Philadelphia seeks to add to taxpayers’ $5.5 billion debt tab

At the polls on Tuesday, Philadelphia voters will find a familiar ballot question — one that's been there every year for more than two decades, in almost the exact wording.

The question asks voters whether they would let the city issue bonds to pay for maintaining and building capital projects in transit, parks, museums, streets and municipal buildings. This year, the city proposes to issue $181 million in bonds.

Through the ballot question, Philadelphia has asked voters to approve nearly $1.39 billion in borrowing over the last decade. Every time, voters have agreed.

This year's ask, $181 million, "is a lot of money, but it's got to be looked at in context with the city's larger budget," said Patrick Christmas, the policy program manager for the watchdog group Committee of Seventy. The city's operating budget for fiscal year 2019 is $4.7 billion and the six-year capital budget, which is funded mostly through the bond proceeds, is $10.2 billion.

Bonds are usually issued to be paid back within 20 years. It's done this way so the taxpayers who fund projects actually get to enjoy them, Christmas added.

It's routine for state and city governments to borrow to maintain and build capital projects, he said, but added there's always room to borrow too much or too little.

"There is a balance to strike, that's the most difficult thing," Christmas said. "Voters don't have a whole lot to go on in these questions."

Only about one in 10 voters will be familiar with the question or its intent when they see it on the ballot Tuesday, said Matthew Levendusky, a Penn political science professor. The rest, he said, will decide based on their values — or won't answer the question at all.

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The most salient parts of the question, Levendusky said, are the cost and the benefits. A person concerned with the city's debt is more likely to vote "No," while someone who believes that the city needs more spending on parks and other programs is more likely to approve it.

Mayor Kenney has asked for more money each year than his predecessor, Michael Nutter. Under Nutter in 2015, voters approved borrowing $155.7 million. In 2016, voters authorized the city to borrow $184.3 million; in 2017, they approved $172 million.

Sometimes, the authorized borrowing doesn't happen until years later. For example, the $293 million the city borrowed in 2017 — and plans to spend through 2020 — was passed by voters in 2015 and 2016.

Some of those expenses include resurfacing 131 miles of streets each year, ramp reconstruction to comply with the Americans with Disabilities Act, renovation of three police district offices plus a new headquarters, new ambulances and fire trucks.

In total, the city has an outstanding debt bill of $5.5 billion, including interest, to be paid through 2047. That includes $1.6 billion in general obligation bonds, plus $2.1 billion more for projects such as Lincoln Financial Field, the criminal justice center, the new police headquarters and a 1999 pension bond deal.

Under the state constitution, Philadelphia can't have general obligation debt that is 13.5 percent more than the preceding 10-year average of assessed value of taxable real property. By that standard, the city could borrow up to $13.4 billion.

However, city officials say that might be an inappropriate debt level, because property valuations have gone up — due in part to a switch to market rate assessments — and wage taxes, not property taxes, are the main revenue generator for the city.

In 2015, city officials agreed its annual debt and long-term obligation payments such as pensions would not exceed 15 percent of general fund expenditures — but they were already above that limit that year and have been ever since. In its most recent fiscal year, those obligations equaled 23.3 percent of the general fund budget. (That doesn't include the $104 million it kicked to the school district.)

"We're well-aware of the downside of having high fixed costs," city spokesman Mike Dunn said in an email. "But the alternative to borrowing, frankly, is far worse. Without sufficient capital investments, facilities fall into disrepair, city services are disrupted, and public safety — to city workers such as first responders and to residents — is potentially endangered."

The city is in the process of updating its debt management policy, Dunn said.

The bond issue on the ballot is separate from Rebuild, the Kenney administration's plan to rehabilitate or rebuild many of the city's recreation centers, parks and libraries. That is expected to be financed in part through a $300 million bond package issued through a city authority; that borrowing does not require voter approval.