A state-appointed overseer has approved Pittsburgh's 2014 city budget and five-year plan but included an amendment that requires the city to pony up additional pension fund money if it doesn't yield at least an 8 percent return on its investments.
The Pittsburgh Intergovernmental Cooperation Authority, one of two bodies charged with overseeing the city's finances, gave its stamp of approval on Wednesday, the deadline set by the state, according to ICA board chairman Nicholas Varischetti. ICA and city officials ironed out the final details during a conference call and subsequent emails.
The ICA, a board appointed by state legislators, must approve the city's budget annually. It holds the power to withhold millions in gaming funds.
Mr. Varischetti said no vote on the matter needs to be taken but added that the authority's review of the budget included input from other board members.
City officials submitted a budget and five-year plan to the authority on Sep. 23. The $479 million budget included modest, across-the-board increases for city departments and a slew of new job positions in the mayor's office proposed by Councilman Bill Peduto, the Democratic nominee who is favored to win the mayor's race next month. The original draft of the budget was amended after officials received input from city Controller Michael Lamb, city council members and the ICA board.
The most significant change is the new pension requirement. The city calculates its annual contributions based on an investment return of 8 percent and is slated to contribute about $50 million next year to the fund. The amendment, pushed by the ICA and agreed to by the city, will now require the city to make up the difference if the market sours and the return falls below the threshold. It does not specify where the money should be taken from.
The city's pensions have far outperformed expected rates of return. In 2012, the pension fund got a 14.3 percent return on its investments. Assistant finance director Cathy Qureshi said the pension fund is performing at about 9 percent so far this year.
Mr. Varischetti said the amendment reflects the ICA's concern about the city's legacy costs, including pensions and retiree health care.
"Legacy costs in the city of Pittsburgh are a huge issue," he said. "We on the ICA are very much aware of that and we're scrutinizing it closely."
The budget will be submitted to city council on Nov. 12, when Mayor Luke Ravenstahl will deliver his budget address. Council then has until Dec. 31 to approve the budget.
Council President Darlene Harris said she endorsed the amendment, saying she did not want the city to fall behind on its obligations to fund the pension.
"We have to keep up with the pension," she said. "If we're short, then we need to put that money into it."
Last year, the ICA board granted conditional approval to the budget and attached several strings before accepting it. The authority compelled the city to create a task force to negotiate with tax-exempt nonprofits for a new deal for voluntary payments and also required the city to continue its implementation of financial management software.
This year, there are no such conditions.
"We have worked hard to bring back financial stability and responsible fiscal leadership to city government, and this budget and updated financial plan does just that," Mr. Ravenstahl said in the news release.
Moriah Balingit: email@example.com, 412-263-2533 or on Twitter @MoriahBee. First Published October 24, 2013 12:38 PM