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State oversight committee chair leery of Peduto pension plan

Bob Bauder
| Wednesday, Nov. 27, 2013, 9:12 a.m.

Mayor-elect Bill Peduto's offer of early retirement to 136 employees, costing the city up to $2 million a year in increased pension costs, could put the administration on the wrong side of Pittsburgh's financial overseers, officials said Tuesday.

The city's fiscal recovery plan bans enhancements to employee pensions. Oversight chairman Nick Varischetti called it “100 percent” binding, though he wouldn't commit to a stance on Peduto's proposal until he has more information.

“We're very much aware that that could be a potential issue, but until we have the data, we can't make any determination,” said Varischetti, chair of the Intergovernmental Cooperation Authority.

A top Peduto official said the proposal abides by the spirit of the recovery plan. Kevin Acklin, who will serve as Peduto's chief of staff, promised the administration is prepared to satisfy all the overseers' concerns before taking power on Jan. 6.

The mayor-elect will guarantee that his proposal will not increase the city's 2014 budget. He aims to eliminate and combine positions to offset costs.

“We're going to put that into the legislation,” Acklin said. “It will be law.”

Peduto wants to make room for personnel he is recruiting. The $2 million-a-year tab for 10 years assumes all 136 eligible non-union employees participate, though Peduto expects only 50 to 60 to do so.

The city must trim costs because revenues are declining. An agreement by which nonprofits contribute about $2.6 million to the city annually in lieu of taxes expires this year, and real estate tax collections are falling because of the countywide reassessment.

About 40 percent of city real estate is owned by tax-exempt entities, about 20 percent of which is owned by nonprofits, Controller Michael Lamb estimated.

Peduto hopes to strike a long-term agreement with nonprofits that could generate up to $20 million annually, according to City Council budget office projections.

“What we're asking for is what would be fair,” Peduto said. “We're not asking for anything that would be outlandish. It's not going to happen quickly, and it does require a partnership and it's going to take a lot of work, but it's doable.”

Nonprofit representatives aren't so sure. They're reluctant to bargain given Pittsburgh's improved financial condition, according to Reynolds Clark, who chairs the advisory board for the Pittsburgh Public Service Fund, which represents nonprofits in negotiating annual contributions.

He noted the city has gone from chronic budget deficits to annual surpluses, has paid down debt and stabilized its employee pension funds.

“I think the sentiment is that the need for the fund has come and gone,” Clark said.

Peduto said he's confident nonprofits will come around because it's the right thing to do. Pittsburgh provides nonprofits and their employees with critical services.

Peduto said he has a good relationship with the nonprofit community, and he sees that as the tipping point.

“I have 19 years of experience working with these different agencies,” he said. “The difference is I can disagree with the lead administrators at these institutions and still be able to call them in the morning. There is a personal bond that has been built and a desire to resolve these issues from both sides.”

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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