Despite progress, state to still monitor city finances

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State oversight of Pittsburgh's finances will continue, the Department of Community and Economic Development ruled yesterday, and will focus on tackling debt, retirement and workers' compensation costs.

State Community and Economic Development Secretary Dennis Yablonsky said in a statement that the city "has witnessed considerable progress in stabilizing its financial position," and praised Mayor Luke Ravenstahl for "spearheading the city's cost containment efforts."

Despite progress, the city needs a second state-written recovery plan under Act 47 that "would provide a blueprint" for fixing its big, long-term problems, Mr. Yablonsky said.

"I don't think that that should necessarily be construed as bad news," said Mr. Ravenstahl.

He said he'd use Act 47 to bolster the city's bids for solutions to its long-term problems. It will allow the city to argue to Harrisburg that "everything they've asked us to do, and then some, we've done."

Mr. Yablonsky's decision ends a process that began in November, when a City Council majority voted to ask the state to consider lifting oversight.

Though the city finished last year with an $89.5 million bank balance, even after transferring $60 million to an improvements fund, Mr. Yablonsky said budget gaps could reappear by 2011.

The city's bank surplus is counterbalanced by a debt principal of around $765 million, a pension fund that's $462 million short of ideal levels, $220 million to $320 million in long-term obligations for some retired workers health care, and a workers' compensation tab that's expected to creep toward $25 million a year.

Getting out of Act 47, Mr. Yablonsky said, "would be premature and could subject the city to a return to distress status in the near future."

City Controller Michael Lamb liked the decision.

"There's a lot going on behind the scenes to begin to address those [long-term] issues," he said, noting a push for statewide municipal pension reform that might steer more aid to distressed cities.

In 2003, Mayor Tom Murphy asked for a declaration of distress, and Mr. Yablonsky granted it. The state appointed the recovery team of law firm Eckert Seamans and number crunchers Public Financial Management.

They prepared a plan, approved by City Council in 2004, which limits costs and union contracts, and which the city must technically live up to. It did little about debt and retirement costs, and Mr. Ravenstahl vowed that omission would not be repeated.

Council President Doug Shields, who sought to have oversight lifted, said the city's fiscal problems "are ones that neither the Act 47 team, nor the Department of Community and Economic Development can change -- only the Legislature can," through help with the city's pension gap and debt.

Council Finance Chairman William Peduto called the extension of oversight "a sound decision." The city's initial recovery plan "has gotten us to where we are today, but we lack any plan that will structurally change our financial situation," he added.

A second panel, the Intergovernmental Cooperation Authority, or ICA, approves and rejects city budgets and five-year plans and can withhold new tax revenue should elected leaders stray. It can't expire before 2011.


Rich Lord can be reached at rlord@post-gazette.com or 412-263-1542.


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