City set to issue $80 million in bonds
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Pittsburgh City Council's approval of an $80 million bond issue Tuesday would bring the first test of efforts to better track capital spending, bring additional discipline to debt management and throw more light on the project planning process.
Some of the policy changes that originated with city officials and others were pushed by state-appointed overseers. If all goes as planned, Councilman Ricky Burgess said, the impact of this borrowing will be measured in ways that weren't possible with previous bond issues.
"I think it will be actually quite significant and revealing," said Mr. Burgess, council's finance chairman.
If Controller Michael Lamb has his way, the city also will develop new procedures for ensuring quality work on capital projects, especially street paving. Mr. Lamb cited "significant deterioration" of some streets resurfaced only two or three years ago.
"Whatever the issues are, there needs to be more attention to what is best practice when it comes to paving streets," Mr. Lamb said.
Mr. Burgess said city officials today are expected to shop the bonds to would-be investors. Mr. Lamb said sales price, interest rate and the city's costs will be presented to council before Tuesday's vote, which could trigger a flood of spending on street paving, new radios for public safety workers, renovation of city buildings, neighborhood amenities and other needs.
Mr. Ravenstahl would use half of the bond money this year and half next year. When federal grant dollars and funds from other sources are added to bond proceeds, the city's capital budget could total $72 million this year and again next year.
Council also will vote Tuesday on refinancing $45 million in old debt. That would save $5 million, money that would be added to the capital budget.
Since taking office in 2006, Mayor Luke Ravenstahl has refrained from borrowing, preferring instead to cobble together a capital program from operating funds while paying down some of the old debt that helped land the city in state oversight more than seven years ago.
Now, after paying off $243 million of the $824 million in old debt he inherited, Mr. Ravenstahl wants to borrow money and ramp up capital spending on deteriorating infrastructure.
At the same time, a new financial management system, a new debt policy and new rules for capital spending portend significant changes in how the city manages its capital program.
The first components of the financial management system, a partnership with Allegheny County, went on line Jan. 17. Mr. Lamb said it will enable the city to better track spending on equipment, fuel, labor and materials. That, in turn, should lead to better-informed decisions about project management -- whether the city should rent or buy heavy equipment, for example, or whether it should use in-house or outside labor.
Until now, Mr. Lamb said, such analysis was available only to the city departments overseeing the projects, and he questioned how consistently it was done.
Implementation of the financial management system followed Mr. Ravenstahl's dispute with overseers over the cost. The debt policy sponsored by Councilman William Peduto was controversial, too, with Mr. Ravenstahl's office calling the initial version too restrictive.
The retooled version, adopted in December, pressures the city to limit borrowing so debt service doesn't cripple the annual operating budget. Within 10 years, the policy says, no more than 12 percent of the operating budget should go to debt service. Debt service currently consumes about 18 percent.
The policy also limits the amount of variable-rate debt the city can incur and gives council the authority to hire a consultant to independently vet bond deals proposed by the mayor's office.
In 2010, council adopted the Neighborhood First Capital Budget Reform Act, which requires the city to disclose a variety of details about the capital plan, including distribution of funds across neighborhoods, a timeline for completing each project and the "estimated useful life" of things built with capital money.
The legislation requires an annual reconciliation of capital funds so unspent money can be redirected to other projects. In the past, money not spent on a project has sat idle for years.
On Tuesday, Mr. Burgess introduced another bill that would bring additional refinements to the capital budget process. Among other changes, it would require that proposed projects be ranked according to public safety needs, federal and state mandates, compatibility with the city's comprehensive plan and other factors.
Mr. Lamb said quality-control improvements also are necessary. He said one possibility is that the city issue more rigorous specifications for asphalt it buys.
First Published January 30, 2012 12:00 am
