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2011 Budget Proposal Overview Bill Peduto, Finance Chair City Council Budget Office Bill Urbanic, Director.

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Presentation on theme: "2011 Budget Proposal Overview Bill Peduto, Finance Chair City Council Budget Office Bill Urbanic, Director."— Presentation transcript:

1 2011 Budget Proposal Overview Bill Peduto, Finance Chair City Council Budget Office Bill Urbanic, Director

2 The 2011 Ravenstahl Budget Police staffing reduced by 25 Officers offset by $3m Federal grant to hire new officers for 3 years. Recruit class funding cut by half 2% salary increase for all non-union employees 668 Fire Fighters (includes 15 from Wilkinsburg fire merger ) $25m PAYGO Budget $456m Revenue and $446m Expenditure Budget Expenditures remain at the 2010 budget level Pension Expense Account for Majority of Increase

3 2007 Expenditures 2011 Proposed Expenditures $446 Million

4 Cost of Government 2003 vs. 2011 $401 Million Budget$446 Million Budget

5 2011 Capital Budget Proposal $52.1 Million

6 CDBG and Operating Funds Allocations by Function 2011 Budget % of Budget Community Programs (ULO, Senior and Employment programs) $ 4,015,00010% Equipment Leasing Authority $ 5,000,00012% Facilities Maintenance $ 4,420,00011% Infrastructure (includes $9 Million for Street Resurfacing) $ 12,700,00031% Transportation Improvement Program (TIP) $ 1,240,0003% Public Safety (Includes $3.25 Million to Demolition) $ 3,865,0009% Administration and Technology Upgrades $ 3,280,0008% URA $ 7,100,00017% Total City Funds $ 41,620,000100% 2011 Proposed Capital Budget

7 CDBG Vs. City Funds

8 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 wont 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)

9 2003 vs. 2011 Benefits as % of Budget 2003 Budget2011 Budget

10 Employee Benefits $133 Million

11 PENSION COSTS INCREASED 85% 03-10

12 Municipalities are asked to run a Social Security Program for Public Safety employees Cant 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 A Broken Pension System for Cities and Older Municipalities The underfunding has to stop at some point!

13 Pittsburghs 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 Deficiencies in ACT 205 for Distressed Pensions Costs the City

14 PENSION – State Required Payment Increases Act 205 STATE PENSION AID Decreases CHART A CHART B 20102003Difference $ 54,227,150 $ 23,875,262 $ 30,351,888 20102003Difference $ 15,352,000 $ 18,214,489 $ (2,862,489)

15 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 dont pay in?? Ridiculous! Aid should be based on number of retirees

16 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 1990s by substituting pension enhancements for wage increases 20 years later City receives less than 9% or $15 Million Pension Aid History

17 Revenues 2011 $456 Million

18 Who Paid in 2010?

19 Tax-Exempt Problem Continues Although significant strides were made with a $13 million commitment over 3 years - Some large profit-making Hospitals & Universities still arent paying their fair share City residents and businesses ($124.5 million in tax burden) Hospitals Universities Colleges Non-profits Large Hospitals & Universities also Exempt from Payroll Tax $17 Million in lost payroll tax revenue 1/3 of City Real Estate is Tax Exempt = $70 Million worth of taxes – City Residents and Business Subsidize

20 Whether you are a business, a resident or a non-profit if you dont 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 Citys 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. Tax-Exempt Problem Continues

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22 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

23 2011 through 2015 20112012201320142015 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)

24 Pittsburghs taxes have weathered the storm so far– Job losses in retail nationwide are well knownPittsburghs taxes have weathered the storm so far– Job losses in retail nationwide are well known Real Estate 28% of Revenue Shielded by base year assessmentReal Estate 28% of Revenue Shielded by base year assessment Salary Based Taxes – Pay Roll & Earned Income Taxes have not been severely effectedSalary Based Taxes – Pay Roll & Earned Income Taxes have not been severely effected Gaming RevenueGaming Revenue State Appropriations will be unreliableState Appropriations will be unreliable Effects of Economic Crisis on Revenue

25 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

26 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

27 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

28 Who pays wage taxes in Pittsburgh? Two out of three jobs are held by non-City residents! City Residents pay $72 Million in Wage and LST (Occupation) Taxes Non-residents pay just $8 Million in LST (Occupation Tax)

29 The Real Problem 2003 Is the Same Problem Today

30 Picture the States 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……….

31 Conclusion: 2011 Budget has an ICA induce $16m hole Out-years - New Revenue & Expenditure savings from State legislative action are still needed for future 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.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 subsidiesLong 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 Citys best interestService reductions and sacrifices by employees and residents are no longer in the Citys best interest Additional sustaining revenue and adjustments in State Pension Laws Must Be in the equation for continued successAdditional 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 CommonwealthMajor issues are still in the control of the Commonwealth Continued lobbying effort by the Administration and CouncilContinued lobbying effort by the Administration and Council

32 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 Councils


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