Report: City set to exit state financial oversight
Pittsburgh has been ‘distressed’ since 2004
Pittsburgh’s financial recovery coordinators agree with Mayor Bill Peduto: The city is ready to emerge from state oversight.
In a 33-page report Thursday, two firms guiding the city government’s financial comeback said Pittsburgh should exit distressed status under state Act 47. The recommendation came three days after Mr. Peduto announced that he would seek to remove the designation by early 2018.
“Over time, the city has adopted a series of financial management tools that will guide the decisionmaking of future leaders on fiscal issues to ensure budgetary stability,” the report says. “The city has strategies in place to address its primary legacy costs — employee pensions, retired employee health care and workers’ compensation — while maintaining its workforce
and increasing the necessary investment in Pittsburgh’s infrastructure.”
The Downtown law firm Eckert Seamans Chernin & Mellott and the advisory firm Public Financial Management in Philadelphia penned the report. State officials appointed them as recovery coordinators when Pittsburgh went under Act 47 in 2004. Neither firm immediately commented Thursday evening.
They developed more than 200 steps to reduce or control costs as the city faced a severe financial crisis, including “junk bond” ratings and an annual budget deficit approaching $100 million.
State oversight provisions since then have featured the Intergovernmental Cooperation Authority, which keeps watch over city spending and debt obligations. The municipal workforce has decreased by 26 percent while payments toward pension obligations have increased. Among the cost controls, Pittsburgh officials restructured benefits to establish or increase employee contributions to health, vision and dental coverage, the recovery coordinators noted.
They also pointed out new union contracts, a “right-sizing” of city services, and cooperation with surrounding municipalities. Pittsburgh is among few large U.S. cities “to make it through the recent recession with its finances largely intact,” according to the report.
“The city successfully balanced its annual budgets and achieved a near-term financial recovery with revenues consistently outpacing expenditures,” the coordinators wrote. Their earlier recommendation that Pittsburgh leave Act 47 oversight — in November 2012 — fell flat. In March 2014, C. Alan Walker, then the state secretary of community and economic development, decided that the city would remain under financial pressed supervision. for a second He amended recovery plan that would keep tackling legacy costs, such as pensions.
Since then, the city has executed that plan and incrementally increased its pension contribution, according to the coordinators. The pension contribution is on pace to reach an actuary-recommended level in 2018.
On Monday, the Peduto administration will introduce legislation to weave responsible fiscal practices into the city code, mayoral spokesman Timothy McNulty said. The proposal includes mandatory standards for fund balances, debt management and realistic revenue projections — measures intended to prevent future crises, Mr. Peduto has said.
“We welcome getting out of financially distressed status, but there are reforms that have to be put in place first by City Council,” Mr. McNulty said. Councilwoman Natalia Rudiak, who chairs the council finance committee, has said it’s necessary to enshrine the provisions. She wants council to vote on them this year. Removal of state oversight should be conditional on that council approval, Mr. Peduto wrote in a letter Monday to Gov. Tom Wolf and Dennis Davin, the state secretary of community and economic development. The letter marked the city’s formal application to conclude designation under Act 47, a law meant to help struggling municipalities steady their finances. The Department of Community and Economic Development is expected to hold a hearing Nov. 28 on the request. Findings will go before Mr. Davin, who will have 60 days to make a decision, according to the department.