Philadelphia reached a deal with one of its unions requiring $127 million in additional spending over the course of its five year plan covering fiscal years 2015 to 2019.
The contract with the American Federation of State, County and Municipal Employees District Council 33 covers July 1, 2009 to June 30, 2016, Philadelphia Treasurer Nancy Winkler said in an interview Monday.
The employees will get raises but these won't be retroactive. Step and longevity increments that were suspended in July 2009 will be reintroduced, with employees regaining the status that they would have had in if the suspension had never happened. There will be no retroactive pay raises based on these step and longevity increments.
The contract also includes changes to the employees' pension plans.
The change will cost the city $17.1 million in fiscal year 2015 and $27.4 million in fiscal year 2016. For comparison, Philadelphia's fiscal year 2014 budget was for $3.995 billion.
The District Council 33 contract has largely already been approved by Philadelphia Mayor Michael Nutter. Only some of the contract's changes in pension rules still await approval by the city council, Winkler said.
The city made a voluntary notice of the labor settlement to the MSRB's Electronic Municipal Market Access site in the week of Sept. 12. The city plans to revise its five year plan to reflect the agreement.
In other Philadelphia financial news, Winkler said the city is moving toward taking steps to help the Philadelphia School District, which is seen as struggling financially.
The city charges a 2% sales tax. The first percent is a long-standing charge. The second percent was introduced in 2009 with a five-year sunset.
The state legislature recently gave the city the right to continue this second percent indefinitely. The state legislature proposed taking out a loan funded by this sales tax revenue and turning over the loan to the school district. The mayor is going along with this. The loan size has not been determined yet, though it will be under $60 million.
The first $120 million of proceeds from the percentage point of sales tax would go to the district. For the next four years the next $15 million per year would be used by the city to pay off debt service on the loan. Anything brought in above $15 million will be additional incremental funding to the city's pension fund.
After four years, all funds above $120 million will be additional incremental funding to the city's pensions, Winkler said.
The city council needs to approve the loan before this plan goes into effect.
Finally, Winkler said that the city council has hired a consultant to review the city's proposed deal to sell the Philadelphia Gas Works utility. She said she hopes the council will pass the sale in the fall.
Nutter announced an agreement to sell the works for $1.86 billion to UIL Holdings Corp. on Monday. The sale would defease the works' bond debt and raise money for the city's pension fund.