Without Act 47 Oversight, Peduto Says City Will Be Financially Solvent – But Cautious

Feb 14, 2018

After 14 years of being designated "financially distressed," on Monday the city of Pittsburgh exited Act 47 state oversight of its finances. State officials hailed the city's return to fiscal good health.

90.5 WESA's Kevin Gavin spoke with Pittsburgh Mayor Bill Peduto about the city's financial future.

Their conversation has been edited for length and clarity. 

KEVIN GAVIN: Mr. Mayor why should we have confidence that the city is ready to be free from that watchdog status and won't return to practices that got it into the financial distress situation that it was in?

BILL PEDUTO:  Well, first off I'd say be cautious. I mean that's one of the reasons that we were able to go almost to complete bankruptcy before we went through 14 years of recovery was because we didn't have enough people watching. So there are legislative changes that have been placed into the city code which prohibit us from borrowing our way out of deficits; which prohibit us from spending down reserve funds; which prohibit us basically from falling into the bad financial management structures that we had before; and it’s not legal for council or any mayor counsel or any mayor to be able to do the things we did before.

GAVIN: But the next council, the next mayor could change that legislatively. What would stop that?

PEDUTO: I think it's just the old fashioned the media reports on it, and people get organized and active and say no. We went through that in the past and it will come in the form in the future of "we’re going to do this one time. This is a very unusual circumstance," and that's exactly how it started with the city of Pittsburgh. And one time became a practice and unusual circumstances led to a structural deficit of $100 million where basically one out of every $4 was not accounted for by the taxes that we were collecting. So there is no guarantee that the city will be able to continue in perpetuity along a path of financial solvency. However, given our five-year projection and looking really seriously at the next 10 years, it appears that the city will remain fiscally and financially solvent and with a healthy reserve fund without the need to raise taxes.

GAVIN: As the city got its finances under control during the years of Act 47, part of it was limiting pay raises to public safety unions. We have heard that they're going to come out hot and heavy for raises because they know sort of took it on the chin during the last 14 years.

PEDUTO:  Well it's not just those that were in the uniforms; those pay raises were limited to all city employees and instead of just choosing one group or another group within city government our belief is that all workers should be compensated adequately. So we will pursue hiring a national consultant that will be able to look at what our workers are paid and to assure that both on a competitive scale with our suburban neighbors and with a competitive scale with similar-sized cities that we're starting to approach the pay that people should be paid.  Will we be able to do that in one or two contracts? No, it's going to take a while.

GAVIN: You said at the departure from 47 that Pittsburgh will begin to invest more in streets parks and the city's many bridges. But it's not like all of a sudden the city has this big pot of extra money.

PEDUTO: Well, we will.

GAVIN: How so?

PEDUTO: We have been so diligent on the amount of money that we borrowed that our capacity to borrow more and still pay less [due to lower interest rates] is upon us, which means we're going to be able to pave more streets. We're going to be able to invest more into our facilities. In other words, we're getting to the point where our debt payments will become significantly lower.

GAVIN: Is it wise to be borrowing money just after exiting at 47?

PEDUTO: No, it wouldn't be unless there was a structure of debt. It's almost like playing Tetris and making sure that you're filling in the outer years with what you can afford to borrow but still are not paying as much as you paid in the past; and the only reason that we're able to do that is because we were so diligent in limiting the amount of money we borrowed over the past 10 years.