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04/06/2007
Can Philadelphia's Next Mayor Escape The Budget 'Blob'?
By: Mike Mallowe , The Bulletin
"It is the Blob that will eat everything."
- Philadelphia 2007: Prospects and Challenges
Philadelphia's next mayor will walk into a city budget that has lost all sense of proportion. That's the opinion of the experts hired by the Pew Charitable Trusts to assess the city's position relative to urban areas like Boston, Atlanta and Baltimore. According to Philadelphia 2007: Prospects and Challenges, the title of the sweeping Pew report released a week ago, the man who takes over for Mayor John Street next year will face this reality: a full 22 percent of all city funds will have to be spent on city pension payments and health care benefits for retired city workers. No other city examined in the report faces anything like this. These numbers represent an enormous jump from $380 million, as recently as 2001, to a projected $842 million by 2009. "It is the Blob that will eat everything," a fiscal watchdog cautioned the authors of the report.
Just six months into his new term, the next mayor will have to sit down with these same powerful city unions and negotiate new contracts. Referring to this pension-and- benefits albatross, Pew's investigation into Philadelphia's future states categorically, "Such an increase is not sustainable." It goes on to warn, "... painful and contentious changes must be negotiated with city unions."
As it is, that $842 million burden could jeopardize desperately needed mayoral initiatives, limit or curtail innovative capital spending programs, and seriously reduce routine city services, from trash pickups to police and fire calls. It will also dramatically impact years worth of deferred maintenance on city buildings, equipment and infrastructure, including streets and bridges.
On a day-to-day basis, this means Philadelphia will continue using city buildings that are already unsafe for workers and the public, more closed firehouses, stalled police cars sitting in parking lots because there's no money to repair them, killer intersections with traffic signals that don't work, water main breaks, giant sinkholes, even longer waits at city health clinics, fewer sanitary inspections of restaurants and food stores, potholes that never get filled, more abandoned buildings, swimming pools and recreation centers that can't stay open ... you get the idea. Neglecting vital repairs and infrastructure maintenance means a slow but sure implosion, as Philadelphia collapses under its own weight.
That is what happens when nearly a quarter of every collected tax dollar goes for payments to people who don't work for the city anymore, and in many cases, don't live in the city after retirement.
Some of these points were vaguely alluded to during Mayor Street's last round of budget presentations earlier this year. But the next mayor will have to confront these obstacles head-on. Philadelphia City Council President Anna Verna, while acknowledging that the city should be spending at least $185 million-a-year on deferred maintenance - it hasn't spent even half that amount for the last eight years - lamented the fact that city departments are now under-requesting badly needed fix-ups and new equipment. They aren't bothering to ask for the money because they know it's a waste of time; the money isn't there - and it won't be there any time soon.
This reality prompted one veteran city executive who is familiar with the impending budget crisis to liken Philadelphia to a "Bos-troit": a rapidly regenerating downtown, like Boston's, ideal for affluent tourists and new-comers, but surrounded by square mile upon square mile of dying neighborhoods, impoverished residents and relentless urban ruin, just like Detroit. And that situation is probably not sustainable, either - at least, not for long. No matter how good it looks, Center City cannot survive if it's totally cut off from the rest of a desolate, crime-ridden Philadelphia. That's no better than living under a state of siege, even if you are enjoying the view from the balcony of a million-dollar condo.
How did the projected debt service on future city pensions and benefits become so completely out of proportion with the rest of the budget? "It's called buying labor peace," one City Hall insider told The Bulletin, "and by the time the bills come due the people who negotiated the contracts have moved on, or out."
He has a point, too, because as municipal workers' unions go, both of Philadelphia's employee unions, the blue-collar one and the white-collar one, are ferociously old school. We've already seen the progress that self-serving, stubborn unions can jeopardize because of complaints from exhibitors at the Pennsylvania Convention Center. But, even in a union town like Philadelphia, is labor bellicosity necessarily a good thing anymore; is it in the best interests of the union members, themselves? Something definitely has to give. The report cited the Plumbers Union as another case in point. Construction on Comcast's new 58-story headquarters in Center City (one of the precious few corporate headquarters still left in Philadelphia) was seriously and expensively slowed down because the union didn't want to install 116 no-flush, water-less, environmentally friendly urinals in the public men's rooms. These new urinals would have required fewer union hours and less plumbing work. Here's how the report explained it:
"It took mayoral intervention to work out a compromise to allow the urinals to be installed, but the developer, Liberty Property Trust, will still pay for the union workers to install the water lines that would service normal urinals, ostensibly as a back-up in case the new urinals do not work effectively."
In order to survive, labor leaders need new construction to keep their members working; but in Philadelphia, these same unions and their outdated work rules can be one of the main disincentives to the very kind of investments that keep them in power. As the report pointed out, those "... painful changes," are on the way.
The next mayor also has to factor in another unalterable reality: Philadelphia's population is on a pace to fall further and further under 1.5 million residents; even Phoenix, Ariz., has now surpassed Philadelphia on the biggest cities list. Yet, the municipal workforce here has not significantly declined since the city had a population of well over 2 million. Imagine how Wall Street would react to a corporation that operated like that.
The report calls these unexploded land mines "sleeper" problems that have received little or no public (or media, for that matter) attention.
Regardless of publicity, the authors stress, the problems are still out there, simmering, just waiting for the next mayor. Other mostly-ignored factors effecting Philadelphia's future progress include:
* An artificial flow of city income. "Right now," an expert remarked in the Pew Report, "they [the John Street administration] are largely living off the increase in real estate transfer taxes ... [due to tax incentives for downtown building projects.]" In just six years, that income stream has gone from $70 million to $230 million. Once the building boom slows down, the real estate transfer taxes will bottom out, along with the housing market.
* Philadelphia is about 60,000 units short of badly needed affordable houses, the kind that wage-earning, taxpaying cops, teachers and union members can afford to own. These men and women represent Philadelphia's working-class heart-and-soul; they symbolize the Rocky character of Philadelphia, yet, they are being driven away, despite nearly $300 million that has been spent by the Street administration on neighborhood "transformation."
* The city's adult population is one of the most undereducated in the nation; 25 percent have no high school diploma; only 20 percent graduated from college; 75 percent of public school students are living in poverty and struggling in the classroom, and close to 60 percent of the households in Philadelphia are headed by single parents. All of this works against what's known as "workforce development" -providing trained and trainable employees for business and industry. "You can't persuade businesses to bring jobs to Philadelphia if you can't guarantee a skilled, educated workforce," one economist pointed out."
"[Mayor John] Street's reactive style has created a vacuum of leadership ...," Philadelphia 2007: Prospects and Challenges concludes. "Both the new and the older leaders reject the fatalism and negativism that we found so common [in Philadelphia] eight years ago. But, whether Philadelphians have a city resurgent, or one still in slow decline will depend in large part ... on whether the new mayor 'gets it' ..."
That's what Philadelphia's voters will have to decide.
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