming. Stung by Nutter's suggestion that Council members should give up their city cars and their participation in the controversial DROP program, as well as complaints members say they're hearing from constituents on the prospect of paying more property taxes, Council came up with its own budget plan, released last Tuesday.

Instead of increasing property taxes, it wants to extend the sales-tax hike five years and borrow against the last two years to fill the $200 million shortfall in fiscal year 2010. Council also claims it can find $75 million in potential efficiency savings that haven't been included in the current budget.

Council deserves credit for coming up with an alternative, instead of just railing against Nutter's proposals. However, the Council plan does raise some red flags. We're leery of the idea of borrowing money to pay for operating costs, because going into debt for short-term expenses is usually not a good idea. Those kinds of fiscal acrobatics could be viewed poorly by rating agencies, which have a big impact on how easy (or hard) it is for the city to borrow money.

Given the current credit crunch, it also seems possible that the interest costs on the loan could be very high. Finally, we worry that if the economy doesn't come back quickly enough, we may not get enough revenue from the sales tax to pay back the balance.

But while both sides debate the wisdom and feasibility of their respective plans, what worries us most is not which plan is the right one - it's clear that some pain is going to be unavoidable in order to fill the budget hole - but how our elected leaders are ever going to resolve this, given how at odds they are.

This is an extraordinary crisis, and fixing it will require extraordinary leadership, not rancor and bickering. The rift between the two parties isn't just annoying, it undermines the city's ability to deal with the problems facing our city.

Both Nutter and Council's plans require approval from Harrisburg. The lack of a united front could hurt efforts to get necessary support from state lawmakers. And that could spell disaster for the city.

It's time for both sides to come together and make a deal. *