Days after the Act 47 Recovery Coordinators submitted their 166-page plan to the city for review, the Intergovernmental Cooperation Authority, or ICA, put in their two cents.
In a letter sent to Mayor Bill Peduto, Controller Michael Lamb, and members of Pittsburgh City Council on Monday, ICA board chair Nicholas D. Varischetti said “current operating costs are 20 percent higher than necessary.”
Varischetti also chastised the city for failing to implement a new payroll system by April 2014 as promised and said “chasing new revenue” from the nonprofit community “should not be the first answer to the current problem.” He argued that the city is unable to accurately track expenses and revenues, leading to operational inefficiencies and wasted money.
On Tuesday, Peduto responded to the letter in writing, saying that “slashing our operating budget by 20 percent would be irresponsible and would likely result in a less effective, less responsive city government.” He went on to request that the ICA send him their specific recommendations for cuts to the operating budget along with the corresponding savings.
Peduto said the city is still pursuing a new payroll system, and that they are working on implementing other systems “to thoughtfully and deliberately analyze the performance of our departments, programs, and services.”
In his letter, Peduto pointed to his efforts at cost saving, saying part of the payroll system delay was due to his team’s rejection of a system was $1 million over budget. He also said he had cut more than $500,000 from the 2014 budget and that his Severance Incentive Package for eligible outgoing employees would save the city more than $5 million over the next five years.
Peduto also asked the ICA to go to bat for the city when it comes to pension reforms in Harrisburg, saying “without serious bi-partisan pension reform, we can pour tens of millions of additional dollars into our pension fund but it will be a fruitless exercise.”
City Councilwoman Natalia Rudiak, chair of the Committee on Finance and Law, said she agrees with the mayor’s response and called the ICA’s proposal to cut the operating budget by 20 percent “arbitrary.”
“I have no idea where the ICA got that 20 percent figure,” Rudiak said. “Even the Act 47 recovery coordinators do not recommend a 20 percent slash.”
What the Act 47 team does recommend is an increase in property taxes, a solution that Rudiak would like to avoid if possible.
“We have about $7 million in revenue from property taxes to make up, and that’s the biggest issue that we’re dealing with now,” Rudiak said. “Act 47 is recommending that we do an adjustment to the millage rate in order to build back in that revenue. Of course that’s something that the council and mayor are grappling with right now because we’re really trying to find alternate sources of revenue.”
City Council voted Wednesday to postpone a discussion on the proposed Act 47 recovery plan until after a public hearing on June 16.
The city is required to submit a final plan to the Pennsylvania Department of Community and Economic Development by June 30, though it is not actually required by law to implement every recommendation in the plan. Instead, City Council will consider individual pieces of legislation that speak to specific changes as laid out in the final Act 47 recovery plan.
Rudiak said, from City Council’s perspective, the deadline is really budget season at the end of 2014. She said she is hopeful that, by then, the city’s nonprofit community will have stepped up to help close the budget gap.
“Right now the mayor’s office is doing a lot of negotiations with those organizations,” Rudiak said. “We’ll help wherever we can, but our hope here on City Council is that those negotiations will prove fruitful and that our non-profits will contribute to our city’s capital needs.”
