City officials have proved they can perform on the tight leash of state fiscal oversight and now Pittsburgh's financial recovery team is willing to let out some slack.
A new five-year plan prepared by the Act 47 team finds the right balance by recognizing the city has earned more latitude in managing its affairs even though it's not yet ready to run free of state control. It sets that goal for 2013.
Pittsburgh was on the brink of bankruptcy in 2004 when, in order to gain new taxing authority from the state Legislature, City Council adopted the first state-mandated five-year plan. Without the changes it required, Pittsburgh would have a $103 million deficit instead of a $53 million surplus today. What worked were new labor agreements, changes in benefits, a two-year wage freeze, restructuring of the Fire Bureau, spending cuts across city departments and contracting out fleet management and other services.
The city needs to continue those thrifty practices at the same time that it turns its attention to its $1.3 billion in legacy costs, largely due to underfunding of its pension plans. The Act 47 plan requires the city to put in an additional $10 million to $14 million more per year and, if it can't come up with the dollars through cutting or other means, City Council would be required to raise taxes that are within its power.
Correctly, the mayor instead is pushing a proposal to lease city parking garages and attempting to persuade the state Legislature to increase the $52 annual per worker tax to $145, something the city cannot do on its own. One dollar a week is hardly an imposition on most people who work in the city -- those who earn less than $12,000 are exempt -- and the higher rate, which could be accompanied by a higher exemption, also is reasonable. By contrast, people who work in Philadelphia pay a wage tax that is far higher than $145 a year for most employees.
One way to generate money for capital projects, also recommended by the Act 47 team, is the city's parking tax. The previous plan mandated cutting it from 50 percent to 35 percent, but the new plan acknowledges that didn't put money in consumers' pockets because most lot operators didn't cut their rates. Instead, it proposes keeping the rate at 37.5 percent, which would free at least $3 million for road and bridge repairs, a direct benefit for commuters. Like the worker tax, that change would require legislative approval.
Most other elements of the plan require action only by city officials. Contracts expire this year for the city's biggest unions, including those for police and firefighters, and the new Act 47 plan gives the city more leeway in fashioning agreements. Where the 2004 plan proscribed cutting vacation days, changing benefits and freezing salaries, this plan only sets the maximum sum available for each bargaining unit. The amounts are equivalent to -- and can be used to provide -- signing bonuses of $1,000 in the first year and raises of 2 to 3 percent through 2014, but negotiators could allocate the money differently if they so choose. They cannot roll back cuts made in retirement and health-care benefits under the previous plan.
Council has scheduled a public hearing on the plan for June 9, and residents will be well-served once members approve it and the mayor signs it. This plan gives City Council and the mayor adequate direction while training Pittsburgh to live within its means.