Hardware is very cheap nowadays and you can get a very good server for half of the 7000. I played around at Dells site and, using the PowerEdge 2950 III as a base, created a server with 2x Quad Core Xeon, 16 GB RAM and two SCSI-disks in RAID1 for around 3000 USD. This would handle PHP nicely, and the database as well.
So you now have over $7,000.00 for a new server.
I hope it will be over NINE THOUSAAAND.Assumng we actually get all the money from them, we can tally up and see what our budget is.