District likely to get no more than $40 million from Council

by on Jun 14 2012

Updated 8:30 p.m.

City Council is poised to approve a compromise that could raise as much as $40 million for the School District, far short of the $94 million it was seeking.

Council is putting off revising the property tax assessment system through the Actual Value Initiative, instead amending two bills that would raise the property tax by about $20 million and the Use and Occupancy tax by $20 million. 

However, there is still a chance that the Use and Occupancy tax won't pass at all next week when it comes up for a final vote. Beyond that, City Finance Director Rob Dubow warned that failure to pass AVI when the city will have updated property tax assessments by September will result in appeals. Those could cost more than the planned property tax increase will raise, he said, resulting in a net loss for the District and the city.

This year, property tax appeals to the State Tax Equalization Board cost the city and District more than $50 million, and that amount could double next year, Dubow said.

He added that the administration still hoped to influence Council before the final vote on the amendments next week.

Council members are concerned about tax rates, which depend on the overall aggregate valuation for the entire city. But that figure won't be ready in time for the June 30 deadline to pass a final budget. Without it, it is not possible to gauge the effects of AVI on individual property owners.

"We continue to hope that things will change by next week," Dubow said. "We're concerned that the number for the District keeps going down."

The District issued a brief statement: "This crucial issue is still under consideration by City Council as a whole. We are cautiously optimistic City Council will support our efforts to maintain basic educational services for Philadelphia's school children."

With so much less revenue from Council than it already has put in next year's budget, the District will have to try to borrow even more than the planned $218 million to make ends meet in fiscal 2013.

Councilwoman Maria Sanchez said that the District had come to City Council before seeking more money than it ultimately received and still managed to make ends meet.

"I agree, it's not enough, but this is not uncommon," she said.

But District leaders have said that this year is different, making impassioned pleas for the money. They said that without it, they would have to cut individual school budgets further. School Reform Commission Chairman Pedro Ramos said that not getting the funds would be "unthinkable" as the District seeks to close an unprecedented budget gap.

District Chief Academic Officer Penny Nixon said that she had prepared a budget that included the $94 million and didn't want to further cut into school budgets.

"I don't know what we'll do," she said.

Councilman Bill Green said he agreed it was a "dire situation," but warned the SRC "not to put all its eggs in the AVI basket. Unfortunately, that's what they did."

He said they should seek more money from Harrisburg, noting that Ramos and SRC member Feather Houstoun were appointed by Gov. Tom Corbett, whose unprecedented cuts to basic education funding are a major cause of the crisis.

"That's where they should focus their attention for additional funding," Green said, adding that "they haven't even asked."

Over the last several weeks Council support for the District has shifted.  Members were put off by the District's reorganization plan that would divide the District into "achievement networks" and concerned that they didn't have enough influence over how additional funds would be used.

The District had argued against putting any strings on the money, but advocates urged Council to require that any new money go toward restoring nurses, security guards, and other school-based personnel that had already been laid off.

Council also wanted the District to work out something with its blue-collar union, Local 1201 of 32BJ, before the city committed any more funds. Saying that it had to save $50 million in transportation and facilities costs, the District issued layoff notices to all 2,700 of its members.

Union leaders said they had offered $20 million in concessions. Members of 32BJ were out in force to lobby Council members.They were pleased with Council's action, even though it may not raise the money needed to save their jobs.

Earlier in the day, advocates were disheartened.

"It doesn't feel optimistic that they are going to get close to the $94 million, which is very troubling," said Shelly Yanoff, executive director of Public Citizens for Children and Youth.

Yanoff said that in considering various tax options, Council was swayed by the Chamber of Commerce's opposition to increasing the Use and Occupancy tax. And they also raised concerns about the large amount of untaxed property, including nonprofit hospitals and universities. Other cities get payments-in-lieu-of-taxes, or PILOTS, she said.