Sensible adjustment: Overseers give the city a sound fiscal plan
June 5, 2014 12:00 AM
By the Editorial Board
Pittsburgh City Council members and Mayor Bill Peduto greeted a proposed bump in the property tax rate that’s included in a plan from fiscal overseers like a game of hot potato. They don’t want to touch it.
Granted, avoiding tax increases for strapped city homeowners is a laudable goal, but the mayor and council must be able to significantly reduce expenses and drum up new revenue for next year if they are to sidestep a millage hike. One-time budgetary tweaks that have saved the day in the past just won’t cut it anymore.
The five-year plan from the city’s Act 47 team, led by Downtown attorney Jim Roberts and Dean Kaplan of the Philadelphia firm Public Financial Management, is a sensible, long-term guide for extending the advancements that city government has made during the first 10 years of oversight.
Conditions have improved since 2003 when the city teetered on the brink of bankruptcy, but key challenges persist. In the short term, city officials must balance the annual budget. More critical is that council and the mayor continue to exercise fiscal discipline with measures designed to reduce debt and add to its underfunded pension plans.
Council already has made some decisions that work against its financial interest — an early retirement incentive program enacted late last year and a promise to increase the number of police officers.
Under oversight, the city has been paying for most capital expenditures without borrowing, but the Act 47 team now believes the city needs to start putting more money into maintaining its infrastructure — roads, bridges, fire stations and other facilities. Crumbling pavement and weight-restricted bridges are blights that will hurt the city’s improving reputation.
The plan assumes a 5 percent cut in operating expenses next year, a wage freeze for 2015 followed by raises of 1 percent in 2016 and 2 percent annually thereafter, and higher contributions from employees for their health care premiums.
Those are tall orders, but the proposal that met with the most resistance initially is the property tax rate.
Because of the county-wide reassessment that went into effect last year, which raised the value of properties, council and former Mayor Luke Ravenstahl were required to cut the millage rate. The new rate was supposed to generate the same tax revenue as the prior year without giving the city a windfall at taxpayers’ expense. Unfortunately, the rate of 7.56 mills left the city about $7 million short last year, and that will continue every year unless the rate is adjusted.
What the Act 47 team proposes is moderate. Bumping up the rate by 5.5 percent to 7.9758 mills would cost the owner of a $100,000 home an extra $41.58 a year. If council and Mr. Peduto can’t balance the budget another way, that is a reasonable correction to last year’s miscalculation.
Fiscal oversight and the constraints imposed by it have been good for the city’s financial health so far. Council and the mayor should carefully consider the advice offered in the latest five-year plan.
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