Pittsburgh City Council is considering legislation to provide additional scrutiny of the predictions made in its spending plans — a sign of mounting concern about the city’s long-term fiscal health.
“Our financial shape right now is very good. We're not going to miss payments this week,” said City Councilor Bob Charland, who sponsored the measure. “But in terms of next year and two, three years out, I'm very concerned.”
The bill calls for the city controller's office to have expanded oversight in two ways. First, it would extend the office's review of budget estimates, not just for the coming year but for the four “out years” that are included in each spending plan. And second, it would have the controller review not just estimated revenues but anticipated expenses as well.
The change was sought by the city controller herself, Rachael Heisler, who has been raising the alarm about longer-term trends inside the City-County Building.
As it stands now, the controller must certify by no later than the end of September the revenue estimates for the year to come. That ensures some vetting of the projected income that council can think about spending as it debates the plan in the last part of the year.
But the out-year projections, while subject to change, provide a longer-term perspective on the city’s financial picture. Charland’s bill would require the controller to certify those as well — and it would require the controller to approve not just projections of revenue but of future expenditures as well.
“The off-years are just as important when it comes to the outlook about where city finances are headed,” Heisler said. “When we look at the city’s true fiscal health, less of it has to do with this year and more with where we are going to be next year and the year after that. We want to make sure we are being honest with taxpayers and residents and all of our stakeholders.
“The worst time to make a budgetary change is the day before you need to," Heisler added. "You can’t tell people on May 31st that their pool won’t be open on June 1st.”
The next few years were always likely to require some belt-tightening, thanks to a scheduled increase in debt payments. But Heisler said that two key concerns had arisen since the city’s previous budget season last fall.
One is that in the wake of the coronavirus, Downtown commercial property owners have won reductions in the property valuations of vacated office buildings. That won’t just dent future property tax revenues but also require the city to issue refunds for past overpayments. Heisler estimates that reductions won so far will cost the city more than $12 million in refunds and lost revenue this year.
Heisler also worries that, as WESA has previously reported, city budgets currently anticipate millions of dollars each year from a “jock tax” on performers at city-funded venues — a tax that courts have said is unlawful.
The city has appealed the ruling to the state Supreme Court, but Heisler said, “It seems very unlikely that this will be a source of revenue that we will be able to rely upon in the future. I think the courts have spoken.”
What’s more likely, she said, is the city could end up owing refunds here, too: “Cleveland had a very similar case, and the courts there sided with the unions [for professional athletes]. In Cleveland, refunds were issued and I wouldn’t be surprised if we owed refunds here, too.”
Heisler said she had misgivings about how the city is calculating the cost side of the ledger as well. The current budget, she said, understated future growth in salaries for city workers, which also paints a rosier picture of the outlook than is warranted.
It’s not clear whether the Gainey administration welcomes the new initiative. A spokesperson said that administration officials are “currently reviewing the legislation but have no further comment at this time.”
Late last week, the Gainey administration announced plans to create a “joint task force on city finances” that would focus on concerns about the city’s fiscal situation. But the Friday-afternoon statement also sought to play down such concerns, asserting that the first quarter saw “robust revenue collection,” and that shortfalls could be addressed through “routine, fiscally prudent management practices.”
“I remain confident about our overall budget situation,” Gainey said in the statement.
Every budget involves guesswork: No official compiling a spending plan in 2018 could have foreseen the impact of the coronavirus, for example, or the tidal wave of federal money that President Joe Biden would provide after it. And council has a budget expert on staff to help guide its decisions.
Still, Charland said, “The controller and her staff have the expertise to be able to do some forecasting that, frankly, folks on the council side aren't going to be able to. The city's finances are best kept if there's multiple hands making sure that these projections make the most sense. We need to make sure that the city is still in a good financial shape for generations to come."
Charland, who just took office this winter, acknowledged that he wasn’t relishing the discussion to come. But as a staffer to his predecessor, Bruce Kraus, he learned the ropes when the city was trying to emerge from Act 47, a period of state receivership that oversaw city finances from a fiscal crunch more than two decades ago. The city was able to return to fiscal health during that process, but only by paring down city services and deferring much-needed maintenance.
“I don’t think there’s enough muscle memory in city government about how dangerous Act 47 is,” Charland said. “I didn’t want to have to enter the seat and be doing belt-tightening right away. That’s not the fun part of the job. But it looks like the reality.”
