Most City Debt Still Pension Related

Feeling that the City’s finances are in good enough shape, the Mayor has proposed a bond issue of $80 million to pay for capital needs in the City. Some members of Council say the time is not right, the amount is not right, etc. so it seems certain that the relative ease with which the operating budget passed might be absent from discussions over the capital budget.

As of year end 2010, the City had $633 million outstanding on its general obligation bonds. Nearly 40% of this is related to bonds 1998 A, B, and C which were "issued to fund the City’s pension fund" as noted by the Controller’s audit. There is $140 million outstanding on 2006 B which, with others the same year, was used to refund previous bonds. After those outstanding amounts are counted, what remains is $259 million (about 40% of the total) in various bond issues that date back to 1993.

In 1996 (the earliest historical number available on the Controller’s website) per capita debt was $1,507 and the ratio of debt to general governmental expenditures was a very low 9.33%. Last year the per resident amount was $2,058 and the debt to spending ratio was 14.80%, the lowest since the early to mid 2000s. Most of the past fifteen years per capita debt has hovered around $2,400 and the ratio of debt to spending around 18%. That’s why much of the future fiscal optimism of the City is predicated on the "debt cliff" when payments fall significantly, supposed to arrive somewhere around 2018.

Are Pittsburgh’s Shovels Ready?

Following the directive of CB01 of the 2009 recovery plan and section 508 of the City’s Home Rule Charter, a City Councilman today introduced legislation that would create a six year capital improvement program for the City. The program would create a committee to select and oversee capital projects, the sources and uses of capital revenues and expenditures, and generally how to manage the infrastructure needs that include 2.3 million square feet of facility space and 900 miles of roadway.

The critical question becomes how to pay for those needs. In order to avoid taking on additional long-term debt (the Act 47 plan notes that "Pittsburgh continues to face a debt crisis" and per person it amounts to more than $2,200 but current debt is to be retired in 2024) much of the City’s capital needs have been met on a pay as you go basis out of current revenues, other state and Federal funds (including stimulus money) for an annual capital expenditure of $59.6 million in FY09. Actual City contributions (not counting state and Federal) were low in comparison with other cities like Cincinnati and Toledo.

At the time the Act 47 team recommended that money from freezing the parking tax at 37.5% be set aside for capital, but that has been dedicated to pensions via Act 44. The time frame for the City to identify a method of funding capital needs is coming in the 2013 fiscal year when the plan expires.