“We’ve been through a lot.”
That’s how Pittsburgh Mayor Bill Peduto began Monday’s press conference, where he unveiled his 2015 budget proposal, as well as a five year plan to solve the city’s financial problems.
The theme of the morning was “truth in budgeting,” something Peduto and budget director Sam Ashbaugh said had been missing from previous administrations’ approach to revenue and spending.
The mayor outlined a $21 million increase in expenditures and an $11.7 million decrease in revenues from 2014 to 2015.
Peduto attributed the increase in spending to an $11.4 million pension funding gap, a $2.7 million rise in the cost of health benefits, $2 million in debt service, a $5 million increase in public safety overtime pay and $2.2 million in operational spending that was previously included in the capital budget.
“We have never funded all the police officers that we put into our budget. Because of that, we shift expenses at the end of the year,” Peduto said. “We’re going to put our police on the street, and we have a $5 million increase based on truth in budgeting.”
Ashbaugh said the city plans to fully staff its public safety departments for the first time in recent memory.
“(We will have) 892 police officers, 657 firefighters and 175 paramedics,” Ashbaugh said. “We are actually budgeting for those positions and plan to fill them to meet the public safety needs of our city.”
Additionally, Ashbaugh said roughly $2.2 million in public safety equipment purchases had historically been paid out of the capital budget as a way to mask shortfalls in the operating budget.
“We agree that these equipment purchases need to be funded, but (it’s) not appropriate to use bond funds that have a useful life of 20 years for equipment that might have a useful life of five to seven years,” Ashbaugh said.
The $11.7 million revenue reduction was attributed to the 2013 millage rate decrease, which left a $7.3 million gap in the budget, as well as to inaccurate revenue projections from emergency medical services, fines and other sources.
“Combined, these are all the issues that have created $11.7 million in phantom revenues: revenues that simply don’t exist but are put into our budget,” Peduto said.
The solution proposed by Peduto and Ashbaugh includes a 0.5 mill increase in real estate taxes, which is expected to generate roughly $8 million in accordance with the Act 47 recovery plan.
Peduto said the millage increase will work out to about $40 extra a year for a $100,000 home, and that the decision to increase real estate taxes is part of a strategy of “shared sacrifice” among all Pittsburghers.
“We are on a trajectory now (where real estate tax revenue) goes down (each year), meaning we don’t have money to fix streets, we don’t have money to take care of potholes, we don’t have money to hire police officers unless we readjust it so that it goes back to where the calculation should have been,” Peduto said.
Ashbaugh said the change will prevent “drastic cutbacks” in core municipal services.
“The consequence of not doing this action would be reducing the police force by approximately 75 officers, closing five fire stations, completely shutting three departments – City Planning, Building Inspection, and Animal Control – or eliminating 20 percent of Public Works,” Ashbaugh said.
The city will also eliminate 75 vacant positions for a savings of $3.4 million, refinance its debt to save $3.7 million, reduce non-personnel expenditures by $1.6 million, and ask the Parking Authority to fork over $10 million in revenue owed to the city. Other Act 47 initiatives will account for an additional $8.2 million in savings.
Absent from the operating budget are contributions from the city’s non-profit and foundation community. Peduto said negotiations with the four biggest nonprofit organizations — UPMC, Highmark/West Penn Allegheny Health System, The University of Pittsburgh and Carnegie Mellon University — are ongoing, and that any contributions will go toward long term obligations.
“It’s about how they can help us to fix the big problems, the structural issues of this city,” Peduto said. “Our pension, our inability to have an adequate capital campaign, the long-term debt structure of this city.”
Peduto said his entire time in city government, dating back to his work under former City Councilman Dan Cohen in the 1990s, budgeting has been about staving off bankruptcy. He said his “truth in budgeting” approach is about solving the city’s financial problems for years to come.
“It’s about the long term financial health of this city,” Peduto said. “If we can get through these next five years, we can guarantee to a generation ahead of us that they won’t inherit the problems that we’ve had to solve.”
A copy of the budget proposal and the presentation from Monday's news conference are available on the city website.
