Pittsburgh plan to close budget hole includes property tax increase

Bob Bauder
| Monday, June 2, 2014, 4:18 p.m.

Pittsburgh's financial overseers say the city must pull off many “bunts and singles” to avoid a 6 percent tax increase in 2015.

The city's state-appointed Act 47 coordinators — Dean Kaplan and James Roberts — recommended the real estate tax increase and a host of other revenue-raising initiatives in a five-year financial plan last week that is set to be introduced Tuesday to City Council.

Mayor Bill Peduto and City Council members oppose the increase and say they can find alternatives that would offset the loss of about $7 million in tax revenue from last year's decrease from 10.8 mills to 7.56 mills. The city was required to lower the tax rate because of Allegheny County's property reassessment.

Overseers said officials lowered it too much.

“They cut taxes by 30 percent,” said Roberts, an attorney in the Downtown firm of Eckert Seamans Cherin & Mellott. “What we're suggesting is getting back 5 percent or 6 percent.”

Kaplan, a managing director of Philadelphia-based financial advisers PFM Group, estimated the increase, if approved, would cost owners $40 more for every $100,000 of property value.

Kaplan and Roberts met with Tribune-Review editors and reporters on Monday to discuss the plan.

City Council is working to find alternatives to a tax increase, council President Bruce Kraus said. Members scheduled a public hearing for 10 a.m. June 16. A final vote is set for June 30.

“I'll speak for myself, and I think I can speak for the entire body and say our desire coincides with the mayor's desire to see the goals of the Act 47 plan accomplished without any tax increase,” Kraus said.

Kraus was not sure how the city could compensate for the loss of $7 million a year, saying council would examine that in coming weeks.

The city must approve the increase or find dedicated funding from other sources, which Kaplan compared with “bunts and singles.”

The penalty for rejecting the plan is suspension of state financial aid.

“We're willing to listen to whatever alternatives they come up with,” Roberts said.

Hailed as the final solution to Pittsburgh's financial ailments, the plan also recommends $100 million in new borrowing — $50 million next year and $50 million in 2018 — dedicated exclusively for capital improvements.

Roberts said the city can borrow that amount and hold debt repayments to 10 percent of annual expenses, below the recommended 12 percent.

Peduto hopes to improve funding for critical capital needs such as roads and bridges by persuading city nonprofits to ante up $20 million a year collectively as a payment in lieu of taxes.

“It would not go into the operating budget,” said Peduto spokesman Tim McNulty. “It would go to capital needs ... perhaps with some advice from the nonprofits on how it should be spent.”

The Pittsburgh Public Service Fund, an organization of nonprofits established to negotiate yearly payments to the city, disbanded in April after making its final $1.8 million payment from 2013, said Reynolds Clark, chief of staff and vice chancellor for external relations at the University of Pittsburgh, who chaired the group. Nonprofit payments to the city totaled about $2.6 million a year for 2012 and 2013.

McNulty said the mayor has been meeting with nonprofit leaders about increased payments.

“The mayor has years of experience working with the major nonprofits in town, probably more experience than anyone in local government, so he's going to build on those relationships to convince them that this is a good idea for them and the city,” he said.

Bob Bauder is a staff writer for Trib Total Media. Reach him at 412-765-2312 or bbauder@tribweb.com.

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