Housing, taxes, and Trump: What you need to know about city budget negotiations between Mayor Cherelle Parker and Council

Mayor Cherelle L. Parker and Philadelphia City Council are in the final stages of negotiations over the next city budget, and things had been looking relatively harmonious.

Then President Donald Trump got involved.

The U.S. Department of Homeland Security on Thursday included Philadelphia in a list of “sanctuary” jurisdictions that may lose federal funding for declining to assist federal immigration enforcement.

It’s far from clear what that will mean for Philly. Trump may not follow through with funding cuts to cities. And if he does, those cuts may be overturned in court. And so far, city officials have largely taken a wait-and-see approach to the news out of Washington.

Still, Philadelphia received $2.2 billion in federal funding in 2024, the last full year that has been tallied, and losing that money could be catastrophic, especially for public health programs and social services.

» READ MORE: How much could Philly lose if Trump cuts funding to cities? Here’s what you need to know.

“Welcoming and protecting our neighbors is a moral and political imperative,” Councilmember Nicolas O’Rourke said Friday, “and if federal dollars are used to punish our values, then we must seriously consider how we fund our city in ways that reflect our commitments — not Washington’s threats.”

Here’s what you need to know about the state of play in city budget negotiations.

Parker in March proposed a $6.7 billion city general fund budget, and lawmakers held eight weeks of hearings to kick the tires on her taxing and spending plans.

Now, they’re meeting behind closed doors, with Parker’s administration going back and forth with Council President Kenyatta Johnson’s team.

The critical day in the negotiations is Wednesday, when a series of key committee meetings are scheduled. If things go smoothly, lawmakers that day will approve amendments to Parker’s proposals that Council negotiated with the administration, setting up the budget and the H.O.M.E. initiative for final passage votes on June 12, the last day before Council adjourns for summer recess.

If talks break down, the committee meetings may come to naught, and Johnson could schedule additional legislative sessions in June. The final deadline is July 1, the start of the next fiscal year.

Projections for the current budget’s fund balance — a key cash reserve that represents the amount of money left unspent — have been growing, and the surplus is now projected to be a healthy $882 million, freeing up more money that will roll over into next year and giving elected officials more wiggle room.

The increase has been driven by better-than-expected tax collections and city agencies spending less than they are budgeted, in part due to the city’s continuing struggles with hiring.

The extra money should make it easier for the administration to fulfill individual Council members’ wish lists of priorities, theoretically making the final phases of budget negotiations more smooth.

“We are having meaningful discussions,” Finance Director Rob Dubow and Budget Director Sabrina Maynard said Friday.

The city’s business and wage tax rates will almost certainly be cut. The question is by how much.

Johnson is leading a charge to dramatically reduce and eventually eliminate the business income and receipts tax, or BIRT. Last year, he convened the Tax Reform Commission, which recently recommended doing just that, as well as making wage tax cuts.

Parker is supportive of tax cuts, but she so far has not been willing to be as aggressive. Her budget proposal called for cutting the BIRT’s tax on business’ gross revenue from 0.1415% to 0.141% next year and its tax on profits from 5.81% to 5.71%.

Her budget proposed a small cut to the wage tax, an increase in the real estate transfer tax, the elimination of the 1% construction tax, and no changes to the property tax.

It also included an unusual 13-year schedule of future tax cuts, the most severe of which would begin as she would likely be leaving office.

External factors are pulling the debate in different directions. Progressives have said Trump’s threats to cut federal funds from cities means it’s no time to turn away revenue.

Meanwhile, Parker has thrown a curveball into talks over the business tax this year when she announced in March that her administration was asking Council to eliminate a popular tax break known as the BIRT exclusion that primarily helps small businesses.

The administration said the move came in response to a lawsuit contending that the exclusion, which exempts the first $100,000 of business’ income from taxation, violates the state constitution’s so-called uniformity clause.

As part of her H.O.M.E. initiative, Parker has asked Council to approve seven bills, and lawmakers appear likely to advance five of them before their summer recess.

“All members of Council are supportive of the H.O.M.E. plan, so that’s a good start,” Johnson said Thursday. “It’s just working out the details and what we all feel comfortable with in terms of [what we can] support.”

Most importantly, Council has scheduled a Wednesday committee meeting to consider a bill that would allow the administration to issue $800 million in city bonds to pay for the initiative, indicating it’s on track for passage.

The other four are relatively minor zoning bills meant to facilitate rapid development and density of housing.

The two that have not progressed have something in common: They would limit Council’s role in land use and development issues.

One would streamline the process of moving property into the Philadelphia Land Bank by removing a step that depends on Council action. Another would create preapproved lists of city-owned properties that the city could sell without Council having to approve each transaction.

Council could take those up in the fall. But it’s far from clear there’s any appetite among legislators to adopt those types of policies.

So far, the Trump administration’s inclusion of Philadelphia in its list of “sanctuary” jurisdictions at risk of losing federal funding has not had a direct impact on city budget negotiations.

That’s largely because the federal government has not yet attempted to cut off funds in relation to its sanctuary crackdown, and the Parker administration said it hasn’t received any communications from Washington.

“We are aware that the Department of Homeland Security has published a list of jurisdictions across the country, including Philadelphia and other cities and counties in Pennsylvania,” City Solicitor Renee Garcia said Thursday. “Philadelphia has not received any formal notification from DHS. We will review any communications carefully.”

The dynamic could change in the coming days if the White House makes more concrete moves to pare back funding.

Staff writers Fallon Roth and Jake Blumgart contributed to this article.