Continuing on the theme of legacy costs and the City’s and the Act 47 team’s effort to combat them is the question of infrastructure. Most cities, Pittsburgh included, issue bonds in order to raise money to pay for long-term capital needs. But the City’s long term debt, which includes some of the obligations incurred in fixing infrastructure, has grown to more than $762 million, about $2,200 per person.
In order to avoid additional growth in debt, the Mayor moved capital needs to a "Pay as You Go" arrangement whereby money is taken out of general operating revenues and set aside for the capital budget. Starting with $60 million in the 2008 fiscal year, the plan was "to not issue debt for the next five years". Not issuing debt would save an anticipated $100 million in debt service costs and administrative fees, savings desperately needed by the City.
Here are two problems coming down the line: first, City documents show that just paving roads (both planned and deferred maintenance) will range from $33 million to $27 million annually through 2013. That does not count any other capital needs the City itself handles. Second, the Act 47 team analysis states that "after 2011 the City will have to cut back on capital or begin borrowing again". A double edged sword if it comes true: either infrastructure is in disrepair or the City boosts its long term debt.
Maybe that borrowing could be held off until the five year time period is met; if so, the City will have to hope that the economy has gotten better. That’s because one of the three major bond rating agencies noted that "the ratings of many governments could be downgraded in the coming months, something that would make it more expensive for them to borrow money to finance their operations." This would present major problems for the City if it had to go to the bond markets in the near future to take care of other capital or legacy cost needs.
