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.

Is the City Debt Diet Working?

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.