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Soda Tax Scam Forces Open Door to City Fiscal Malaise

Council hearings should expose fiscal fraud

Mayor Kenney’s calculated and crafted appeal to finding another way to dupe Philadelphia’s citizens took a surprising but important turn late last week.

For those who may not have gotten the message, the sparing between the mayor, city council and interested parties shot past a compromise and a vote for approval when Council President Clarke announced he would be holding hearings on the city budget, more commonly known as the “Mayor’s Budget.”

For those not aware, the Philadelphia budget is prepared by the Mayor’s office, reviewed by City Council and then the Controller’s Office, but is not official and accepted until the State PICA Board approves it. That final step has been the subject of what I characterize as a Kabuki dance for the last few years, but most importantly is that what this process has done is keep the public in the dark about a budget and a process that does not pass the smell test.

Mayor Kenney discloses only hours before he thought he had the votes from City Council that he was not going to use all the money from this windfall tax he would control for Pre-K, but for shoring up shortfalls in the city budget and paying for other projects he desired. My guess is that, while his office has to have his budget ready for review and approval in the next month and half, he has learned just how much manipulation has been going on with past budgets and does not know where he has to “manufacture money” to produce this year's “document of duplicity.” Admitting he was going to use some of the money for other purposes than he originally claimed may represent a new level of honesty, or just realization that the problems and shortfalls are just too big to try and ram through with unrealistic assumptions on existing revenue streams.

Bear in mind, we pay our City Council members more than any other city in the nation, and they only work 9 months (that assumes they are “working” during those 9 months).

We have one of the largest city work forces relative to population at 1 for every 50 residents, and despite that they are paid overtime on an incredibly consistent basis.

The sweetheart pension deals of the past, the DROP program, and other gravy train parts of our budget cost this city dearly and the way around them has been to just not pay into the pension programs according to defined legal requirements for years on end. For extended periods of time this shadow budget has made assumptions on the earning potential of the pension fund that are pure fantasy, and everyone involved knows it. Add to that “forgiveness “ from state legislators in meeting contribution requirements year after year lets the city use its funds for other obligations; in effect kicking the pension can down the road while the overseers at PICA pretend they don’t know what is going on behind the curtain.

Now, City Council reviews this budget but I would hardly call them a body of sharp fiscal pencils, and in the past they only take objection when they want something for themselves to use to buy votes or want to take on the mayor for political purposes. But in the backwash from the Soda Tax war they are calling for public hearings on the overall budget – something long overdue if it ever happens and happens in a way that the truth is not paved over as it has been for some time.

To his credit, Controller Butkovitz has done his own required annual review of the budget and submitted it personally, and in writing, at the annual meeting of the PICA Board. To the best of my recollection, he has argued against acceptance of the budget for every one of the last three years. Even PICA’s own staff has issued warnings against fiscal shortfalls and assumptions made by the Finance Director and the Mayor to the point where in one recent fiscal year even they recommended against acceptance and approval. The Board rejected those opinions and approved it “as written” anyway.

Not to worry, the political appointees of the PICA Board, bipartisan that they are, never fail to produce a dog and pony show that barely passes for professionally informed review of a complex document, and then makes sure to pass the budget no matter how many financial crises are befalling the city at any given time. (pensions, school system, union contracts, expensive patronage, overtime, unproductive city owned real estate, runaway costs and massive amounts of uncollected real estate taxes.)

Bear in mind, Boston, a city very much like ours in age and size, pays 80 percent of its obligations with real estate taxes. Philadelphia owns more real estate than any other major city but leaves much of it outside the tax rolls so it can be used as “currency for contributors” by City Council and other powerful insiders. Add to that the infamous “Councilmanic Privilege” and instead of having a legitimate real estate tax base, we have to use our onerous wage tax to pay nearly 50% of our obligations; leaving only 15% of our budget covered by real estate taxes.

Now, if I can learn all this by reading the public records from the PICA meetings, why does none of this seem to resonate with the PICA Board Members and force them to take the very steps the PICA Act gave them in the power and mandate to use?

The answer is that if they don’t approve, all state funding for any purpose stops until the budget meets approval. Politicians on both sides of the aisle don’t want to stop that gravy train, even if the state itself is near insolvency.

City Council is giving us the opportunity to trump the PICA Board and ask our own hard questions about how these “Mayor’s Budgets” use our tax money and support the massive, manipulative and politically misdirected city budget.

I am suggesting more than public hearings dig into how we have been duped by the politically powerful raiding the cookie jar for so long, and paying themselves handsomely to do it.

Jim Foster

The Independent Voice