Philadelphia Mayor Wins Partial Victory in Settling Labor Dispute

FOR two years, the city of Philadelphia has been on the brink of a financial collapse that Mayor Edward Rendell likened to Armageddon during his 1991 campaign.

Now, almost a year after the Democratic mayor took office, Philadelphia still has one of highest tax burdens in the country, but the city has settled a contract dispute between municipal workers and the mayor that could have imperiled plans for economic rehabilitation.

Through his optimistic outlook and unyielding approach to financial reform, Mayor Rendell - who took the reins from W. Wilson Goode in January - has managed to convey a sense that the city is taking control of its own future, political observers say. `We're broke'

Not that he has much of a choice. "It's real simple: We're broke," says Frederick Voigt, executive director of the Committee of Seventy, a civic watchdog organization. "Ed Rendell is driven by the financial realities we are faced with."

Philadelphia has been financially strapped because it must care for an increasingly poor and troubled population on a shrinking tax base. But the challenges facing this administration are different in magnitude than those facing any previous mayor, Mr. Voigt says. "We are not talking about eliminating fat. We are now down to the muscle and maybe even the bone," he says.

Last February, the Rendell administration introduced a five-year plan for stabilizing Philadelphia's finances that is being watched closely by other urban leaders. The plan avoids tax increases, relying heavily on freezing wages and slashing the benefits of city workers.

A major victory for the mayor was the plan's unanimous approval last February by the Philadelphia City Council. Another partial victory came Tuesday when Rendell reached tentative agreement with the city's two unions only hours after a brief work stoppage that the city called a strike, the unions a lockout.

The pacts are similar to money-saving contracts Rendell unilaterally imposed two weeks ago, claiming talks were at an impasse. The move - which the unions claimed was illegal - precipitated the strike.

The new contracts include a two-year wage freeze, a 2 percent raise in the third year and 3 percent in the fourth. The pacts reduce holidays from 14 to 10; and give the city some power to lay off workers. They also give the city oversight over the workers' health plans.

But unlike Rendell's original plan, they continue a previous leave policy that gives city workers 20 sick days a year.

While Rendell has been criticized for taking a hard-line approach in the negotiations, he was left with little alternative, says Ted Hershberg, a public policy professor at the University of Pennsylvania. "The whole recovery [of Philadelphia] is based on very conservative assumptions and has to live within those assumptions," he says. Rendell's popularity

One obstacle that Philadelphia faces on the road to recovery is the fact that rural Pennsylvania residents have often viewed the city with distaste - and hence been loathe to spend state money on it. But Rendell's sharp sense of public relations could help turn this feeling around. It already has boosted the mayor's popularity at home, with polls showing most residents optimistic about the city's future.

"A major victory for [Rendell] is that he's in good spirits, he hasn't lost his sense of humor" despite the city's financial difficulties, says Michael Hooper, a political science professor at Temple University.