Mayor Tom Murphy (RPCV Paraguay) warns Pittsburgh teetering on budget abyss
City teetering on budget abyss
By Andrew Conte
TRIBUNE-REVIEW
Thursday, December 2, 2004
Pittsburgh property owners face a wallet-draining future unless City Council approves the $425 million budget plan approved by the Act 47 recovery team and state-appointed oversight board, Mayor Tom Murphy warned Wednesday.
"My fear is if you don't pass this budget, the alternatives are far more painful for the residents of the city of Pittsburgh," Murphy told council members.
If council rejects the current budget plan -- with Councilman Doug Shields' recent about-face, members now are 5 to 4 against it -- city officials must make some difficult choices.
The Legislature last month gave the city the power to increase the annual occupational privilege tax to $52 from $10 and to impose a new 0.55 percent payroll tax on all for-profit businesses. Even if council approves the taxes, it won't be able to get its hands on the revenue.
Until the Act 47 budget plan is approved, the money would go into a trust held by the state oversight board. Its five members have said they will not release the money until council agrees to the Act 47 plan, which includes spending cuts.
The city and its authorities cannot borrow money, either. Pittsburgh likely needs a short-term loan to stave off insolvency while waiting for property and other tax revenue to begin replenishing city coffers. Several projects, including a North Shore parking garage, remain on hold.
The city also could face state sanctions, Act 47 recovery team coordinator Jim Roberts said. The state could withhold about $5 million a year in tax revenue it shares with the city and cut off grants for economic development.
There's more, Roberts said: Just because council refuses to go along does not mean that Act 47 budget cuts would be voided. The recovery team will continue working with the Murphy administration to lay off employees and change work rules in collective bargaining agreements, he said.
Because the mayor and council must reach a budget agreement before the end of the year, Murphy said he will come up with a new plan -- one that could look a lot like the budget he floated while the Legislature debated new and increased taxes. That budget called for a 34 percent increase in property taxes.
Murphy also could call for massive spending cuts.
Without increasing taxes, Murphy said he would have to lay off every non-uniformed employee -- and still might be facing red ink.
If the two sides do not reach agreement, the city will not be able to pay its bills in the new year.
Council members opposed to the Act 47 proposal have not laid out alternate spending plans.
Councilman Jim Motznik, the most outspoken opponent, readily acknowledged he has no idea how to balance city spending next year. Council will have to find some way to fill the gap, he said, adding that it could "cut an agency or two."
Murphy said he would reject any budget plans coming from the council.
"I'm not doing a phony budget," Murphy told the council. "I've done phony budgets in the past. I'll sit here and admit that. It's been done for years."
Shields -- now aligned with the four long-time Act 47 opponents, Motznik, Len Bodack Jr., Twanda Carlisle and Luke Ravenstahl -- might be the only one with a plan. But since switching sides on Tuesday, Shields won't say what he wants to switch back.
Murphy hinted at some issues in play during his talk with council. He reiterated that the city's maintenance garage must be privatized. City refuse workers will have to beat private operators' proposals if they want to continue collecting garbage.
"Your opposition to this is like chasing ghosts," Murphy said, turning toward Motznik and Shields. "I don't think it's a necessary opposition."
The Act 47 opponents say they win if council fails to propose a balanced budget. Motznik said local banks and business leaders are not about to let the city run into the ground.
Gov. Ed Rendell's administration appointed the recovery team after declaring Pittsburgh a distressed municipality under state Act 47 last December. State lawmakers responded by creating the oversight board in February.
What's next?
If City Council rejects the $425 million budget plan approved by the Act 47 recovery team and state oversight board, Mayor Tom Murphy will have to prepare a new plan that would raise property taxes and slash spending.
# State law requires the mayor and council to agree on a balanced budget by Dec. 31. Murphy said he would submit a new balanced budget that could require laying off all non-uniformed city employees. The mayor said he will veto any budget proposed by council.
# If the mayor and council cannot agree on a new budget, the city will not be able to pay its bills in the new year. City officials have warned Pittsburgh could become insolvent before it starts collecting property tax revenue in 2005.
# If City Council approves the increased and new taxes approved by the state Legislature, but doesn't approve the Act 47 budget, revenue from the taxes would be held in a trust controlled by the oversight board. Its five members have said they would not release the money until council agrees to the Act 47 plan.
# Neither the city nor its authorities can borrow money until the council passes the Act 47 budget. To stave off insolvency, the city likely needs a bridge loan to pay its bills until tax revenue starts coming in next year.
# If council votes down the Act 47 budget, the state could withhold about $5 million a year in revenue and cut off grants.
# The Act 47 team and Murphy administration would continue to implement many of the changes that do not require council's approval, such as laying off employees and demanding concessions in collective bargaining agreements.
Andrew Conte can be reached at aconte@tribweb.com or (412) 765-2312.
