Bloomberg News

Philadelphia Mayor Will Appeal Firefighter Pay Award

July 31, 2012

Philadelphia Mayor Michael Nutter said he’ll ask a judge to overturn a firefighters’ contract- arbitration award, saying the fifth-biggest U.S. city can’t afford the more than $200 million cost.

“We will not agree to an award that could jeopardize the city’s financial position,” Nutter said in a statement. The city’s school district has said it may close a quarter of its public schools by 2017 to cut costs.

Nutter has until tomorrow to contest the findings of a three-member arbitration panel that concluded July 2 that the city could afford annual raises of 3 percent for three years, retroactive to July 2010, for about 2,100 uniformed personnel. Kenneth Jarin, representing the city on the panel, dissented, citing the $238 million cost through fiscal 2017, including retiree benefits. He put this year’s expense at $77 million.

The award “perpetuates the same conditions that created the financial challenges the city has weathered over the past few years,” Nutter said in the July 27 statement. “It is unfair to taxpayers to continue down the same path.”

The burden of personnel expenses shouldered by Philadelphia taxpayers also bears down on cities across the U.S. as revenue has failed to keep pace with labor costs. A National League of Cities survey in 2010 showed 79 percent of municipalities cited increasing employee-pension expenses as a source of budget pressure, up from 61 percent in a 2003 survey.

Taxing Authority

Pennsylvania lawmakers gave Philadelphia the authority to increase local sales taxes to pay for critical services, state Senator Mike Stack, a Democrat from the city, said yesterday in a letter to Nutter asking him to drop his plan and implement the award. Stack also pointed to $515 million in delinquent property levies owed to the city and annual savings of about $14.5 million Nutter made by closing firehouses.

“We cannot afford a weakening of our emergency services,” Stack said in the letter. “Fire safety is an area that we must preserve and strengthen.”

The union sued July 17 in state court in Philadelphia, asking a judge to force the city of 1.5 million to implement the arbitration award.

“The city doesn’t respect us,” Bill Gault, president of Local 22 of the International Association of Fire Fighters, said yesterday by telephone. “What good is a city without public safety?”

Levy Increases

Philadelphia, where a quarter of residents live in poverty, double the state rate, has raised property taxes in each of the past three years. Yet Gault said his union hasn’t received a pay increase in four years. From 2008 to 2012, U.S. consumer prices rose almost 8 percent, according to a Federal Reserve Bank of Minneapolis inflation calculator.

No reserve will be maintained for raises, while budget officials in Philadelphia anticipate spending $1.3 billion on wages each year through fiscal 2017, according to a plan sent to the Pennsylvania Intergovernmental Cooperation Authority. The agency oversees the city’s finances.

The award would “blow up” this year’s budget and set a precedent for other unions to pursue similar deals, said Sam Katz, chairman of the authority.

To contact the reporters on this story: Romy Varghese in Philadelphia at rvarghese8@bloomberg.net.

To contact the editor responsible for this story: Stephen Merelman at smerelman@bloomberg.net.


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