A Capital Idea -- Stop Squabbling, Start Spending

Even though we are more than seven months into the fiscal year, the City of Philadelphia’s entire $70 million city-funded Fiscal Year 2006 Capital Budget is on hold as the Mayor and City Council squabble over the power to spend money on elected officials’ pet projects.  Because of this infighting, critical projects from resurfacing streets to repairing fire stations are being delayed while need for investment in our capital infrastructure is nearing a critical level. 

To understand how this possible, we need to understand a little more about budgeting in Philadelphia.  The City of Philadelphia doesn’t have just one budget; it really has two budgets.  The first budget is the operating budget, which funds the city’s day-to-day expenses.  The second budget is the capital budget, which funds the purchase and construction of items with a longer useful life.  So the salaries of firefighters or the maintenance of police cars would be paid for out of the operating budget, but the construction of a fire station, the purchase of land for a park, or the renovation of a library would be paid out of the capital budget.  The city may issue bonds and go into debt as a homeowner would do with a mortgage to pay for items in the capital budget, but the payments for those bonds would come from the operating budget much as a homeowner would make mortgage payments from his or her checking account. 

As required by law, the Fiscal Year 2006 Capital Budget was approved by the Mayor and City Council, last spring.  But, because the city money in the Capital Budget is funded through a bond issue, we can’t spend the money without an additional step.  Voters must approve the issuing of bonds to fund capital expenditures.  Therefore, before the city can spend the money, the voters must say it is okay to borrow the money.  Before voters can vote on whether it is okay to borrow the money, City Council must pass a law to allow the question of whether it is okay to borrow money on the ballot. 

City Council right now is refusing to pass legislation to put the question of whether it is okay to borrow money to fund this year’s capital budget on the ballot as part of an ongoing dispute between the Mayor and City Council over spending on capital projects from last year — Fiscal Year 2005.  In Fiscal Year 2005, as part of the Mayor’s effort to push budget cuts as a way to discourage City Council from passing tax reform legislation, the Mayor specifically cut the amount of money in the Capital Budget that would be used to fund improvements to existing recreation centers that would be made at the discretion of City Councilmembers.  City Council added $7 million to the Capital Budget to restore those projects, but in the end, the Mayor refused to spend the extra money.  In our strong-mayor form of government, one power that makes the Mayor strong is that Council can determine what the city can spend, but the Mayor actually decides how the money is spent. 

To try to force the Mayor’s hand, City Council has refused to enact a law to allow voters to approve the borrowing of money to pay for the projects in the Fiscal Year 2006 Capital Budget until the Mayor agrees to spend the money Council added to fund recreation center repairs in last year’s Capital Budget.

Of course, the city’s crumbling infrastructure is in desperate need of repair and many of the worthy projects are being held up by this dispute.  The City Planning Commission actually recommends that the city dramatically increase capital spending to keep all of its infrastructure in good condition.  Delaying the spending of the inadequate amount we devote to our infrastructure needs is not helping at all. 

City Council is considering a bill that would allow voters to decide whether we should borrow money to fund the Fiscal Year 2006 Capital Budget.  If City Council does not pass this legislation, it is unlikely that the question about the borrowing will appear on the May ballot (we already missed the chance to put the question on last November’s ballot because of this ongoing dispute). 

This City Hall squabbling is not helping to move Philadelphia forward.

POSTSCRIPT -- In the end, Council did not approve the bill to permit voters to decide whether to borrow to fund the Fiscal Year 2006 Capital Budget...the city will have to find a way to finance ongoing capital projects and then try again to get the loan-authorization measure on the November ballot.