Pittsburgh wants to cut its debt. Financial pros get big bucks to arrange debt deals. City Controller Michael Lamb and Councilman Patrick Dowd want those pros to bid against each other for the right to handle $45.3 million in public money that's now socked away for future debt payments.
Both officials endorsed that idea yesterday, after the state-picked Intergovernmental Cooperation Authority board met and announced that it was close to an agreement with the city on the much-discussed debt fund. The agreement isn't expected to go into detail on how the money is managed -- but maybe it should, Mr. Lamb suggested.
"There will be fees," he said, and the way to minimize them is through competitive bidding. "Open it up to all comers."
ICA Executive Director Henry Sciortino did that one better. Why not invite the firms that have made much money from handling city debt deals to do the work pro bono? "We're going to push as hard as we can to make [the debt reduction] cost nothing," he said.
At issue is the money set aside, at the ICA's insistence, to reduce the 2011, 2012 and 2013 debt payments of the city, which could otherwise run deficits in those years. The ICA estimates that $45.3 million set aside now can reduce debt obligations in those years by $51 million, but how that happens isn't clear.
Lawyers are hashing out an agreement. Its bottom line: The city "can't spend the money without the prior consent of the ICA," said Mr. Sciortino, and it must go toward reducing the city's $720 million debt.
Mr. Lamb said the city can invite firms to tell the city how much money they would need, now, to pay off $51 million in city debt in those three years -- and then award the job to the lowest responsible bidder.
That would be a departure for a city in which financiers have traditionally been chosen without any competitive process. Mr. Lamb's suggestion comes three months after Mayor Luke Ravenstahl created a panel to find the best contracting processes, and recommend them to the city in May.
Right now, the $45.3 million is sitting in an account controlled by Mr. Lamb and dedicated to paying debt -- but not necessarily future debt. Mr. Dowd attended the ICA meeting and pressed for specifics about how the money will be sealed off from the city's operations, who will approve its use and whether the ICA could force the city to use the money.
"I don't think that my questions were answered," Mr. Dowd said after the meeting. "There's no clarity about the role of the council, the controller and the mayor."
Mr. Dowd said that if an agreement emerges that puts all of the decision-making power in Mr. Sciortino's hands, as he thinks may be the case, then "that's not oversight. That's running the city.
"I think it's shameful that this wouldn't be competitively bid," he added. "If nothing else, we need to reassure the public that their tax dollars are being put to the best, highest possible use."
Mr. Sciortino said the emerging agreement might not say exactly how the money will be managed. "We do not have a preconceived notion of who should do what or how it should be done." Whatever process emerges, potentially including competitive bidding, should be outlined in writing, he said.
ICA Board Chair Barbara McNees said the emerging agreement with the city will be made public.
Rich Lord can be reached at firstname.lastname@example.org or 412-263-1542.