End of Act 47 financial oversight to offer lift for Pittsburgh

Bob Bauder
| Friday, Oct. 12, 2012, 12:01 a.m.

If the state releases Pittsburgh from financial oversight, it could mean only good things for the city and Mayor Luke Ravenstahl's re-election aspirations, financial and political experts said.

One of Pittsburgh's two state-appointed overseers — the Act 47 recovery team — recommends giving the city financial independence. The city still would submit budgets for approval to the Intergovernmental Cooperation Authority.

Experts said release from Act 47 would remove a “black cloud” from Pittsburgh's financial outlook and generate a positive outlook for credit ratings, investors and Ravenstahl's campaign next year.

“This is a major thing for the city,” said Mulugetta Birru, former executive director of the Pittsburgh Urban Redevelopment Authority and Allegheny County Economic Development. “Pittsburgh has changed. It has become the example for many cities to come and learn from.”

In a letter to the state Department of Community and Economic Development, the Act 47 coordinators said the city has major challenges, including $1.5 billion in employee legacy costs such as pension and health care benefits. But it reduced the workforce by about 800 full-time employees, cut debt by more than $300 million since oversight began in 2004 and avoided state takeover of employee pensions by committing parking taxes to the pension system.

The city's bond rating rose from junk status in 2003 to much better ratings.

“It's clear that the city has moved in a positive direction,” said state Rep. Mike Turzai, R-Bradford Woods, who sponsored legislation creating the ICA. “I hope that the city is able to address its long-term obligations.”

Turzai said he thinks the private sector could better run some operations, such as the Pittsburgh Water and Sewer Authority and the Parking Authority.

If the state lifts Act 47, bond experts said, Pittsburgh could expect higher ratings and lower costs of borrowing money.

“This is good news for Pittsburgh,” said Tim Davis, vice president and director of the Fixed Income and Municipal Bond Department for Hefren-Tillotson Inc. in Wexford. “Having that dark cloud removed helps investors, especially institutional investors, dig deeper into their pockets to invest in the city.”

Birru, who moved back to Pittsburgh after a stint as economic development director in Wayne County in Michigan, which includes Detroit, said financial independence could dispel business uncertainty for developers looking toward Pittsburgh.

“It has a very positive perception for outsiders wanting to come explore Pittsburgh to invest,” he said.

Political observers believe Ravenstahl would benefit politically — though one of the mayor's likely opponents said that could be premature. Councilman Bill Peduto, who formed a finance committee to run for mayor but hasn't announced a campaign, said council had a lot to do with the city's improved financial condition.

“We need to be able to have a solid financial platform before we can leave,” he said. “We don't have that yet.”

Still, Ravenstahl, as the leader of city government, would benefit from any positives that happen during his tenure, said Gerald Shuster, professor of political communication at the University of Pittsburgh.

“The rap on him has been that he doesn't pay attention to the more serious elements of his job, when in fact this shows he's done a good job of that,” Shuster said. “Has he done it alone? Probably not, but nonetheless he's responsible for it and you know the old Harry Truman line — ‘The buck stops here.'”

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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