June 21 — 9:37 pm, 2012

Council approves $40 million, puts off AVI

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included nonstop maneuvering in City Hall and Harrisburg, Council voted to hike property tax rates using the current, outdated assessments.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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