Four Reasons Philly Business Will Find Things Tougher Next Year

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(This post originally appeared on The Philly Post)

So far, the outlook for 2015 is pretty good. Most experts are predicting a continued economic strengthening with even one member of the Federal Reserve saying Monday that the “dreary days” of the economy may be over. The Hartford says both small– and medium-sized businesses are “successful” and “optimistic” about next year. Additional surveys of businesses conducted by Sage, Principal, ADP, PNC and others confirm the same: increased financial strength, growth and optimism as we head into the new year. Seems like good times ahead.

Uh … except for businesses in Philadelphia. Here, we face a few unique challenges. Challenges that may mean 2015 (and 2016) may not be so good. If you’re running a business in or around the city, be careful of these four potential bumps in the road.

An Increased Minimum Wage

Following a national trend, the city has already announced that it will raise the minimum wage it pays to its workers to $10.88 per hour. And now, City Council is pushing a city-wide boost to $15 an hour. It won’t be easy for them because of “… a 2006 preemption clause added to the state’s 1968 wage act — which says the law trumps local ordinances on the topic — has long been read as banning cities from setting their own rates.” The push will also face significant opposition from business groups. But clearly a fight is brewing and minimum wage advocates seem ready to take up the challenge to the existing law. An increase may not affect very small businesses and the ultimate rate per hour would likely be below $15. But an increase does seem very possible in the next year or two and could prompt a wage trend for all workers. That will likely mean higher costs for many companies in the city, even those that are already paying above the minimum.

A Requirement to Pay for Sick Time

Yesterday, a task force recommended to Mayor Nutter that he enact a law requiring employers with 15 or more employees to pay for sick time. Recently, Governor-elect Wolf also expressed his desire to legislate mandatory sick pay state-wide. Business groups, as you can imagine, are not amused: “Mandated sick leave could bring on higher overtime costs and disrupt (my) company’s round-the-clock schedule,” says one business owner. “If people are just walking out the door getting paid and we have to figure out a way to replace them at the last moment — aside from the fact it’s a logistical nightmare — it’s a financial burden to say the least.” The proposed legislation will also not be popular in the Republican controlled state legislature. Regardless, it’s clearly an issue that has the support of both our Mayor and Governor and, if enacted, will also have a big impact on employers in and around the city.

The Pope’s Visit

We know now that the Pope plans on visiting our city in September and, of course, this is an exciting thing for everyone. Some businesses — hotels, restaurants, souvenirs — will benefit. But many companies in and around the city will pay penance for the papal visit. Penance in the form of lost days and money due to employee absences, blocked roads, traffic issues, rescheduling of meetings and an overall disruption of normal commerce before, during and after the historic week. There will be thousands of pilgrims jamming the city, demonstrations and visits by celebrities and dignitaries who surely bring havoc to our roads and airports. Don’t believe me? See what the good citizens and business owners of Jerusalem, London and other parts of England had to deal with when the Holy Father visited their areas.

A Growing Pension Crisis

Now that voters have kicked out a Governor who, for better or worse, was seriously committed to cutting statewide pension costs, I’m predicting a renewed spike in these liabilities throughout 2015 and the future. Philadelphia’s pension system has only enough funds to cover between 50 percent and 69 percent of what’s owed in pension benefits. And, if a lawsuit that’s currently challenging the Philadelphia’s School Reform Commission’s decision to require teachers to pay for their healthcare succeeds, the school district will once again be faced with an enormous budget shortfall. Without a plan for funding these liabilities, other than taxing a shale gas industry that’s already under pressure as energy prices decline, look for a continued rise in pension and healthcare liabilities due to state workers, unions and teachers that could ultimately threaten Philadelphia’s long-term financial stability vis-à-vis Stockton, California, and Detroit. Even a rumor of bankruptcy could send property values down, drive businesses and customers away from town, and cripple the city’s ability to raise even more debt.

Healthcare reform, a rising national deficit and debt that could mean higher taxes and less government spending in the future, foreign competition, a global economic slowdown, changes in technology, etc. etc. These are issues that will challenge business owners across the country in 2015. And what about the Philly area? Yeah, we face those challenges too. And a few unique ones of our own.

Happy New Year everyone.

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