Government
12:06 am
Mon October 29, 2012

Is Pittsburgh No Longer "Financially Distressed?"

Update 10:10 a.m.

Due to the severe weather from Hurricane Sandy that's expected to hit the state, the Pennsylvania Department of Community and Economic Development (DCED) has postponed the hearing scheduled for 4 o'clock this afternoon in the City Council Chamber on removal of the city of Pittsburgh from Act 47 oversight and lifting of the "financially distressed" designation.

"In light of the declaration of a state of emergency for PA and the danger posed by the pending storm, we are postponing today's Act 47 hearing in Pittsburgh."

DCED spokesman Steven Kratz says no new date for the hearing has been set, but the department is trying to reschedule as soon as possible.  90.5 WESA will cover the Act 47 hearing when it's rescheduled.

Original Story

Nearly nine years after being declared a distressed municipality under Act 47, Pittsburgh officials make their case to be removed from state oversight at a hearing in the City Council Chamber this afternoon.  Mayor Luke Ravenstahl says the city is ready to have the "financially distressed" label lifted.

It was three weeks after another hearing in Pittsburgh that Dennis Yablonsky, Pennsylvania Secretary of the Department of Community and Economic Development (DCED) issued a ruling on December 29, 2003 saying the city was being placed in the Act 47 program.

The city was adopting balanced budgets but officials were tapping reserves and using one-time revenue sources including selling delinquent tax liens to private collectors, to fill in gaps in income. 

But in November 2003 Mayor Tom Murphy, halfway through his third and final term in office, introduced a 399 million dollar budget in November 2003.  It had a 42 million dollar hole.  Legacy costs for retirees were rising while the city’s credit rating was falling.

Murphy said the city needed state help and petitioned for distressed status which he hoped would pave the way for additional revenues including a new commuter tax.

“There are we believe certainly under Act 47 opportunities to get fixed, to modernize the city’s tax structure, and to fix it in a way that fairly places the burden of taxes on everybody who enjoys the city.”

"Not a State Takeover"

Act 47 was created 25 years ago to help local governments with chronic budget troubles or in danger of defaulting on bond payments or missing payroll.  27 municipalities are currently in Act 47 including Reading, Scranton and the most recent addition, Harrisburg. Two communities, Aliquippa and Farrell have been under Act 47 since the beginning.

In making his decision, Secretary Yablonsky assured Pittsburghers that it was not a state takeover.

"It was designed to be a partnership between the state and the local municipality.  The local governing body, in this case the mayor and city council will contiue to run the city on a day to day basis.”

The state hired Act 47 recovery managers, but the Republican-controlled Senate insisted on another oversight panel, the Intergovernmental Cooperation Authority.

Pittsburgh Mayor Luke Ravenstahl said it has been a partnership.

“It’s put us on solid financial footing, they have been a partner.  That doesn’t mean at times we haven’t disagreed and even disagreed significantly but the fact of the matter is we’re a more financially solvent city, we’ve paid our debt down, we haven’t raised taxes, we’ve begun to deal with our pension obligations and our long-term legacy issues and so the city of Pittsburgh today is in much better position.”

Ravenstahl: 4 Years Ago the City Wasn't Ready, Now It is

In 2008, the DCED revisited the city’s financial state. At that hearing, Mayor Ravenstahl did not take a position whether the Act 47 designation should be lifted or not.

“I think in 2008 we weren’t as strong as we needed to be to be removed from Act 47.  Our argument wasn’t as strong as it is today and I wanted the Secretary to have the process play itself out without my opinion being significant in the outcome.  I wanted them to look at the facts, look at the numbers and understand what the budgetary situation in Pittsburgh was, and they did.  I agreed with them at the time and was not surprised they decided Pittsburgh needed to remain."

But now, Ravenstahl says the city is ready to be removed from state oversight and he will make his case today before DCED officials.

Only six municipalities have emerged from Act 47.  The most recent is Homestead which was under Act 47 from March 1993 until March 2007. 

  • Ambridge, Beaver County:  entered Act 47 in April 1990; designation lifted in April 1993
  • East Pittsburgh, Allegheny County:  entered Act 47 in November 1992; designation lifted in December 1999
  • Homestead, Allegheny County:  entered Act 47 in March 1993; designation lifted in March 2007
  • North Braddock, Allegheny County:  entered Act 47 in May 1995; designation lifted in April 2003
  • Shenandoah, Schuylkill County:  entered Act 47 in May 1988; designation lifted in April 1993
  • Wilkinsburg, Allegheny County:  entered Act 47 in January 1988; designation lifted in November 1998