Money Matters: From Act 47 to UPMC, mayoral candidates sound off on city’s financial state The city’s financial picture has improved, but the new mayor will have plenty of work to do
By admin on May 2, 2013
by Charlie Deitch
Before he stopped running for re-election in March, Mayor Luke Ravenstahl spent a lot of time touting the city’s current financial picture — and his role in fixing it.
And in some ways, the city’s financial picture has improved since he took office in 2006. The city’s debt has been cut from more than $800 million to about $580 million. The city’s pension is 60 percent funded — up from 34 percent in 2009 — and the city’s coffers have a surplus.
But the next mayor may have other problems to contend with. Pittsburgh still operates under two state fiscal-oversight boards: the Act 47 board and the Intergovernmental Cooperation Authority. While there appears to be no immediate end in sight to the ICA, Ravenstahl’s petition to exit Act 47 is pending before the state officials — a move some officials say is premature. In addition, the new mayor will be left to deal with a lawsuit filed by Ravenstahl challenging the tax-exempt status of UPMC (which has counter-sued the city).
With that in mind, we’ve compiled information from interviews and candidate debates to see how the Democrats stand on the city’s financial plight — and where they hope to find new revenues.
Peduto says the city’s financial recovery has come a long way, but a complete turnaround is still distant. An early supporter of using Act 47 to improve the city’s finances, Peduto served as council’s finance chairman while the city devised its second five-year financial-recovery plan, which was enacted in 2009.
He says he worked to “make sure the city stayed away from bankruptcy” by taking “the hits necessary,” even cutting his own salary.
“In my time on council,” says Peduto, “I didn’t create the financial mess we face, but I mopped it up.”
Peduto says exiting Act 47 now would be a mistake. He favors finishing up the current five-year plan by 2014, and then entering into a final five-year plan. The city could opt out early if certain benchmarks — like selling off excess property and establishing a “professional management system for paving” — are achieved.
By 2018, Peduto says the city’s debt-service payments will decrease by about $40 million, and to continue to chip away at that debt, he says it’s important to “refrain from borrowing heavy sums of money.”
Similarly, Peduto says the city can resolve its pension headache if it follows up on another initiative he helped launch: taking revenues from increased parking-meter rates and dedicating them to the fund. (Peduto has been in a running argument with the city’s Parking Authority, which he says is withholding money from the fare hikes.) Finally, Peduto says he will work toward a statewide change to pension plans that will allow for new employees to enroll in a modified 401(k)-style plan, while keeping the city’s current pension plan for those already enrolled.
When it comes to challenging the tax-exempt status of the city’s nonprofits, Peduto supports Ravenstahl’s lawsuit against UPMC, but says Ravenstahl erred by declaring UPMC would be the only target. Peduto says health-insurer Highmark is in the same class as UPMC, and challenging one should entail challenging both.
“If you say there’s unfairness in [tax payments] and then just pick one, it’s an unfair measurement,” Peduto says. “Saying we’re going to go through an entire approach and look at everyone … would have been the best approach.”
Self-described community activist A.J. Richardson says the city needs to take a “more proactive approach to finances” by increased public transparency in how the city’s money is being allocated in the community.
Richardson says the city should also invest in small businesses as a way to generate new revenues. But he says before an individual receives a grant for small business, he or she must complete a financial-literacy course that he would also like to see taught in public high schools.
Finally, Richardson says he agrees with Ravenstahl’s attempt to remove UPMC’s tax-exempt status and says the health-care giant is “acting more like a corporation than a nonprofit” and “is more concerned with its own quantity of life, rather than people’s quality of life.”
Wagner has often been a tough critic of the city’s finances. As a state senator in 2003, he joined with Republicans in supporting a bill to preclude the city from charging a tax on commuters — something it might otherwise have been able to do under Act 47. The legislation drew fire from fellow area Democrat state Sen. Jay Costa and Democrats in the House, but Wagner remained firm. The city, he said, lacked “good fiscal management,” and until that changed, “I, for one, am not going to require the people that I represent to pay new taxes to the city of Pittsburgh or to any other community in Pennsylvania.”
Some critics contend that Wagner was settling scores with then-Mayor Tom Murphy — who had beat Wagner in a tough 1993 mayoral election — or trying to win favor from suburban voters before his statewide auditor-general campaign. But Wagner denies that, saying Murphy’s “record was not one of fiscal responsibility and … I didn’t feel comfortable further taxing the people and giving those dollars to an administration going into Act 47.”
Today, Wagner says the city has reduced its debt burden under financial oversight. But like Peduto, he says there is more work to be done: “I haven’t seen the efficiencies in city government necessary for [ending Act 47 oversight] to occur.” That would be a goal of his first term, he adds.
Wagner and Peduto also agree that the city can generate revenue by selling off at least some of the 30,000 properties held by the Urban Redevelopment Authority.
As for the city’s challenge of UPMC’s tax-exempt status, Wagner sounds broadly sympathetic to the lawsuit. “Yes, the mayor … had every right to challenge UPMC on their nonprofit status,” he told an April 3 gathering at the University of Pittsburgh. But there’s a caveat: Wagner hasn’t decided whether he’ll continue that challenge.
As he told the Pitt audience moments later, if elected mayor, “I will look at the mayor’s challenge of UPMC and continue it if they’re not meeting the guidelines set up by … the laws of Pennsylvania.”
In an interview with City Paper, Wagner said that after being elected, he’d conduct his own review and decided whether to drop the lawsuit, continue it or even expand it.
“Maybe there should be more entities involved in this,” Wagner says. “There are some other pretty big nonprofits here.”
Under fiscal oversight, Wheatley says the city “has done a decent job” working to resolve its financial mess. But, he says, there are substantial challenges moving forward — especially in finding a solution to pensions.
Wheatley says the right solution is one that “won’t add an additional tax burden to local businesses and taxpayers and doesn’t include selling off the city’s resources.” His own proposal? Getting the city to realize big savings if it examines its energy utilization and enters into “energy-performance contracts.”
For example, Wheatley told the audiences at an April 11 forum, “if we were spending $100 million on energy consumption as a city, we can get guaranteed $33 million back that we can invest in more energy-efficient” programs and infrastructure.
Those savings, he continued, could be dedicated to the city’s long-term pension obligation.
“These aren’t new concepts,” Wheatley added. “They’re being used and are successful in other cities.” The U.S. Army has used such performance contracts to realize energy savings, as have cities including Boulder, Colo.
Wheatley says the city’s pension problems may also be a key to solving the ongoing fight with UPMC. Instead of challenging nonprofits, he says, they should be brought to the table “for a conversation.”
“I don’t want to threaten our largest employers for them to do right,” Wheatley says. “We have a history in this city of sitting down and talking with these groups. If we explained the situation and got them to commit somewhere around $15 million a year that would be attached strictly to the pension obligation, I think that’s something we could sell.”
Wheatley can’t say if he would come in and halt the lawsuit against UPMC if elected, but adds that “if you’re going to challenge [UPMC’s] status, it should be expanded to all large nonprofits to make sure everyone is held to the same standard.”
Wheatley says the city is positioning itself to come out of Act 47 oversight. But without financial oversight, he says, it will be all the more important for a mayor to keep costs down — namely by being a tough negotiator with city unions.
And Wheatley, who has received no endorsements from labor groups, says he’s the guy for the job: “I am not beholden to anyone.”
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