Philadelphia Budget Shows Skilled Hands at Work

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by Tony West
How often does the City of Philadelphia draw international attention for the swift and daring completion of its annual budget? Welcome to 2016.

Mayor Jim Kenney’s Sugary Drinks Tax initiative (which wound up as a Sugary/Sweetened Drinks Tax) caught the eye of the world. But the rest of the budget process – specifically the ways public money will be spent – shows a city newly confident of its finances and assured in its direction.

Luck helped Kenney. Philadelphia has left the deep recession of 2008 behind. Its economy and its population are growing. Every year, more construction projects age out of the 10-year real-estate tax abatement. The improving economic climate has enabled the government to “focus in on new revenue sources,” as 6th Dist. Councilman Bobby Henon put it.

“That was a startling development, as I had previously brought up my concern that our fund balance was too low and credit agencies could be weary of our finances,” said Domb.

COUNCILWOMAN Jannie Blackwell chaired Phila. City Council's Finance Committee hearings during intense discussions of the 2016-17 budget.

COUNCILWOMAN Jannie Blackwell chaired Phila. City Council’s Finance Committee hearings during intense discussions of the 2016-17 budget.

Henon is Vice Chair of City Council’s Finance Committee, which manages the discussion of the budget every year, from the moment it receives the mayor’s proposal in winter to its enactment in June. The fiscal year runs from Jul. 1, 2016 to Jun. 30, 2017. (Finance Committee Chair Jannie Blackwell could not be reached for comment.)

The mayor proposes, but City Council disposes. So a smooth budget process is one in which the mayor anticipates City Council’s concerns before delivering his proposal, and then works to allow City Council members to put their own stamp on a workable outcome.

First, the “soda tax.” Although many are caustic in criticizing it and some doubt it will survive a legal challenge, no one can deny it got done politically. In this budget, Kenney managed to increase investments in pre-K, libraries, parks and recreation centers – all calculated to make Philadelphia neighborhoods more livable and more valuable – without actually ballooning overall everyday expenditures.

True, 2016’s total outlay of $4.19 billion is 5.9% larger than 2015’s $3.96 billion. But with a rebounding economy and a growing population, there are more revenues and more public-service demands.

It’s better to look at the previous peak budget, from 2009-10 (a year flush with federal stimulus money), to see how Philadelphia has done since then. From 2009 to 2016, the city budget has grown by only 3.8%. But total inflation from 2009 to 2016 is 10.6%. The takeaway: Philadelphia is running a leaner municipal machine than it did back then.

COUNCILMAN Bobby Henon

COUNCILMAN Bobby Henon

“I do not see this as an increased budget,” Henon insisted.

Henon stressed the 2016 budget would add police and fire vehicles, hire new police officers, hire 40 more craftsmen for Parks & Recreation, generate a lot of third-party contracts, increase workforce diversity, reduce recidivism, spread block cleanups citywide and help L&I crack down on imminently dangerous buildings. There is widespread support for all these projects, and most citizens would be happy if even half of them come to pass.

The real winners in the City budget aren’t always so clear. Many agencies are funded in large part by special tax sources or by outside grants, so they are much bigger than their general-fund allocations suggest. But some government branches show clear gains in the coming year.

Contributions to the School District of Philadelphia are up significantly, from $69,185,000 to $104,264,000 – about a 50% jump. This sends a strong message to Harrisburg that Philadelphia is doing its fair share as our delegation lobbies for more support from the Commonwealth.

The Mayor’s Office of Innovation & Technology – this is, more or less, the City’s IT department – is also ramping up. Its general-fund base jumped 14% over 2015, to $95,312,000; in addition, it gets $79 million from three other funds.

Other big investments are tied to rainmaking.

The Revenue Dept. gets $30,204,000 this year, up 17% from last year. In addition, it gets $40 million from three other funding sources. So it looks like a decision has been made at the highest levels in City Hall to spend money to make money.

The Sheriff’s Office funding will increase by 11% this year. Evidently, Sheriff Jewell Williams has convinced his partners over at City Hall that he is a responsible manager of sheriff’s sales, which are a key economic engine for the city.

The Sinking Fund is up 12%. It is needed to secure the bonds the city issues, including the ones funded by the soda tax.

The general fund, which is paid for by universal taxes, isn’t the only driver in the budget. Neither are special taxes like the soda levy. Hundreds of millions of dollars come in the form of grants from the state, the federal government and private charities. Grantsmanship is a key part of effective local government, and the Kenney administration has sent signals it intends to pump up the city’s game in this arena.

The MacArthur Foundation grant awarded to the city to reform its criminal-justice system, for instance, is cited by Henon as an example of what an entrepreneurial municipality can achieve without zinging its taxpayers.

But many large departments and agencies were given nominal increases, held to baseline or even trimmed. Sometimes, this is good news. At $238,852,000, the huge Prison Dept. is down 2.5%. These are welcome savings for a city long burdened by the costs of crime.

Kenney isn’t the only new face in a City Hall office this year. “We have new members, which has been exciting,” remarked Henon. “They have a vibrancy, an enthusiasm. You have activists, former Council employees, highly successful businessmen with many different perspectives.” He was referring to freshmen Helen Gym, Cherelle Parker, Derek Green, Allan Domb and Al Taubenberger – five out of 17 on City Council, a big block that tends to run together.

COUNCILMAN Derek Green

COUNCILMAN Derek Green

Councilman at Large Derek Green is one of these freshmen. But he is intimately familiar with City Council budgets. For many years, he was the budget expert for Councilwoman Marian Tasco. He watched John Street come in with his first budget. He watched Michael Nutter come in with his first budget. Now he’s repeating the process with Kenney.

“Every new Mayor goes through a process of identifying how they’re going to work with City Council,” remarked Green, adding that each new mayor must lead with a bold action plan: Street had the Neighborhood Transformative Initiative, Nutter had ethics reform. “Rebuild Philadelphia,” the bond issues to fix neighborhood schools and other children’s support services, is the flag Kenney is flying.

Council President Darrell Clarke, who has run the show in Room 400 these last four years, has placed his stamp on the budget process. Most people say he runs an efficient shop these days.

“The Council President has done a good job of trying to make it easier for Council Members,” Green said. “He created a template of how business would proceed, working with the Mayor.”

Information is the key to Clarke’s approach, Green said. The Council President provides a framework started under the City’s Chief Financial Officer Folasade Olanipekun-Lewis, to educate Council Members on the nuts and bolts of budget issues.

Another Council newcomer made his mark on the 2016 budget negotiations. Councilman at Large Allan Domb, a successful Center City developer, has no need of his City salary; but he takes pride in bringing his business acumen to public business.

To finally come down on the side of Kenney’s budget, Domb extracted promises from the administration to reform the City’s property assessments (Domb says commercial properties are woefully underrated) and beef up delinquent-tax collections. Some of his input may be seen in the increased rainmaking budgets noted above.

Domb also insisted that the City’s fund balance be enriched. This is of little interest to ordinary citizens but of great interest to people who lend money to the City. If the fund falls too low, lenders demand more money from the City in interest – ultimately whacking taxpayers.

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