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Analysis: Act 47 ... now and forever 

Pittsburgh gets another five-year plan -- and we know how well those work

What has the city's new five-year financial plan accomplished? A lot, actually. The plan spells out future pay raises for city employees (while antagonizing their union leaders). It starts to replenish the city's depleted pension fund. It even takes steps to create a more diverse city work force.

One thing it almost certainly won't do, though, is get the city out of financial receivership.

That's not what its financial overseers -- under the state's Act 47 for distressed municipalities -- want you to think. The city first went into receivership in 2004, but the amended recovery plan insists that by staying on course, Pittsburgh "can complete its recovery ... and exit Act 47 oversight." Yet even the plan's supporters seem dubious.

"Act 47 can't get us out of Act 47," acknowledges city Councilor Bill Peduto, who fought hard for the plan's approval. "It's like asking someone to fix your transmission with a weed whacker."

Councilors on the losing end of council's losing vote last week were even harsher.

"This is not a plan to restore financial health," Councilor Patrick Dowd announced after the vote. "It is, rather another 5 years -- with a near-certain 5-year extension beyond that -- in which financial distress is prolonged."

The vote split old factions and created new ones. Dowd voted no along with Darlene Harris, who Dowd beat in a 2003 school-board race. Peduto's yes vote supported Mayor Luke Ravenstahl, a frequent foe ... even as a usual Peduto ally, City Council President Doug Shields, voted no.

What does it all amount to?

When the city first went into Act 47 five years ago, it could barely pay its day-to-day expenses. Thanks to cost-cutting and new taxing powers, it's racked up budget surpluses ever since. But the city is still saddled with more than $723 million in debt, and has only $250 million in its pension fund -- well below the $900 million it needs.

To start addressing those problems, the new plan requires the city pay an extra $10-14 into the pension fund each year.

Where will the extra money come from? The five-year plan has some suggestions. They include surcharges on patients who use city hospitals, students who attend city universities, and commuters who use its parking lots. The plan also resurrects ideas that would require state approval -- and that were dismissed back in 2004. Both plans recommend a $145-per-worker tax on people working in the city, for example, though the state has authorized only $52.

This year's suggestions will likely be controversial, too. Under the 2004 plan, the city was compelled to lower its parking tax, the highest in the country: Replacing that tax with a "fee" is legal -- but it won't be popular. The Allegheny Institute, a local conservative think tank, has issued a position paper thundering "Pittsburgh has to face up to the fact that it has to reduce employees and their associated costs."

Peduto counters with a recently completed city wage study, which notes that "[c]urrent compensation levels are significantly behind public and private market averages." As it is, union leaders are already threatening to sue over the plan: While it promises small cost-of-living increases in the future, it bars unions from getting any more than that.

But the larger concern is that none of these fixes will address the city's long-term problem. The current plan extends to 2013, but after that, Dowd notes, debt payments will soar to nearly $90 million. The city will once again be facing deficits -- of potentially $24 million a year

"Act 47 doesn't really do much to help us," he says, because "it can only tell the city what to do, not the state or anyone else." Meanwhile, Dowd says, "we're creating enemies with the unions."

Back in 2004, Shields says, he warned legislators that unless the city got its $145 tax and other requests, "five years from now, the city will be right back where it is today."

"That's exactly what happened," Shields says. The city kept its head above water only because "We just didn't hire anybody."

He points to an audit of the Bureau of Building Inspection done last fall. That report found that "BBI is underfunded for its mission." Management positions were unfilled, the report found, and "BBI also lacks basic technology such as cell phones and computers for its inspectors."

Shields acknowledges the new plan has some upside, in part because city officials negotiated with state overseers to change it. Among the alterations were efficiencies designed to make services like snow-removal more systematic and less susceptible to political pressure. There were also measures to increase diversity among city workers. Shields says the amendments are "good government initiatives that Mr. Peduto has sought for many years."

For his part, Peduto agrees the city can't regain its footing without more help from the state. While Shields believes the plan was "fatally flawed" -- and that rejecting it might force Harrisburg to face up to the city's problems -- Peduto contends that state officials are "facing a $3 billion deficit themselves. I don't think Harrisburg is going to be impressed with us taking our ball and going home."

Then again, could council do anything to motivate Harrisburg to help?

"Don't you feel like Don Quixote asking that question?" says Don Friedman, a local political consultant who first recalls hearing about Act 47 some 15 years ago, when former Mayor Tom Murphy took office. Getting state assistance "is just really not in the cards," Friedman says. The city just doesn't have enough leverage to overcome suburban legislators like Jane Orie (R-McCandless), he says. "The state could still say, 'We don't have money to help the local library -- why would we help a city over its head?'"

Pittsburgh may be following the only course it can, Friedman says: streamline government where possible, and hanging on "until pension problems begin to catch up in other cities." That way, "the need for reform is bigger than Pittsburgh."

In other words, maybe there's a reason that city officials and their overseers are putting off today's problems until tomorrow. Ordinarily, that might be irresponsible ... but now, it could be the city's only hope.

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