$80 Million in Bonds Ready for City Council Passage
After two months of debating, approving, disapproving, and more debating, it seems like the mayor's office, City Council, and the Intergovernmental Cooperation Authority have all agreed on a plan for Pittsburgh to borrow a hefty $80 million.
It's the largest bond floated in city history, and the first new debt issued since Mayor Luke Ravenstahl took office. Pittsburgh City Councilman Bruce Kraus said it's necessary to pay for much-needed capital improvement projects.
"We're at historically low interest rates, and all one has to do is take a look around to see the capital need throughout this city," said Kraus. "There's so much that needs to be done, and so much that we can do."
New public safety vehicles and infrastructure upgrades are two of the major items Council Members want to pay for with the bonds.
New Capital Budget Rules
The plan to borrow only got approval from ICA overseers after Council agreed to restructure the capital investment process. That means a new board of city officials and residents will decide which projects get funding over the next six years, based on a strict set of guidelines.
The $80 million in bonds would be the first money to fall under the oversight of the proposed Capital Project Facilitation Committee.
"It's one thing to have the piece in place that we need to borrow the money. It is equally or probably even more important that we have in place the piece that says exactly how we are going to spend that money, and how we are going to rank capital projects to receive that funding," said Kraus.
Funding Retiree Healthcare
One of the other conditions for ICA approval was the creation of a trust fund to help cover the health care costs of retired city police and firefighters. As of 2010, the city's "Other Post-Employment Benefits" (OPEB) liability was about $488 million, but Council only approved $2.7 million for the trust fund.
City Controller Michael Lamb called that a "very small step" in the right direction.
"We're talking about setting aside a very small amount of money to deal with a very enormous financial problem," said Lamb.
Contracts with police and firefighters after 2005 don't include retiree healthcare, so the city is only responsible for covering those hired before that date.
"As those members of the police and fire forces get older and retire, there will be an increasing amount of the obligation, but it will drop off," said Pittsburgh Finance Director Scott Kunka. "There's an end to the obligation."
That rise-and-fall pattern of retiree healthcare costs is why city leaders put such a relatively small amount into the trust fund; they say the fund will be an aid to the city's normal way of paying for the benefits as the bills come in.
In a strange technicality, the bond issues, the new rules for capital spending, and the creation of an OPEB trust fund are expected to get both preliminary and final passage when Council meets on Tuesday.