Tuesday, April 12, 2011

City Budget Eyes “Cliff”

In 2012 the city of Pittsburgh will have to spend nearly $90 million in debt service, in 2017 that number drops to $30 million. Council members, the mayor and city financial directors have taken to calling that “the cliff” and are looking longingly at that date as a way to begin spending money on pent-up capital needs and on dealing with long-term pension fund problems.

Council held its second of three special meetings looking at the city’s fiscal health this afternoon. The first meeting looked at the 2011 budget, today’s meeting took a stab at the next 5 years and the third will look at the long range health of the city’s finances.

Councilman Bill Peduto says the key is to keep the city going long enough to get to the “cliff.” His next goal is 2025 when all city debt will be eliminated assuming no new bonds are issued.

Pittsburgh City Council Budget Director Bill Urbanic says it will not be easy to get through the next 5 years. “We need to continue to watch health care and pension costs… [property] reassessment may cause an increase, we would think that would be what would happen but you never know… also we must continually look for efficiencies and new sources of revenue,” said Urbanic.

Urbanic told the council that many of the new revenues promised by the state legislature when the city entered into Act 47 have not been as robust as had been expected. He says by allowing the $52 a year LST to be collected on dollar a week rather than in one lump sum costs the city hundreds of thousands of dollars. “The payroll tax is not performing as first anticipated and the reduction of the parking tax actually hurt us a little more than we expected as well,” said Urbanic.

The discussion prompted City Councilman Patrick Dowd to chime in, “It would be very interesting to look back and ask ‘just what did we get when we got oversight?’ and I think that the answer will show us that we did not get a whole lot.”

Capital spending continues to be a point of discomfort for many council members as they look into the future. The 5-year plan calls for annual capital spending of $20-30 million. “I don’t know that there is anything magic about that particular number,” says Ravenstahl Administration Budget and Finance Director Scott Kunka. He said it seems to be based more on tradition since falling under state oversight than anything else. “It does seem to be right in the sweet spot where we can maintain or even get a little ahead on our infrastructure needs.”

Most council members feel the number is too low. Bill Urbanic’s staff recently did a needs assessment and came up with an estimate that $100 million would be needed in the first year to catch up with a backlog of capital needs. To stay ahead of the list the study found a need for annual spending of $30-50 million.

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