What you need to know

Philadelphia City Council members reached a compromise late Wednesday night over the next city budget, which takes effect July 1.

Lawmakers voted in committee to add about $80 million in spending to Mayor Jim Kenney’s $5.6 billion budget proposal, and they agreed to cut the wage and business taxes.

They also sought to soften the impact of rising property assessments with boosts to property tax relief measures.

Here’s what you need to know about the budget.

probably. Due to the first citywide property reassessment in three years, which saw residential valuations increase by an average of 31%, most homeowners will see their real estate tax bills increase.

Lawmakers are planning to leave the property tax rate itself unchanged at 1.3998%, but they are also aimed to enact a series of relief measures that could soften the impact of the higher valuations.

Most significantly, they voted to boost the homestead exemption, which reduces the taxable value of owner-occupied homes, from $45,000 to $80,000. That means anyone whose home is assessed at less than $80,000 won’t pay property taxes next year.

» READ MORE: Philly is poised to boost property tax relief measures and cut business taxes thanks to a last-minute compromise

Some homeowners could also pay less in taxes next year, if the expanded relief is larger than the change in their assessed value.

Council also increased funding for the Longtime Owner Occupants Program, which limits assessment increases for low-income homeowners whose valuations jumped by more than half. That program’s budget is $25 million this year, and Kenney had proposed increasing it to $30 million. Council went a step further, to $35.2 million.

Council voted to cut the wages and business taxes.

The business income and receipts tax on net profits is poised to go from 6.2% to 5.99% under the new plan, costing the city $13.6 million next year.

The plan also cuts the wage tax, resulting in a $20.5 million reduction in next year’s budget. The plan lowers the wage tax rate from 3.8398% to 3.79% for city residents, and from 3.4481% to 3.44% for people who work in Philadelphia but live outside the city limits.

The business and wage tax cuts were approved in voice votes, with Councilmembers Helen Gym, Kendra Brooks, and Jamie Gauthier voting against the proposals.

Kenney’s original $5.6 billion budget proposal increased spending by 5.5% over the current fiscal year, with funding increases spread across city government.

Highlights included a $23.7 million increase to the Police Department budget, $7.7 million in new funding for the Fire Department, and $4 million more for 911 improvements and a co-responder system that deploys mental health crisis specialists for some emergency calls.

Council approved all of the administration’s proposed funding increases and added some of its own, including an additional $6 million for the Police Department, $15 million for rental assistance, $5.8 million for the public defenders office, and $5 million to expand the Community Life Improvement Program .

The Free Library of Philadelphia, which has struggled to reopen branches at full service since the pandemic, will also get a boost: Kenney had proposed a $10.4 million increase to its $55.8 million allocation from the city, and Council added an additional $2.6 million.

It also added funding for a variety of quality-of-life issues, such as $1 million for street lighting improvements, $2 million for abandoned vehicle removal, and $2 million to tackle short dumping.

The Kenney administration has continued to insist upon caution in spending the $1.4 billion in federal pandemic aid allocated to Philadelphia by the federal pandemic relief American Rescue Plan. Council ultimately accepted Kenney’s proposal to spend only $335 million of that money next year, leaving more than $800 million untouched.

A Council committee that includes every member voted to approve the budget and tax plans late Wednesday night, sending it to the Council floor.

It’s possible but highly unlikely that Council members could still try to amend the budget, meaning the committee-approved version of the tax and spending plans will almost certainly become law.

The legislation is scheduled to be approved at Council’s June 23 meeting, the last before lawmakers adjourn for the summer.

It then heads to Kenney for his signature, and takes effect July 1.

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