Case Study

City of East Orange, NJ
Strategic Financial Plan

The Essex County Improvement Authority (ECIA) engaged PFM to establish a four-year strategic financial plan for the City of East Orange. The newly elected Mayor found a City with a large and growing structural budget deficit, weak administrative apparatus - particularly in tax collection - a large and expensive workforce, depreciating property values, a depopulated middle class, and few prospects in the way of economic development. Although engaged by the ECIA, PFM worked hand in hand with the City's executive branch to put in place a plan for long-term recovery.

PFM developed a dynamic, quantitative model that allowed the City to project budget balances over a five-year period, applying a number of "what if" scenarios of particular concern to the City's leadership. The Plan identified for the Administration the many causes of its structural imbalance on the revenue and expenditure sides of the budget. Labor contracts were thoroughly reviewed, and a workforce strategy articulated. Department operations and costs were weighed against current needs and comparable spending elsewhere, with outsourcing and reorganization proposed for many agencies.

The Plan spelled out initiatives to cut costs or increase non-tax revenue by $129 million over five years. The executive branch embraced the Multi-Year Strategic Financial Plan, using it to frame the FY1999 Budget proposal to the City Council.

PFM also served as financial advisor on a leasing transaction between the ECIA and the City's water utility that provided sufficient funding to keep East Orange afloat until the recurring revenue and savings initiatives could be put in place.

Since then, the Plan has served as a framework document to support the efforts of the State of New Jersey and East Orange to guide the City toward economic recovery. The Mayor cited the Plan's implementation as an important reason for the City's achievement of a $7 million budget surplus in FY2000.

The City again engaged PFM to support the formulation of its second Four-Year Strategic Financial Plan, which was completed in mid-2003. The City Council joined the Executive Branch in setting the principle direction and themes of the second Strategic Plan, expanding beyond financial, operational and workforce issues to include economic development (e.g. reduction of rent control and tax abatement, coupled with regulatory reform and engagement of commercial developers for city-owned land) and public safety governance.

The City has since received its first investment-grade credit rating in almost two decades, and has become the first sizable New Jersey local government to free itself of the State's official designation as a "Distressed City".