Revenue Budget and Capital Budget - PowerPoint

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					2011 Budget Proposal
      Overview

  Bill Peduto, Finance Chair

   City Council Budget Office
      Bill Urbanic, Director
      The 2011 Ravenstahl Budget

  $456m Revenue and $446m Expenditure Budget
    Expenditures remain at the 2010 budget level
 Pension Expense Account for Majority of Increase
  Police staffing reduced by 25 Officers offset
by $3m Federal grant to hire new officers for 3
   years. Recruit class funding cut by half
      668 Fire Fighters (includes 15 from
           Wilkinsburg fire merger)
  2% salary increase for all non-union employees
                $25m PAYGO Budget
20112007 Expenditures
     Proposed Expenditures
                  $446 Million
             All Other Gov
                  12%
   Public Works
        7%
                             Public Safety
                                29.5%


    Benefits 32%
                             Debt 19.5%
                             Cost of Government
                       2003           vs.                  2011

               All Other                               All Other Gov
                 Gov                                        12%
                 13%         Public         Public Works
                                                                       Public Safety
Public Works                 Safety              7%
     8%
                              34%                                         29.5%


 Benefits                                     Benefits 32%
   25%                                                                 Debt 19.5%
                           Debt
                           20%



  $401 Million Budget                                      $446 Million Budget
2011 Capital Budget Proposal
             $52.1 Million


      Federal, State and
       other matching
           funds
        $10.5 Million
             20%                CDBG
                              $16.5 Million
                                  32%




                  CITY
              $25.1 Million
                  48%
        2011 Proposed Capital Budget

      CDBG and Operating Funds Allocations                          2011            % of
                 by Function                                       Budget          Budget
Community Programs (ULO, Senior and Employment programs)      $        4,015,000    10%

Equipment Leasing Authority                                   $        5,000,000    12%

Facilities Maintenance                                        $        4,420,000    11%

Infrastructure (includes $9 Million for Street Resurfacing)   $       12,700,000    31%

Transportation Improvement Program (TIP)                      $        1,240,000    3%

Public Safety (Includes $3.25 Million to Demolition)          $        3,865,000    9%

Administration and Technology Upgrades                        $        3,280,000    8%

URA                                                           $        7,100,000    17%

                           Total City Funds                       $ 41,620,000      100%
           CDBG                          Vs. City Funds
                              Admin &
                            Technology
                               11%
           URA




                                                                                             %
                                                                                          .12
           19%




                                                                                       h 6
                                                                  URA
                                      Community




                                                                                  Tec
                                                               15.53%
                                    Programs (ULO,




                                                                                   &
                                                     TIP                                         Equipment




                                                                               min
Public Safety                         Senior and
                                                     5%                                           Leasing
  Includes                           Employment




                                                                            Ad
                                                                                                 Authority
 Demolition                            programs)                                                    20%
                                                   Public Safety
     8%                                   24%
                                                      Includes
                                                     Demolition
           Infrastructure                              10.01%                                     Facilities
         (includes Street                                                                        Maintenance
           Resurfacing)           Facilities                        Infrastructure                 11.23%
                28%              Maintenance                      (includes Street
                                     10%                            Resurfacing)
                                                                        32.16%
Debt Service improves moving closer to be in
   compliance with GFOA Best Practices

•Best practice would be no more than 10% of Budget
• Debt service is reduced from 20.6% in to 19.5% in 2011
PAYGO has begun to work to pay off debt but won’t be fully
realized until 2018
•Bond Dollars are now exhausted
•The PAYGO Capital Budget will be depleted following 2011
will need to borrow for capital in near future
•Additional Fund Balance Dollars are being proposed to be
used to defease future bonds ($37.7 Million)
      2003 vs. 2011 Benefits as % of Budget
2003 Budget   Healthcare             Worker's Comp
                                                        2011 Budget
                 11%                      5%




                           Pension
                             7%                           Healthcare
                                                             15%
                                        SS-Severance-                        Worker's Comp
 All Other                               Unemploymt
                                                                                  6%
                                             3%
    74%
                                All Other
                                  63%
                                                                 Pension
                                                                   14%




                                                                       SS-Severance-
                                                                        Unemploymt
                                                                            2%
Employee Benefits $133 Million
                                SSI- Unem ploym ent-
                                     Severence
                                        5%




     Pension
       38%
                              Healthcare
                                 40%




       Unem ploym ent Com p
               16%                    Personnel Leave
                                     Buyback/Severance
                                            1%
35
  ,0                                                PENSION COSTS INCREASED 85% ’03-’10


                                                                                                                        32,438,342
     00
       ,0
         00
           30
             ,0
                00
                  ,0
                    00
                      25
                        ,0
                           00
                             ,0
                               00
                                  20
                                    ,0
                                       00
                                         ,0
                                           00
                                             15




                                                                                                                            85%
                                               ,0
                                                  00
                                                    ,0
                                                      00
                                                        10
                                                          ,0
                                                             00
                                                               ,0




                                                                                       4,453,670
                                                                 00




                                                                                                          2,629,163
                                                                    5,
                                                                      00
                                                                         0,
                                                                           00
                                                            -                0




                                                                                 Healthcare        Worker's Comp      Pension
A Broken Pension System for Cities and Older Municipalities
 • Municipalities are asked to run a Social Security Program for
   Public Safety employees

 • Can’t sustain a social security system where the beneficiaries
   retire at age 50 with ½ their salary or better for the next 30 years

 • Older municipalities are at a disadvantage with aging, reduced
   workforce

 • More pensioners than active employees Payout is more than Pay-
   in

 • Now, many newer municipalities are 100% funded by state aid -
   while older communities have their aid diminished

 • Current formulas rely on excellent market returns and discourage
   full funding of pensions


         The underfunding has to stop at some point!
 Deficiencies in ACT 205 for “Distressed
        Pensions” Costs the City
• Pittsburgh’s State Pension Aid decreased by nearly $9
  Million Dollars since $24 Million in 1988

• Meanwhile other “distressed” communities such as
  Upper St. Clair, Fox Chapel, Mount Lebanon, etc.
  continue to realize substantial State subsidies

• Since State Pension Aid comes from the same pool of
  funds, payments to wealthy communities adversely
  effect truly distressed communities such as Pittsburgh
  and other Act 47 communities

• Some correction has taken place, but not enough
PENSION – State Required Payment Increases


        2010            2003            Difference


  $   54,227,150   $   23,875,262   $   30,351,888
 CHART A

  Act 205 STATE PENSION AID Decreases


        2010            2003            Difference

  $   15,352,000   $   18,214,489   $   (2,862,489)
 CHART B
   City, Penalized by the
Commonwealth, in “Catch 22”
  •State Pension Aid Formula has worked
        against city recovery efforts

       1 Police Officer or 1 Firefighter = 2 Units

 •Reductions in Police and Fire positions
    penalizes the City by reducing aid
Aid System that helps people that are working
that don’t pay in?? Ridiculous!
Aid should be based on number of retirees
        Pension Aid History
• In 1988, Philadelphia was locked in at 25% of
  Pension Fund pool and received $30 Million

• Pittsburgh received 19% of pool in 1988 or $24
  Million Dollars

• Wealthy communities opt in during the 1990’s by
  substituting pension enhancements for wage
  increases

• 20 years later City receives less than 9% or $15
  Million
                               Revenues 2011
                                All Other Slots Revenue    2% Share of Slots       State Approp.
             Non-Profit Paym ent                1%
                                    3%                           2%                      1%
                     1%
Authority Paym ents
        2%
             Provision of Services
                      3%
         Breakeven Centers
                5%
                                                            Real Estate Tax
                                                                  29%
      Federal & State Grants
                5%

                          Other Taxes, including
                           Penalties & Interest
                                    9%                          Parking Tax
                                                                    10%


                  Payroll Prep. Tax
                                                    Earned Incom e Tax
                        10%
                                                           16%

                                Deed Transfer Tax
                                       3%
                                                                               $456 Million
    Who Paid in 2010?
                                    Non-Profits
          Suburban Workers
                 2%                    0%



             Parking
              10%



Government/Act77
                              City Business
      13%                          31%




                   City Taxpayers
                         44%
        Tax-Exempt Problem Continues
 •Although significant strides were made with a $13 million commitment
 over 3 years - Some large profit-making Hospitals & Universities still
 aren’t paying their fair share
                                              1/3 of City Real Estate is Tax
                                              Exempt = $70 Million worth
                                              of taxes – City Residents and
                               Hospitals
                               Universities
                               Colleges
                               Non-profits    Business Subsidize
  City residents
  and businesses

  ($124.5 million in tax                       Tax-exempt
  burden)                                      properties

                                               Taxpaying
                                               properties


•Large Hospitals & Universities also Exempt from Payroll Tax
                           •$17 Million in lost payroll tax revenue
Tax-Exempt Problem Continues
•Whether you are a business, a resident or a non-profit if you
don’t pay your electric bill – your lights get shut off

•It costs money to run government and the City of Pittsburgh and
its shrinking tax base can no longer afford to give away services

•Non-profits provide valuable services to the region but only a 56
square mile area of the poorest population are impacting with
paying for the hosting of those services.

•For future agreements we need to determine in a scientific
manner what the value of services are that are provided to each
non-profit sector and determine a real number that can be
depended on in the City’s annual budget or figure a way to be
able to spread out the costs of those services to the region that
benefits from the services the non-profits provide.
 Non Profit Breakdown based on Payroll Tax $17 Million



                                                 Education
                                                 $4.4 Million




                                                                  Medical

                                                                  Education

                                                                  All Other




                                                    All Other
                                                   $1.3 Million
  Medical
$11.3 Million
        Revenue Proposed Budget

•Majority of taxes stay flat or under perform in out years
   •Real Estate, LST, and Payroll Tax, Increase in prior
   year RET collection with Jordan
•Payroll Tax is performing but does not supply as much
as Business Privilege and Mercantile Tax did
•Parking Tax had been growing better than expected –
and the State froze the tax at 37.5%
•State eliminates other taxes via “State Tax Package” of
2004 (Act 222) $9 Million Eliminated with loss of the
Business Privilege Tax
              2011 through 2015


               2011          2012          2013           2014           2015

Expend      446,487,573   456,948,847   498,838,636    506,562,279    518,159,120

Revenue     456,109,600   487,137,100   475,372,100    481,980,000    493,524,000

Surplus /
(Deficit)     9,622,027    30,188,253   (23,466,536)   (24,582,279)   (24,635,120)
 Effects of Economic Crisis on Revenue

• Pittsburgh’s taxes have weathered the
  storm so far– Job losses in retail nationwide are well
  known
• Real Estate 28% of Revenue Shielded by
  base year assessment
• Salary Based Taxes – Pay Roll & Earned
  Income Taxes have not been severely
  effected
• Gaming Revenue
• State Appropriations will be unreliable
Discussion for State Legislative Adjustments

              Expenditure Side:
 • Pension Reform
    – Pension pooling with other communities
    – Attempt to fix the Pension was half hearted
    – All municipalities need to be in 1 plan
 • Assistance with Retiree Healthcare
 • Pittsburgh is not the only Commonwealth municipality
   with these problems – most urban job centers – Erie,
   Johnstown, New Castle and other Act 47 communities
   (Urban Job Centers)
 • Assistance with shared service items such
   as Public Safety, CIS and Public Works
Discussion for State Legislative Adjustments

            Revenue Side
 • Must revisit tax reform package of
   2004
 • Potential other opportunities:
 • Allow increase in the Amusement Tax
   currently 5% - each % = $1.9 Million
 • Revise $52 LST to a percentage of
   income 0.25%= $16.5 Million
Discussion for State Legislative Adjustments

                   Revenue Side
 • Create Formula for Non-Profits
   – One that can apply to all Commonwealth host
     communities
   – Suggest using payroll tax as a measure for
     contribution 0.55% = $17 Million
 • Split Earned Income Tax = $29 Million
   –   Half where you live 0.5% where you work
   –   City of 300,000 residents supports 600,000
   –   Landscape has changed (sprawl)
   –   Statewide issue – this is why Act 47 creates a non-
       resident tax, it was also in Act 250 for Pension relief
            Who pays wage taxes in Pittsburgh?
        Two out of three jobs are held by non-City residents!




City Residents pay                   Non-residents pay just
$72 Million                          $8 Million
in Wage and LST (Occupation)          in LST (Occupation Tax)
Taxes
The Real Problem 2003




Is the Same Problem Today
 Picture the State’s Cities as amusement parks

                                    It costs money to
                                    maintain rides and pay
                                    staff – everyone has to
                                    pay to keep the park
                                    open


There are Day passes, Senior
Passes, resident passes and
deals for charities
There are NO FREE RIDES
except in Pittsburgh -
non-profits, suburban workers etc……….
      Conclusion: 2011 Budget has an ICA induce $16m hole
      Out-years - New Revenue & Expenditure savings from State
          legislative action are still needed for future



• The cost of providing services will continue to increase in
  both the private and public sectors.
• Long term public safety expenditures will continue to
  increase we must take advantage of all grant and other
  subsidies
• Service reductions and sacrifices by employees and
  residents are no longer in the City’s best interest
• Additional sustaining revenue and adjustments in State
  Pension Laws Must Be in the equation for continued success
• Major issues are still in the control of the Commonwealth
• Continued lobbying effort by the Administration and Council
    ICA rejects Mayors budget

• Rejection #1 – included lease plan, which
  has not been passed
• Rejection #2 – Pension payments $12
  Million less than mandated by Act 47
• ‘Unverifiable Revenues’ – non-profit $20
  million dollars in 2012 – not contiguous
  with the Act 47 Plan
• 2011 Budget is now Council’s

				
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Description: Revenue Budget and Capital Budget document sample