Tag Archives: CAFR

A True Debt Picture

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Hidden debt, understated pension and health care liabilities, and debt accumulated for special purposes but never approved by voters is the subject of an op-ed and estimated to be $7.3 trillion. Special authorities, corporations, etc. serve as a vehicle to accomplish such tasks.

Does this happen locally? In plain view taxpayers and inquisitive folks can peruse financial statements to see the clear picture. Let’s start with the city of Pittsburgh: its 2010 CAFR features several tables on debt and debt service: its net general bonded debt that year totaled $629.7 million. On a per resident basis (using a population of 306k), the result is $2,058. Our newest Benchmark City report uses the 2011 CAFR and the per capita amount fell to $1,900. When the related tentacles of City government are examined, the debt level changes: the City is responsible for 63% of URA debt, or $48.4 million; 50% of Auditorium Authority debt, or $1.6 million; and 100% of Parking Authority debt, or $97.4 million. Overlapping debt that would affect a City of Pittsburgh resident would include 100% of School District debt (though Mt. Oliver Borough would account for a small share) or $487.4 million, and 25% of the County debt (the CAFR estimated by population share) or $163 million. Together the total rises to $1.4 billion, $4,500 per capita.

How about Allegheny County? It has direct debt of $771 million, or $630 per capita. The County’s CAFR attributes 100% of the Community College debt to the County, adding $46 million. If the debt of local governments within the County’s ‘orders (but not part of the County) are added in, that adds on $2.8 billion from public schools, $677 from cities (Pittsburgh, McKeesport, Clairton, and Duquesne), and $601 million from boroughs and townships. No authority debt is applicable to the County from the CAFR table, and someone living in Aspinwall would be liable for debt incurred by Pitcarin or Sewickley, but when the Controller’s office puts the whole tab together the total almost touches $5 billion, bringing per capita amounts to $4,000.

One Time Fixes an Every Year Thing

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"It is the County’s goal to ensure current year revenues are sufficient to fund current year expenditures without the use of non-recurring revenues. However, non-recurring and unbudgeted areas of funding used to finance expenditures were as follows". This boilerplate language appears every year in the County Controller’s Comprehensive Annual Financial Report (CAFR) under the section "Relevant Financial Policies" as a way of saying that the County has a goal to live within its budgeted means but cannot.

Since the 2007 CAFR-covering the 2007 fiscal year, which for the County runs on a calendar basis-through the newly released report covering 2011, the County has used the following amounts of non-recurring revenues: $41.8 million, $24.7 million, $35.2 million, $48.9 million, and $45.6 million. The sources of the revenues varied-gaming money, sales of property, state funds, etc. That adds up to the nearly $200 million referenced by the County Controller in the conference releasing the new CAFR.

Recent uses of non-recurring revenue came about even though the previous County Executive pledged in September of 2009 that "the county’s long-standing practice of balancing its finances with one-time revenue sources is a thing of the past." The $50 million deficit that the former County Controller predicted in April of 2009 that would surface in 2012 was tempered, supposedly, with the 1 mill tax increase passed by County Council at the end of 2011. Whether the County avoids using non-recurring revenue this year will become clear upon the release of the 2012 CAFR.

City’s Retiree Benefits Problem Getting Worse Fast

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As we have written on previous occasions, the City of Pittsburgh’s legacy cost issue is multi-faceted-although little attention is given to some important parts of the problem. Heavy focusing of time and effort on one part of the problem can allow others to worsen. 

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City’s OPEB Liability Grows—Fast

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Until the Governmental Accounting Standards Board issued Rule 34 the amount of money governments spent on health care benefits, life insurance benefits, etc. for retirees-known as post-employment benefits other than pensions, or simply OPEB-was recorded as an expense but not on a long-term actuarial basis the way pensions were. The rule made auditing reports state OPEB assets, liabilities, the difference (assets-liabilities), payroll covered, and afforded the opportunity to clearly see the actuarial basis of expenses associated with OPEB.

The GASB rule worked its way down to the smallest governments after the largest ones implemented it first. Pittsburgh’s first valuation was taken on January 1, 2006 and showed unfunded liabilities of $320.3 million. There were, and still are, no assets set aside to pay OPEB liabilities, and there are no requirements for any government at any level to do so.

Four years later the City’s OPEB liability is now $488.6 million-an increase of 52%. For comparison’s sake, the County’s liability grew 32% to $96 million from 2007 to 2009 and the Port Authority’s went up 11% from 2007 to 2009. The unfunded liability for PAT dwarfs both the City and the County with $812 million unfunded as of 2009. For the County to have matched the City’s rate as of 2010 its liability would have to have stood at $111 million.

So while the City waits to see the results of its year end bailout plan for its underfunded pensions worked, it has another huge tab waiting in the background.

Police Pleas for More Staff

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Within five years, more than half of the Pittsburgh police department’s 886 sworn officers are eligible to retire. Getting new blood into the City forces is tough, say FOP officials, because of the pay of suburban departments and the fact that some police officers with children don’t want to send them to the Pittsburgh Public Schools (thus the recurring efforts to amend the law to allow City officers to live where they want).

The FOP says it almost never has reached the budgeted amount of 917 officers because of normal turnover and that, in fact, Pittsburgh could be best served with a department of close to 950 officers. Based on Pittsburgh’s population (310k) that higher number would put the employee per 1000 people ratio at 3; add in other police staff and Pittsburgh would far exceed other U.S. cities on staffing.

The City’s CAFR shows that from 2000-2009 total City full time equivalents fell 24%; police fell 23%. The 2009 Act 47 plan shows that on "headcount by bargaining unit" the FOP count fell 1.9% from 2004-2009 while all personnel in all bargaining units fell 9.9% over the same time period.

Facing retirements and budget constraints-along with the realization that Pittsburgh is already high on overall police staffing-there has to be a better way. The Act 47 team made a point of turning non-safety services to civilian employees so that the sworn resources can be better deployed on the streets.

Is the City Debt Diet Working?

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The Controller for the City of Pittsburgh just released audited financial data for 2009. The data shows that the City had a small surplus for the year and that its long term debt fell to $680 million. The last Act 47 report showed a debt of $791 million. Based on the 2000 Census population of 334k, the City’s per capita debt burden fell from $2,667 to $2,035. That latter number is likely closer to $2,200 since the City’s population has fallen from 2000.

There’s two ways to determine if the diet is working. Relative to other U.S. cities, carrying more than $2,000 per person in debt is quite high. Pittsburgh was the only city in the Act 47 comparison that had more than 20% of its general fund spending represented by debt service. It is the City’s second largest expense after salaries and wages.

The other way is to see what it cost the City to try and avoid taking on debt. The Act 47 team noted that Pittsburgh undertook refunding in 2005, 2006, and 2008; the savings from those refinancing actions were then used to fund capital needs on a pay as you go basis, but "these changes came at a tremendous cost" according to the Recovery Plan. From FY12 through FY17 debt service is expected to increase a total of $125 million.

If the City takes on no additional debt everything outstanding as of now will be paid off by FY2024. That’s assuming all capital needs can be covered on a pay as you go basis and the City avoids the temptation to issue bonds for pension costs should the parking garage plan not come to fruition.