Aug. 1 (Bloomberg) -- Philadelphia asked a judge to overturn a firefighters’ contract-arbitration award after officials said the fifth-biggest U.S. city can’t afford the cost of more than $200 million.
“The city does not have the money to pay for this award, those costs would be borne by the taxpayers in the form of service cuts if the award were allowed to stand,” the city said today in a filing in state court in Philadelphia.
Mayor Michael Nutter contested the findings of a three-member arbitration panel which concluded July 2 that the city could afford annual raises of 3 percent for three years, retroactive to July 2010. One quarter of the city’s residents live in poverty, which is twice the state’s rate. The city’s school district has said it may close a fourth of its public schools by 2017 to cut costs.
“Even with the benefit of hindsight and undisputed financial data, the panel inexplicably ignored the economic reality of the city’s financial condition,” the city said in court papers.
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.
The arbitration award covers 2,100 uniformed personnel.
“The city doesn’t respect us,” Bill Gault, president of Local 22 of the International Association of Fire Fighters, said July 30 in a phone interview. “What good is a city without public safety?”
Philadelphia has raised property taxes in each of the past three years. Gault said his union’s workers haven’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.
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 July 30 in a letter to Nutter asking him to drop his appeal 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, asking a judge to force the city to implement the award.
Philadelphia officials aren’t maintaining any reserves for raises and 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, Sam Katz, chairman of the authority, said before the city’s latest appeal.
The case is City of Philadelphia v. International Association of Fire Fighters Local 22, Case ID: 120704490, Court of Common Pleas, Philadelphia County.