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Leaders trying to solve Pittsburgh's budget crisis

Bipartisan committee asks Harrisburg help

Saturday, September 27, 2003

By Timothy McNulty and Tom Barnes, Post-Gazette Staff Writers

They don't have a solution yet for Pittsburgh's financial problems, but a group of local business, civic and political leaders wants the General Assembly to make their plan the "highest priority" when it is completed.

The group, coordinated by Republican philanthropist Elsie Hillman and former U.S. Steel chairman David Roderick, met yesterday and issued a letter to the four legislative caucus leaders.

It said a panel chaired by Roderick will forge and "present a consensus plan to key decision makers in a unified and expeditious manner." Until then, the group asked the Democratic and Republican leaders of the House and Senate "to give our committee time to complete its work, and agree to give our unified solution for the city's financial situation the highest priority if state action is needed."

Sources said the substance of the private meeting at the Omni William Penn Hotel was similar to another held Downtown on Sept. 19. Discussions involved how to avoid seeking bankruptcy-type protection for the city, possibly by instituting a fiscal oversight board to review city spending and revenues.

There was little public comment about the closed-door meeting. Sources said it was attended by various business and labor leaders as well as four state lawmakers: Sen. Jane Orie, R-McCandless; Sen. Jack Wagner, D-Beechview; Rep. Dan Frankel, D-Squirrel Hill; and Rep. Mark Mustio, R-Moon.

The meeting had at least two attendees not there last week: Mayor Tom Murphy and the secretary of the state Department of Community and Economic Development, Dennis Yablonsky of Mt. Lebanon.

His department would help oversee the city budget should it enter "distressed municipality" status under state Act 47, and other city requests for budget help, like state grants or loans.

"At this point [the department] is hoping that legislative action will be taken to help improve the current economic conditions in Pittsburgh," said Laura Felty, deputy press secretary for the department. "We are willing to do all that we can to help Pittsburgh legislators, Mayor Murphy and local officials come up with a viable plan for the city."

The city faces a $40 million budget shortfall this year and an estimated $81 million shortfall next year. Various proposals from Murphy for payroll and alcohol taxes and an increased occupation privilege tax have been rejected or ignored, which is why a new "unified front" is necessary to get Pittsburgh budget reform approved, Gov. Ed Rendell told KDKA-TV yesterday.

"Without a unified front I don't think the Legislature is going to respond, and I think the Legislature needs to respond but they've been using the fact that there isn't a unified front here in Pittsburgh as a reason for not responding," Rendell said.

Sen. Jay Costa, D-Forest Hills, has introduced legislation supported by Murphy and the Allegheny Conference on Community Development that has been called "dead on arrival" by other state lawmakers. It calls for an oversight board and cutting existing business taxes, matched with a payroll tax on for-profit companies and a $42 increase in the yearly worker tax.

Some business leaders involved in the private meetings have balked at state authorization for any new taxes, while officials sympathetic to city government say at least some new revenue is necessary to bridge the budget gap, along with deep expense cuts.

Business leaders from the Allegheny Conference and elsewhere are pressuring the city to combine more services with the county, possibly leading to total consolidation with the county over the long term.

For now, the battle over which reforms to propose will stay behind closed doors in Roderick's committee.

"At the end of the day, I think there's no question we'll have an oversight board," said Costa, who did not attend yesterday's meeting. "There will be language requiring the city to take significant steps toward merging services with Allegheny County and working to streamline its operations. The only question is if additional tax revenue will be authorized."

State Rep. Don Walko, D-North Side, announced yesterday that he would introduce legislation closing business privilege tax exemptions for city manufacturers, banks and brokers.

Closing those exemptions would go a long way toward closing the city's massive budget shortfalls, Walko and city Controller Tom Flaherty said at a news conference. It irked them that top officials from some of those same tax-exempt companies -- including Mellon and PNC banks -- are proposing saving the city money by consolidating services with the county.

"They don't want to pay their fair share. They want to consolidate," Flaherty complained. "This consolidation will lead to a lack of services to the public."

Tim McNulty can be reached at or 412-263-1542. Tom Barnes can be reached at or 1-717-787-4254.

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