Issue Summary (Updated January 2010)
Pittsburgh's Financial Overseers

The Issue:

The City of Pittsburgh has been in Act 47 distressed status and under the watch of an oversight board for five years.

What We Know:

Act 47 is an open-ended designation—a municipality is in it until the Secretary of DCED determines that it has erased the conditions that led it into Act 47 in the first place. The City petitioned the state in 2007 to be removed from Act 47 status. In rendering his decision in July of 2008, the Secretary noted “rescission at this time would be premature and could subject the City to a return to distress status in the near future...many of the conditions that originally led to the distress determination have not been fully alleviated”.

In addition, Act 11 of 2004 created the oversight board to assist the City of Pittsburgh with its financial difficulties. As intended in the statute, the oversight board would “operate concurrent and equally” with the Act 47 Recovery Team. The five directors of the oversight board were appointed by the leaders of the House (2), Senate (2), and the Governor (1). The appointees were required to have “substantial experience in finance or management” and were to be either residents of Pittsburgh or have their primary place of employment in the City. The statute gave the oversight board an existence of at least seven years, which means it will go out of business in 2011 unless it is renewed by state action.

Pittsburgh is cureently operating with an amended recovery plan.  The purpose of the amendment was to address pending legacy costs of debt, pensions, post retirement benefits, workers’ compensation along with a long-term capital plan, while maintaining positive operating budgets well into the future.  The plan recommended that the City put more money into pensions, including the possibility of new fees and charges, including some on college students.  This morphed into the tuition tax, and the oversight board nixed the 2010 budget based on the fact that their was no legal foundation for the tax. 

Recommendations:

If the oversight board does end its legal existence in 2011 the door is open for the City to pursue a tax on non-residents.  A municipality in Act 47 is free to petition the courts for an increase in the wage tax to fall on non-residents (it would also have to increase on City residents by the same percentage).  However, the law that created the oversight board prohibited such an action while the board was in place.  Should the board expire and the City and its defenders stick to their notion that the City needs more revenues to get out of its predicament, look for this avenue to be explored.