Kenney and Clarke Split Over Major Policy

The allies stand on opposite ends of a business tax debate.

L to R: Darrell Clarke and Jim Kenney

L to R: Darrell Clarke and Jim Kenney

The Philadelphia Jobs Growth Coalition, a powerful group of business owners and labor leaders, is holding a news conference Friday with state lawmakers to unveil legislation aimed at overhauling the city’s taxes in hopes of creating tens of thousands of jobs.

Mayor Jim Kenney, who supports the plan, is scheduled to attend the event. Guess who won’t be there? City Council President Darrell Clarke.

Last year, Clarke raised major concerns about the Growth Coalition’s tax proposal — and he sounded the alarm again this week, just one day before its big event. What this means is that Kenney and Clarke disagree on one of the major policy questions facing the city today.

Since early 2015, the Growth Coalition has called for officials to lower the city’s wage and business taxes, while simultaneously increasing commercial real estate taxes. Center City District CEO Paul Levy and Brandywine Realty Trust president Jerry Sweeney, who have led the efforts, say the idea is that Philly’s economy would grow if lawmakers lowered taxes on things that can move out of the city (jobs), and raised taxes on things that can’t (buildings).

Specifically, the Growth Coalition is calling for an amendment to the state constitution that would allow the city to increase taxes on commercial properties at a rate of up to 15 percent higher than on residential properties — but only if the money generated from that was used to reduce wage and business taxes. At the press conference Friday, state Sen. Tony Williams and state Reps. John Taylor, Dwight Evans and Bill Keller are expected to reveal legislation that would begin that process. (State voters would also have to sign off on the idea … and so would Council. It’s a long undertaking.)

Lauren Hitt, a spokeswoman for Kenney, said he backs the Growth Coalition’s plan. “The mayor supports reducing wage and business taxes,” she says. “In order to do that, we need a new source of revenue. [The] mayor thinks the Levy-Sweeney plan presents a feasible way to get that revenue in a Republican legislature. He’s open to hearing serious alternatives, but thus far this is the only one that’s been presented.”

At a meeting Thursday, Clarke had a strongly-worded resolution introduced that criticized the amendment backed by Kenney and the Growth Coalition. Clarke called it “radical,” and said it would “irrevocably tie the city’s hands in an ill-advised manner.” That’s not all: “It is the complete opposite of what is needed because it would only restrict the city’s flexibility,” Clarke’s resolution reads. “What is needed is a constitutional amendment that enhances the city’s capacity to design appropriately targeted taxes — taxes that are fair to homeowners and business owners, and that support investments in essential services.”

Translation: Clarke believes the city should have more freedom to set its own tax policy — and that this amendment would cede that power to Harrisburg. He wants the state constitution to be changed so that the city can tax commercial building owners at a higher rate than homeowners — just like the Growth Coalition does — but he doesn’t want to be forced to lower wage and business taxes in return.

Critics of Clarke’s proposal say it isn’t politically viable. Republicans amending the state constitution to let Philadelphia Democrats raise taxes with no strings attached? Yeah, right. Supporters of the Clarke way counter that, in recent years, the Republican-dominated House and Senate have passed enabling legislation that allowed the city to raise the sales tax and create a cigarette tax. Plus, they point out that many large commercial businesses already effectively got a tax break under former Mayor Michael Nutter’s Actual Value Initiative.

Clarke has also argued in the past that the Growth Coalition’s proposal — contrary to what has been promised — would actually cost the city money. Hitt, however, says Kenney only supports changing the city’s tax structure “in a way that wouldn’t create any shortfall for the general fund.”

So who will win out? It’s hard to read the tea leaves in Harrisburg right now (it’s safe to say that any idea coming out of Philadelphia is never a slam dunk in the state legislature, though). But we may soon know where Council members stand on the issue: Clarke could call for a vote on his non-binding resolution as soon as next week.

Last June, City Council voted 14-1 in favor of a resolution urging the General Assembly to pass legislation to amend the constitution. Clarke was the lone “no” vote. There are five new members on Council, though, and it’s hard to imagine that Clarke would have introduced a resolution Thursday if he didn’t have a fighting chance of getting it approved.

There are larger ramifications here, too: If the resolution comes up for a vote and passes, it would suggest that Clarke still presides over Council with an iron grip. If it doesn’t pass, that may indicate that his power is waning ever so slightly.