City files suit to release gaming funds
The steady surge in hostilities between Pittsburgh and its financial overseers at the Intergovernmental Cooperation Authority since Mayor Bill Peduto took office last year escalated into a lawsuit Thursday, with the city asking an Allegheny County judge to order the authority to fork over about $11.4 million in gaming revenue.
“This is money that belongs to the taxpayers of the city of Pittsburgh to pay for their services and to support the still-fragile financial recovery of our city,” the mayor said in a news release. “The ICA is not only playing political games but has crossed the line into violating state law. Their actions are hurting the city and I won’t stand for it any more.”
The city telegraphed the suit last week when it delivered a letter to the authority demanding the release of the gaming money and setting Wednesday as the deadline. And it comes about three months after Mr. Peduto’s administration, which has locked horns repeatedly with the ICA
over what the mayor’s office contends is a propensity to overstep its bounds, asked the state Department of Community and Economic Development to dissolve the authority.
Lyndsay Kensinger, a spokeswoman, said the department received a request in March from the city to terminate the authority. The authority was established in 2004 by the state Legislature after the city entered the state’s Act 47 program for distressed municipalities to provide a separate tier of financial oversight in addition to the Act 47 coordinators.
While Mr. Peduto pushed to keep the city in the Act 47 program, his administration has less use for the authority, which approves the city budget and whose volunteer board members are appointed by Republican and Democratic leaders in the General Assembly and the governor. Battles have been waged over the authority’s insistence on the quick installation of a payroll module that is part of a large city-county financial management system and the mayor’s first budget, which included a modest property tax increase and parking-rate increases.
“It's no secret that the city has long had great partners in DCED and the Act 47 team in working on our financial recovery, while the ICA has been obstructionist,” said Tim McNulty, a spokesman for Mr. Peduto. “The city has continually held up its end of the bargain, through multiple years of sound budgeting, fiscal transparency and three recovery plans. It’s worth studying if the ICA has outlived its lifespan after a decade of funding from state taxpayers."
Act 11 of 2004, which created the ICA, says “the authority shall exist for a term of at least seven years” and notes that the state secretary of Community and Economic Development shall “certify that the authority is no longer needed” if the city has had “annual operating budgets and five-year financial plans approved by the approved by the board for at least the three immediately preceding years.”
Ms. Kensinger said Dennis Davin, appointed secretary of the department in January by Gov. Tom Wolf after more than a decade as the director of the Allegheny County Department of Economic Development, is working with his legal office “to conduct a comprehensive review of all materials related to the ICA.”
In a statement, ICA chairman Nicholas Varischetti said the board would not comment on pending litigation but asserted it is “well within its legal authority” to withhold gaming money.
“This board will not be bullied or manipulated in order to meet the mayor’s arbitrary timelines,” he said. “It is my sincere hope that the mayor and his advisers will come to recognize the ICA’s legitimate role in this matter and that he will personally rededicate himself to a more cooperative working relationship with this independent oversight board, and that he will direct his team to begin to work cooperatively as well.
“Nothing is gained from [Thursday’s] unnecessary legal action and from the mayor’s antagonistic rhetoric.”
In a separate letter answering the city’s demand for the gaming revenue, Mr. Varischetti blamed Mr. Peduto’s office for the rancorous relationship with the authority, saying “the level of unprofessional behavior from members of this administration is appalling” and noting that the authority has released about $8.2 million in gaming funds to the city since Mr. Peduto took office in 2014.
That money came from 2013 gaming revenue. The ICA is still holding onto money from 2014 and 2015. Executive director Henry Sciortino did not provide copies of the authority’s budgets and audits requested by the Pittsburgh Post-Gazette, nor did he respond to queries about how interest from the city’s gaming funds is handled.
Mr. Varischetti credited the authority with helping the city shed debt, pay down pension obligations, improve its bond rating and cut costs. He maintained the authority is still willing to meet with Mr. Peduto’s administration and release additional money provided the city returns a signed copy of a letter agreeing to conditions set by the ICA and promising to implement the financial management system and payroll module no later than Jan. 31.
After Mr. Peduto took office, he said the payroll project was behind schedule and grossly over budget. He commissioned an independent review that ended in March, when the mayor announced the city would finish the system, albeit with a new vendor.
The city hoped the announcement would convince the ICA to release gaming money, but Mr. Varischetti refused, saying the authority’s approval of the city’s 2015 budget was predicated on the payroll project being completed.
“The mayor has inherited a better city fiscally because of oversight,” Mr. Varischetti wrote. “However, his new breed of fiscal discipline has meant more taxes, more fees, higher parking rates and more spending.”
Mr. McNulty said Mr. Varischetti’s letter was “completely irrelevant to the fact that they owe us what will be $20 million in gaming money” by the end of 2015.
“We’re taking the city’s fiscal situation very seriously and they’re trying to turn it into a soap opera to us to justify their existence,” he said.