Oversight agency recommends Pittsburgh regain control of its finances

Bob Bauder
| Wednesday, Oct. 10, 2012, 11:50 a.m.

Pittsburgh officials deserve to regain control of the city's financial future, according to one of two state oversight agencies.

The Act 47 coordinators told the state Department of Community and Economic Development in a letter Friday that the city has “made great strides toward fiscal recovery.”

“Pittsburgh has taken critical steps to address its legacy costs of pensions, retiree health care, worker's compensation, debt and capital needs,” the letter says.

Act 47 provides two state-appointed experts to help financially troubled municipalities develop plans to regain financial footing.

Act 47 coordinator James H. Roberts said Wednesday he believes the Intergovernmental Cooperation Authority, the other oversight agency, is still needed to oversee budgeting.

The state declared Pittsburgh financially distressed in 2004 because of chronic budget deficits and debt payments that topped $90 million annually as well as unfunded pension liabilities of $375 million. The city has been required to submit budgets and five-year financial plans to the oversight agencies for approval.

Roberts, a Downtown attorney, said the city needs continued ICA oversight of employee legacy costs estimated at nearly $1.5 billion and debt totaling $607 million. The city has knocked off $217 million from its debt principal since 2006.

“There's no question that continued long-term scrutiny of these things is required, but that's not a reason to keep Act 47 around,” Roberts said.

DCED spokesman Steve Kratz said department Secretary C. Alan Walker would decide whether to end Act 47 oversight after a public hearing and a review of a report submitted by Roberts and Managing Director Dean Kaplan.

City Controller Michael Lamb said elimination of Act 47 oversight would be premature. He said revenue remains stagnant and infrastructure continues to suffer from years of budget cutting.

“I've always said I think this administration can use all the oversight that it can get, and I still feel that way,” said Lamb, a likely candidate for mayor next year.

Joanna Doven, spokeswoman for Mayor Luke Ravenstahl, called Lamb's statement “political grandstanding.”

Ravenstahl said removal from oversight would improve the city's image and help it financially.

“This will send a strong message to the financial markets, I think, that Pittsburgh is back on its feet again,” he said.

ICA Chairman Dana Yealy promised a continued commitment in helping the city resolve its financial problems. In addition to a $1 billion pension liability, the city is responsible for $488.6 million in retiree health care costs for employees hired before 2005.

“The ICA also strongly agrees with Act 47 that the city still faces many challenges, including pension reform and long-term agreements with nonprofits,” he said in a prepared statement.

City Councilman Ricky Burgess, who chairs the finance committee, said he hopes the Act 47 coordinators' recommendation will prompt community leaders to lobby the Legislature for enactment of a payroll tax on Pittsburgh nonprofits. Tax-exempt nonprofits are paying the city $2.6 million in lieu of taxes this year toward the city's $460 million budget. Burgess said a payroll tax would permanently solve Pittsburgh's financial problems.

“This is now the opportunity for us to guide our own (financial) ship,” he said.

The Act 47 team created a financial recovery plan for Pittsburgh in 2004 and updated it in 2009. The plan scrutinized the city department by department and offered suggestions for cost-cutting, deficit and debt reduction, revenue enhancement and how to address union contracts and long-term employee pension and health care liabilities.

Pittsburgh would become the seventh municipality to leave Act 47 oversight since the law took effect in 1987. Twenty-one municipalities in Pennsylvania remain under fiscal oversight.

The state has spent about $4.6 million to fund the Act 47 team and $4.4 million on the ICA since 2004, according to Kratz.

Bob Bauder is a staff writer for Trib Total Media. He can be reached at 412-765-2312 or bbauder@tribweb.com.

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