Street OKs Philadelphia budget, not business tax reductions
By Marcia Gelbart and Angela Couloumbis

At the last possible minute, Mayor Street yesterday put the kibosh on a bill that would have axed hundreds of millions of dollars in punishing business taxes through 2017.

Shortly afterward, this year's grueling budget process officially came to an end. The mayor signed off on City Council's $3.4 billion budget and its plan to further cut the city wage-tax rate, an average savings of $88 a year by 2009 for a person earning $30,746, Philadelphia's median salary.

"This is not an easy decision, and certainly not a popular one," Street wrote to Council in a letter explaining his actions, "but I lived through the dark days of our fiscal crisis and I do not want to squander what we have achieved in the last 12 years by returning to them."

The mayor's embrace of a new spending plan on the first day of fiscal 2005 ensured that paychecks would keep coming for Philadelphia's municipal workers and that trash, library and other city services would remain up and running.

Even so, to help keep the budget balanced, Street unexpectedly slashed $4 million from this year's Police Department budget of $459 million, using his authority to veto individual spending items.

Additionally, Street yesterday would not rule out the possibility of layoffs, though he said he would work to avoid them.

"A lot of what went on was mayoral demagoguery and Chicken Little philosophy and very little foresight or vision," Councilman Jim Kenney said of Street's decision to veto the business-privilege tax. That veto cut $110 million out of Council's proposed $160 million worth of tax reductions through 2009.

"It frustrates you when you see it happening, and you realize that unless you do something about it, the city is going to die," Kenney said.

Council members tried to override the veto during a raucous special legislative session in which emotion almost trumped reason, with one councilman - Rick Mariano - jumping up from his seat and cursing.

But in the end, Kenney and other Council proponents of both tax-cut measures were unable to garner the 12 votes needed to beat back Street's objection to the bill.

Street, who had kept silent since Council approved the budget June 21, announced his intentions yesterday before Council even convened, during a morning interview with radio host Mary Mason.

"He was freelancing," said mayoral spokeswoman Barbara Grant. "He wasn't scheduled to be on."

The bottom line on taxes - a key sticking point in the budget process that dragged on for more than three months - is that Philadelphia's tax structure will change little from what it is today. Although Council started out with 13 tax proposals to consider, it eventually passed only two, and now the mayor's veto leaves just the one in place.

Viewed another way, Council initially wanted to add $338 million in tax cuts to the $375 million proposed by Street. The final version has just $50 million in additional cuts.

"All in all, it seemed a better way to go," Street later said in explaining his decision to keep the wage-tax cuts coming but veto the business-privilege tax bill. He had previously argued that both were too costly and would require the city to greatly reduce programs and services.

But he said he decided to support the wage-tax bill because if he didn't, two other related wage-tax measures would have forced him to cut at least $15 million more to keep the budget balanced. However, his veto of the business-tax bill also means he had to forgo $50 million in revenue from a parking-tax increase, which was tied to the passage of both tax bills.

Not vetoing both tax bills, however, enables the mayor to argue to tax-cutting proponents in the business community that he did not completely stand in the way of change. At the same time, Street now has a little more to work with financially as he bargains new contracts with the city's municipal unions.

But yesterday, neither business nor union leaders were particularly impressed with Street's actions.

"This is not tax reform at all," said Bill Miller of the tax-cut advocacy group Philadelphia Forward. "The purpose of these bills was to give Philadelphia a competitive edge... . But what we saw today was raw politics and business as usual."

Herman "Pete" Matthews, president of the city's blue-collar union, whose members packed the chamber yesterday, said: "Every time there's a fiscal crisis, it's on the backs of the city workers.

"If it keeps going the way it's going," said Matthews, of District Council 33 of the American Federation of State, County and Municipal Employees, "there's a very strong possibility for a strike."

While the city's white-collar union, AFSCME District Council 47, has agreed to extend its contract through July 14, District Council 33 is approaching negotiations day by day. Both union pacts expired yesterday.

In spite of the uncertainties - and the shadow cast by indictments this week in the City Hall corruption probe - Street remained upbeat yesterday, joking throughout his afternoon news conference.

Some Council members were also mostly because their budget restored funding initially cut by Street to cultural programs, and city pools and recreation centers.

However, the Police Department still has to absorb $4 million in new cuts. "Some of it is overtime," Street said. "It was not a pleasant thing to do."

The mayor also said some city employees might find themselves out of work. "We have obligations to reduce spending that are built into this budget, and we may very well end up having layoffs."

Federal Grand Jury has indicted 12 people in ongoing Philadelphia Corruption Probe
Probe Uncovered When Listening Device Found In Mayor's Office


PHILADELPHIA -- A federal grand jury has indicted 12 people -- including the former city treasurer, a powerful city lawyer and two Commerce Bank officials -- in a wide-ranging probe into corruption in Philadelphia city government.

Philadelphia Mayor John F. Street has not been charged.

Among those indicted were Ron White a politically powerful lawyer who is friend of and political contributor to Mayor John Street, and Corey Kemp, a former city treasurer.

White, 54, faces 34 counts related to fraud, extortion, and making false statements to the FBI. He faces a maximum sentence of 555 years in prison and an $8.25 million fine.

Kemp, 34, faces 28 counts related to fraud, extortion, making false statements to a bank, money laundering, and filing a false tax return. He faces a maximum sentence of 798 years in jail and a $10.7 million fine.

The indictment alleges that from January 2002 through October 2003, White "corrupted" former city Treasurer Corey Kemp by making payments to him.

In exchange, Kemp followed White's directions regarding which financial service companies would be selected to carry out city bond transactions, prosecutors said.

"The nameplate on the desk of the City Treasurer may have read Corey Kemp but Ron White was calling the shots," said U.S. Attorney Patrick Meehan. "This is an indictment not only of the defendants but of a 'pay to play' culture that can only breed corruption."

The indictment also charges that CommerceBank/Pennsylvania president Glenn K. Holck and regional vice-president Stephen M. Umbrell made favorable and otherwise unavailable loans to Kemp.

As a result, Kemp allegedly favored Commerce Bank in the award of a $30 million line of credit and other transactions.

Other charged in the indictment include:

La-Van Hawkins, 46, a Detroit businessman
Janice R. Knight, 40, a businesswoman, of Wade Drive in Cherry Hill, N.J.
Charles LeCroy, 49, a former managing director of the southeast regional office
Anthony C. Snell, 44, a former vice-president of J.P. Morgan
Denis Carlson, 49, a senior vice-president of Janney Montgomery Scott,
Francis D. McCracken, 54, the pastor of the St. James Chapel Church, Church
Jose Mendoza, 44, of Reading
Rhonda M. Anderson, 30, of Walnut Park Drive in Philadelphia.

The probe became public on Oct. 7 when police conducting a security sweep discovered a listening device that the FBI had placed in the City Hall office of Philadelphia Mayor John F. Street.

Over the next few days, federal agents seized Street's hand-held computer and raided the offices of two of his supporters, the power-broker lawyer Ronald A. White and the leader of a Philadelphia mosque, Shamsud-din Ali.

The FBI also seized hundreds of boxes of records from the city's finance department, its retirement board, development agencies, and an office in charge of helping companies owned by minorities and women seek city contracts.

Street has denied any wrongdoing and has repeatedly said that he does not believe he is a target of the investigation.

In late fall and early winter, federal prosecutors revealed in a series of letters to other probe subjects that the wiretapping efforts ranged far beyond the mayor's office.

Pay Has Increased For Philladelphia Area Execs

PHILADELPHIA (AP) Despite complaints from some that C-E-Os are paid too much, top executives at most of Philadelphia's biggest companies saw their pay increase last year, according to an annual newspaper survey.

The Philadelphia Inquirer reports that chief executives at publicly traded companies in Greater Philadelphia saw their compensation increase by an average 33 percent in 2003.

That's about nine times the raise received by the median U-S worker.

The pay survey included 951 executives at 201 publicly traded companies.

Top earners included Comcast chairman Ralph Roberts, who got 35-point-nine (m) million dollars in pay and stock options and M-B-N-A chief executive officer Charles Crawley, who earned nearly 34-point-eight (m) million dollars.

The list included few women.

The top paid female executive was Endo Pharmaceuticals Holdings C-E-O Carol Ammon. She made eight-point-seven million dollars.