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Indecision sinking city budget

| Wednesday, Sept. 25, 2002, 12:00 p.m.

Anyone who has lived or worked in Pittsburgh for any length of time likely can recite the clichés used by local officials to describe the city's ailing finances. That's because the problem isn't new.

Last week, Mayor Tom Murphy weighed in, raising the possibility the city could file for bankruptcy-type protection under state law if it does not rein in expenses. The problem, he said, is the city's rising public-safety costs, particularly for firefighters, the increasing number of tax-exempt properties in the city and suburbanites who work in the city but pay only a yearly $10 occupational tax.

Two years ago, a panel of financial experts told the Pittsburgh Tribune-Review that unless city officials made significant changes — and in some cases politically unpopular ones that included raising taxes — Pittsburgh was in danger of going broke.

For the past 10 years, the city has battled a structural deficit in which its expenditures continue to outpace its revenue. The Tribune-Review reported the city spent $58 million more on average than it took in over the past decade.

At the time, the paper found the city faced a $1.68 billion debt that included principal and interest. Today, while the city's debt has dropped to about $1.35 billion, payments on it represent a considerable part of the city's expenditures.

Not much more has changed since then.

City officials still have not made the politically tough choices to help it over the long term, one of the panel's experts said.

"It's been the mayor and the City Council in the front seat of a speeding car, both of them see the wall, but no one hits the brake," said Robert P. Strauss, professor of economics and public policy at Carnegie Mellon University's Heinz School of Public Policy and Management. Strauss had been an advisor for New York City during its financial crisis in the 1970s.

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He said raising taxes is difficult for the mayor now because of the property tax increases by the Pittsburgh Public Schools.

"If the city raises taxes as much as the school district, Pittsburgh will be a very expensive place to live," Strauss said.

He said options such as combining the city's firefighters and paramedics departments and hiring more civilians to work in the police department's administrative offices would help cut public-safety costs.

Over the past decade, public safety has accounted for a third of the city's expenses and the cost continues to rise. In 2001, the city spent $52.1 million for firefighters alone. By 2004, the figure will jump 21 percent to $65 million.

The increase is partly the result of last year's contract, which the mayor negotiated parts of with Firefighters Local No. 1, including an 8.7 percent raise for senior members.

Some, including Murphy's political rivals, say the mayor made the sweetheart deal to curry union votes in a tight primary election last year. Regardless, the decision is coming back to haunt him with a budget that can't afford the deal.

Councilman Bob O'Connor, who ran against the mayor last year and lost by 699 votes, accuses Murphy of acting out of political convenience, saying the budget is sound enough one year to approve a raise for firefighters and arguing the next that it is not.

The mayor's administration, however, said last year's contract is a separate issue from the strain public-safety costs have put on the budget. The administration says the problem historically has been an unfair state law that favors unions in collective bargaining and forces cities into contracts that are difficult to pay for.

"The high cost of providing public-safety services is a long-standing problem for the City of Pittsburgh, dating back even to the days of [Mayor] David Lawrence," said Murphy's spokesman, Craig Kwiecinski.

"Our budgetary problems cannot be misconstrued as the result of one contract, but rather the legacy of decades of rising costs. These long-standing issues will require this community to come together and work cooperatively to address them, and we look forward to the recommendations of the (mayor's) PGH 21 (committee) in order to begin that community discussion," he said.

Last week, the mayor said he wants to cut the public-safety budget by $15 million and $20 million or else the city might request a state financial takeover.

None of this is news to David Miller, who served as a Murphy budget director in the mid-1990s. He said if the state declares the city financially distressed under a state law known as Act 47, the city will gain the leverage that it doesn't have now because future union contracts must conform with a financial recovery plan the city must follow.

But he said the move would tarnish the city's image with developers, Wall Street, and others looking to invest in the city.

"From my perspective, (Murphy's) not saying anything now he wasn't saying in 1996," said Miller, an associate dean at the University of Pittsburgh's Graduate School of Public and International Affairs. "I know I was trying to convey a message. I think it's a hard message to carry."

In 1996, Miller had been part of a task force, similar to the mayor's current PGH 21, to find ways the city could save money.

The task force, called Competitive Pittsburgh, was headed by Paul O'Neill, the current U.S. Treasury secretary and then the chairman of Alcoa, Inc.. The city implemented about 80 percent of the recommendations, but some, such as closing many of the city's firehouses, went nowhere.

"The principal piece of Competitive Pittsburgh was the reduction and cost of fire services," Miller said. "If anything, the cost is higher now, and the inability of us to control the costs has caused different policy options to be put on the table."

He pointed to the city's sale of the water authority and its tax liens in the mid-'90s as quick-cash solutions that temporarily pulled the city out of trouble. But he likened such a solution to a homeowner selling her children's furniture or a slice of the back yard to make the mortgage payment.

"You can't rely on it long-term," he said. "Sooner or later, something will break."

Staff Writer Andrew Conte contributed to this report

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