1. CITY OF PATERSON: Presentation to Its Shareholders: The Employees and Taxpayers SFY 2011 Curing the problems in unity

2. CITY OF PATERSON What can we consider to cure the problems before us? First, we need to understand how serious the problems really are..... 2

3. CITY OF PATERSON The Problems We Are Facing The City’s SFY11 budget, as introduced, included a request for Transitional Aid of $70 million from the State of NJ. We were awarded only $22 million! The reasons we requested $70 million: – The State reduced other state aid previously allotted the City by more than $5 million. – Real estate assets owned and sold by the City in the past have been exhausted. Revenue this year is $6 million less than last year. – The City’s surplus has been completely wiped out, leaving nothing in the ‘bank’. Last year, the City’s budget included surplus revenue of $6.5 million. – The City ended its SFY10 with a deficit of $5.3 million, which has to be raised in this budget cycle. – The City had a shortage in its health benefits line item in SFY10 of $1.6 million. This also has to be raised in the current budget cycle. – There are many costs which increase every year. The SFY11 budget currently has fixed cost-increases of almost $25.5 million in the major areas. 3

4. CITY OF PATERSON The Problems We Are Facing The cost of major SFY11 increases: Police Salariesup $8.8 million Pension Costsup $3.7 million Health Insuranceup $3.6 million Fire Salariesup $3.5 million Debt Service Costsup $2.9 million Other Salariesup $1.9 million Public Works Costsup $1.1 million 4

5. CITY OF PATERSON The Problems We Are Facing The escalation of these costs, coupled with the City’s loss of revenue opportunities, are the primary causes of the City’s inability to keep paying for these costs. Until all of us – the City’s Shareholders – realize that the only cure for what ails the City is to take bold and courageous steps to reduce these increases, we will be left with options that includes layoff. 5

6. CITY OF PATERSON Ideas Under Consideration Currently, we have initiated a 10 Day Furlough on all City employees (except for our Public Safety Department). Objective – to save approximately $1.2 million. Reality – In order to achieve any significant savings, a 10 Day Furlough on Public Safety Department would have saved an additional $3.1 million. 6

7. CITY OF PATERSON Ideas Under Consideration Reduction of the Work Hours – From a 35 Hour Work-Week to a 32 Hour Work-Week (or Equivalent in Public Safety Department) Objective – The City wishes to realize an almost 8.5 % savings in payroll costs, across the board. For SFY11, the total payroll costs are $110 million. If this objective had been effective July 1,2010, the annual across-the-board savings would have been $9.3 million. 7

9. Preliminary Budget Adjustments

10. Analysis of FY 2011 Budget Tax Levy Amount of LevyChanges to LevyIncrease to Levy FY 2010 Base Levy104,116,122.00 FY 2011 Introduced Budget181,106,599.5276,990,477.52 Receipt of State Aid158,407,240.87(22,699,358.65)54,291,118.87 Debt Restructuring153,707,240.87(4,700,000.00)49,591,118.87 Buyouts & State Boards150,607,240.87(3,100,000.00)46,491,118.87 Vacancies & Furloughs147,607,240.87(3,000,000.00)43,491,118.87 Revenue Enhancements145,607,240.87(2,000,000.00)41,491,118.87 Other Expense Reductions144,607,240.87(1,000,000.00)40,491,118.87 Currently Billed Tax Increase5,205,806.00 Balance of Tax Levy35,285,312.87

11. Total Fiscal Year Tax Increase IntroducedReceipt of AidDebtBuyouts &Vacancies &RevenueOther BudgetRestructuringState BoardsFurloughsEnhancementsExpense 22,325,0004,700,0003,100,0003,000,0002,000,0001,000,000 Municipal Levy181,106,599.52158,407,240.87153,707,240.87150,607,240.87147,607,240.87145,607,240.87144,607,240.87 Averaged Assessed Value 350,0002,790.081,925.841,746.891,628.871,514.651,438.501,400.42 Total Fiscal Year Tax Levy 350,00010,269.269,405.029,226.079,108.058,993.838,917.688,879.60

12. Projected Levy Comparisons Tax LevyMid LevyLevy After Work BookAdjustments Municipal Levy122,116,078.00132,116,078.00144,607,240.87 Averaged Assessed ValueProjected Balance of Increase 350,000544.11924.841,400.42 Total Fiscal Year Tax Levy 350,0008,023.298,404.028,879.60