Philadelphia Mayor Michael Nutter last week announced that the city faces a $1 billion deficit over the next five years and a $108 million gap in the $4 billion fiscal 2009 budget due to declining revenues.
Officials are addressing the budget strains while working on a $350 million tax and revenue anticipation note sale that will price in the next couple of weeks and a $185 million new-money general obligation deal that will sell in early December, said finance director Rob Dubow. The GO bond proceeds will support infrastructure upgrades.
Meanwhile, the city will continue to hold off on selling $3.5 billion of taxable pension bonds until market rates improve.
“Given where the market is, we are delaying that deal, and when market conditions come back and it works for us again, we’ll want to proceed with it,” Dubow said.
To help fill the budget deficit, the mayor said he will lay off 220 city employees and eliminate another 600 vacant positions, curb spending, and reduce many recreational programs. In addition, Nutter filed legislation to the City Council requesting that it suspend current corporate tax reductions into mid-2015, a move that would generate $220 million of tax revenue.
“The theory behind the tax reductions is reducing your taxes makes you more competitive so long as you can maintain those tax reductions without harming services,” Dubow said. “And when we looked at where we where, there was no way to keep doing the reductions and not really damage services.”
While Philadelphia’s current budget is $4 billion, more than half of the fiscal plan is dedicated to fixed costs like debt service, pension and health care contributions, and programs that generate matching federal funds. That leaves officials to find $100 million of cuts within only $850 million of remaining discretionary spending for the rest of fiscal 2009, which ends June 30, Nutter said in a special televised budget speech last week.
The funding gap comes, in part, from underperforming business tax revenue that officials now estimate will be $50 million below current-year projections and $400 million below previous five-year expectations. In addition, officials now anticipate $30 million less in real-estate transfer tax receipts for the current year.
“Make no mistake. This will be a mid-year revision of epic proportions, and because this recession may linger beyond next year, we can’t look for brief, one-time changes,” Nutter said. “We must batten down the hatches and prepare for the worst. And that means reshaping government for leaner times.”
He stressed that essential services such as police, fire, and emergency care will not be affected by the cuts, but the city will reduce overtime and will not fill 200 vacant positions in the police department.
The mayor proposed closing 62 of 73 outdoor pools in the summertime and six of eight indoor pools, as well as three ice rinks, unless private funding can be found.