The Next Mayor: Five Questions the Candidates Should Face

The remaining Philadelphia mayoral candidates are going to be hard pressed with tough questions from voters this election. With the systematic issues Philadelphia faces in areas like education and government accountability to the public, the two candidates are going to have to pitch solid solutions to get voters on their side. Whoever is taking over for Mayor Michael Nutter will inherit a wide range of frustrations from Philadelphia’s citizens.ManionKinneyFall15SchoolDistrict1

What are we going to do to make our schools better?

Philadelphia’s public school system has faced multiple problems in recent years. The two key points that cause the public’s frustration when it comes to the Philadelphia Public School District are school closures and funding, which go hand in hand.

Without the proper budget, schools are unable to operate normally and provide for their students, leading to another school closing in the Philadelphia Public School District. More school closings will have parents looking into other options, like charter schools, that offer their children a solid education and are not totally dependent on city funds.

Councilwoman Jannie Blackwell said, “The city needs to decide how charter schools can be funded. The system fights charters.”

After a recent victory in Commonwealth Court in September that ruled that the Philadelphia Public School District cannot bypass the state law and set an enrollment limit for charter schools, funding for these schools is going to be absolutely necessary as enrollment is expected to rise. While the problems with Philadelphia’s schools go way beyond funding, it is the key to solving the district’s problems.

ManionKinneyFall15Dollar1Where are my tax dollars going?

As Philadelphia’s schools struggle to get funding, another flood of issues arise.

Back in March, Mayor Nutter announced a 1.47 percent rise in real estate tax in order to allocate more money for public schools. While schools need funding, Philadelphia faces other problems, both physically and politically, that could benefit from tax dollars.

Raising taxes pushes citizens away from the city and towards the suburbs where they would still pay similar tax rates, but would be able to reap the benefits.

How are we going to improve the relationship between the local government and the small businesses?

Philadelphia’s local government has a strained relationship with its local businesses. Most recently, the 2015 Papal visit has businesses asking themselves if it’s worth it stay open or lose profits for the day and close down. Without the city assisting businesses in planning around the Pope’s visit, Philadelphia’s Independence Visitor Center decided to take to social media to start a hashtag #OpenInPHL to spread the word about businesses that will be open during the Pope’s visit. While this is one example of how Philadelphia’s government has lacked support for its small businesses, it shows where small businesses lie on their list.

After the Pope’s visit, Philadelphia will still need to foster and keep building the relationship between its government and small business. In some of Philadelphia’s districts, their city council representatives are already working on these relationships.

Philadelphia Councilman Bobby Henon’s director of communications, Eric Horvath,  said, Whether it’s with 15  – and counting – storefronts that have taken advantage of the Storefront Improvement Program through the Department of Commerce, or the Business Improvement District along Frankford, that will bring an extra layer of services to the avenue.”

ManionKinneyFall15ConstructionWhat is the government doing to fix our sidewalks and streets?

If you take a look at most of Philadelphia’s side streets, you can easily spot the potholes and other road repair problems. A trip down a Philadelphia sidewalk will have you dodging debris from unmaintained sidewalks. The next mayoral candidate will single-handedly be able to fix this during their term in office, they can most certainly get the ball rolling.

Councilwoman Blackwell said, “The condition of the sidewalks and streets is an issue, as well as retaining walls and other structural issues.”

She also noted that these street and sidewalk repairs are under the many maintenance issues Philadelphia and other large cities face and is something that the local government will have to reach out to the state government for, in order to receive funding and approval.

ManionKinneyFall15ATM1What is my government doing for me?

Underlying all of Philadelphia’s issues is its government’s lack of accountability to their people. Raising taxes without citizens seeing results in their schools and communities is a major issue with Philadelphia’s government.

Councilwoman Blackwell said, “People are tired of paying taxes and not knowing where it’s going.”

As Philadelphia switches over its leadership, it seems as though the best place to start is in the everyday operations of the city itself.  From sidewalk renovations to following up on vacant buildings, the state of the city’s appearance may be the first stop for showing the public what they are paying for.

Eric Horvath said, “Philadelphia’s government is the one that picks up your trash, plows the snow from the streets, inspects building construction and demolition, gives residents a say in what gets built in their neighborhoods and how. It’s the first stop in accountability. The next mayor must work to ensure all of those services run well, efficiently and honestly – and with each member of Council to do so.”

As tax dollars are a way of funding public institutions, it sounds like Philadelphia’s mayoral candidates are going to have to be open to the idea of creating a public forum to quell voters’ wariness when it comes to government spending.

– Text and photos by Kaitlin Marie Manion and Lena Kinney.

Small business owner struggles to keep up

Some small business owners are still recovering from the recession. In Center City, barber Anthony Di Reno says it’s hard to keep up with rising taxes. Reporting for TUTV: Phil DuPont in Center City.

Grays Ferry Wants Change From New Mayor

“They need to do something for the kids in this area,” Joe Finnegan said. “They don’t have anything to do. There need to be more playgrounds and after school programs. There has to be jobs for these young kids coming out of high school as well. With all this crime, parents have to be more responsible for their kids, then there wouldn’t be as many of these problems.”

The impact that the next mayor of Philadelphia will have on the city will be felt heavily by neighborhoods that are under-serviced. One such place is Grays Ferry, located in South Philadelphia. This once stable, Irish-Catholic community has been marred by racial tensions, crime and economic despair since the 1970’s.

This hardship is still felt in the present day. Lifetime resident Dave Renna remembered better times.

“This neighborhood used to be nice,” Renna said. “You had so many corner stores, a bakery right down the street, stuff like that. Everybody knew each other and watched each other’s back.”

Renna also highlighted the policies that have affected the residents economically.

“We need to get money back in the neighborhood,” Renna said. “(Mayor) Nutter’s trying to get funding in too many different ways. I’m a smoker, and he put a two-dollar tax on the cigarettes. I pay school taxes, and he’s hurting everyday people economically. Why should we suffer?”

Despite these complaints on the current city administration, there is hope from the Grays Ferry community that changes could come from a new mayor. The favorite candidate throughout the neighborhood seems to be former Philadelphia City Councilman James Kenney. Lifetime neighborhood resident Carroll McCollum weighed in on why Kenney has garnered the support.

“He has the support of the fireman, cops and teachers,” McCollum said. “I think he would be the best for the whole city, not just Grays Ferry. We need a mayor that’s going to stand up and say, ‘let’s be a city again’.”

Similar to Renna, McCollum has complaints with the current administration.

“Nutter’s more concerned about his image than anything else,” McCollum said. “He’s handcuffed in certain areas, but in some situations, like the education funding, a better job could be done. Now people around here have to send their kids to Catholic schools that cost ten thousand-dollars-per-year.”

Another prevalent issue for the residents of Grays Ferry is housing. The residents mentioned that the University of Pennsylvania, located directly across the Schuylkill River from the neighborhood has promised for years to expand. In theory, this would allow infrastructure to be improved, and have prospective homebuyers congregate to Grays Ferry.

Finnegan, a former resident of the community, commented on the importance of this issue.

“We’ve been ignored for a long time,” Finnegan said. “There’s Section 8 housing, absentee landlords all over the place. They don’t fix the properties, they all fall apart and then the tenants don’t have the money needed to fix it up themselves. If Penn follows through with what they’ve been saying for years, then hopefully that could mark an improvement.”

With the crime prevalent in the neighborhood, Finnegan also believes that it is important to keep the youth occupied in productive ways. He noted that doing
this would benefit younger people in the community. As a new father in the city, he wants it for his own family, and others in the same situation.

Ultimately, the new mayor of Philadelphia will have to make policies for the entire city, and not just the community of Grays Ferry. What these residents of the neighborhood highlighted, showed the concern that they have for the preservation of their home. Whether change will come or not, it is equally important that people like this care about where they live. That is the first step.

– Text and image by Patrick Smith.

Government: What Philadelphia’s Tax Code Means for Business

NextMayorLogo2015When Jeff Hornstein, vice chair of the Philadelphia Crosstown Coalition, talks about the business climate in Philadelphia, he immediately tells the story of one of his fellow Zeta Tsi fraternity brothers, whom he met as an undergrad at MIT from the late-1980s. Both men attended the University of Pennsylvania for graduate study – Hornstein in political science and his fraternity brother in biotech. Hornstein would spend nearly a decade as a coordinator and campaign director for teachers and service workers unions. His friend would found a promising biotech firm in Center City.

“Just when he was ready to raise private capital, his investors essentially forced him to leave town,” Hornstein said. “Why should you pay 6.4 percent of your profits to the City of Philadelphia?”

Investors urged the friend to move his business to a suburban county, where there are no local taxes on corporate profits.

This experience and others like it have influenced Hornstein, in his role at the Philadelphia Crosstown Coalition, to push for a more substantive discussion of tax reform in the run-up to May’s mayoral and city council primaries.

In early February, the coalition, which represents the interests of 19 neighborhood civic groups from across Philadelphia, submitted 16 questions to the candidates ahead of a series of community forums. One quarter of their questions addressed taxation.

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While on the campaign trail for a city council run in 2010, Hornstein said repeatedly, “Let’s make Philly less weird when it comes to taxes and zoning.”

Key to understanding Philadelphia’s weird tax code is the “uniformity clause” in Pennsylvania’s constitution. It states, “All taxes shall be uniform, upon the same class of subjects, within the territorial limits of the authority levying the tax, and shall be levied and collected under general laws.”

The clause resembles language present in many other state constitutions, but the Pennsylvania Supreme Court, unlike courts in most other states, has interpreted it as a prohibition against progressive taxation of income and property, according to the Pennsylvania Bar Association. So, within any Pennsylvania municipality all property, no matter its use, and all personal income, no matter the amount, must be taxed at the same rate.

“Pennsylvania’s Constitution has been interpreted to disallow any form of progressive taxation,” said Hornstein, who now works as an economic advisor in the office of the city controller.

Even the generally conservative South Carolina, where Hornstein lived for a time, has a more progressive tax code than Pennsylvania, where a forty-story tower in Center City that houses banks and pharmaceutical companies will be charged the same 1.34 percent property tax rate as will a crumbling brick row home in North Philadelphia.

Because of the state Supreme Court’s interpretation of the uniformity clause, City Council finds raising property taxes politically untenable, since any increase would affect many of their constituents, including low- to middle-income residential homeowners.

Enter the wage tax, which makes up 46 percent of the city’s revenue stream, according to a 2013 study by the Pew Charitable Trusts. The income of every resident of Philadelphia, in addition to state and federal income taxes, is taxed an additional 3.92 percent. Non-residents who work in Philadelphia pay a slightly lower 3.4915 percent. Business leaders have said this tax makes Philadelphia uncompetitive compared to other cities in attracting new businesses.

???????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????How does the wage tax affect business?

Robert Inman, a professor of finance, public policy and real estate at the Wharton School at the University of Pennsylvania, has studied the impact of wage taxes and other business taxes on economic growth in Philadelphia over the last three decades. According to his data, around half of the jobs lost since the 1980s were due to wage and business taxes.

“We know this because when we’ve raised those rates, we’ve lost jobs,” Inman said. “And when we’ve lowered those rates, we’ve gained jobs.”

Inman, who is a member of the Mayor’s Council of Economic Advisors, said the wage tax is only a secondary concern to businesses in Philadelphia. After all, the wage tax is paid by workers, not by corporations. Still, the non-resident wage tax, in particular, factors into many hiring considerations and can affect a business’s bottom line, he said.

When a suburban resident considers a job offer in the city, he or she must plan for 3.4915 percent of their income to be lost for the privilege to work in Philadelphia. To attract talented employees, companies in the city sometimes absorb that wage tax disparity to be competitive with salaries offered by businesses in the suburbs, Inman said.

For Inman and Hornstein, though, Philadelphia’s gross receipts tax, which is assessed on all revenue regardless if a business makes any profit, is more burdensome for companies than the wage tax. For the lucky entrepreneurs who do turn a profit, like Hornstein’s old MIT buddy, the city then taxes those profits an additional 6.43 percent. Annual revenue, much less profit, can difficult for any business to predict, so tax burden can vary greatly from year to year.

“In Philadelphia, business people seem to be willing to pay their fair share, especially when it comes to property taxes,” Hornstein said.

They’d just much rather know ahead of time what that fair share amounts to.

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In a few weeks, the Philadelphia Crosstown Coalition should have answers to their questionnaire from each of the mayoral and city council candidates. Question three asks if the candidate would shift the burden of the city’s revenue from wage and business taxes to real estate. The crucial point is that any reduction in wage taxes will leave a hole in the city budget – a hole that city council would be loath to fill with increased property taxes.

Hornstein has his own ideas.

“Lowering the wage tax is not a panacea, but it could be part of comprehensive tax reform, as long as it is revenue-neutral,” Hornsteing said.

But many in and around city government say they see no sense in trying to rewrite the state constitution or get a new ruling from the state supreme court about the uniformity clause. Inman, however, said that a group of business leaders, including Paul Levy of the Center City District and Jerry Sweeney of Brandywine Realty Trust, plan to push for such reform in the state capitol as part of an effort to reduce wage and business taxes.

One possible solution

A lack of support in Harrisburg for Philadelphia tax reform has pushed the city government to find a more subtle approach to fixing the problem: changing the ways the city assesses property taxes. The Actual Value Initiative, which, in 2013, reassessed all properties in Philadelphia to bring tax values closer to actual values, has been controversial for shifting $300 million of real estate tax burden from commercial to residential property owners.

Still, a reassessment of property values offers a unique opportunity to rework how land is taxed in the city, Hornstein said.

As the tax code stands under AVI, a property’s value is assessed with an emphasis on “improvements,” or the value of the building in its current condition, more so than the value of the land itself. This punishes landowners for improving the condition of buildings on their property and contributes to blight and vacancy in the city, Hornstein said. It also underemphasizes the importance of location in determining property value.

If city council and the mayor can come together to rework the formula used to assess the value of real estate with more consideration for the value of the land itself, property in Center City will be valued much higher than it is now, while residential property in outlying parts of the city will either stay the same or go down, Hornstein said.

Continuing to adjust property tax revenues comes with complications. As one report from the PEW Charitable Trusts found, prior to AVI, many city residents benefitted from assessments that had not been updated in a decade or more, and felt okay about this since they paid more in wage taxes.

Changing property taxes also requires a Property Assessment office has enough funding to stay on top of changing values.

“Imposing a new system will solve little in the long term unless assessments are kept accurate and up to date,” the report said.

Would lower taxes fix the problem?

It’s unclear, however, whether a fundamental change in the tax code would even do much to spark economic growth.

An analysis of job growth in the city and the surrounding suburbs suggests economic growth may not be as contingent on taxes as some business leaders say. Though jobs may move between Philadelphia and the surrounding counties, when comparing the metropolitan area to other cities in the Northeast, there has not been much overall growth.

“Over the last ten years, you’ll see that the number of jobs in the city is essentially unchanged, and the same is true for the metropolitan area as a whole,” said Larry Eichel, director of Pew’s Philadelphia research initiatives.

Quality of life factors, such as the overall level of education and cost of housing in a region, may have more impact on long-term job growth, according to a report from the non-partisan Center for Budget and Policy Priorities.

This doesn’t mean taxes aren’t an issue, only that it’s very hard to prove cause and effect.

“The question is ‘what would have happened to both statistics if Philadelphia did not have a wage tax or if it had a lower wage tax?’” Eichel said. “And that’s hard to answer.”

But with the state court’s current interpretation of the uniformity clause, the problem may not even be Philadelphia’s to fix. The city’s biggest tax obstacle may remain the commonwealth of Pennsylvania.

– Text and images by Michael Buozis.