Coronavirus and 2020 local budgets: City of Pittsburgh

Three months into the fiscal year the City of Pittsburgh is wrestling with serious budget issues due to the impact of the coronavirus.

The chief of staff to Pittsburgh’s mayor noted the city will experience a major decrease in tax revenue. The mayor predicted that the city will run a deficit.

The city’s 2020 operating budget has $608.2 million in revenues and $608.1 million in expenditures for a slim positive result of $135,839. The projected fund balance at the beginning of 2020 was $85 million.

Taxes will be impacted by an economic downturn. The property tax is budgeted to raise $150.1 million (25 percent) of total revenues (taxes, licenses and permits, charges for services, fines and forfeits, intergovernmental revenue, interest and miscellaneous). Earned income tax is budgeted at $106.6 million, payroll preparation tax at $71.1 million and local services tax on people working in the city at $14.8 million.

Taxes on parking, amusements and the facilities usage are related to sporting events and concerts, many of which have been postponed or cancelled. The 2020 budget amounts for those taxes are $59.3 million, $18.3 million and $5.5 million, respectively. Taxes collected in March are due by April 15^th.

The city also receives a host fee payment of $10 million from the Rivers Casino, which is closed. In 2018 the full amount of the host fee and $26 million in parking tax money went to the city’s pension contribution.

Based on data from the city controller’s office $40.7 million in revenues were raised ($36.9 million from taxes) and $51.2 million was spent in January. Outstanding encumbrances totaled $25.5 million.

The city’s home rule charter requires a balanced operating budget. Amendments can be made after adoption but the requirement must still be met.

So what is being done? Council is considering a resolution to permit the mayor and/or the directors of the Office of Management and Budget and the Department of Finance to secure lines of credit to maintain city operations during the pandemic. Council approval is required for any agreement for credit under the proposal. It is not clear how much credit the city seeks to obtain. For comparison purposes, prior to entering Act 47 the city secured $40 million from local banks for the first quarter of 2004 (the budget that year was $388 million) but never utilized the money.

The city won’t likely receive any money directly from the $150 billion “Coronavirus Relief Fund” section of the CARES Act because it does not meet the population threshold for local government (minimum of 500,000). The city is slated to receive $12.7 million in Community Development Block Grant funding from another section of the act. That is in addition to the $13 million that was in the 2020 capital budget.

In 2009 as the economic slowdown began to be felt in the area we wrote “the one thing [local governments] should not do is to make the local problems worse by raising taxes to fill budget gaps.” There were two tax increases that went into effect in 2020 (on deed transfers and a voter-approved increase in the property tax) prior to the pandemic but there has been no mention of additional changes to city-levied taxes. Time will tell if there are reductions to planned 2020 expenditures. If, as the chief of staff noted, there could be “deep and long lasting changes” to city government coming, perhaps it would be time to look at money saving proposals we have advocated for, such as privatization and outsourcing, to reduce city expenditures.