Sam Katz’s Audacious, Radical Plan to Save City Schools (and the Pension Fund, Too)

He's not even a mayoral candidate. Yet.

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Sam Katz is acting more like a mayoral candidate than the mayoral candidates themselves.

Thursday afternoon Katz launched a new website—Citizen Sam—and dropped what is, by far, the most comprehensive policy paper of the mayoral race to date: an ambitious, even radical, heavily-footnoted proposal to eliminate the school funding and pension crises in about, oh, 82-fell swoops; without raising taxes.

Here’s the gist:

Collect $45m-$50 million from the city’s non-profit eds and meds sector in the form of PILOTs (stands for Payment In Lieu of Taxes) or some other mechanism.

“Re-examine” the assorted tax abatements, incentives and other tax discount programs. Katz stops short of advocating for the outright abolition of these tax breaks, and he doesn’t offer up a dollar figure for how much revenue a re-examination might generate.

Improve the “absurd and embarrassing performance of its tax collection system.” Katz suggests this could be achieved through a combination of tax lien sales and outsourcing collection to private companies (which is already happening in a lot of cases). He suggests allocating all revenue generated by these reforms, and the PILOT payments, to city schools, for an annual recurring total of about $75 million (doing the math, it looks like Katz is counting on $25 million in additional tax delinquency collections, which is not an unrealistic projection). Katz says selling the liens on the city’s huge inventory of delinquent properties could generate a one-time infusion of $250m-$400 million (which seems like an optimistic estimate).

Pour a whopping $3 billion into the city’s pension fund—which Katz suggests can be obtained by selling or leasing city-owned assets like PGW, the airport, street parking, and the Water Department—and thus reduce the city’s annual pension payment by $280 million. He’d allocate $180 million of that for the School District. How does that work? Think of it as paying down a mortgage debt, refinancing, and then being on the hook for a smaller monthly payment thereafter. This would be, to put it mildly, politically challenging to pull off. Katz knows this. He writes: “The lease, sale or partnership of these services is a very difficult strategy, no doubt… But when a community makes a huge commitment to invest in the education of its children and in its economic future, there is nothing but hard and complex choices to make.”

A new “massive endowment” to generate income that the School District can use to “take on important projects beyond the basics.” Katz imagines this endowment—which he’d like to see reach $1 billion within a decade—would be funded through a mix of philanthropy (mostly) and some public money (seeded, perhaps, by whatever cash the city could generate by selling off its property tax liens).

Put together, Katz says his plan would generate $250m-$300 million in combined city and philanthropic revenue for the schools every year. He figures that sort of big, local investment would help pry loose another $100 million from the state, for a grand total of $400 million in new funds each year.

Now can we put aside the notion that Katz still isn’t seriously considering an Independent mayoral run? For those new to the city, Katz is a businessman turned three-time mayoral candidate (who very nearly won once) turned amateur historian (he produces the documentary series Philadelphia: The Great Experiment.)

Is his plan workable? Definitely not, at least in the context of our current politics. You saw what happened when Nutter tried to sell PGW. How would Council have responded if Nutter had simultaneously pitched selling PGW, leasing the airport, auctioning off curbside parking and the Water Department too?

Katz anticipates these sorts of objections. Towards the end of his 12-page proposal he writes:

Anyone who has read this memorandum to this point is likely thinking about all of reasons, obstacles and political factors that render this thinking impractical in Philadelphia. I’ve been here all my life and know that getting even little things done is a big deal. But this is a new time of bold thinking, optimism and demographic change. The momentum we’ve built is only sustainable if we bend the poverty curve. Will Philadelphia move towards a 35 percent rate of poverty or towards a 25 percent rate? The answer to that question will determine whether we can sustain a viable future for the city. If anyone knows of a way to do that aside from creating an educated workforce and citizenry, I’d love to hear it.

It’s well-said, but it doesn’t exactly answer the question of how Katz (if he were to run for mayor, and if he were to win) can achieve any of this. Still, in contrast to the incrementalist, thin, proposals the Democratic contenders have been offering, this comes across as bold and audacious if, yes, a bit radical.

Expect more of this sort of stuff from Katz in the weeks and months to come.

Check out his plan in full below, or watch Katz explains the basics of his plan in the video below.

Closing the Educational Funding Gap March 12 2015 by PhiladelphiaMagazine