Philadelphia legislators slammed the Kenney administration Monday for not investing in the growth of Black- and brown-owned businesses in its proposed spending plans.
During their first legislative budget hearing, members of City Council said Mayor Jim Kenney’s proposed budget for fiscal year 2022, which kicks off July 1, and five-year fiscal plan lack a commitment to growing the wealth of residents of color.
“I don’t really see how we’re trying to grow Black and brown wealth when we have not historically done that through this administration,” Councilmember at-large Derek Green said during the hearing.
Green called for using more of the city’s $1.4 billion in federal coronavirus stimulus funds to grow Black- and brown-owned businesses rather than the $55 million that the administration has proposed.
Under questioning from legislators, Kenney chief of staff James Engler acknowledged the administration has never set measurable goals for expanding the city’s share of Black- and brown-owned businesses, in terms of storefronts or employees.
“We know that that number is far too low,” Engler said, referring to the city’s share of Black-owned and minority-owned businesses. “It’s far too low in relation to our peer cities. It is an area of immediate need for us.”
The Kenney administration invested $77.3 million in small business relief last year from previous federal stimulus funds, Engler said. He added that the administration has set other goals for supporting local minority-owned businesses, including seeking to provide a percentage of city contracts to them.
Commerce Director Michael Rashid said the city aims to expand existing programs that help the Black and brown economy, which include assisting them with supply chain issues.
While Rashid said the city welcomed new commitments from big business and banks to support Black- and brown-owned businesses, he was skeptical those pledges would materialize.
“They’re saying that they’re going to spend money with Black and brown businesses,” Rashid said. “Quite frankly, we’re skeptical that those commitments are going to be carried forward.”
Nearly 6% of Philadelphia businesses with employees were Black-owned, according to U.S. Census Bureau’s 2017 Annual Business Survey. When city businesses with no paid employees are included — which African Americans tend to have — an estimated 25% of the city’s businesses are Black-owned, according to the latest census data from 2012.
Legislators also probed the mayor’s proposals to cut wage and business taxes at a time when the city was recovering from the economic fallout from the coronavirus pandemic.
The Kenney administration aims to cut both the wage tax and the business income and receipts tax (BIRT) through fiscal year 2026. Cuts to the wage tax for both residents and non-residents would reduce revenue by $186 million and mark the lowest level for the tax in five decades. The wage tax makes up the largest share of the city’s revenue.
The savings from the proposed wage tax reductions would provide approximately $14 annually for the average median household earning $45,927 in the upcoming fiscal year.
Councilmember Maria Quiñones-Sánchez equated the wage tax cut for the average homeowner to “buying people three cups of coffee.” She said the Kenney administration was not aggressively helping Black- and brown-owned businesses, whose biggest liability is the net-profits portion of BIRT.
Councilmember at-large Helen Gym said Kenney’s proposed tax cuts and overall budget did not appear to address racial equity or Black- and brown-owned economic corridors as the city recovers from the pandemic. Gym characterized the tax cuts as a broad-based tax reduction primarily targeting businesses.
“I have concerns that we would be better off using this money and pursuing a much more moderated strategy around the wage tax reductions and front-ending a lot of support getting the [federal coronavirus stimulus funding] going in our neighborhoods for Black and brown businesses,” Gym said.
City Finance Director Robert Dubow said wage and business taxes “get in the way of job growth in the city.” He said that the net-income portion of BIRT also will be reduced over five years, which will help small businesses.
Dubow added that the city cannot impose different tax rates on businesses or individuals. The city is limited by the state’s uniformity clause, which requires taxes on income be set at the same rate.
Engler said the Kenney administration was aiming to reduce the city’s reliance on the wage tax, “which we know causes us harm when we get financial shocks like a pandemic or like a major recession.”
The Kenney administration expects the city to shed 15% of all jobs due to working remotely, which would reduce wage tax revenue by approximately $100 million a year, Dubow said. Non-residents are required to pay the wage tax only if they work within the borders of the city.
Dubow added that non-residents are projected to claw back an estimated $125 million in the current fiscal year and $70 million in fiscal year 2022.
“So, really a substantial hit to our revenues,” he said.
City legislators must pass a budget before July 1. Budget hearings resume Tuesday at 9:30 a.m.