PICA – Opinion on Five Year Forecasted Statements


Audit Date: July 19, 2013

Audit Categories

  • Financial
Controller: Alan Butkovitz

Audit Tags

  • Budget,
  • Finance,
  • Five year plan,
  • Revenue,
  • Treasurer

Executive Summary


For Immediate Release:
July 19, 2013

Contact: Harvey Rice
215-686-6696

Butkovitz Issues Opinion on Five-Year Plan
City Controller’s Five-Year Plan Opinion cautions City’s projections
on property tax revenues due to new Actual Value Initiative

PICA Transmittal Letter FY14-18

Opinion on City’s Five-Year Plan

PHILADELPHIA – City Controller Alan Butkovitz today released his opinion on the City’s Five-Year Plan for FY 2014-2018. While Butkovitz says the Five Year Plan is reasonable, he cautions that several sensitive assumptions and uncertain conditions could significantly impact the City’s financial future.

This includes the assumption that the City will realize $536.6 million of property tax revenues for fiscal year 2014 and subsequent $2.3 billion over the remaining years of the forecast. These revenues may not be fully realized because it is difficult to estimate the extent of tax appeals that may arise as a result of the City’s newly implemented Actual Value Initiative (AVI), as well as the anticipated success of the more aggressive tax collection efforts for current and prior year property taxes owed.

“While our independent report indicates that the City’s presentation of the Plan is reasonable, the Plan includes particularly sensitive assumptions which the Pennsylvania Intergovernmental Cooperation Authority (PICA) should consider when assessing the Plan,” said Butkovitz.

The City’s Five-Year Plan for FY 2014-2018 was prepared by the City’s Finance Office and then submitted to PICA. Along with the uncertain property tax revenues, the Controller also warned PICA that the Plan does not include more than $90 million in fringe benefit costs pertaining to the July 2, 2012, four-year interest arbitration award with the International Association of Fire Fighters that covers fiscal years 2010 through 2013.

According to Butkovitz, the City also has not included any additional funds above the estimated $36 million cost for its final offer to District Council 33 and $21 million for its most recent offer to District Council 47.

“I strongly urge PICA to be vigilant in analyzing and evaluating the impact of these assumptions on the Plan,” Butkovitz said.

In addition to the sensitive assumptions in the Plan, Controller Butkovitz cautions about
the financial challenges still facing the Philadelphia School District.

“Anticipated funding from the Commonwealth of Pennsylvania has fallen short of the amount requested and negotiations with School District labor unions are still ongoing. Additionally, expected funding from the City has fallen short because it is contingent upon the Commonwealth’s approval of an increase in the cigarette tax,” said Butkovitz.

“I urge PICA to be cautious when reviewing the Plan because of the unpredictability of the assumptions and uncertainties; and because as with any forecast, events and circumstances frequently do not occur as expected,” said Butkovitz.

###