Though revenue decreases loom up ahead, Pittsburghers shouldn’t expect a financial collapse or a painful tax increase any time soon, Mayor Ed Gainey and Deputy Mayor Jake Pawlak said in a Thursday-morning “fireside chat.”
In a conversation livestreamed from Gainey’s office, the two officials went over recently released analysis and predictions about the next five years of Pittsburgh’s finances. They reiterated that while some lean years lie ahead as pandemic-era funding ends, the city doesn’t anticipate drastic changes to its operations.
“This forecast gives me a great deal of confidence that the city is in sound financial shape and that there isn't cause for alarm," Pawlak said. “Just like any government, any business, any personal budget, we have to adjust to the circumstances we find ourselves in and plan accordingly.”
Earlier this week, the budget office released a look back at finances for the first half of 2024, and concluded the city will end 2024 with nearly a $4 million surplus, an improvement over estimates the budget office made at the end of the first quarter.
Thursday’s discussion came as the mayor’s budget office prepares for budget season, with a first draft of the budget due by the end of September.
“At the end of the day, it all comes down to how we deliver core city services to our residents,” Gainey said. “As long as they see that the garbage is being picked up on time, as long as they see that we're removing snow and everything else that we plan on doing, and that we have done … I think that they won't see any type of problems.”
He cautioned against fomenting fear or politicizing the budget conversation.
“When people start trying to make different conversations and have people live in fear because of the way they see the budget, I don't think that's quality management,” he said, without identifying who he thought was exaggerating fiscal problems. “I think quality management is the ability to be transparent and talk about exactly where we’re at. Fear tactics [do] nothing.”
Plans for the future
The five-year forecast predicts a 5.5% decrease in overall revenue next year, mostly due to the expiration of federal COVID aid provided through the American Rescue Plan Act. The forecast projects revenue growth of around 1.7% each year after that.
The forecast expected a decline in real estate tax revenue due to high interest rates and a tight housing market, as well as a drop in property tax collections stemming from property assessment appeals and high vacancy rates in commercial properties Downtown.
But Pawlak said residents need not fear tax hikes or painful service cuts.
“We can continue to provide the level of municipal services that we currently provide with the tax rates that we have now,” Pawlak said. “We'll be able to continue to provide high quality city services without drastic cuts or reductions in their quality.”
He predicted an improved outlook after 2026, when a scheduled debt retirement will remove some repayment obligations.
“That means that in 2027, we'll be paying a lot less in ... interest payments on loans that the city took out years ago,” Pawlak said. “And between that and the just under 2% revenue growth in 2026, 2027 looks like a very good year for us. And after that, we're in great shape. We can handle the next two years because we've been seeing them coming.”
Expenses are also expected to decrease by around $25 million by the end of this year, but Gainey said the average Pittsburgher likely won’t notice much change on the ground.
Gainey said he did not see any “major job cuts coming,” while Pawlak noted that savings could come if some vacant positions currently provided for in the budget were eliminated, as has been done in previous years.
“Most of the savings we would see … are coming from the same kind of savings that are leading to the $25 million under budget result this year, as we have found ways to achieve our objectives less expensively than we previously predicted,” Pawlak said. “We're going to then show that we'll continue those efficiencies into the future.”
The city will, however, continue to keep a rein on capital investments. As it has done this year, the administration will focus on completing ongoing projects rather than planning for new ones. Infrastructure projects, like bridge rehabilitation and landslide remediation, will continue with the help of past planning and funding from the state.
"This year, we will not be able to make as many new investments as we did the last two years because of what's coming up,” Pawlak said. “But we're going to be able to keep funding those things that have been initiated in the past three years because of the way we planned ahead.”
Controller weighs in
In the past, the administration’s upbeat outlook has been questioned by City Controller Rachael Heisler, who raised alarms earlier this year that spending was outpacing revenues, and that its revenue projections were too optimistic.
But in a Thursday statement, Heisler said the mayor’s office’s figures “appear to be responsive to the revenue projections my office made earlier this year.”
Heisler has been meeting with other budget officials as part of a Joint Task Force on City Finances. She said that if anything the administration’s “numbers are more conservative than the likely scenario we shared at the first Task Force meeting.”
The mayor’s budget office took a conservative look at revenues for this report, Pawlak said.
“We'd rather project that we'll get a certain number and actually end up collecting more than that and overshoot [than] have to deal with collecting less than we thought,” Pawlak said.
The office’s estimated revenues for 2025 were around $5.4 million less than what the Controller’s office predicted in April. Its projected revenues for the following several years were also consistently lower than what the Controller’s office expected.
“We’re going to face real challenges in the coming years, but as long as we’re providing residents with an honest outlook, the City of Pittsburgh will be able to respond with appropriate fiscal discipline,” Heisler said. “I look forward to continuing the dialogue about revenue projections and the City’s fiscal health.”
