City Finance Update III Pittsburgh’s Financial Future April 19, 2011 Post Agenda Councilman William Peduto, Finance Chair

Recap of Finance Post Agendas Operating Budget on target for 2011 Capital Budget has deficiencies due to: Slow State and Federal Reimbursements Unexecuted sale of the Courts Building to State Need to clear old encumbrances and projects May need to use a small portion of the City’s $40M “rainy day” fund balance to fund all of 2011 Capital Plan Best Practice Review City does some things well Needs improvement on issues such as communication Need for ERP Financial System

Recap of Finance Post Agendas 2 – Operating and Capital City has $20-$30m annual capital needs Biding Time for debt cliff Must ask state to enable the City to help itself – Cost reduction initiatives, pension reform, shared services with agencies and new revenue abilities Appropriate restructuring of debt to meet needs Continued efficiencies in the operating budget, development of new revenue sources may allow for dedication of excess operating dollars to PAYGO

YEARMMO Parking Tax Revenue Dedication Additional (MMO +) Employee Contribution s Total Revenue Into Fund 2010 $ 45,000,000 $ 0 $ 48,000,000 $ 9,200,000 $ 102,200, $ 46,400,000 $ 13,376,000 $ 3,600,000 $ 9,591,713 $ 72,967, $ 48,720,000 $ 13,376,000 $ 3,600,000 $ 9,916,846 $ 75,612, $ 48,720,000 $ 13,376,000 $ 3,600,000 $ 10,259,332 $ 75,955, $ 51,156,000 $ 13,376,000 $ 3,600,000 $ 10,566,287 $ 78,698, $ 51,156,000 $ 13,376,000 $ 3,600,000 $ 10,863,609 $ 78,995, $ 53,413,800 $ 13,376,000 $ 3,600,000 $ 11,153,176 $ 81,542,976 * $ 56,084,490 $ 26,752,000 $ 3,600,000 $ 11,718,627 $ 98,155,117 Total to Pension Funding $3.4 Billion *Assumes higher MMO increases biennially, Employee Contributions annually, Additional Contribution increases to $5 Million in 2021 – assumption are estimates and are not certified by an actuary Pittsburgh Pension Funding Breakdown

Pension & debt

Debt Service

Debt Cliff – Available Funds

Debt Cliff Minus Additional Pension Contribution

Budgets REVENUES 443,033, ,761, ,746, ,004, ,748, ,882, ,093,379 EXPENDITURES 450,087, ,411, ,320, ,510, ,646, ,627, ,869,750 OPERATING RESULT 5,022,028 (2,650,113) 3,425,271 4,493,226 5,101,294 5,254,560 3,223,630 BEGINNING FUND BALANCE 44,795,746 37,741,774 35,091,661 38,516,932 43,010,158 48,111,452 53,366,012 Transfer to PAYGO Reserve Fund Balance Transfer (12,076,000) ENDING FUND BALANCE 37,741,774 35,091,661 38,516,932 43,010,158 48,111,452 53,366,012 56,589,642

Actions needed for Pittsburgh’s Future Immediate Action Needed in 2011 Meet and provide ongoing discussions to achieve a $9.3m PILOT with the PPA or provide viable alternatives that do not include mass service reductions or property tax increases Administration must meet with Council and provide the necessary legal and financial support to avert State takeover of the pension Eliminate “phantom” capital line items to assure needed 2011 Funding Meet and provide ongoing discussions for Code and Charter changes necessary for implementation of the Enterprise Resource Planning (ERP) system Pursue budget and accounting reform ordinances

Actions needed for Pittsburgh’s Future  Capital budget.  Immediately work to reconcile capital budget funds and projects for 2011  Analysis with Act 47 and oversight board of various long-term funding scenarios.  Action on Council-Controller parking plan to avert state takeover of pension system  Cost controls. We have done a good job of keeping down costs, but we need to create more efficiencies.  Revenue enhancements. Look for new revenue without increasing real estate or earned income taxes.  State action. Changes in State law for pensions, non-profit payments, reassessment, pursue PLCM Core Communities in Crisis recommendations, etc..  Continued Commitment from Act 47 and ICA to assure budget and five year plan is implemented

Actions Needed for Pittsburgh’s Future Conversion to ERP system Fully implemented Council-Controller plan to secure pension system Restructure/issuance of new debt for 6 year capital program Structure new debt to meet additional pension payments and debt cliff Pursue further efficiencies in operating budget Pursue state approval of new options for revenues Increase enforcement of tax fraud for all revenue sources Remain compliant with 5 year plan through 2014

Actions Needed for Pittsburgh’s Future Lobby to end state oversight in 2015 Or create final 5 year plan Increase pension payments additional $13,376,000 starting in year 2018 Utilize debt cliff for additional pension payments, capital budget & issuance of new debt Continue to hold the line on operating expenses Provide Pittsburgh with a long term, sustainable operating and capital budget through 2025