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Philadelphia’s new mayor rode into office as a reformer ready to whip city finances into shape. But his first budget looks like he’s giving away the store

Michael Nutter promised to bring Philadelphia back to fiscal responsibility while tackling a crippling wage tax and debilitating pension costs. But with Hizzoner’s first budget, currently being debated by City Council, the belt-tightening looks more like a pair of elastic-waist sweatpants: a $3.98 billion spending plan, bloated by $50 million freed up by a $4.5 billion bond issue. The argument goes that investing in infrastructure, education, safety, and a more business-friendly tax environment will bolster revenue and fill city coffers; in other words, sinking the city into red ink now — the plan will balloon city debt to $11 billion — will pay off later.

Finance director Rob Dubow says the budget is “aggressively attacking the pension problem and labor agreements.” It provides small increases for city workers, but if the Mayor thinks he’s being “open” by showing the unions his cards, he’s naive. Predictably, the unions see the bond issue as the city coffers being filled, in part for them. “The amount that is set aside from even the city’s own figures is only a 2.1 percent increase, which, considering wages, health and welfare, and pensions, is a starting point,” muses local AFSCME chapter president Cathy Scott. (Note the phrase “starting point.” )

Is Nutter mortgaging the future because he doesn’t have the guts to ruffle labor’s feathers? Summing up the reaction after the budget was first unveiled, Daily News columnist Dave Davies wrote, “Anytime somebody tells me the answer to a financial problem is to borrow a big heap of money, I get nervous.”

The surprise is that some get-your-fiscal-house-in-order types aren’t. “This budget goes to fulfill most of the campaign promises,” says Philadelphia Forward executive director Brett Mandel, not one prone to praising city spending. “In terms of revenues, it’s not so ambitious.”

Bond raters — the folks who decide whether bonds like Nutter’s are worth buying — are fence-sitting. “It could help them, but depending on how it is structured, it could hurt them” if the city can’t pay off the debt, says Jeffrey Panger, an analyst with Standard & Poor’s, one of three major agencies that assess municipal bonds. “Philadelphia’s bond rating has been pretty stable over the last several years, but it’s pretty low-grade.”

Nutter is betting his budget that his approval ratings won’t follow suit.

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