Posted on 10/22/2004 11:59:32 AM PDT by 2banana
Tom Ferrick Jr. | Another excuse not to cut costs
Inquirer Columnist
Bad news for the City of Philadelphia. Fitch Ratings this week dropped the city's credit rating by a notch, from A- to BBB+.
To quote the financial rating company: "The downgrade reflects poor revenue growth and significant increases in fixed costs and public safety spending, leading to the depletion of the city's reserve position."
Those Fitch guys sure do know how to write crackling prose, don't they?
The bad news is good news for the Street administration.
City Council is back and is itching to cut taxes once again. This time, it is targeting much-hated business taxes.
Council tried to cut them in the spring but failed. (Though it did succeed in cutting the much-hated wage tax.)
The Fitch rating gives the mayor another arrow in his anti-tax-cut quiver, as in: How can we afford to cut taxes when independent observers say we are in trouble already?
The mayor has a point.
It's no secret that Philadelphia has spent the reserves it had when John Street first took office.
It's no secret that various projects - such as Safe Streets, the sports stadiums, the PGW bailout - turned out to be expensive add-ons to the city budget.
It's no secret that - as the Fitch report mentions - Philly is skirting on the edge even without counting the cost of new labor contracts now being negotiated with city employees.
$200 million more
Once those contracts are signed and sealed, the increased wages and benefits will cost the city an additional $200 million over the next four years, according to my calculation.
But this is only half the story.
The same Fitch report highlights another problem in city government. To quote again:
"Payroll and benefits, which equal two-thirds of general fund spending, grew at twice the pace of local tax revenues over the past five years."
To put it another way, our spending on employee wages and benefits exceeds growth in local tax revenue.
In fact, the cost of benefits is the fastest-growing component in the city budget. Some examples:
When John Street took office, 17 cents of each dollar spent by city government went to pay for employee fringe benefits. When he leaves office, the figure is expected to be 26 cents on the dollar.
When Street took office, city payments to the pension fund for its employees totaled $196 million a year. This year, they will total $319 million.
When the mayor took office in 2000, health and welfare benefits cost the city $187 million a year. This year, the bill is $275 million.
This year, the mayor had a clear shot at changing those trends. Contracts for the blue- and white-collar unions were expiring.
Nothing done
The administration made fringe-benefit cost reduction a priority in its five-year plan, floating various ideas - including getting city employees to switch from a defined-benefit pension plan to something like a 401(k).
Earlier this year, in talks with various city officials I was told that - painful as it may be - the city had to get a handle on these costs and at least reduce the rate of increase, if not cut the costs overall.
And what's been the result?
Nada. Zero. Nothing.
District Council 33, which represents blue-collar city workers, is still negotiating a new contract. But District Council 47, the white-collar union, has settled on a new four-year deal.
The DC47 contract makes no changes in the pension formula. It makes no changes in health care.
In fact, it provides a fairly generous increase in payments to the union's Health and Welfare fund by the city - 10 percent a year in each of the next two years, then a reopener to discuss future increases.
In short, when it came to confronting this issue, the mayor punted.
Come to think of it, he may have provided a good reason to cut taxes.
To wit: The pols lack the political will to face these issues. Maybe the only way to go is to restrict tax revenue, so they are forced to make the tough decisions needed to curb government costs.
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Contact Tom Ferrick at 215-854-2714 or tferrick@phillynews.com. Read his recent work at http:/go.philly.com/ferrick.
its such a shame. the last chance to save this once great city was sam katz but the morons who live here voted the most corrupt mayor in the country back in for 4 more years. this city deserves everything it gets.
This will help W in PA.
Unfortunately, we've now got a union hack from Philly as governor.
Nope. The unions will blame president Bush. Same principle as dictators blaming the misery of the people they oppress on the evil US.
May not help him with Philly, although Kerry's swish cheese on a cheese stake won't help him. But it may play well outside the big cities and get them to vote.
Hw did something else weird with that steak sandwich too, but I forget what it was...he wanted something else really stupid on it. Then there's a pic of him somewhere holding the thing away from him and looking totally grossed out. DUD!
I mean, really, I should have gone into civil service years and years ago...I would have three times the pension, plus wonderful health benefits...
good thing is, all those wonderful civil service pensioneers will have to pay for me in my retirement....looking forward to it....
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