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NEWS NEWS

MAYOR'S OFFICE OF COMMUNICATIONS

Michael A. Nutter, MayorDouglas I. Oliver, Press SecretaryOffice: 215-686-6210Cell: 215 439-4655

Room 216 - City HallPhiladelphia, PA 19107

Phone: 215. 686.6210 or 6211Fax: 215.686.2170

www.phila.gov

Friday, July 17, 2009 FOR IMMEDIATE RELEASE

HARRISBURG DELAY CAUSES CITY TO STOP PAYMENTS TO

VENDORS

Philadelphia,July 17, 2009 The City of Philadelphia has informed Harrisburg lawmakers that, due to theState budget impasse, the City is forced to delay spending on anything other than employee compensation, debtservice, and emergencies. This means that all payments to vendors and suppliers will be delayed until thepassage of the State budget and passage of legislation authorizing an increase in the Citys sales tax andchanges to its pension payments. This step comes as the City faces a growing cash crisis which must be

addressed immediately.

I have made repeated trips to Harrisburg over the last several weeks and I know that lawmakers are workinghard to pass a fair and balanced budget, said Mayor Nutter. That said, the delay in the State budget process isseverely impacting the Citys cash flow and we have no option but to take these difficult steps.

The budget crisis in Harrisburg has had a more damaging impact on the City this year because Philadelphia isasking for critical items to balance the City budget the authorization of the temporary sales tax increase andpension reforms. These two items will generate $250 million in new revenues and savings in our current FY 10budget, and provide $700 million over the course of the Five-Year Plan. Without legislative action very soon,the City will be unable to complete a routine cash flow borrowing at an affordable rate as it normally does each

year.

In addition, until a State budget is approved, the City will not receive any of the normal state reimbursementsfor services like child welfare services and juvenile detention. In total, those reimbursements are about $100million that are traditionally received at the end of August.

The City also announced that all new capital projects will be under stringent review. Over the next few days the

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City will review every capital project and will determine which can proceed in the absence of the passage of theState budget and the passage of legislation authorizing the City to raise the sales tax by 1% and make changesto its pension payments.

If the State budget is resolved and the legislation authorizing the sales tax and pension reforms (HB 1828) isapproved in the very near future, the City will be able to avoid this cash crisis.