Government
5:30 pm
Mon July 9, 2012

City Finances Could Be Headed for Trouble

The city of Pittsburgh ended 2011 with a surplus of $20 million. That's according to the Popular Annual Financial Report (PAFR) released today by City Controller Michael Lamb. That may sound like good news, but Lamb said the surplus was due to one-time revenue sources.

"We received $10 million in state pension aid we weren't expecting, and we received $10 million in gaming revenues that was actually from a prior year, and that's actually what drove that surplus. It wasn't anything that we did to hold down costs," he said.

Without those two revenue sources, Pittsburgh would have been right at budget or potentially in a deficit for 2011. Lamb said that a continuing population decline and ongoing pension problems could spell financial disaster for the city in coming years. Still, there is some good news: the city made more headway on debt payments last year.

"We paid about $52 million toward outstanding bonds in 2011, bringing our total outstanding debt to around $581 million, which is a far cry from where we were five or six years ago," said Lamb, "so we're moving in the right direction on long-term debt."

The city continues to have a problem with population, which is a problem because Pittsburgh's finances are heavily reliant on the amount of people who live here.

"The city's population drives our property tax, our wage tax, our payroll prep tax, and even the local services tax. All those taxes are really driven in large part by the people who live here, and when we have fewer and fewer people living here it creates a real strain on the city of Pittsburgh. We at one time had 700,000 in the city of Pittsburgh. Today, based on the last census, we are a city of 300,000," said Lamb.

Another big financial hurdle, according the PAFR, is the city's Comprehensive Municipal Pension fund. He said the pension has a lot of issues and is far from stabilized. He cited as a concern the city's plan to reduce the amount of money going into the pension over the next five years. Lamb added that underfunding the pension is what landed it in hot water in the first place. He said pension reform is badly needed, but cannot be done without help from Harrisburg.

As far as what can be done on the city level, Lamb said the future doesn't have to be bleak. He urged the city to minimize costs and maximize revenue. On the cost side, he said moves as simple as changing the way office supplies are purchased could help. For more revenue he said there is not enough tax enforcement, and he estimated some $5 million to $10 million is left on the table each year from parking taxes, wage taxes, and payroll preparation taxes, among others.

"Moving forward, ideally, if we could see some new revenue source, whether that be an increased contribution from the non-profits or an increase in the local services tax, and we could dedicate that revenue to the pension to help address that problem, that would be great. That would really relieve us in the out years," said Lamb.

The PAFR also provides information about Pittsburgh's demographics, elected officials, and the Pittsburgh Promise.