SEEING A SURPLUS
Controller says city in ‘very strong financial position’
Pittsburgh is in a “very strong financial position,” despite stock market fluctuations that hit the pension fund and the city’s purchase of an “overpriced” property last year, according to City Controller Michael Lamb, who released the annual review of city finances Wednesday.
By the end of 2018, the city saw a $3.3 million surplus after it transferred $26 million to pay for capital projects and put $10 million toward the Housing Opportunity Fund and $13 million toward the city’s pension fund.
“And while doing all that, we were still able to generate a surplus,” Mr. Lamb said at a Wednesday news conference about the report.
Overall, the city saw a roughly $32 million increase in 2018 tax revenue compared to 2017, following an upward trend over the past decade.
The past several years of increases may reflect “higher incomes for a portion of our residents,” Mr. Lamb said.
For the first time since he took office, Mr. Lamb said revenue from the the Local Services Tax — a $52 tax charged to any person who works in the city and makes over $12,000 — jumped by $1.5 million.
The increase is evidence of more people working within the city, he said, though the exact number is unclear. The total has not been adjusted for seasonal workers or people with multiple jobs who may have been charged more than once and have not sought a refund, he said.
And while the city’s pension fund portfolio took a hit — from $467.8 million at the beginning of 2018 to $449.4 million by year’s end — because of a dip in the market, Mr. Lamb said the city has “already made it up.” With city, employee and state contributions, there is “light at the end of the tunnel of the pension fund, or at least a plan to get there.”
The city still remains on the hook for $918.4 million in pension costs over the foreseeable future.
But financial challenges remain on the horizon, as the city was just released from under state oversight for its former financially distressed status.
Half of the city’s revenue comes from taxes on real estate and earned income, 30% and 20%, respectively.
“Keeping in mind of course that our biggest revenue source, the real estate tax, is in a situation where about 40% of our properties in the city are exempt from taxation,” Mr. Lamb said. “And the fact that the earned income, which is only paid by people who actually live in the city of Pittsburgh, and that’s been a shrinking number.”
The city received $504,000 in payments in lieu of taxes from tax-exempt entities under a number of “preexisting contractual arrangements,” Mr. Lamb said. “It has nothing to do with the revenue we used to get from large nonprofits” like UPMC or the universities. In 2012 — the high point for the decade — the city received $4.8 million in voluntary payments from large tax-exempt nonprofits.
Another financial challenge: The city spends more than half — 52% — of its money on public safety.
“When people come here to work, we have to protect them and our city residents. But a big chunk of that burden is born by the people who live here. How do we continue to have a city for a much bigger population than the population that’s actually paying for that government?” he said.
City spending in 2018 jumped noticeably — by about $43.3 million — which Mr. Lamb attributed to the purchase of the former Art Institute of Pittsburgh building at 420 Blvd. of the Allies, where several city departments, including the Department of Permits, Licensing and Inspection, will relocate.
Some members of council criticized the city’s $27.5 million purchase of the Downtown building and planned $12 million in renovations.
“I call it the permits palace,” Mr. Lamb said. “I’m still bothered by that purchase, that we spent that much money for a building to house our employees and the Housing Authority and the Urban Redevelopment Authority.”
The mayor’s office maintains that purchasing the building cost less than renovating the city’s current 200 Ross St. location, with spokesman Timothy McNulty calling the controller’s office “quick with biased criticism but not real solutions.”