A mid-to-late 1970s (possibly early 80s?) group of radical-black-activist types were wanted for various crimes. They holed themselves up in a couple of row house/townhouse units in a poor/ghetto part of Philly.
These were NOT nice people by any stretch of the imagination. However, instead of waiting them out, or deploying police in the specific units in which the criminals were holed-up, the Philly police dropped some kind of jury-rigged incendiary device out of a helicopter on to the row houses/townhouses. They pretty much wiped out an entire city block.
That's how I remember it, anyway.
The group they bombed was MOVE.
They were trash, but police definitely overreacted (to put it mildly).
http://en.wikipedia.org/wiki/MOVE
You are correct, except that it was a bomb that they dropped to knock out a fortified installation on the roof. It started a fire from gas cans that were up there, and the result was what you recall.
Whenever there is a standoff situation, the Police try to force a conclusion by aggressive engagement (They attack) and it almost NEVER ends well (Can you say Waco?).
People always die every time it has been tried.
It was an outfit called MOVE. The Philly cops managed to do almost a million in damage IIRC.
That's pretty much it except for the part where the police came with a fully auto Ma Duece and used the suppressing fire to keep the people in the house, where I believe 11 men, women and children were burned alive.