No Property Tax Hike in City Council’s Alternate Budget Proposal

L: Mayor Jim Kenney | R: City Council President Darrell Clarke

It didn’t take long for City Council members to become inundated with calls from concerned constituents after Mayor Jim Kenney introduced his $4.7 billion budget proposal for fiscal year 2019 back in March. The chief complaint from residents was the package’s 4.1 percent property tax rate increase to help bridge the gap in the Philadelphia School District’s projected deficit of $630 million over the next five years.

In a move designed to provide relief for overburdened homeowners while still funneling funds to Philly’s needy schools, City Council approved its own alternative budget proposal on Tuesday that won’t raise property taxes. If ultimately co-signed by the mayor, the Council’s budget would expand the homestead exemption for property owners to $40,000, lowering tax bills. To offset this change, an increase in the real estate transfer tax would shift some of the responsibility for financially supporting the school district away from modest-income homeowners to market-rate property owners and developers.

“Taking the mayor’s proposal and inviting city residents into the legislative process over eight weeks of public hearings is the democratic ideal of crafting a budget, which is why Philadelphia City Council typically delivers on-time, balanced fiscal packages that are fair and broadly responsive to constituents’ concerns,” Council President Darrell Clarke said in a statement.

According to Council, the proposal would bring approximately $605 million to the School District over the next five years through:

• A slowdown in scheduled wage tax increases that would raise $340 million.
• A city grant increase that would raise $100 million.
• Department of Prisons reductions that would yield $95 million.
• Sequestration to collect additional revenue from tax-delinquent property owners that would raise up to $93 million.

“Our Fiscal 2019 budget measures include additional tax relief for homeowners, many of whom have seen dramatic increases in property assessments this year,” Council said in a statement. “We continue to encourage those property owners to appeal questionable assessments to the Board of Revision of Taxes, and an independent audit of the Office of Property Assessment authorized by City Council will soon be under way.”

There’s no word yet whether Kenney will go along with the newly proposed budget. Mayoral spokeswoman Deana Gamble told the Inquirer that officials are “still reviewing” it.

In an open letter addressed to Council on Wednesday, the Chamber of Commerce for Greater Philadelphia expressed support for Kenney’s budget and the property tax hike over the alternative proposal: “The fairest and best source of city funding to meet this need is to increase the real estate tax,” the Chamber wrote, saying that Philly’s taxes are “relatively low” compared to suburban communities in both Pennsylvania and New Jersey. The Chamber also opposes the slowdown in wage tax increases proposed by councilors and increasing the homestead exemption (unless there is also an increase in the property tax).