Pittsburgh City Council gets set to tackle plan for recovery

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As Pittsburgh City Council prepares to take up debate on a five-year financial recovery plan scheduled to be adopted by the end of the month, neither the mayor's office nor council members were tipping their hands Tuesday about what a final version of the document might look like.

The plan includes some harsh medicine to eliminate operating deficits, reduce debt, increase pension contributions and boost capital spending -- all objectives that must be met before the city can exit Act 47 oversight.

The amended recovery plan, drafted by the city's financial overseers appointed under Act 47, was introduced Tuesday with no discussion.

The recommended measures include "moderating employee wage and benefit cost growth" and increasing the real estate tax millage to the level in place before a 2013 tax cut, which came in the wake of the countywide reassessment. Instead of keeping revenue flat, the cut, which was endorsed by then-Mayor Luke Ravenstahl and passed by the city council, dropped real estate tax revenue from $126.6 million in 2012 to $119.3 million in 2013.

That decrease, combined with what the report's authors described as prudent moves by the city's pension boards to lower expected rates of return to more conservative estimates and adjust mortality assumptions to reflect longer life spans -- creating larger unfunded liabilities and higher minimum contributions from the city -- will result in a total decrease of $14 million in the city budget next year. That figure will grow to $21 million by 2018, the report says.

Still, Mayor Bill Peduto and council members say they will work to avoid a tax increase.

"The mayor's goal is to balance the five-year plan without a tax increase," spokesman Tim McNulty said. "There will be discussion in council through the month to see what the options are, and there is time to work together on a solution."

Council President Bruce Kraus said those discussions will be "fulsome" and "robust."

"It's not the mayor's plan and it's not the city council's plan. It's the Act 47 recovery team plan," Mr. Kraus said. "The mayor has made it perfectly clear that his desire is to not see a tax increase. ... As president of council, my desire coincides with the mayor's."

Councilman Dan Gilman described the Act 47 team's recommendations as a "menu of options" rather than imperatives.

"They are far from certainties," he said. "The last place I would ever look for revenue is from the hardworking taxpayers of Pittsburgh."

Councilman Daniel Lavelle also said major nonprofits need to contribute more to the city but doubted an agreement could be finalized in a month.

"We have a little less than 30 days to get this done," he said. "I think the biggest issue we're faced with is whether or not we will increase the millage rate. ... It's the very last option for me. I believe our citizens are already overly taxed, but unfortunately nothing can be left off the table."

A public hearing on the plan is set for 10 a.m. June 16, and Councilwoman Darlene Harris has requested an additional informational session for council members, called a "post-agenda meeting."

"I'm just listening to what's going on at this point," she said, also declining to weigh in on specific policy prescriptions for complying with the goals of the Act 47 plan.

The council debate over the Act 47 plan comes as the mayor and the head of the Intergovernmental Cooperation Authority for Cities of the Second Class, an oversight body created by the state for the city's finances, traded letters over the city's "structural weaknesses," particularly the delay in establishing a comprehensive financial management system, and potential plans to pursue revenue from nonprofits.

"The city's payroll represents the largest single operating expenditure, yet there is no current ability to verify the actual cost of payroll due to the lack of any centralized system, internal controls or pre-audit review," wrote ICA Chairman Nicholas Varischetti in a letter Monday, calling on the city to slash operating costs before "chasing new revenue."

In a letter Tuesday, Mr. Peduto fired back, citing his administration's cost-cutting initiatives and asking the ICA to make more specific recommendations for additional cuts. His administration arrived in office to find that the financial-management system in question could not reliably perform basic tasks and halted the project so an audit could be performed and a new plan developed.

"I share your sense of urgency around the implementation of this tool, but I will not allow any more staff time or taxpayer dollars to be invested in a broken system," the mayor wrote.

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