Brian O'Neill: Mayors' finance statements can't all add up

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In Mayor Bill Peduto's stark warning that the city is looking at a $60 million, long-term gap in keeping the roads paved and the pensions funded, there was an echo of a mayor's warning 20 years ago.

In 1994, Mayor Tom Murphy announced early in his first term that the city faced "a real crisis." It had to deal with a deficit of nearly $27 million inherited from the Sophie Masloff administration.

Outgoing mayors often leave presents like that, particularly when they aren't all that fond of their successors. Take the last mayor, Luke Ravenstahl, He and Mr. Peduto have a real hate-hate relationship. Thus on his way out the door, Mr. Ravenstahl and his allies on the pension board lowered the city's investment assumptions. That means the city's contributions have to rise.

Expecting a lower investment return is a sound move, but Mr. Ravenstahl didn't want to do that a couple of years ago when increased pay-ins would have been his problem. Funny how that works.

A 7.5 percent return rather than 8 percent -- those numbers may amount to millions but they don't excite voters. The only numbers they care about are on their tax bills, and whoever occupies the mayor's chair is going to take the hit.

An old hand in the Masloff administration said rocky mayoral transitions have less to do with leaving booby traps and more to do with perspective. Jim Turner was Mrs. Masloff's chief administrative officer and her finance director before that, and he affirms that Team Masloff left the Murphy squad with loads of financial problems.

But that's life on Grant Street. The Masloff gang walked along a ledge staring into that same financial precipice for years, Mr. Turner said, and it was only when the new guys arrived that they screamed about the danger of falling off.

Mr. Murphy ultimately sought state financial oversight under Pennsylvania's Act 47 as a distressed municipality -- but not until his third term. The city has been under that state oversight for more than a decade now, and recently Mr. Murphy wrote a letter to Gov. Tom Corbett urging him to continue it. Mr. Corbett announced in March that the state would stay that course.

How can Pittsburgh still be in such distress when it has made a nationally touted comeback, when its real estate appreciation has bettered Allegheny County's and when it had the lowest vacancy rate among America's big-metro downtowns last year?

Let's count the ways.

About 40 percent of the land in the city is tax-exempt. Some of that is government buildings and parks, but every time a hospital or university buys another building the city gets less property tax revenue. The city has 30 percent fewer workers than it had 20 years ago, Mr. Murphy wrote to Mr. Corbett, but state law still ties Pittsburgh to the past.

The act that governs police and firefighter contracts needs to be amended "with strong and direct language that requires the arbitrator to take into account the ability of the city to afford higher wages or benefits without having to raise taxes,'' Mr. Murphy wrote.

He urged the state to close a loophole that allows hundreds of municipalities to get state pension money "by creating an artificial 'distressed status.'''

In many of these places, Mr. Murphy said, neither the government nor the employee pays anything into the pension fund -- yet the state funds the pensions. That system has stripped away so much money that Pittsburgh gets less from the state than it did in the 1980s.

Pennsylvania also should recognize that most people served by hospitals and universities live outside the city. The state ought to share in some of the costs of keeping the streets paved and the traffic lights working. The state already does that for local governments where state parks are located, Mr. Murphy argued.

What Mr. Murphy might have added, but didn't, is that states in the South and West, most of them run by fiscally conservative Republicans, long ago adjusted to the modern economy by making residents out of their commuters whether they like that or not. Cities such as Houston, Phoenix, Oklahoma City and Jacksonville annexed so much land over the past century that their footprints are 10 times the size of Pittsburgh's 55 square miles. That's a tax base.

That will never happen in Pennsylvania, and shouldn't, but the state might consider giving cities some of the tools they need before they fail, not after. Maybe then the city wouldn't be suing UPMC to stem its insatiable tax-exempt footprint.


Brian O'Neill: boneill@post-gazette.com or 412-263-1947.

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