Philadelphia's_Prese

City of Philadelphia1/28/2009

January 28, 2009

• City of Philadelphia

• Informational Session

Philadelphia’s Present Condition

Part 2


AGENDA

I. How the national economic crisis affects

Philadelphia’s budget

II. Description about the major drivers of the

Philadelphia budget

Philadelphia’s Present Condition


How the national economic crisis affects


State of Philadelphia


When the national economy suffers,

Philadelphia’s economy suffers

-8.00

-6.00

-4.00

-2.00

0.00

2.00

4.00

6.00

8.00

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

% Change in Real GDP

Perc

en

t C

hange

Calendar Year

US Economic Growth 2001 to 2010


When the national economy suffers,

Philadelphia’s economy suffers

-8.00

-6.00

-4.00

-2.00

0.00

2.00

4.00

6.00

8.00

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

% Change in Real GDP % Change in Real City Tax Receipts

Real GDP Growth compared to Philadelphia Total Tax Growth

Perc

ent

Change

Calendar Year


As real estate market declines, so does the

real estate transfer tax revenue

22.3%

10.0%

29.7%

31.0%

52.0%

51.4%

60.3%

11.5%

-10.2%

-37.3%

0.0%

-60.0%

-40.0%

-20.0%

0.0%

20.0%

40.0%

60.0%

80.0%

FY2000 FY2001 FY2002 FY2003 FY2004 FY2005 FY2006 FY2007 FY2008 FY2009 FY2010

FY2000 to FY2008 are actual; FY2009 and FY2010 are projected

Philadelphia Realty Transfer Tax Growth

FY2000 to FY2010

Perc

ent C

hange

Calendar Year


Market forces determine pension performance

-5.5%

-5.2%

2.4%

15.9%

10.3% 11.4%

16.9%

-3.7%

-20.0%

-0.4%

-17.0%

5.7%

9.8%

4.9% 5.1%

18.1%

-13.8%

-28.2%

-40%

-30%

-20%

-10%

0%

10%

20%

30%

Jun-01 Jun-02 Jun-03 Jun-04 Jun-05 Jun-06 Jun-07 Jun-08

Philadelphia Gross Pension Returns vs Dow Jones Annual % Change

Gross Pension Returns Dow Jones Annual % Change

Jan-09

* Note: The pension fund invests in other items in addition to equities.

DATE

PercentChan

ge


Breakdown of local tax revenue

Real Property16%

Wage, Earnings, Net Profits, PICA

57%

Business Privilege

14%

Real Estate Transfer

5%Other

8%


Financial Shortfall Over 5 Years

Without corrective action, Philadelphia’s projected

shortfall will continue to get worse

-$47

-$169

-$472

-$667

-$871

-$1,042-$1,200

-$1,000

-$800

-$600

-$400

-$200

$0

Millio

ns

FY12FY11FY10 FY13 FY14FY09


Description about the major drivers of


State of Philadelphia


The total annual City budget for all funds is $6 billion

FY ‘09 Budget

Enterprise Funds: $926 million

Grants / Community Development Funds: $1.1 billion

Other Funds: $29 million

General Fund: $3.9 billion

Discretionary = 41%

Non-Discretionary = 59%

* As of November rebalancing plan

The entire $1.04 billion shortfall in the 5 year plan is in the

General Fund

Funding Breakdown


Pension costs have skyrocketed beyond health

benefits, wages, and department costs

0%

20%

40%

60%

80%

100%

120%

140%

160%

180%

200%

FY99 FY09 FY13

Wages Benefits Pensions Fire, Library, Recreation, and Fairmount Park Costs

Perc

en

t C

han

ge

FISCAL YEAR


Losses driving the $1.04 billion shortfall in the

5-Year Plan

Tax Revenue Losses

-44%

Increase in pension

payments-32%

Department operating deficits

-12%

Failure to achieve POB

savings-12%


The “Big Six” departments make up 49%

of the City’s budget

Police Department14%

Fire Department5%

Prison System6%

First Judicial District3%

Streets Department3%

Department of Human Services

15%

Department of Public Health

3%

Pensions and Benefits

24%

Debt Service3%

Other Departments24%


Police Department

32%

Fire Department10%

Prison System10%

First Judicial District

8%

Streets Department

8%

Department of Human Services

8%

Other Departments

24%

The “Big Six” departments employ 76% of

the City’s workforce


Benefits and Pensions make up 25% of all

budget costs

Pensions12%

Benefits13%

Salaries and Overtime

36%

All Other Expenses

39%


Pension costs will continue to increase

through the 5-Year Plan


Other City Responses to Financial Crisis

Phoenix, AZ $270 million shortfall in FY09 and cuts ranging from 15% to 60% in departments

Los Angeles, CA $432 million shortfall in FY09 and cuts to core services like Public Safety, considering privatization of services

San Francisco, CA $575 million shortfall in FY09 and FY10 and $26.7 million in cuts to the Health Department

Seattle, WA $1 million cut from operating costs in FY08 and FY09 real estate tax revenue projections down 40%

Houston, TX $200 million in infrastructure projects postponed and plans to liquidate certain investments for capital

Atlanta, GA $140 million shortfall in FY09 and approximately 600 layoffs, including the Fire Department

Boston, MA $140 million shortfall for FY10, borrowing for $600 million in capital projects postponed, one-year wage freeze for ALL employees, 15% cut across departments

Washington, DC $258 million shortfall in FY09 and elimination of 200 vacant positions New York, NY

$5.2 billion shortfall in FY09 and FY10, 12% cuts across departments, 7% property tax increase, tax cuts delayed and 3,000 layoffs

Chicago, IL $500 million, or 8%, in cuts

* Source:


• Thursday, Feb. 12th: St. Dominic's School, Frankford

Avenue near Benson Street, Holmesburg.

• Wednesday, Feb. 18th: Mastery Charter School, Pickett

Campus, Wayne and W. Chelten avenues, Germantown.

• Thursday, Feb 19th: St. Monica's Catholic School, 16th

and Porter Streets, South Philadelphia.

• Monday, Feb. 23rd: Pinn Memorial Baptist Church, 54th

Street near Woodcrest Avenue, Overbrook.

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