Junk-Bond Philadelphia

September 23, 1990

Philadelphia has just joined an exclusive club in having its municipal bonds downgraded to junk-bond status. The city suffers from many problems, some of which plague all big cities: Hemorrhage of jobs and citizens to the suburbs, increasing numbers of people below the poverty line and cuts in federal aid. Add huge new expenditures for public-health problems such as drugs and AIDS.

Spokesmen at investment rating services say Philadelphia's economy is generally strong. And they say good things about the city's overall management. Still, they stand by the "junk" ratings. They've lost confidence in the city's ability to raise the money it needs to pay its bills.

Philadelphia, unlike Baltimore, is a county as well as a city. Its court system, Pennsylvania's largest, is wholly supported by local taxes. The municipal budget is $2 billion, and the schools have their own $1.5-billion budget.

Paying for all that puts a squeeze on taxpayers. The average household pays the highest taxes in the East. Philadelphians shell out 61 percent of local governmental costs, more than any other U.S. metropolis. The city has asked state legislators for more taxing authority, but higher taxes simply drive out residents, businesses and jobs.

Two kinds of bad politics are at work: local disunity, as when the City Council last March discarded Mayor Wilson Goode's budget and passed one $200 million in the red, and long-standing state opposition to its biggest subdivision.

Philadelphia desperately needs regional tax support for its mass transit, as well as state help funding its courts, police and fire and and other services. But Pennsylvania politicians, especially Republicans, distrust Philadelphia, home of 15 percent of the state's population and 24 percent of its Democrats. Suburban policy makers rebuff calls to broaden the mass-transit support base or to pay a bigger share for the water, sewer and other services their constituents use. Politicians outside the area routinely block aid increases.

This situation can't change unless Pennsylvania's leadership realizes everybody loses if Philadelphia falls into dependency. A revival cannot come if state politicians only point disapproving fingers, suburban politicians starve regional services and city politicians keep putting feuds and personal ambitions above the health of the city.

The plight of Philadelphia should be an object lesson for Baltimore and Maryland. It just must not be allowed to happen here.

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