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Council approves $40 million, puts off AVI

By Dale Mezzacappa on Jun 21, 2012 08:37 PM

by Dale Mezzacappa
and Benjamin Herold for the Notebook and WHYY/NewsWorks

City Council put off a property tax reassessment sought by Mayor Nutter on Thursday and instead approved a plan that would raise about $40 million in additional funds for the School District.

That is less than half the $94 million that officials said was needed to stave off further cuts to schools and classrooms.

After a marathon day that included nonstop maneuvering in City Hall and Harrisburg, Council voted to hike property tax rates using the current, outdated assessments. By a vote of 11-6, it also increased the Use and Occupancy tax on businesses. Each would raise about $20 million.

School Reform Commission Chairman Pedro Ramos said that he was still hopeful that Council would approve additional funds for the schools before it adopts its final budget next week. And Council President Darrell Clarke said they are still brainstorming about how to provide more funding.

"I, along with a number of other councilmembers, [have] a number of ideas on how to provide revenue to the School District, and we will be rolling those out very shortly," Clarke said.

Clarke would not elaborate on what the alternative revenue-generating ideas were, but did not say anything about new taxes.

The District has already included the $94 million from the city in its bare-bones budget for next year – and still plans to borrow about $218 million to make ends meet.

“Every dollar below the $94 million has to be made up for elsewhere, presumably through further reductions” in personnel costs and school budgets, said Ramos. “That will be an enormous challenge. We’re going to continue to do our best to uphold our commitment to schools and make every effort to preserve those school budgets, but it’s not going to be easy."

Ramos reiterated that to bring the District into “structural balance,” it would be unwise to delay the requested funding increase and borrow anything beyond the $218 million. Without action, the District would be more than a billion dollars in the red by 2017.

“We’re hopeful that by next week we can be up to $94 million,” Ramos said. “We believe the case for funding this year is pretty clear.”

Nutter also held a press conference to stress the urgency of getting the District the money it has sought.

“We continue to be challenged with two major issues -- a broken property tax assessment system … at the same time our schools, our children and their teachers need all the resources we can provide, as quickly as possible,” Nutter said.

He called it “a critical time that cries out for attention to our young people.”

Nutter wanted Council to enact the so-called Actual Value Initiative (AVI) in time for next year that would update badly out-of-whack city property assessments and capture additional tax revenue. His office estimated the reassessment would bring in $94 million for the schools.

Council, however, voted to delay AVI for a year due to uncertainty over the final assessments and their impact on various communities. Nutter and Finance Director Rob Dubow have maintained, however, that since the new assessments will be available in September, failure to use them next year will open the door to costly appeals to the state.

Both the mayor and Council were also looking to Harrisburg for protective legislation Thursday. Council wants a bill that would hold the city harmless from tax appeals to the State Tax Equalization Board from use of the old assessments while this is all worked out. Nutter wants legislation that would allow the city to reopen its budget in the fall, begin using the new AVI assessments, and readjust the millage rate accordingly.

The political cross-currents were evident as Council spent the morning listening to speakers on the budget. The District’s blue-collar union, SEIU Local 1201 32BJ, packed the room. They had urged Council to insist on a settlement for them that would avoid wholesale layoffs and outsourcing of their work before approving additional money for the District.

32BJ president George Ricchezza said that the union had offered $25 million in concessions, but that the District had cut off talks. District spokesman Fernando Gallard said that there was merely a “pause” in talks while the District awaited final word on its revenue picture for next year. As of now, all 2,700 of the blue-collar workers – bus drivers, maintenance workers, and others – are scheduled to be laid off starting July 15.

Business owners also spoke, opposing any increase in the Use and Occupancy tax.

Since 2011, the District has laid off more than a thousand teachers, nurses, administrators and others in paring back its budget by more than $600 million.

Ramos said that the budget deal in Harrisburg between Gov. Corbett and the legislature, the details of which were being kept under wraps, would result in about $21 million more for the District through restoration of $100 million in Accountability Block Grants. He called that encouraging but still not enough.

“That body also has not done its work,” Ramos said. “But given this week in the city, it is some welcome potential good news.”

Additional reporting by Tom McDonald of WHYY/NewsWorks.

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Comments (16)

Submitted by Anonymous (not verified) on June 22, 2012 9:58 pm

Has anyone heard anything about upcoming teacher layoffs because of the lack of new funds from the city? I was supposed to pick a new school next week and was sent an email earlier tonight saying the session to pick a new school was cancelled because the district anticipated staffing changes over the next few weeks.

Here's the text of the email:

Dear Colleague:

The Office of Human Resources has you classified as a Forced Transfer. You will need to select another school for the upcoming 2012-2013 school year. We anticipate staffing changes to occur over the next several weeks. We are canceling your transfer session. Please do not attend the session scheduled for Tuesday 6/26/2012 at 1pm. You will be scheduled at a later date in the summer to select a school.

It is imperative that the District be able to communicate to you quickly and efficiently. As a forced transfer, all communication will be done via School District email. Therefore, you are encouraged to check your School District email account on a daily basis during the summer months to find out when you will be scheduled to select a position.

All of the vacancies are available on-line on the District's webpage. You will need to review the vacancy list prior to coming in for your scheduled session. Please note : the vacancies will change each day, as placement occurs. We strongly encourage you to have several school selections readily available. Selections will be made in seniority order, some of the schools you were interested in may be selected by other colleagues.

If you are unable to attend your scheduled session, you may send a proxy to make a selection for you. The proxy needs to bring photo ID and a letter from you authorizing them to make the selection.

Thank you in advance for your cooperation.
The Office of Human Resources

Submitted by Anonymous (not verified) on June 23, 2012 3:08 am

I know someone else that got the same email, I don't know about layoffs but it could be because of the meetings over the new superintendent taking place Monday and Tuesday the same time as transfer sessions were initially scheduled.

Submitted by Jason (not verified) on June 23, 2012 7:03 am

Sorry but taxpayers can not afford 1.8% of market value taxes. This would just drive many of us out of the city as we can not afford to pay some of the highest real estate taxes in the nation. AVI needs to be implemented but with a reasonable tax rate, no more than 1% of real value. Meanwhile the School District will have to trim its budget as it should have been doing all along. We are living in hard times and the School District has to realize this. There are other savings that can be made: cut across the board, eliminate DROP, collect back taxes, etc.

Submitted by Concerned Philadlephian (not verified) on June 23, 2012 8:59 am

Those of us who don't live in gentrified areas will benefit from AVI because we have overpaid property taxes for years while people with 10 year tax abatement, people in Center City, Northern Liberties, South Philly, etc. are not paying their fair share based on the value of their homes. I will be lucky to get 1/3 less than what I paid for my house while people in parts of Philadelphia will get 4 to 5 times what they originally paid.

While I'm tired of property tax increases in a city that does not collect delinquent taxes and create an equitable system, the schools are strapped. Yes, DROP needs to go and the Commonwealth needs to get off the voucher/privatization kick. But, there is little left to cut in schools unless we get rid of all extra curricular from sports to music.

Submitted by Ken Derstine on June 23, 2012 8:37 am

"the School District will have to trim its budget"

They are not "trimming". They are chopping to the bone and then the bone. Charters are being brought to us by outsiders who have come here to pillage and destroy and then leave.

Philadelphia is going to be suffering the consequences of the destruction of its public education for years to come. Concerns about property taxes will soon be laughable compared to the consequences of the destruction of public education.

Submitted by Mrs. G (not verified) on June 24, 2012 12:32 pm

Come to New Jersey, then talk to me about taxes.

Submitted by Ms.Cheng (not verified) on June 24, 2012 5:23 pm

Interesting thing I heard from a Cherry Hill, NJ resident who works in Philly. NJ gives them credit for the wage tax they pay to Philly. The NJ income tax is on a graduated scale (higher income pays higher percentage, $40k to $75k is 5.25%). Now let's see PA State tax is a flat 3.07% plus Philly City 3.93% (residents) or 3.50% (nonresidents)= 6.5 to 7.0%. O.k. then the sales tax in NJ is 7.0% whereas in PA it is 6.0%, unless you live in the City in which case it is 8.0%. Do they have a Recovery Tax (making sure you pay sales tax based on your residence on all your purchases) in NJ I wonder? I don't believe they have a separate School Tax like Philly does. Yes the property tax in NJ looks to be about 34% higher than for comparable properties in PA (3br, 1-1/2 bath, .20 acres: PA $4,033; NJ $5,413). The NJ Real Estate Transfer tax doesn't go above 1% ($2 to $3.90 per $500 sale price) for homes selling for $350k or less; whereas in Philly it is 4% (with 3% going to the City, 1% to the State).

Alright let's compare the big numbers, that is income and real estate taxes. If say my salary is $60k and I live in the City, I would pay 1.75% more income tax than in NJ which would equal $1050 more. Add that to $4033 (real estate tax on PA home), I get $5,083. That leaves a difference then of $330 (recall, real estate tax in NJ is $5,413). O.k. then yes you would pay a few hundred $ more per person in NJ in this scenario. At the $75k limit the difference becomes only $67.50 (above $75k to $500k in NJ the income tax rate jumps to 6.37%, nearly the same as the combined City-State taxes in PA... how many of us make over $75k?).

Conclusion then, NJ seems to do a better job pro-rating their taxes... and a better job using them.

Found this article to back me up (which states the important things without all my numbers): ..."New Jersey's income tax advantage" Sept. 29, 2010

"New Jersey tax law provides generous deductions for individuals, spouses, dependents and even property taxes in order to arrive at a "taxable" income. That income is then divided into six brackets and taxed at progressively higher rates.

New Jersey residents pay lower rates than Pennsylvanians on the first $35,000 of taxable income for single filers and the first $70,000 for married couples filing jointly. So it’s immediately clear that New Jersey imposes lower income taxes on working poor and middle-class families.

Additional earnings are taxed at higher rates, but when deductions also are factored in, four out of five households in New Jersey pay less in state income taxes than they would in New York or Pennsylvania. And that doesn’t include calculations for city income taxes levied in New York City, Philadelphia and elsewhere."

Submitted by Anonymous (not verified) on June 24, 2012 7:37 pm

In short, flat taxes are a fraud perpetrated on the middle class and working poor.

Why do you think PA is the ONLY state with a true flat tax system? Ask anyone who didn't grow up in the state but lives here now. Pennsylvania has the worst state government system I have ever experienced, and the city government is only marginally better if at all.

Submitted by Ms.Cheng (not verified) on June 25, 2012 8:25 am

Yes, I am amazed at the narrow minded thinking that would create something like the Recovery Tax. It totally bypasses the merchants it purportedly "helps". What is necessary is making PA competitive, by yes, even dropping the sales tax so that the merchants increase their sales and are able to (lo and behold) pay more to the State in income tax. Nice of them to support "choice" but not in all things, eh?

PA and the City need to be careful of isolationist (here equivalent to fragmented/compartmentalized) thinking. Seems they're not even aware that that is what they're doing. Consolidating zones so there're less representatives required in legislature... and the reason given is streamlining the process and saving money - come on, that is (besides transparent manipulation) a slap in the face of their whole reason for being!

Years ago, I wrote Congressman Fattah that I supported the idea of a flat tax if it were on a household's disposable income. We have the Consumer Price Index and other sophisticated means of calculating a fair dollar amount of the cost of necessities which should include health care, insurance, transportation, along with food, utilities, and shelter, and we use this already in determining eligibility for assistance programs. I never heard back from him or his office. I guess it's something that would benefit the middle to lower classes far more than the upper. NJ's progressive income tax structure seems to incorporate the understanding that there is spending on subsistence that should be taxed little if at all.

I did wonder when we moved to the City over 12 years ago why our none of our neighbor's 4 children had chosen to live in the City. I watched as other families stayed only briefly, and as more renters came, remaining residents aged, and "for sale" signs lingered longer and longer. Again, I had to accede that my hope and vision for the potential I saw (neighborhood school and now neighborhood) were up against more powerful forces and self interests, and would never be realized.

Submitted by Jason (not verified) on June 23, 2012 4:11 pm

I repeat: We can not afford a 1.8% of market value tax rate. Yes, some people have been paying way less than that and they need to pay more but the rest of us who having been paying rates around 1% can NOT afford to pay 1.8%. Simple as that. I will have to sell if that happens and I won't be the only one. Our public schools are an enormous failure yet they keep asking for more funding. WHY do Catholic schools do better when they pay so much less? Why did the School District employ an incompetent Superintendent who cost taxpayers a fortune to fire?

If the public schools REALLY need so much funding and administrators, teachers and others who work for the District are unwilling to make concessions, the city needs to look to other sources of funding and not just home owners.

Times are changing, there is less money going around. The city will have no tax base if 1.8% taxes are imposed. The days of three month vacations, generous pensions and other perks may be numbered. We need to face facts.

Submitted by Ken Derstine on June 23, 2012 5:10 pm

I agree that basing school funding on property taxes is unfair. There has to be a more equitable way to fund public schools because it is in the interests of the entire community, not just property owners. There was a bill to fund schools with income and sales taxes before the legislature this session, but unfortunately it got tabled last week.

The conservatives are more interested in pushing for tax breaks for Shell and a tax credit bill which Rep. Roebuck has called "vouchers on steroids". ("The bill would spend $100 million on vouchers in its first year, rising to $200 million in the third year. Both figures are higher than in any previous voucher bill, Roebuck said.") The House will be voting on HB 2468 on Monday. See here for details:

Once again, the problem is not that they don't have the money, it's what agenda they are pushing. As was said at a recent SRC meeting by Rev. Waller, "90% of can't do is don't want to!".

Submitted by Anonymous (not verified) on June 24, 2012 12:44 am

The teachers' union does not give a damn about your plight. They just want theirs. It's what unions do. They suck from the host until the host dies. Reference the auto companies and the entire steel industry. Watch them. They will give no concessions such as contributing to their healthcare costs like everyone else does. They will throw the young teachers under the bus first. And they wonder why people across the nation are fed up with public sector union thuggery.

Submitted by Anonymous (not verified) on June 24, 2012 8:53 am

Except, the PFT gave concessions last year, CASA is probably going to give concessions this year, and SEIU has been in negotiations for days to try to bargain their concessions.

Sorry. People keep trying to throw these boilerplate anti-union arguments around without knowing a fool thing.

Submitted by Anonymous (not verified) on June 24, 2012 4:21 pm

The anti-union language is sometime over the top, but it's true that unions are there to look out for their (established) members. That's what unions do. They may give lip-service to other things, but if you look at what they'll fight hard for, it's pay, benefits, and seniority protections.

It's possible that new leadership in unions could transform their purpose into a significant force in improving the educational system. But right now they are purely political organization focused on getting as much money and and benefits for their members. I'm not saying that as a bad or good thing, just as an observation about what they do.

Unions fight for "education" as long as "education" means jobs for unionized teachers. Again, I'm not necessarily criticizing the union for that, but, realistically, that's what they do.

It might be pretty short-sighted, though, since unless public schools in urban areas make some substantial improvements, the PEOPLE, through both individual choice (choosing private schools, charters, etc.) and large-scale choice (removing bargaining rights, etc.) will basically end teacher's unions. I think it would actually be a shame, because I think unions COULD serve a really important as a voice for educators and it's a little scary to think what might happen if there were no unions at all. But right now, unions aren't making too many good-faith efforts to tackle difficult challenges. They are pure political/labor unions with relatively narrow goals in service of their most loyal (i.e. long-term) members. (This comes from both policy study and experience being in the PFT, where the only messages I ever got were who to vote for and which days to wear red for "solidarity.")

Submitted by Ms.Cheng (not verified) on June 24, 2012 7:35 pm

Jason, I agree with you, and I am actively looking to move our family out. The only words to describe making AVI "revenue positive" is "insular" and "self serving". NO mention of correcting for the bubble which popped in 2008. On my street, the homes that are listed for close to what they sold for during the frenzy are still unsold. In my search for a new home, I see "sold" prices have dropped across the board by 1/3 from what they were in 2006 or 2007.

If lenders had stuck to traditional standards, home price increases would have been keyed to wage increases, about 6% in the past, but much lower now.

Mayor Nutter has become insular and self serving; Council is insular, non critical, and quite frankly, spinelesss. The SRC can't sue the State, because they are the State; the City can, but refuses to. So much for the value of a college degree, that is, where's any critical thinking whatsoever? What is being put out is that without the $94 million, the District will be unable to qualify for further loans. In times of recession, yes entities must often operate by borrowing against the future; but if the borrowing is wise/well thought out, then the risk is lowered. Mr. Knudsen must come up with better stats for the lenders, because as you say Jason, by putting a greater burden on strained households, the City risks losing those who have less and less reason to stay here: Those who it most needs, the educated middle class. Maybe it doesn't need us after all? I'm not sticking around to find out... I've got kids to get through more formal education (just above cut off for aid) and no pension coming to me :)

Submitted by Anonymous (not verified) on June 26, 2012 8:25 am

PSD Funding is up over 100% since 2001 compared to 31% inflation. Enrollment is roughly flat.

I have a difficult time understanding why the school district is chronically underfunded after years and years of super-inflationary increases.

Regardless, 1.8% taxes will help turn Philly into Detroit. Property taxes were the only reasonably rated taxes in the city. Now they will join the wage tax and obnoxiously entitled business privilege tax, as being in the "worst in the country" class.

No matter how high taxes are or how much money is sent, I have full faith the PSD will remain a mismanaged deficit ridden monster.

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