$4.5 million spent on keeping the city in line

But critics ask: Are the state's oversight costs really worth it?

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Oversight of City of Pittsburgh finances has cost the state $4.5 million, a figure that some say represents money well spent, while others wish they could put those dollars to other uses.

"There are some short-term costs that lead to long-term savings," said state Sen. John Pippy, R-Moon, who argued that oversight should continue.

The cost "is probably double what it should be," said city Councilman Jim Motznik. "They basically have two boards doing the same job. ... Those tax dollars could be spent in a much better manner. We still have pools that are closed and streets that aren't paved."

The state paid the Act 47 recovery team $2.38 million for its services from late 2003 through October of this year. The separate Intergovernmental Cooperation Authority appointed at the behest of state legislative leaders, spent $2.07 million in state funds from February 2004 through June of this year.

"It's my goal to be eventually out of state oversight and obviously the costs associated with that will go away," said Mayor Luke Ravenstahl.

Council on Dec. 4 voted to ask the state to consider ending the city's distressed status under Act 47. As of Friday, the state Department of Community and Economic Development, which decides who gets into and out of distressed status, hadn't received a letter from the city making the request formal, but already was preparing a response.

Development Secretary Dennis Yablonsky likely will wait until the city's year-end financial results are in, and then hold a hearing on the request in late February or March before deciding whether to end Act 47 status.

If not, Act 47 team co-leader James Roberts intends to write a new recovery plan to replace the one council approved in 2004.

That multi-year plan would try to address one big question, Mr. Roberts said. "How do we get out of distressed status? ... The only way to do that is, expenditure controls have to continue."

Notably, Act 47 caps labor contracts, preventing unions from using politics or binding arbitration to get pay and benefit boosts that a municipality says it can't afford. City unions lobbied council to pass the resolution asking to end distressed status.

The million-dollar-a-year cost of oversight is fueling the calls to end it -- especially since the state cut its annual subsidy for general city operations from $10 million to $6.125 million.

"I think that million could be put to better use, like helping to pay off the debt, or placing money in the pension fund," said Councilwoman Darlene Harris.

State spending on the Act 47 team has averaged $600,000 a year. Almost all of the money goes to law firm Eckert Seamans Cherin & Mellott, and Philadelphia consulting firm Public Financial Management. Though their bills have dipped since peaking at $690,000 during the 2004-05 fiscal year, they will rise as the team gets started on a new plan, Mr. Roberts said.

"When you look at how far the city has come since 2004, you'd have to consider that money well spent," said Mr. Roberts. The city barely was able to pay bills in 2004, and now has a bank balance nearing $100 million.

For years, council and then-Mayor Tom Murphy were at odds over how to plug a deficit that threatened to hit $70 million.

"I don't know where a plan would've come from if it weren't for ICA and Act 47 coming together to make a plan," Mr. Roberts said.

Pittsburgh's Act 47 team costs nearly half of the $1.2 million to $1.4 million the state spends annually on consulting for the 17 municipalities now under Act 47 oversight. "Pittsburgh is the largest community in the program that we have had," explained Fred Reddig, executive director of the Governor's Center for Local Government Services, which helps distressed municipalities.

The statewide bill could climb as the ranks of the distressed grow.

Since 2004, 35 municipalities have entered an early intervention program designed to keep them out of Act 47. They include Butler, Washington, Beaver Falls, Ambridge, Dormont, Penn Hills and Elizabeth Borough. New Castle and Nanticoke fell from that program into full-blown oversight.

The Governor's Center gets yearly fiscal reports from all 2,560 municipalities, and around 100 meet at least one criteria of distress, Mr. Reddig said.

Only in Pittsburgh has that resulted in two overseers, thanks to General Assembly leaders' desire to have their own set of eyes on the books. The ICA's five-member board includes representatives of each of the four legislative caucuses, and state law puts it in place through at least 2011.

ICA spending has declined from $904,000 during that panel's first year to $467,000 in the 2006-07 fiscal year, said that agency's executive director, Henry Sciortino. The biggest costs now are payments to Virginia-based System Planning Corp.'s TriData division, which is studying the city's fire and paramedic services, and Mr. Sciortino's $168,000 annual salary, from which he pays some expenses.

Mr. Sciortino said the ICA was instrumental in getting the Legislature to approve a 2004 tax shift that improved the city's bottom line. Its spending includes around $500,000 for consultants that have yielded suggestions on how to run the police and fire bureaus, and cut worker's compensation costs. The ICA has sued the city to curb labor contracts and cap the controller's office budget.

Mr. Motznik said the ICA hasn't done anything the Act 47 team couldn't do. "They threw away that money that went to the ICA," he said. "Anything that we do, we have to run past the ICA and the Act 47 coordinator."

"I think there is some duplication in effort, but that wasn't our decision," said Mr. Roberts.

Mr. Sciortino said the ICA looks at the big picture and fine-tunes long-term plans, while Act 47 looks at the details.

There seems to be no appetite in the Republican-controlled Senate for ending oversight of Democrat-ruled Pittsburgh. "These current expenditures are critical to the city government learning the discipline necessary to overcome the tendencies which led the city to reach its dire financial status," wrote Sen. Jane Orie, R-McCandless, in an e-mail response to questions.

Both overseers argue that when they work together, good things happen.

"The taxpayers are about to get real benefits, because the [city's] accounting system is about to change," Mr. Sciortino said. The ICA demanded replacement of city accounting software that has been troublesome for a decade.

Now the Governor's Center is paying the Government Finance Officers Association, and Philadelphia-area information technology firm Smart Business Advisory and Consulting to review the accounting systems of the city, Allegheny County, and their authorities.

Meanwhile the state is buying the Pittsburgh Municipal Courts Building from the city for $9 million. The one hangup is the need for a city-county agreement on paying maintenance costs for the building, which both governments use.

Once the sale is consummated, $3 million of the price will go for implementing the suggestions that come from GFOA and Smart. The rest can cover other needs.

The overseers now are considering the future of the city's efforts to win contributions from tax-exempt groups. They city's long-term plan, approved by the ICA, counts on $4.2 million to $4.3 million a year in donations from nonprofit organizations.

"We were told that [Mr. Ravenstahl] was attempting to get a commitment for $4.3 million," Mr. Roberts said. "We haven't seen anything in writing yet."

An arrangement with the University of Pittsburgh Medical Center, unveiled Monday, raises questions about that figure. UPMC has agreed to pay $10 million a year toward the Pittsburgh Promise of college aid for public school graduates, but will drop its annual $1.5 million gift to the city's coffers. That had been the biggest contribution.

City Chief of Staff Yarone Zober said Tuesday that the city is talking with tax-exempt groups about ongoing contributions.

Mr. Ravenstahl hasn't experienced city government without state oversight, and he said he didn't begrudge the Act 47 team or ICA their paychecks.

"When you have professionals that are hired to do the job, it's going to cost money," he said. "Obviously, [$4.5 million] is a significant amount of money. They've been helpful in assisting us and in cooperating with us to get us to where we are today."

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


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