Capital projects cut savings

Pittsburgh did a “much better job” of controlling costs in the second half of 2014 and saw a $2 million operating surplus, but the transfer of millions toward capital projects created a “major drop” in its savings account.

Controller Michael Lamb released those and other findings Friday in the 2014 Comprehensive Annual Financial Report.

The unassigned fund balance — government parlance for the city’s savings account — was $53.7 million, down $28.7 million from 2013 and the lowest since 2010, he said.

“We knew that was going to happen because we knew last year we were going to transfer a significant amount of money” — about $25 million — “out of our fund balance to capital projects,” he said.

Mr. Lamb cited two reasons why the $2 million operating surplus wasn’t larger: The city didn’t receive gaming money that one of its financial overseers, the Intergovernmental Cooperation Authority, has withheld until the city moves to install an automated payroll system.

And nearly $7 million from the savings account was moved to the early-retirement severance program that Mayor Bill Peduto pushed through last year to save the city money and give longtime employees not on board with his new administration a “soft landing” — a program Mr. Lamb has previously criticized. That sum was moved into the benefit account to pay for the program, which cost $2.6 million, and the rest of the money was used to cover operating expenses, he said.

“That money is gone now, and the fact is the [severance] incentive program continues on, so we’re still paying for that this year” from the savings account, he said.

Mayoral spokesman Tim McNulty said the automated payroll system should be in place by year’s end, but the ICA has still refused to deliver $10 million in gaming funds for 2014 and another $10 million for this year.

“The city expected the surplus to be larger, too, and it has everything to do with the lack of gaming money … and nothing to do with the incentive package,” he said.

Mr. Lamb also noted a “a very good picture” with regard to the city’s long-term debt and said the pension fund grew again last year. He credited much of the city’s success in controlling its costs in the latter half of 2014 to then-newly hired director of Office of Management and Budget, Sam Ashbaugh.

More details: http://pittsburghpa.gov/controller/cafr