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Lawmakers craft plan to oversee finances without new taxes

GOP tightening the city's belt

Saturday, October 04, 2003

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

HARRISBURG -- Republican legislators are drafting a bill that would create a powerful five-member board appointed by General Assembly leaders to oversee the city of Pittsburgh's deficit-ridden finances.

The legislation, which could be unveiled next week, would set up an intergovernmental cooperation authority for Pittsburgh, similar to one that has overseen Philadelphia's finances for over a decade. Gov. Ed Rendell, a former Philadelphia mayor, recently said that the board should get much of the credit for Philadelphia's financial turnaround.

Unlike that board, the Pittsburgh plan does not come with a sweetener of new tax revenues, as Mayor Tom Murphy has hoped.

The Pittsburgh Post-Gazette obtained a draft of the GOP bill, but one of those involved in the effort, state Rep. Mark Mustio, R-Moon, cautioned yesterday that revisions could be made before the proposal is released, perhaps by the middle of next week.

"It's a work in progress and still subject to change," he said, adding that his group will soon seek support for the proposal from Democratic legislators.

"It's a working draft but I think we are headed in the right direction," said Rep. Mike Turzai, R-Bradford Woods.

Rep. Tom Stevenson, R-Mt. Lebanon, said the bill is being developed by House Republicans working with Sen. Jane Orie, R-McCandless, whose support is seen as crucial in getting the bill through the Senate.

"We are coming up with one bill to introduce in the House and the Senate," he said. "This would be a strict oversight board to make sure the city has made the spending cuts and is acting responsibly financially before any additional taxes could be levied or bonds floated."

The Philadelphia board was given taxing and bonding authority when it was created in 1991, and the Legislature raised Philadelphia's sales tax by 1 percentage point to fund a pool of bond money, which the board uses to grant the city some $200 million annually and pay down its long-term debt.

Pittsburgh faces a $40 million shortfall in its $386 million budget this year, and projected deficits of $81 million and almost $95 million the next two years.

Murphy and members of a task force named by Rendell have argued that those deficits cannot be closed without new revenues, but the GOP plan contains no new tax authorizations.

It does give Murphy one thing he wanted, which is in the Philadelphia law, too: a requirement that arbitrators of police and firefighter contracts weigh the city's ability to pay.

Pennsylvania's firefighter and police unions are entitled to binding arbitration in contract negotiations. Murphy and other have blamed the system for out-of-control public safety costs.

The bill would create a five-member, unsalaried panel that would exist for at least seven years. Four members would be named by the Democratic and Republican leaders of the House and Senate. Those four would name the fifth member, who would be the chair.

The board would be empowered to tell the city's mayor and City Council to submit not just annual budgets for its approval but also five-year plans of revenues and expenditures. The five-year plans would be due approximately Oct. 1 of each year.

Those plans would include budgets for city-affiliated agencies with members appointed by the mayor, like the Urban Redevelopment Authority.

If the city does not submit budget plans or comply with its budget promises, the board would be empowered to suspend state funding to the city or the agencies, placing it in escrow until the city complies.

The oversight board is to be appointed within 10 days after the law takes effect, which could be later this year or early in 2004. The initial five-year plan is to be given to the board "as soon as practicable" after the board takes office.

The oversight board would have to report to the governor and General Assembly each fall on the progress Pittsburgh is making in correcting its finances.

The draft bill provides $500,000 in state funds for the authority to use in doing its work until June 30, 2005, with the city paying for the board after that. Authority members wouldn't be paid but would likely hire an executive director and some other staff, along with, possibly, outside lawyers and auditors.

Pittsburgh City Council and the mayor would have to approve an intergovernmental cooperation ordinance allowing the oversight board. Under the bill, the city cannot borrow any money until that ordinance is approved.

The draft bill bars the city from seeking federal bankruptcy protection unless approved by the governor or from officially becoming a distressed municipality under state Act 47, which would let the city apply for new commuter taxes and other funds.

The Republican proposal is the second effort by state legislators to deal with Pittsburgh's budget deficit.

The first, a Democratic bill sponsored by Rep. Dan Frankel, D-Squirrel Hill, and Sen. Jay Costa, D-Forest Hills, also calls for an oversight board but includes two major tax measures, a $42 increase in the annual occupation privilege tax and creation of a new payroll tax on businesses. It hasn't attracted much support in the Legislature, which is controlled by Republicans.

The new bill comes as local civic, business and political leaders have been meeting to discuss the city's financial woes and develop their own solutions. Yesterday, the group met with Murphy to review city spending reductions, commission leader and former U.S. Steel chairman David Roderick said.

Under the latest draft bill the oversight board would have broad power, influencing such things as:

Consolidation or merger of city or school services, including public safety services.

"Appropriate" staffing levels for city departments.

Financial contributions by nonprofit or charitable organizations that receive city services.

Restructuring of city debt.

Cooperation agreements between the city and Allegheny County.

Elimination, sale or transfer of city services or property.

Effective delivery of city services.

Possible implementation of user fees for city services, "including sewage, water treatment and refuse collection."

Potential privatization or competitive bidding of city services.

Increased fines for parking violations or violations of other city ordinances.

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

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