fy 2010-2014 budget briefing for city council

February 9, 2009

Disclaimer: This is a planning document for discussion only. This document does not reflect any decisions by the Administration.

FY 2010-2014 Budget Briefing for City Council

Mayor Michael A. NutterFebruary 9, 2009

February 9, 2009


Table of Contents

• Rebalancing the budget in November 2008• The current deficit - $1.04 billion• The process for closing the $1.04 billion

deficit• Department budget scenarios for 10%,

20%, and 30%• Revenue options for closing the deficit• What other cities are doing• Next steps

February 9, 2009


Rebalancing the Budget in November 2008

A Look Back At What We Did

February 9, 2009


• Solved for a $1 billion shortfall over the life of the five year plan, FY09-FY13

• In FY09 alone the projected shortfall totaled $108.1 million

Rebalancing the Budget in November 2008

February 9, 2009


The Largest Component of the FY2009 Rebalancing Plan: Suspending Tax Reductions

• City funded tax reductions after FY09 were suspended

• Dollar value of tax suspensions equated to almost $230 million from FY09-FY13

• Tax reductions will resume as scheduled in FY15

February 9, 2009


How We Closed the $108.1 Million Budget Gap for FY 2009

Department and Program Cuts47%

Other Savings9%

Efficiency Savings and Revenue Enhancements

44%

One-time savingsFurloughs for exempt employees

We identified administrative efficiencies and revenues that had not been collected by the city or were in need of scheduled increases. These included: Increasing collections from delinquent taxpayersReducing overtimeConsolidating IT functionsIncreasing permit, license and registration fees

Unfortunately, enhancements, efficiencies and one-time savings only allowed us to fill 53% of the budget gap. Program, service and employee workforce reductions were necessary to get us the rest of the way there. Workforce Reductions Programmatic Reductions

100%

February 9, 2009


Some Examples of Cost-Savings from FY2009 Rebalancing Plan

• Reduction in Police overtime: administrative overtime, arrest/investigative overtime ($8m)

• Furloughs for exempt employees• Salary cuts for Mayor’s office and Cabinet

members• Consolidation of IT functions• Increased permit, license and registration fees• Reduce trash setout limits from 12 bags and 6

cans to 8 bags and 4 cans.

February 9, 2009


# of Positions

Full time (filled and unfilled) 800

Part-time 20

Seasonal 1,500

Contractual 550

Workforce Reductions in FY2009 Rebalancing Plan

February 9, 2009


Independently Elected Officials

• 10% budget reductions were received from:– City Council

• 5% budget reductions were received from:– Register of Wills– Courts– Controller– Sheriff– District Attorney

February 9, 2009


The Challenge We Are Facing Today

The current deficit is projected to total $1.04 billion

February 9, 2009


Projected Negative Fund Balance Totals $1.04 billion Over 5 years

-$47

-$169

-$472

-$667

-$871

-$1,045-$1,200

-$1,000

-$800

-$600

-$400

-$200

$0

Mill

ion

s

FY09 FY10 FY11 FY12 FY13 FY14

February 9, 2009


Major forecasters expect the US economy to shrink in 2009 as part of a global contraction in economy activity

Forecasts of US Economic Growth, 2009 and 2010 (forecast as of January 2009)

2009 2010

Blue Chip Consensus Forecast -1.6 2.4

Moody's Economy.com -1.6 2.0

International Monetary Fund -1.6 1.6

Congressional Budget Office -2.2 1.5

Global Insight -2.5 2.2

February 9, 2009


The speed and depth of the unfolding recession has caught economists and forecasters by surprise

Monthly Forecasts of Growth in US GDP for 2009percent change from 2008

2.8

2.3

1.1

-2.2

-3.0

-2.0

-1.0

0.0

1.0

2.0

3.0

4.0

Jan-08 Feb-08 Mar-08 Apr-08 May-08 Jun-08 Jul-08 Aug-08 Sep-08 Oct-08 Nov-08 Dec-08 Jan-09 Feb-09

Blue Chip CBOIn the 5 months between September 2008 and February 2009, the Blue Chip Consensus Forecast of US growth fell by 3.4 percent

February 9, 2009


City of Philadelphia is using Congressional Budget Office Forecasts to Develop Forecasts of City Revenues

• Office of Budget and Performance Evaluation (OBPE) is using the most recent Congressional Budget Office projections (January 2009) of US economic growth in its forecast

• These national economic forecasts are used to develop forecasts of the city’s tax base growth and revenue growth

CY2009 CY2010 CY2011 CY2012

US GDP Growth(CBO, January

2009) (2.20)

1.50

4.20

4.40

February 9, 2009


OBPE forecasts of the local economy are not as pessimistic as other forecasters

• OBPE expects the Philadelphia economy to slow considerably in CY09 and begin to rebound in CY10 as measured by total Philadelphia personal income and total wages

• In contrast, Moody’s Economy.com anticipates much slower growth for Philadelphia in 2010 and 2011, particularly in total wages

Growth Rates for the Measures of the Philadelphia Economy

CY2009 CY2010 CY2011 CY2012

OBPE, Total Personal Income 0.9% 2.5% 3.8% 4.2%

Moody's Economy.com Total Personal Income 1.2% 1.3% 2.7% 4.3%

OBPE, Total Wages 1.6% 2.6% 3.5% 3.8%

Moody's Economy.com Total Wages 0.3% 0.1% 1.6% 3.8%

February 9, 2009


Adopting Moody’s Economy.com forecast for personal income would increase forecast tax revenues marginally over the FY10-FY14 Plan

Philadelphia Total Personal Income, in millions of current $

$49,500

$51,192

$57,263

$51,650

$52,926

$54,939

$49,920

$51,965

$52,607$53,315 $54,774

$57,121

$45,000

$47,000

$49,000

$51,000

$53,000

$55,000

$57,000

$59,000

CY2007 CY2008 CY2009 CY2010 CY2011 CY2012

OBPEEconomy.com

For example, if the City adopted the Economy.com personal income forecast, sales taxes would be higher by at least $2.3 million over the FY10-FY14 Plan

February 9, 2009


However, adopting Moody’s Economy.com forecast for wages would decrease forecasted wage tax revenues by at least $214.5 million over the FY10-FY14 Plan

Philadelphia Total Wages, in millions of current $

$35,087

$36,232

$37,779

$39,109

$37,198

$40,597

$36,808

$38,612

$36,609$36,558

$36,445

$35,377

$33,000

$34,000

$35,000

$36,000

$37,000

$38,000

$39,000

$40,000

$41,000

CY2007 CY2008 CY2009 CY2010 CY2011 CY2012

OBPE

Economy.com

The lower growth rate for wages in the Economy.com forecast substantially lowers wage tax revenues during the FY10-FY14 Plan.

February 9, 2009


Economy.com Forecasts Significant Job Losses for Philadelphia

• Employment in Philadelphia is projected to fall from the peak of 660.2 thousand jobs in 2007 to a low of 637.2 thousand jobs in 2011.

• Unemployment is expected to rise from the current rate of 8.6% in December 2008 to 12.3% in 2010.

February 9, 2009


FY09 RTT revenue has fallen significantly since 2008, compared to the same quarter last year

-50.0%

-45.0%

-40.0%

-35.0%

-30.0%

-25.0%

-20.0%

-15.0%

-10.0%

-5.0%

0.0%

2008: Q1 2008: Q2 2008: Q3 2008: Q4 2009: Q1 2009: Q2

Pe

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February 9, 2009


FY09 wage tax revenue has fallen since 2008, compared to the same quarter last year

-3.0%

-2.0%

-1.0%

0.0%

1.0%

2.0%

3.0%

4.0%

5.0%

2008: Q1 2008: Q2 2008: Q3 2008: Q4 2009: Q1 2009: Q2

Pe

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February 9, 2009


FY09 sales tax revenue has fallen, compared to the same quarter last year

-8.0%

-6.0%

-4.0%

-2.0%

0.0%

2.0%

4.0%

6.0%

8.0%

2008: Q1 2008: Q2 2008: Q3 2008: Q4 2009: Q1 2009: Q2

Pe

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February 9, 2009


Total Projected Tax Revenues Have Fallen Over $1 Billion

$2,200

$2,250

$2,300

$2,350

$2,400

$2,450

$2,500

$2,550

$2,600

$2,650

FY2007 FY2008 FY2009 FY2010 FY2011 FY2012 FY2013

Mill

ion

s $

FY2009 June Original FY2009 November Rebalancing FY2009 January Projections

Revenue projections have decreased over $1 billion from June 2008 to January 2009

February 9, 2009


Business Privilege Tax Revenue Projections Have Fallen Over $425 Million

$350

$370

$390

$410

$430

$450

$470

FY2007 FY2008 FY2009 FY2010 FY2011 FY2012 FY2013

Mill

ion

s $


Revenue projections have decreased over $425 million from June 2008 to January 2009

February 9, 2009


Real Estate Transfer Tax Revenue Projections Have Fallen Over $316 Million

$100

$120

$140

$160

$180

$200

$220

$240

FY2007 FY2008 FY2009 FY2010 FY2011 FY2012 FY2013

Mill

ion

s $



February 9, 2009


Real Estate Revenue Projections Have Fallen Over $70 Million

FY2007 FY2008 FY2009 FY2010 FY2011 FY2012 FY2013



February 9, 2009


Wage Tax Revenue Projections Have Fallen Over $60 Million

$1,080

$1,100

$1,120

$1,140

$1,160

$1,180

$1,200

$1,220

$1,240

$1,260

FY2007 FY2008 FY2009 FY2010 FY2011 FY2012 FY2013

Mil

lio

ns

$

FY2009 June Original FY2009 January Projections

Revenue projections have decreased over $60 million from June 2008 to January 2009 Note: November Rebalancing and January Projections are the same

February 9, 2009


Sales Tax Revenue Projections Have Fallen Over $60 Million

$120

$125

$130

$135

$140

$145

$150

$155

$160

FY2007 FY2008 FY2009 FY2010 FY2011 FY2012 FY2013

Mill

ion

s $



February 9, 2009


The current economic situation remains unstable and uncertain

• The unprecedented financial and economic crisis remains volatile and exceptionally uncertain– “the uncertainty surrounding the outlook was considerable and that the

downside risks … were a serious concern.” Federal Open Market Committee minutes December 15-16, 2008

• Economists continue to change national growth forecasts as a result– The Blue Chip Consensus Forecast released today lowered economic growth

assumptions for the US to -1.9% from -1.6% for 2009, and to 2.1% from 2.4% for 2010.

• Things may continue to worsen, further lowering Philadelphia’s revenues – Two noted economists, Nouriel Roubini, at NYU Stern School of Business

(one of the few to accurately predict the timing and scale and impact of the financial crisis) and Kenneth Rogoff, of Harvard, argue that the recession may be deeper and last much longer than currently forecast by most economists.

February 9, 2009


Impact of the Proposed Stimulus Package for Philadelphia

• Stimulus legislation is a moving target, and as a general matter we should not rely on these potential funds in our FY10 budgeting

• Furthermore, most of the potential stimulus funding will support Capital rather than our Operating Budget, although there would be some for the operating budgets of the School District and Philadelphia Housing Authority

• The major exception to this is the way the stimulus may interact with the Governor’s recently proposed State budget

• Some stimulus cuts could lead to indirect impact on the Pennsylvania budget that might affect our reimbursements, especially for Social Services.

February 9, 2009


Major Drivers of Philadelphia’s Budget

Increasing obligations from the following areas constrain Philadelphia’s finances:– Pensions– Employee Health Benefits– Criminal Justice

February 9, 2009


Percentage Change from FY2000-FY2008 of Major Budget Drivers

31%

69%

96%

144%

0%

20%

40%

60%

80%

100%

120%

140%

160%

% Change in RemainingObligations

% Change in Prisons % Change in PensionCosts

% Change in EmployeeHealth Benefits

February 9, 2009


The Rise in Projected Pension Costs from FY09-FY14

$350

$400

$450

$500

$550

$600

$650

$ M

illio

ns

Approved Plan (6/08) Rebalancing Plan (11/08) Current Projection (1/09)

Major Assumptions:

• Pension fund loses 30% in FY09 (through December, the fund had lost just over 20%).

• In FY10 and moving forward, the fund returns to making its earnings assumption of 8.75%

Major Risks: Losses beyond 30% in FY09 or failure to hit earnings assumption in future years.

Opportunities to Outperform Budget: Losses below 30% for FY09, earnings in excess of assumption in future years, legislation in Harrisburg or Washington or ability to issue pension obligation bonds at attractive rates.

February 9, 2009


The process for closing the

$1.04 billion deficit

February 9, 2009


Process: The Lead Up

• Town Hall Meetings: Nov & Dec 2008– 8 meetings, citywide

– After rebalancing the FY2009 budget, we knew we were about to start another, longer budget process for FY2010

– We heard the public: • They want us to look at everything• They want to better understand the options and trade-

offs Philadelphia faces

February 9, 2009


Process: Informing the Public

• This unprecedented level of public engagement in the budget process is a demonstration of the Nutter Administration’s commitment to dialogue, education, and moving forward together as one city.

Five PhillyStat sessions on the budget– 2 informational, context setting sessions

January 26: The State of the CityJanuary 28: The State of the City’s Finances

– 3 sessions, led by the Mayor, on budget scenarios • February 12: Health and Opportunity• February 17: Public Safety• February 18: Transportation & Economic Development

February 9, 2009


Process: Engaging the Public

• Community budget workshops coordinated by the Penn Project for Civic Engagement and WHYY

Thursday, February 12, 2009Northeast: St. Dominic’s School

Wednesday, February 18, 2009Germantown: Mastery Charter School

Thursday, February 19, 2009South Philadelphia: St. Monica’s Catholic School

Monday, February 23, 2009West Philadelphia: Pinn Memorial Baptist Church

February 9, 2009


Process: Transparency & Communication

• Transparency of Scenarios– Scenarios from departments are public– These scenarios will be the bases for discussions

• Meetings with stakeholders on the challenges and choices– Conducted by the Mayor and his senior staff

• Conversations across the City – Kitchen table chats– Visits to faith institutions– Meetings with Block Captains– Participation in civic and community meetings– Stop bys at local diners, businesses, barbershops and

salons

February 9, 2009


Process: City Managers

• The Budget Director has requested 10%, 20% and 30% budget reductions from:– The Administration’s Department Heads– Independently Elected Officials– City Council

• Financial, personnel and service/program impacts have been requested at all levels

February 9, 2009


Guiding Principles

• Any proposed reductions and revenue enhancements should be considered within the context of increasing:– Fiscal integrity– Safety– Education– Jobs

February 9, 2009


How do we begin to close the gap?How do we begin to close

the $1 billion gap?

February 9, 2009


$1.8 Billion of the City’s FY09 Budget is Discretionary $2.1 Billion of the City’s FY09 Budget is Nondiscretionary

$112.2

$674.4

$74.5

$1,200.3

$1,870.3

Contractually Required M andated/Re imbursed Basic Operations Other Fixed Costs All Other

February 9, 2009


Closing the $1 Billion Deficit

• A 10% reduction across all departments would provide $187.5 million annually

• A 10% reduction across all departments would provide $937.5 million over the five year plan

• This is still $107.5 million less then what is needed to close the gap

February 9, 2009


Impact of a 10% cut across the board

These departments would comprise 70% of all cuts

$0

$20,000,000

$40,000,000

$60,000,000

$80,000,000

$100,000,000

$120,000,000

$140,000,000

$160,000,000

$180,000,000

Free Library, Recreation, Fairmount P ark$7,694,507

Public Health, Supportive Housing, DHS$12,822,679

First J udicial District$10,309,698

All Other Operating Departments and Independently Elected Officials

$48,790,119

Streets$12,662,286

Fire$19,279,639

Police$52,499,653

Prisons$23,505,731

February 9, 2009


What happens when departmental cuts are removed from the plan?

$940

$675

$560

$460$400

$335$280 $245

$0

$100

$200

$300

$400

$500

$600

$700

$800

$900

$1,000

$1,100

(in m

illion

s)

Without Police cuts

And w ithout prison cuts

And w ithout Fire cuts

And w ithout Streets cuts And w ithout

Public Health, OSH and DHS cuts

And w ithout FJ D cuts

And w ithout Library, Rec., and Fairmount Park cuts

All departments take a 10% cut

$1.04 billion needed for balanced five year budget

February 9, 2009


The Budget Scenarios

Department scenarios for 10%, 20% and 30% budget reductions

February 9, 2009


The Budget Scenarios:

• Reflect potential impacts from service reductions and revenue enhancements

• Demonstrate the depth and scale of the challenges and tradeoffs we face

• These are potential scenarios that help us evaluate our choices

February 9, 2009


Police

$ Positions

2008 Actual Budget $523,965,9306,624 sworn, 822

civilian

2009 Original Budget $524,001,7496,824 sworn, 843

civilian

2009 Rebalanced Budget $536,442,088

6,624 sworn, 843 civilian

2010 Base Budget $524,996,5256,624 sworn, 838

civilian

Reduction Value Positions Lost

10% Reduction $52,499,653929 sworn, 73

civilian

20% Reduction $104,982,3831,765 sworn, 87

civilian

30% Reduction $157,517,1722,598 sworn, 107

civilian

February 9, 2009


Fire

$ Positions

2008 Actual Budget $189,179,212

2,389 uniform, 114 civilian

2009 Original Budget $192,693,965




2010 Base Budget $192,796,390


Reduction Value Positions Lost Service Levels

10% Reduction $19,279,639 163 uniform3 engine companies, 2 ladder

companies, 3 medic units





Revenue Value

Increase transport fees $5 million

February 9, 2009


Prisons

$ Positions

2008 Actual Budget $222,013,102 2,400

2009 Original Budget $230,001,319 2,400

2009 Rebalanced Budget $230,180,119 2,400

2010 Base Budget $235,057,310 2,360

Reduction ValuePositions

Lost

10% Reduction $18,628,540 40

20% Reduction $42,134,271 210

30% Reduction $65,640,002 590

February 9, 2009


First Judicial District

$

2008 Actual Budget $120,016,366

2009 Original Budget $114,552,203


2010 Base Budget $103,096,983

Target Value

10% Target $12,667,750

20% Target $20,090,750

30% Target $23,941,740

February 9, 2009


Streets

$ Positions

2008 Actual Budget $128,589,201 1,839

2009 Original Budget $145,092,480 1,966

2009 Rebalanced Budget $133,188,280 1,906

2010 Base Budget $126,622,858 1,796


10% Reduction $12,667,750 110

20% Reduction $20,090,750 274

30% Reduction $23,941,740 372

Revenue Value

Commercial Property Collection charge $3 million

City Plan fee $18.75K

Increase hauling permit fee $230k

Save as you throw

$26.5 million for Q4 FY10; $106 million annually

($5 per week per household)

February 9, 2009


Licenses and Inspections

$ Positions

2008 Actual Budget $30,254,839 356

2009 Original Budget $27,635,668 374

2009 Rebalanced Budget $27,307,561 336

2010 Base Budget $26,875,594 330

Reduction ValuePositions

Lost

10% Reduction $2,687,559 6

20% Reduction $5,375,118 55

30% Reduction $8,062,677 100

February 9, 2009


Human Services

$ Positions

2008 Actual Budget$614,779,975 / $71M City

share 1,772

2009 Original Budget$616,308,936 / $60M City

share 1,871

2009 Rebalanced Budget$605,419,669 / $67M City

share 1,871

2010 Base Budget$591,305,201 / $61M City

share 1,871


10% Reduction $18,638,087Subject to State or Federal

funding


funding


funding

February 9, 2009


Free Library

$ Positio

ns

2008 Actual Budget$40,458,9

71 739

2009 Original Budget

$40,245,065 730

2009 Rebalanced Budget

$36,984,508 619

2010 Base Budget$32,196,0

51 628

Reduction Value

Positions Lost Service Levels

10% Reduction$2,447,29

4 67

10 branches closed, 32 branches 3.5 days/week, 3 regionals 6 days/week, Central 7 days/week OR

all 49 branches 3 days/week, 3 regionals 6 days/week, Central 7 days/week


9 96

23 branches closed, 26 branches 5 days/week, 3 regionals 6 days/week, Central 7 days/week OR 17 branches closed, 23 branches at half days, 3 regionals and 9 branches 6 days/week, Central 7

days/week


5 162

30 branches closed, 19 branches 5 days/week, 3 regionals 6 days/week, Central 7 days/week; 162

positions

February 9, 2009


Recreation

$ Positions

2008 Actual Budget $38,769,657 496 FT/114 PT

2009 Original Budget $40,395,732 517 FT/141 PT

2009 Rebalanced Budget $38,746,870 484 FT/231 PT

2010 Base Budget $32,156,586 440 FT/98 PT160 recreation

centers


10% Reduction $2,996,659 69

20% Reduction $5,993,316 121

28 recreation centers closed OR 40 centers operate

at half day schedule

30% Reduction $8,989,974 18258 recreation centers closed

February 9, 2009


Fairmount Park

$ Positions

2008 Actual Budget

$13,172,039 170

2009 Original Budget

$15,740,540 189

2009 Rebalanced Budget

$14,301,486 169

2010 Base Budget

$12,592,432 169

Reduction Value

Positions Lost Service Levels

10% Reduction $1,259,243 16

20% Reduction $2,368,486 40

All (13) Park fountains, summer and fall seasons of

historic mansions

30% Reduction $3,627,730 105

All (13) Park fountains, summer and fall seasons of

historic mansions, Horticultural Center, Lloyd

Hall, Welcome Center at JFK Plaza

February 9, 2009


Public Health

$ Positions

2008 Actual Budget $112,695,423 665

2009 Original Budget $122,778,884 757


2010 Base Budget $119,149,986 740


10% Reduction $4,934,999 6

20% Reduction $9,869,998 58Close Nursing Home,

close one health center

30% Reduction $14,804,997 157

Close Nursing Home, close three health

centers

Revenue Value

Sliding scale co-pay for uninsured visits at Health Centers $1,022,000

Charge fee for pre-employment and “back to work” physicals $759,769

February 9, 2009


Supportive Housing

$ Positions

2008 Actual Budget $40,544,073 131

2009 Original Budget $40,210,085 138


2010 Base Budget $38,863,600 134


10% Reduction $3,886,360 6167 family beds and 117

single adult beds lost





February 9, 2009


Records

$ Positions

2008 Actual Budget $7,633,941 76

2009 Original Budget $7,679,871 76


2010 Base Budget $6,093,897 69


10% Reduction $1,468,377 23 filled



Revenue Value

Update recording fees by $30 $3 million

February 9, 2009


Revenue Options

February 9, 2009


Value of Potential Tax Rate Changes (amounts in millions)

Current Increase Additional Revenue

Sales (requires State authorization) 7.0% 0.1 percent $12.8

Real Estate 3.305% 1 mill $10.8

BPT – Gross Receipts 1.415 mills .1 mill $5.0

Real Estate Transfer Tax 3.0% 0.1 percent $4.3

BPT – Net Income 6.45% 0.1 percent $4.2

Amusement 5.0% 1 percent $3.7

Parking 20.0% 1 percent $3.5

Wage – Resident (requires PICA approval)

3.9296% 0.01 percent

$2.3

Wage – Non Resident (requires PICA approval)

3.4997% 0.01 percent

$1.6

February 9, 2009


Annual Resident Wage Tax Burden for a Hypothetical Family of Three in Philadelphia, 2007

$1,672

$3,361

$5,036

$6,683

$10,009

$1,715

$3,447

$5,164

$6,853

$10,264

$331

$1,386

$2,634

$4,030

$6,763

$0

$2,000

$4,000

$6,000

$8,000

$10,000

$12,000

$25,000 family income $50,000 family income $75,000 family income $100,000 family income $150,000 family income

FY2010 3.9296% Wage Tax Burden Amount Wage Tax Burden Amount with 0.1% Increase 51 City Average Burden Amount

Source: Government of the District of Columbia, (August 2008) "Tax Rates and Tax Burdens - in the District of Columbia - A Nationw ide Comparison. 2007"

A 0.01% Wage Tax Increase will add the following amount to a family's tax burden:$25,000 income $50,000 income $75,000 income $100,000 income $150,000 income

$43 $86 $128 $170 $255

February 9, 2009


Annual Real Estate Tax Burden for a Hypothetical Family of Three in Philadelphia, 2007

$1,786

$4,235

$5,199

$6,275

$9,898

$1,840

$4,363

$5,356

$6,465

$10,197

$1,786$2,035

$2,538

$3,101

$5,004

$0

$2,000

$4,000

$6,000

$8,000

$10,000

$12,000


Current 3.305%* Real Estate Tax Burden Amount Real Estate Tax Burden Amount with a 1 mill Increase 51 City Average Burden Amount

Source: Government of the District of Columbia, (August 2008) "Tax Rates and Tax Burdens - in the District of Columbia - A Nationw ide Comparison. 2007"* City portion of Real Estate tax

A 1 mill Real Estate Tax Increase will add the following amount to a family's tax burden: $25,000 income $50,000 income $75,000 income $100,000 income $150,000 income

$54 $128 $157 $190 $299

February 9, 2009


Annual Sales Tax Burden for a Hypothetical Family of Three in Philadelphia, 2007

$566

$803

$1,046

$1,491

$1,645

$574

$814

$1,061

$1,512

$1,669

$723

$1,003

$1,321

$1,844

$2,062

$250

$450

$650

$850

$1,050

$1,250

$1,450

$1,650

$1,850

$2,050

$2,250


Current 7% Sales Tax Burden Amount Sales Tax Burden Amount with a 0.1% Increase 51 City Average Burden Amount

Source: Government of the District of Columbia, (August 2008) "Tax Rates and Tax Burdens - in the District of Columbia - A Nationw ide Comparison. 2007"

A 0.1% Sales Tax Increase will add the following amount to a family's tax burden:$25,000 income $50,000 income $75,000 income $100,000 income $150,000 income

$8 $11 $15 $21 $23

February 9, 2009


Business Privilege Tax Burden

• According to a study by Wharton Economist Robert Inman, increasing the City’s business tax rate will result in revenue increases in the short term, but a reduction in revenues in the long term – because businesses become less likely to stay or move to Philadelphia.Source: Robert Inman, “Local Taxes and the Economic Future of Philadelphia: 2008 Report.”

• We are one of only a few cities which tax businesses on both income and receipts.

February 9, 2009


What Other Cities Are Doing

February 9, 2009


New York, NY

• Balanced $500 million problem for FY09• New $4 billion gap for FY10 out of $43.3 billion total

budget• The Four Components of Mayor Bloomberg’s Plan:

– Reduce operating expenses: $1 billion– More generous Medicaid reimbursements from federal

government: $1 billion– Pension reforms, health care contributions and other sources

from unions and the state: $1 billion– Increase sales tax to 8.625 percent from 8.375 percent: $894

million

February 9, 2009


New York, NY

• Reduce operating expenses: $1 billion– Reduce the number of education employees by 1,440:

$91 million– Reduce subsidies to libraries by 7 percent: $20 million – Reduce money for senior centers by 5 percent: $5

million– Reduce the police force by 1,000 officers, to 34,700:

$48.9 million– Reduce firefighter crews from 5 to 4 per company or

eliminate companies in dual-company fire houses • (requires union negotiations)

February 9, 2009


New York, NY

• More generous Medicaid reimbursements from federal government: $1 billion– Not applicable to Philadelphia

• Pension reforms, health care contributions and other sources from unions and the state: $1 billion– Tier 5 pension system for new employees: $200

million• work longer and retire at a later age• legislation pending

– Bloomberg has asked for the suspension of pay raises

February 9, 2009


Los Angeles, CA

• Balanced $406 million shortfall for FY09

• New $433 million problem in FY10 of $7 billion budget

• Considerations by Mayor Villaraigosa include:– Recall take-home vehicles – Voluntary retirement of union employees– Layoffs

February 9, 2009


Chicago, IL

• Balanced $469 million problem for FY09– 420 layoffs– Furloughs for all employees

• Unions agreed to furloughs to avoid 1,000 layoffs

– New taxes, fines and fees– Privatization of the Chicago Skyway, Midway

Airport, downtown parking garages and city parking meters

– Slowed police hiring• New estimated $50.5 million deficit for FY10 (revised

twice since November)• Mayor Daley has requested additional cuts from

departments and concessions from labor unions to help balance

February 9, 2009


Phoenix, AZ

• Balanced $250 million problem for FY09• New $270 million in FY10 out of $1.2 billion

general fund and $3.7 billion total budget• Mayor Gordon’s Budget includes:

– Eliminate 50% of afterschool programs– Cut branch library hours and only 1 of 8 branches

now open on Sunday– Close "mini" city-hall offices– Leave 250 police officer positions and 51

firefighter slots vacant– Reduce graffiti removal– Eliminate softball leagues from 12 parks– Eliminate 1,091 positions

February 9, 2009


Phoenix, AZ

• Reductions (continued)– Increases in all fees– Cut maintenance for parks and streets– Increase the weekly garbage and recycling trash rate by

$1.35 a month for homeowners from $25.45 to $26.80 a month and increase commercial trash fees by $2 a month from $36.25 to $38.25 a month

– Close transfer stations on holidays and weekends– Reduce hazardous waste events from ten to four times

a year – Cut daytime security officers– Eliminate weekend clean-up staff– Cut quarterly pick ups for old sofas, kitchen appliances,

yard trimmings and other bulk items to twice a year.

February 9, 2009


Detroit, MI

• $300 million deficit for FY10• Mayor Cockrel’s plan includes:

– 20% Mayoral paycut– Cut $2 million from Mayor’s Office budget– 10% paycut for all 15,000 City workers

• Alternative is 1,000 layoffs

• Downgraded to below investment grade due to poor financial management

February 9, 2009


Fundamental Questions as We Address the Budget Problem

• What city services should we provide, and at what level?

• What is the best way to pay for these services?

February 9, 2009


Where We Go From Here

• Continue to engage with City Council

• Maintain a vigorous public participation process

• Conduct meetings with stakeholders

• Mayor presents his budget to City Council on March 19, 2009

February 9, 2009


FY 2010-2014 Budget Briefing for City Council

Mayor Michael A. NutterFebruary 9, 2009

fy 2010-2014 budget briefing for city council

Documents