Council, Administration Battle over City Debt

Nov 16, 2011

Pittsburgh City Council is forging ahead with a new plan to control the city's borrowing habits, despite stern opposition from Mayor Luke Ravenstahl's administration.

The measure, given preliminary approval on Wednesday, would put strict limits on how much total debt the city could take on, pegging that number as a percentage of the General Fund.

The mayor's Finance Director, Scott Kunka, said that the city needs more freedom when borrowing.

"The particular piece of legislation we have in front of us has hard, inflexible rules that we think will hamper the process as we move forward," said Kunka.

The mayor's budget plan includes $80 million in new debt over the next two years, an effort that would be blocked by the debt policy legislation.

Councilman Bill Peduto said that the city should incur debt responsibly, implying $80 million in bonds may be too much.

"[The bill] will assure us that we're not just trying to go on a shopping spree, but making sure there's money down the line for future generations to pave streets," said Peduto.

The legislation would limit the city's debt to 17% of the total amount of Pittsburgh's General Fund, combined with its debt service payments. Another provision limits debt to 5% of the total taxable property value of the city.

Too Tight a Grip, or a Responsible Limit?

Councilman Patrick Dowd said that the bill's parameters for borrowing are too severe, because markets change too rapidly for a set policy to remain relevant.

"It does not make sense for us to say, 'We're going to have debt service that does not exceed 17%,'" said Dowd. "Typically, what you'd want to do … Let's say 17 is the middle; you'd go from 15 to 20, and somewhere inside of 15 to 20 is where judgment and execution come into play."

But proponents argued that the bill includes a provision to review the policy every three years, allowing Council to make changes. Matthew Barron, a Peduto staffer who helped draft the legislation, said that the bill goes even further by allowing Council to pass special exceptions when warranted.

A Contended Bill

The bill was vetted through Pittsburgh's state financial overseers, the Intergovernmental Cooperation Authority and the Act 47 team, before being presented to Council on Wednesday. After a long debate, sponsoring Councilman Peduto said that he can't accomodate "eleventh hour" contentions from the administration.

"Considering that ICA is on board, [Act] 47 is on board, the majority of Council is on board, it is actually just a respect to the administration to allow their thoughts to be put into it," said Peduto.

After that comment, Peduto stifled further debate by calling for a vote on the bill. It passed with five members in support, three in opposition, and one in abstention — far from a veto-proof majority.

The bill will come up for a final vote on Tuesday.

The $80 million in new debt proposed by the Ravenstahl administration would be the first new bonds issued in several years for Pittsburgh.

The last debt policy for the city was not written as a law, but rather a document of guidelines. It was drafted in 1995.