Pittsburgh City Controller Michael Lamb said that despite a “very challenging year” caused by the coronavirus, Pittsburgh’s finances are in better shape than many other places. He credited both sound management and an "eds-and-meds" economy -- even if he sounded unimpressed by commitments from the eds-and-meds sector announced by Mayor Bill Peduto Thursday.
“Obviously, the pandemic created major disruption in our lives, in our economy and clearly the city finances as well,” Lamb said in introducing the city’s Consolidated Annual Financial Report Friday morning. The city’s amusement and parking taxes in particular were hurt by coronavirus shutdowns and limits on gatherings: Parking revenues dropped by nearly half, to $31.3 million, while the amusement tax dropped by over $10 million to just $2.5 million.
The city’s “rainy day” fund, Lamb noted, shrank by more than a third last year, from $133 million to $85.4 million.
But that still amounts to over 14% of the city’s spending last year -- above the threshold of 10% that governments try to keep on hand. The city’s pension fund ended the year in better shape than it began, a fact Lamb credited to a decade-old decision to replenish the fund with some parking-tax revenue. Overall, he said, the pension fund’s health was “a credit to the leadership of the city … that they have made this commitment and continue to see great results.”
Lamb said other revenue sources actually held steady or even improved.
Real estate tax revenue, the city’s largest source of income, grew by 3%, to $151.8 million. Earned income tax, which is paid by city wage-earners was off by just over 1% from the year before, remaining at $108.3 million.
Lamb said that reflected the fact that in Pittsburgh’s diverse economy, some of its largest employers largely avoided layoffs.
“I think maybe we got through the storm a little better than a lot of other cities just because of the diversity of our economy,” he said. “Our focus here in Pittsburgh on on research and on health care and education really helped us continue to have significant employment in the city even in the time of a pandemic.”
That said, Lamb showed little enthusiasm for a commitment announced by Peduto Thursday in which four of the eds-and-meds economy's biggest players -- UPMC, Highmark, Carnegie Mellon University and the University of Pittsburgh -- committed $115 million to social goods.
That money will be spent on various social causes, like affordable housing and health programs, as part of what Peduto bills as the “OnePGH” initiative to raise money from nonprofits who don’t pay taxes.
The problem, Lamb said, is that when it comes to the city’s day-to-day costs, “the burden of this government rests heavily -- too heavily, frankly -- on the people who live here. … [T]hat burden is going to stay pretty much the same because we continue to not receive any real dollars to the city budget from our large non-profits.”
“For the past eight years, our large non-profits have done very good things in our community” around education and housing and other issues, Lamb said. “According to yesterday's announcement, those things are going to continue. But what's also happened in the last eight years is that these organizations have not made or have not entered into with the city a payment in lieu of tax arrangement and according to yesterday's announcement, that's going to continue as well.”
Peduto has long argued that the city’s previous means of seeking support from non-profits -- payments in lieu of taxes -- generally provided only a few million dollars a year. UPMC and Highmark, he said on Thursday, had each committed to spending more of that on their own in each of the next five years -- and in ways that can target “those that need the most help within our city.”
"The old model of asking nonprofits for money to put into the city general fund hasn't worked for decades," said spokesman Tim McNulty on Friday. "This is a new outcomes-based model that will mean more money and more projects befitting Pittsburgh residents."
Still, Lamb said a lack of direct support of city operations from the city’s biggest landholders and employers was “particularly unfair to the city taxpayers who continue to bear the burden of this government."
At the same time, he did acknowledge that a 2017 Peduto initiative to fund affordable housing with a hike in the deed transfer tax had worked better than Lamb had expected.
The 25% increase made the tax, which is levied at the time a property changes hands, the highest in the state. Lamb previously warned that it could chill the city’s real estate market.
But last year, revenue from the tax grew from $37 million to $44 million. Lamb acknowledged being “surprised” by that but said, “I can admit when I’m wrong.”
Lamb surmised that much of the revenue had been driven by sales of commercial properties or multi-unit housing, and that “for the ordinary homeowner, [the hike] has ben problematic.” But “The good news for the city is that all across the country, there is just a big pick-up in home buying, and so we’re benefiting from that.”
