Philadelphia would cut business tax rates every year and begin spending hundreds of millions of newly allocated dollars on housing and drug treatment programs under a proposed 2026 budget Mayor Cherelle Parker presented Thursday.
In her second annual budget address before City Council, Parker celebrated sharp drops in violent crime during her first year in office and her efforts to “clean and green” the city, and laid out her plans for next year and beyond.
She proposed increasing spending on the Vision Zero traffic safety program to $5 million a year, giving the school district an additional $12 million and creating more extended-day programs, and spending over $100 million on beautification, public safety and event planning as hundreds of thousands people visit for the Semiquincentennial and sports events next year.
“We will engage every corner of Philadelphia — with meaningful investments, economic opportunities and a spirit of celebration across every neighborhood,” Parker said. “At the same time, we’ll ensure that the nation’s birthplace and first World Heritage City takes center stage as we host a slate of major events that will elevate Philadelphia on the world stage.”
In addition to her funding proposals, Parker announced the city will soon launch a task force aimed at revitalizing the struggling Market East corridor, chaired by Brandywine Realty Trust president and CEO Jerry Sweeney; focus on settling several city employee union contracts; and reopen the Martin Luther King, Jr. Bridge, a major commuter route to Center City that has been closed for reconstruction for nearly two years.
The spending plan comes to $6.7 billion, up about 5% from the current budget that was approved last summer. City Council will hold hearings and modify Parker’s proposal before giving approval ahead of a June 30 deadline. The new fiscal year starts in July.
The budget speech comes as the mayor and officials keep a watchful eye on President Donald Trump’s efforts to reduce federal spending, which could significantly impact the city’s finances.
Philadelphia received $2.8 billion in federal grants in the previous fiscal year, and collected over $1 billion in wage taxes from federal workers and from educational and research institutions, according to the Parker administration.
“There is uncertainty in the air now. People don’t know what to expect from their government. Uncertainty can breed fear,” the mayor said. “I want the people of Philadelphia and our city employees to hear me: Your city is here to keep you safe, and to safeguard your basic rights.”
Going big on HOME
Parker has vowed to build or renovate 30,000 units of housing over the next few years. While she said she’ll share her full plan at a March 24 council meeting, the budget proposal shed some light on the initiative’s cost.
The city would issue $800 million in bonds over five years to pay for the Housing Opportunities Made Easy (HOME) initiative, with the first $400 million going out in the next fiscal year and the rest in 2027. Another $11 million would be spent to hire planners and other staff to implement the plan.
“I want shovels in the ground. I want houses rehabbed and restored,” Parker said, according to her prepared remarks. “We … will not spend years in planning mode. This cannot wait. If you know anything about me, you know I understand the urgency in our communities. We’re here to take action.”
The city would have to pay $166 million over five years to service the HOME debt plus additional amounts in future years. Those costs would be offset in part by hiking the Real Estate Transfer Tax paid by homebuyers and sellers by about 9%, to 3.578% of the property’s value. That increase would generate $173 million over five years, Parker said.
Another big spending item is $216 million over five years to operate Riverview Wellness Village, a long-term drug recovery home with 336 beds that the city opened last month in Northeast Philadelphia. Parker did not mention the annual cost, but city officials have previously said they expected to spend $47 million on Riverview in fiscal year 2026.
The city hopes to eventually receive some reimbursement from state and federal sources, such as Medicaid and the Pa. Department of Drug and Alcohol Programs, officials said.
The recovery home is a key part of Parker’s plan to suppress Kensington’s open-air drug market and move unhoused people in addiction off the streets. City Council last year authorized $100 million in borrowing for the project’s capital costs, of which close to $54 million was spent to renovate the property, the administration has said.
Parker wants to put up new buildings at the Wellness Village to house an additional 300 residents and add other amenities, at an estimated cost of $125 million.
A “big deal” tax reform plan
After leaving tax rates unchanged last year, Parker is proposing several changes, including a controversial plan to cut business taxes substantially over the next decade and a half.
Currently, Philadelphia’s Business Income and Receipts Tax, or BIRT, essentially consists of two taxes — one on total revenues (gross receipts) and the other on profits (net income). It has long been a target of complaints from businesses and others who say it suppresses job creation and drives companies out of the city. Council’s Tax Reform Commission recently proposed eliminating it entirely.
Parker proposed taking steps toward that goal. She wants to start reducing both tax rates every year, with the goal of halving the net income rate — which currently generates $400 million a year — and zeroing out the smaller gross receipts rate by 2039.
The net income rate would fall from 5.81% to 5.71% in the coming fiscal year, and to 5.5% in the year after. The gross receipts rate would be trimmed slightly from 1.45 mills down to 1.410 mills and then to 1.380 mills. She also proposed restarting small annual reductions of the wage tax, which were suspended last year.
“This is a big deal. In fact, no mayor and City Council have stood together to reduce both sides of the BIRT and the wage tax at the same time in 17 years,” Parker said. “These $212 million in tax reform investments are historic and unprecedented.”
Advocates say proposal is “negligent and risky”
The timing of the tax reductions is tied to the city’s effort to fund its Pension Fund. It’s scheduled to be fully funded in 2033, freeing up $430 million a year for tax cuts and other uses.
At the same time, the city is ending an exclusion from BIRT for the first $100,000 in gross receipts, which has been challenged in court as violating the state Constitution. Parker said she regretted losing the exclusion, which eased the tax burden on small businesses, and said the city would start a new $30 million program to help affected companies.
The overall tax plan was immediately criticized by community advocates, who warned it could lead to cuts in public services like libraries, parks and sanitation.
“Mayor Parker’s tax plan looks grimly similar to what we’re seeing from the White House: it strips key protections for small businesses while slashing taxes for mega corporations,” said Kimmy Cook of the Alliance for a Just Philadelphia. “It is extremely negligent and risky to codify 15 years of tax giveaways to big business at a time of unparalleled instability in recent history.”
The mayor also announced a few other changes to taxes and fees. A document recording fee that benefits the Housing Trust fund will increase by $3, with the funds going to a program that helps residents resolve “tangled titles” and clarify home ownership.
A construction impact tax that imposes a 1% levy on certain housing projects would be eliminated to help incentivize new residential construction.
Parking meter rates in Center City will increase for the first time since 2014, rising from $3 to $4 per hour and reportedly bringing in an additional $4 million a year for the city and the school district.
More cash for traffic safety, apparently
Here are some of the other highlights of Parker’s address.
– After taking heat last year for rejiggering funding for Vision Zero, Parker said the city will spend $5 million on the initiative next year, and a total of $30 million over six years on speed cushions, line striping and other traffic safety measures.
Advocates and councilmembers have called for a single, $5 million Vision Zero budget line. The city has not yet released full budget documents and it’s not yet clear how the funds will be described in the spending plan.
– The city will put $550 million into labor reserve funds over five years to pay for union contracts. Parker said she wants to see chief deputy mayor Sinceré Harris and her labor negotiators reach multiyear agreements with four unions: the Fraternal Order of Police, the Firefighters’ and Paramedics Unions, and district councils 33 and 47 of AFSCME.
– The city will add another $67 million in its five-year plan to complete a long-promised new police forensics lab, which Parker said will be located at 4101 Market St. in West Philadelphia. Every police officer will be outfitted with a body-worn camera by the end of 2025, and the department is working to install dash-cam cameras in every patrol car.
– As part of the city’s Clean and Green efforts, it will partner with other groups on a 10-point greening plan that will include tree planting, vacant lot cleaning and greening, park improvements and support for community gardens. $4.2 million will go toward installing planters along commercial corridors.
A new anti-litter task force will coordinate litter enforcement and citing of blighted properties, and twice-a-week curbside trash collection will be expanded to North Philly. It’s currently being done in Center City and South Philly.
City workers will focus on removing graffiti from highway overpasses and hotspots, and $2.4 million will be spent over three years “to redirect graffit artists’ energy through powerful programs run by Mural Arts.”
– Parker did not mention top-line budget figures for some areas that typically draw public interest, such as Parks and Recreation and the Police Department. Detailed numbers should be available once the administration releases a budget summary and an updated five-year plan.