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City of Philadelphia Five-Year Financial Plan Fiscal Year 2006 - Fiscal Year 2010 (including Fiscal Year 2005) Fourteenth Five-Year Plan for the City of Philadelphia pursuant to the Pennsylvania Intergovernmental Cooperation Authority Act Presented by the Mayor, January 25, 2005 Approved by City Council, June 16, 2005 Approved by PICA, July 21, 2005 CITY OF PHILADELPHIA MAYOR John F. Street MAYOR'S CABINET Joyce S. Wilkerson .......................................................................................................................................................Chief of Staff Pedro Ramos .......................................................................................................................................................Managing Director Vincent J. Jannetti .....................................................................Acting Secretary of Financial Oversight/Director of Finance George Burrell ................................................................................................................................... Secretary of External Affairs Stephanie Naidoff................................................................................................... Director of Commerce/City Representative Romulo Diaz ................................................................................................................................................................. City Solicitor Richard Lombardo ..............................................................................Acting Secretary of Strategic Planning and Initiatives/ Executive Director of City Planning Commission Sylvester Johnson........................................................................................... Secretary of Public Safety/Police Commissioner Debra Kahn ..................................................................................................................................................Secretary of Education Dianah Neff............................................................................................................................................ Chief Information Officer Kevin Hanna ........................................................................................Secretary of Housing and Neighborhood Preservation Budget Director Dianne E. Reed COMMISSIONERS AND AGENCY HEADS Lloyd Ayers James Muller Fire Commissioner Deputy Managing Director, Fleet Management Karen Borski John Nacchio Interim Executive Director, Fairmount Park Commission City Treasurer Bernard Brunwasser Lynda Orfanelli Water Commissioner Personnel Director Julia Danzy Cheryl Ransom-Garner Director, Division of Social Services Acting Human Services Commissioner Joan Decker Victor N. Richard III Records Commissioner Recreation Commissioner John Domzalski Joan Schlotterbeck Health Commissioner Acting Public Property Commissioner Arthur C. Evans Barry Scott Director, Office of Behavioral Health/Mental Retardation Svcs. Acting Director, Risk Management William Gamble Elliot Shelkrot Procurement Commissioner President and Director, Free Library of Philadelphia William Grab Patricia L. Smith Director, Office of Labor Relations Director of Neighborhood Transformation Rob Hess Robert Solvibile Director of Adult Services Acting Licenses and Inspections Commissioner Charles Isdell Clarena Tolson Aviation Director Streets Commissioner Nancy Kammerdeiner Richard Tustin Revenue Commissioner Director, Capital Program Office Leon A. King Prisons Commissioner CITY OF PHILADELPHIA FIVE-YEAR FINANCIAL PLAN Introduction................................................................................................................................. ……….i Maintaining Fiscal Health......................................................................................……………...1 Implementing Neighborhood Transformation and Blight Elimination................................34 Promoting Economic Development..........................................................................................48 City Workforce ..........................................................................................................................81 Providing High Quality Public Education and Comprehensive, Coordinated Social Services......................................................................95 Enhancing Public Safety and Quality of Life........................................................................115 Appendices: I. Departmental Key Performance Measures II. Departmental Five Year Obligations Summary III. Enterprise Funds: Division of Aviation, Water Department, Philadelphia Gas Works IV. Long-Term Obligations V. Other Statutory Requirements – General Fund VI. Other Statutory Requirements – Cash Flows VII. Base Obligation Methodology VIII. Capital Program and FY2006 Capital Budget IX. Acronym Dictionary Introduction Overview The commitments and investments the City has made in the areas of public safety, education, social services, economic development, and neighborhood transformation and blight elimination have added a new vitality and strength to the city. The FY04 annual Citizen Survey reflects the highest satisfaction levels with many City services ever recorded in the Survey’s history. Operation Safe Streets has effectively reduced the open-air drug trade. With the City’s leadership, the School District of Philadelphia has gone from a deficit-producing entity to one where continuous educational and financial progress is being made, attracting exciting investments from outside partners like Microsoft. The Division of Social Services established by the Mayor helps agencies to attack problems of self-sufficiency, drug and alcohol abuse, and child welfare in a systemic, coordinated way. Annual tax reductions have been implemented, which by the end of FY05 will have returned over $1 billion to the taxpayers. The Neighborhood Transformation Initiative and the annual tax reductions have effectively raised property values in all city neighborhoods, as evidenced by dramatic increases in real estate transfer tax revenue and housing sale prices. Protecting the City of Philadelphia’s real and measurable progress requires a delicate balancing act among competing needs. Faced with a declining fund balance, dramatic increases in pension, health, and medical costs, an archaic City Charter that impedes sound management practices, an aggressive tax reduction scheme, and state intrusions on Home Rule and local governance, the City has been forced to take drastic action over the past year. In FY05, with a fund balance projection of just over $1 million and a looming deficit projection of $40 million for FY06, the City had no other choice but to reduce the budget through position eliminations and employee layoffs, since labor is our largest expenditure category. The July 1, 2005 budgeted workforce compliment of 22,914 leaves many City departments at their lowest staffing levels in 40 years. In this revised FY06-FY10 Five Year Plan, the City describes the actions planned to support the Mayor’s objectives, enhance Philadelphia’s world-class status, and manage with less while continuing to propel the city into the future. We also recognize that significant challenges remain. With tax cuts all but locked in over the next decade and pension obligations escalating by an average of over $30 million each year, the Five-Year Plan is tenuously balanced, as shown in the chart on top of the next page. Introduction FY06-FY10 Five Year Financial Page i Plan Fund Balance at Year-End General Fund FY91 (Historical) - FY10 (Projected) 295.1 $305* 230.0 230 205.7 169.2 s r 139.0 118.5 128.8 lla o 130 91.3 80.5 73.4 71.0 D f o 26.7 22.2 s 3.0 15.4 2.7 n 30 0.9 Millio -70 -46.8 (71.4) -170 (153.5) 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 Fiscal Year Source: Office of Budget and Program Evaluation * The Fund Balance reduction in FY01 was primarily a result of a one-time adjustment imposed by the Government Accounting Standards Board in its Statement 33, requiring the use of the full-accrual accounting method starting that year. Without this adjustment, the fund balance would have been $305 million. The $46.8 million General Fund deficit at the end of FY04 was the City’s first negative fund balance in twelve years. While the deficit is primarily attributable to a delay in receiving state reimbursement for human service program costs, it is nonetheless a sign of the increasingly limited room for error in City finances. Even after the employee reduction initiative that included layoffs, the fund balance, not including the reserves identified below, is projected to be $26.7 million and $22.2 million in FY05 and FY06, respectively – roughly 0.6 percent of General Fund revenues. Subsequent to the passage of the FY06 budget by City Council, at the request of PICA, the City made a technical modification to revenues. The City added a revenue line item called “Revenues Reserved for PICA Concerns” that reserves an additional $7 million in FY06 and FY07, as a contingency against shortfalls in payments from the Philadelphia Parking Authority. While the City expects to receive $25 million of full funding, the reserve reduces the fund balance in those fiscal years, as well as cumulatively during the Plan. The fund balance is projected to fall to $0.9 million in FY08. Rating agencies seek, and GFOA recommends, fund balances in the 5 percent ($100 million) to 15 percent range. The fund balance improves in FY09, due
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