Budget Address of
Mayor Michael A. Nutter
February 14, 2008
Good morning Council President Verna, Majority Leader Tasco, Majority Whip Clarke, Minority Leader O’Neill, Minority Whip Rizzo, members of Council, guests and my fellow Philadelphians.
What a pleasure it is to return to these hallowed chambers where the public’s business has been guided by Council President Anna Verna, who for almost a decade now has made sure that every Council member has had the opportunity to succeed in advancing their public policy goals.
Council President, I appreciate your leadership now as much as I did when I was a member of City Council and look forward to a productive partnership as we address the needs of Philadelphians.
Five weeks ago we took our oath of office and pledged to work together, to make Philadelphia the city of our dreams, the safest, cleanest, best educated, most productive city in America. For all of us, it was a NEW DAY.
Now, it’s time for the NEW WAY.
As I present a proposed budget for 2009 and a Five-Year Plan for your consideration, my message is straightforward: We confront fiscal issues that have been ignored for too long. The time for heavy lifting has arrived.
But if we work together in partnership, if we make smart investments, we’ll secure our future and make this city and region strong as we face the global economic challenges of this century.
This is not a message of fear and doubt. It is a message about hope and change.
Yet, as the elected and appointed officials of this government we must recognize an unvarnished truth.
We must do better. And today we start that journey.
We’re not going to create another bureaucracy, feed it scarce tax dollars and then walk away saying ‘job done.’ Absolutely not. Results matter and we’re going to manage for results.
Providing quality service is a constant conversation with the customer -- the people and businesses of this city -- and we’re going to become very good listeners. We’re going to track our performance very carefully and make continuous adjustments.
This proposed budget and strategic plan identifies core service areas that we all agree upon – public safety, education, jobs, healthy, sustainable communities, delivered by a government with the highest ethical standards and a commitment to top-notch customer service.
But as we begin this lengthy budget process, let us not get lost in big numbers and obscure budget principles. Our actions will impact on the lives of Philadelphians.
And as I made clear on my first day in office, public safety is going to be a central concern for us. In the last few years, the echo of gunshots on our streets, the sound of police sirens in the night, the tragic and unacceptably large number of homicides – it has all sapped our spirit.
But I believe the new crime fighting strategy conceived by Police Commissioner Ramsey is going to change the dynamic in our neighborhoods as 200 more officers hit the streets by May 1 and many more follow in the coming year. We’re going to focus on high crime areas and use proven policing strategies, from lawful stop and frisk procedures to a rededicated effort to get guns off the streets.
In the next five years we’re going to spend $78 million in new funds to hire more police. By the end of fiscal 2009, we’ll have 400 more officers on the street.
As part of our new capital plan, we’ll invest $16 million for desperately needed improvements to police buildings and technology. In addition, we propose to spend $2 million each year to create a network of surveillance cameras that will enhance our safety. By the end of this year, alone, we will install 250 surveillance cameras and more are in the pipeline.
But even a return to basic policing informed by the latest data-driven techniques is not enough. That’s why I am recommending a substantial increase in city funding, $5 million in the coming year and $25 million over the next five years, for the Youth Violence Reduction Partnership, which provides intensive services to young people aged 15 to 24 who are identified as most likely to kill or be killed.
This program has a proven track record and many vocal advocates such as Councilwoman Donna Miller, who has pushed for more resources. The new funding will help us expand the program beyond the current police districts served.
And related to our efforts to protect the city’s youth, I want to say that the 14,000 children receiving child protection services are not going to be forgotten. I have directed the Commissioner of Human Services to notify its contractors that they will be funded through the end of the year.
Keeping the public safe also means getting to the sick and injured as quickly as possible. We need to improve our response time in emergency medical services.
Already, we’ve added $1.2 million this year, to increase the number of medic units and the number of units we deploy during peak hours.
On Tuesday, I proposed a $3.8 million increase to the Emergency Medical Services budget, which will support increased overtime and staffing for 40 new EMT’s as well as two new vehicles in the coming fiscal year, with three more to follow in 2010.
These changes could not have been made without the persuasive advocacy of Councilwoman Joan Krajewski, the analytical spotlight cast on this issue by City Controller Alan Butkovitz and the technical expertise of Fire Commissioner Lloyd Ayers and I want to thank each of them for their assistance.
Increasing our EMS capacity is going to help us improve our response time to life-threatening emergencies, but we also need to unburden our 911 system, where fully a third of the calls are not emergencies.
Heeding the advice and hard work done by Councilman Jim Kenney in this area, we are going to establish a 311 non-emergency system with annual allocations of $2 million.
This 311 system will also enable us to enter a new world of customer service. Citizens will no longer have to search high and low for a number to call with the range of quality of life problems that beset us, from potholes and abandoned cars to tree limbs and trash complaints.
Our goal by the end of the year is to have a new system called PhillyStat, which will track these service calls from start to finish.
We’ll know how long it takes the Streets Department or L&I to respond and when the problem is resolved. It will become a key element in our drive toward accountability and greater efficiency.
And I also know that PhillyStat will please City Councilman Bill Greenlee who has been pushing hard for more efficient delivery of city services.
Health and Sustainable Neighborhoods
Philadelphia has always been one of America’s great cities and part of its charm is its thriving Center City, but we’re also a city of neighborhoods, distinct, quirky but always interesting neighborhoods.
As part of our plan to promote healthy and sustainable neighborhoods, I want to establish Philadelphia as THE GREEN CITY in America, from an emphasis on green construction practices to a national leadership role in the recycling movement.
For too long, Philadelphia has been at the fringe of the recycling movement with a collection rate of just 6 percent. In the coming year we’ll invest $6 million and $25 million over the next five years to create a process that is more user friendly and will increase our participation rate.
In May, we’re going to expand single-stream recycling to North Philadelphia. Initially, this new effort will provide for every other week collection, but by January 2009, we will have weekly, citywide, single-stream recycling.
Along with our emphasis on recycling, we’re also moving to implement a citywide litter prevention strategy, and for his interest in a clean, sustainable city, I want to thank Councilman Frank DiCicco for his help in this area.
Shortly, I will name a director to a new Office of Sustainability who will focus on best practices in sustainability, energy efficiency and green-collar jobs and will work with city departments whose missions impact our environment.
No plan to make Philadelphia a green city is complete without focusing on Fairmount Park, one of the greatest park systems in America. It soothes the urban soul and attracts visitors from all over. I want to make this park the best in the country, bar none. To do that we must give it the resources that it’s been denied for years.
I propose providing a $1.5 million increase to Fairmount Park in FY09. Over the five years of the plan, the budget of Fairmount Park will rise from $13 million to $19 million, an increase of more than 46 percent. And I want to thank Councilman Darrell Clarke for his determined stewardship on this issue.
To fund these initiatives, I am proposing an increase in the parking tax from the current 15 percent to 20 percent. We estimate the increase will generate an additional $16 million, which will support the park, an aggressive tree-planting program and our first “pay as you go” capital program, in this case for street resurfacing.
With City Council approval, we will continue the city’s efforts to rejuvenate its neighborhoods by adding $1 million per year to the city’s Housing Trust Fund. With this new money we’ll leverage other public and private funding and aim to produce at least 1,000 affordable housing units each year. Building more low and moderate cost housing in this city of homeowners is a key goal, and I thank City Councilwoman Jannie Blackwell for keeping this issue in front of us all.
City Council has also been loud and clear on its concern over the funding commitment to the Department of Public Health and I want to thank Councilwomen Marian Tasco for her advocacy in this area. Councilwoman, we heard you! We’re proposing an additional $3 million per year to enhance our health centers, add key professional personnel and upgrade technology.
Education
We now have before us a series of aggressive goals, cutting in half the school dropout rate, doubling the number of Philadelphians with college degrees and encouraging more people to re-enroll and complete their degrees. If we succeed, our city will be richer for it because an educated employee makes more money across a lifetime than a low-skilled worker.
Philadelphia already is heavily invested in its schools, spending $800 million a year on educating our children. And Gov. Rendell’s new funding formula for public schools will help us and we need to tell our friends in Harrisburg that this new formula is critical for our schools.
We are addressing the dropout crisis by re-programming the money we now have and leveraging our current social services funding to do a better job of linking students to schools.
Reducing the dropout rate is also about helping students understand the meaning of their education in the march to work and careers. Following Council’s lead last year, we will provide $1 million for summer internships, helping 860 Philadelphia students see the link between school and life after school. And as I announced yesterday, we will add 100 more slots this summer.
As part of our plan to encourage more Philadelphians to go to college, we need to help Community College of Philadelphia in its mission. Community College of Philadelphia serves as a critical gateway to higher education. Many Philadelphians start their college experiences at Community College, earn a two-year degree there and move on to four-year programs.
I propose to bolster the college’s funding with an annual increase of $4 million or $20 million over the course of the Five-Year Plan.
This new funding will help Community College blunt the escalating cost of education and make it more affordable for young Philadelphians to go to college and to remain in their course of study.
Jobs and Economic Development
Between 2001 and 2006, our job base contacted by 4.5 percent. It was a slower decline than the 1980s and 90s, but we can’t let this trend continue.
So, I’m committing the resources of this government to the goal of halting, once and for all, this drain of jobs and people. We’re going to reverse directions and grow this city by 75,000 residents in the next five to 10 years.
And one of the assets we’ll use is our cultural institutions – our museums, libraries, entertainment venues and historical treasures. We’re going to reopen the Office of Arts and Culture, founded with foresight by Mayor Wilson Goode, and increase funding to the Cultural Fund by $2 million in 2009.
And let me here cite the substantial contributions of Council members Blondell Reynolds Brown, Jack Kelly and Frank Rizzo, who vigorously pushed for more investment in our arts and culture.
But using culture as a magnet to attract jobs and population must be part of a broad effort to make Philadelphia a business friendly environment. We must continue the steady reduction of wage and business taxes if we are to retain the business we have, attract new business and secure the prosperity Philadelphians deserve.
In recent days, we’ve seen what the new spirit of cooperation can do. After lengthy negotiations, City Councilman Brian O’Neill and the leadership of the Fox Chase Cancer Center have reached agreement on expansion of that world reknown institution. Thank you Councilman for your leadership.
I also want to thank Councilman Wilson Goode, who has proposed a series of aggressive reductions in the business privilege tax that will enhance this city’s competitiveness.
Following his lead, I am proposing to eliminate the gross receipts portion of the business privilege tax in eight years. We must also target the other onerous part of the BPT, the net income portion of the tax. For the first time, we will begin to take down that tax, from its current 6.5 percent to 6 percent by fiscal year 2013.
At the same time, we will also continue the wage tax reductions that began under then Mayor Rendell in 1995. Over the course of the next five years, the rate will drop below 4 percent for the first time since 1976.
Earlier, I said the message accompanying this 2009 budget and Five-Year Plan was one of hope, not fear. The spending initiatives I’ve outlined are exciting and doable. But I also said we face fiscal challenges and that the time for heavy lifting has arrived.
As we start our journey toward a consensus on the budget, we all have to acknowledge there are storm clouds in the distance. Some, in fact, are upon us. Our national economy is sputtering. Whether we’re in a recession or not, this much is clear – we’re already seeing a flattening of our tax revenues, particularly in the real estate transfer tax.
And while we have a healthy budget surplus at the moment, we face enormous needs.
For too long we haven’t invested enough in our buildings and other infrastructure.
The Philadelphia Gas Works, despite recent improvements, remains a threat to the city’s fiscal stability. The school district faces major financial challenges and our tax structure is a dead weight on every business and taxpayer in the city.
But our most pressing challenge is much closer to home and we all know what it is.
The single largest expense in our budget is the salaries and benefits we pay our hard-working employees. They consume 60 percent of our budget. Health care and pension costs, now roughly a quarter of our budget, are increasing at rates that cannot be sustained any longer.
With contracts for the city’s four municipal unions set to expire at the end of June, we have an historic opportunity to establish a new partnership for progress between city government and our employees.
I’ve said that city employees deserve a fair and reasonable contract but one that also treats city taxpayers in the same way.
The administration and city employees have very tough choices to make together.
The right choices will result in smart investments and the long-term security that we all want for city employees.
With that in mind, let me first address the pension issue. Based on the needs of current and future retirees, the city Pension Fund has an unfunded liability of $3.9 billion.
Looked at another way, only 52 percent of our pension obligation is actually funded.
And yet, in 2001, the city’s general fund sent about $194 million to the Pension Fund. This year, that payment will top $437 million. Larger pension payments are in sight. And still the unfunded liability remains.
Our retirees and current city employees should not have to worry about their future after years of loyal service to the city. We need to act. We need to correct a succession of decisions that have resulted in an underfunded Pension Fund and increased general fund obligations that endanger the future of the Pension Fund.
Today, I’m proposing that we issue a new Pension Obligation Bond, roughly $4.5 billion, that would stabilize the Pension Fund at a 95-percent funding level.
The new debt service on these bonds will be far lower than the projected payments we are now scheduled to make to the Pension Fund.
And part of the savings, roughly $50 million per year, would be returned to the city’s general fund.
At the heart of upcoming negotiations with our labor unions will be the compensation packages, the combination of wages and benefits, including health care.
The city’s contributions to employee health care have increased by double digits each year. During the same period, a national survey of employer-sponsored health plans showed an average increase of 6 percent.
This administration is committed to an honest and open dialogue with our unions.
As the Five-Year Plan makes clear, there isn’t much wiggle room and there are dozens of worthy demands for our scarce resources. But to union leaders, let me say in the greatest spirit of partnership and collaboration, here are our books, test our revenue estimates and also examine the many demands for city resources that we face.
This is the new spirit of openness and transparency that I pledged during the campaign last year. As I’ve mentioned many times publicly, let’s all pledge to negotiate in honesty and good faith for the benefit of our employees and citizens.
Yesterday, when I addressed the Greater Philadelphia Chamber of Commerce, I posed a challenge to the business community. I said that we, together, are on a quest for a better life but that government can’t do it all.
We owe it to ourselves, to our children and to our grandchildren to make the hard choices now so that we can meet the challenges of the future.
More than two centuries ago, a group of leaders gathered here in Philadelphia and said quite simply they’d had enough. They cut their ties from the old ways and established something new.
It’s now time for the city, its employees and its taxpayers to forge a new partnership based on trust, cooperation and a recognition that the old ways simply won’t work any more.
In the coming weeks, City Council, our public employees, administration officials and our fellow Philadelphians will examine every assumption and projection in this budget and Five-Year Plan.
I expect a full discussion of these proposals and I also know that the three new members of Council, Maria Quinones Sanchez, Bill Green and Curtis Jones, are going to be well prepared because they spent weeks and weeks studying the operations of city government before taking office.
It’s that kind of commitment that will make the New Way of doing business here in City Hall a clear benefit for all Philadelphians.
We don’t walk into this process under the assumption that we have a monopoly on ideas, but we believe the proposals set forth here today will put us on a course for a safer, cleaner, greener city, where our children are protected and educated, where government performs its tasks in an open, honest and efficient manner and where performance is measured, improvements are made and services are delivered.
Madame President, members of City Council, ladies and gentlemen, this is the new way of doing the public’s business, and so I urge us all to stand together and embark on a new day.
