Unless Coatesville can soon make revitalization a realty the city faces financial disaster. That was the finding of an independent financial management firm hired through a state early intervention program to help municipalities weather financial crisis.

The 23-page report prepared by Fairmount Capital Advisors Inc. of Philadelphia found a stagnant tax base unable to keep up with expenses that over the next five years could result in staggering deficits reaching $13 million by 2013.

"Ultimately, the city will not achieve structural balance in the budget unless there is significant growth in the tax base," said Dan Connelly of Fairmount. "There are no quick fixes. The city didn't get into this overnight and it's not going to get out of it overnight."

"I think it's sobering," said City Manager Harry Walker about the report. "We have to step up our game."

Connelly also warned that if the city decides redevelopment is the best way to overcome future financial catastrophe, the city must set benchmarks for its economic development and if those benchmarks aren't being met, it must be prepared for tax increases and staff reductions.

The report noted that this year the city must borrow $2 million to overcome projected deficits in this year's budget. Walker said the loan was in anticipation of the sale of the Conti property purchased for a golf training center during the Janssen Administration. The city was able to balance the 2008 budget only by projecting $1.2 million from the sale of the Conti and projecting $600,000 in permit fees from new construction.

Walker said there are several developers interested in the Conti property; however, he refused to identify them. Walker did say during his manager's report that developers were finding Coatesville more developer friendly than other municipalities in the county.

The Fairmount report also recommended next year the city layoff two full-time city employees, three police officers and seek reductions in employee collective bargaining agreements. Over a five-year period these saving could reduce the budget by $1 million. "Implementation of these recommendations is vital; however, even fully if fully anticipated budgetary impact is achieved, significant deficits remain," the report warned.

Citing the uncertainty of the city's financial position, the report cautions the city must track its revenues and expenditures more closely, particularly cash flow forecasting relative to economic development projects.

"We already started on it," said Walker, "Before we were taking items and putting them in line items here and there. We weren't even comparing apples to pears. Now line items actually mean something. Before we weren't actually looking at what was going on."

Earlier this month Walker dismissed City Manager Rick Dean; he claimed Dean technically quit because he abandoned his job. Dean was injured in an auto accident following a city council meeting.

Connelly presented two scenarios, which he termed optimistic, where redevelopment could bring financially stability. "The most optimistic financial projections include many ifs and little margin for error," he said.

In the first scenario, Connelly listed four projects completed or confirmed that next year could generate $407,147 in transfer taxes, permit fees, and earned income taxes paid by the workforce building the projects and residents moving into new homes. Only one of those projects, Brandywine Center at Chester Avenue and East Lincoln Highway, has been completed. The other three -- Brandywine Ridge, McCool Properties and the Famous Restaurant -- have been confirmed, but work has only begun on the McCool Properties, the former Famous building. But even if the projections are accurate, Connelly said it would not be enough to stop the city from building up deficits that by 2013 would equal $6.2 million.

The second scenario presented by Connelly was more ambitious; it calls for work to begin within the next three years on the development of the Flats, Pulver's hotel and office building, Carl Chetty's condominium and apartment towers, the 500 plus Brandywine View townhouse community, the artist colony tower to be built adjacent the Coatesville Cultural Society, and a convenience store.

The charts below shows the economic milestones the city must meet for the years 2009, 2010 and 2011.

The report concluded:

1. No silver bullet for the city's financial challenges;
2. Fiscal stability can be achieved with significant expansion in the economic base and realization of economic base and realization of development projects;
3. The most optimistic financial projections include many ifs and little margin for error;
4. Progress of economic development projects must be monitored closely;
5. The city must set financial benchmarks and milestones;
6. Administration must work closely with labor to control personnel spending;
7. The city must be prepared to react in case of milestones are not reached;
8. Cash flow reporting and forecasting must be improved;
9. Consequence of not reaching revenue and benchmarks; tax lien sale; staff reductions; and Act 47.