Bonding Process | Opinion | Pittsburgh | Pittsburgh City Paper

Bonding Process

The city's credit rating is so poor partly because no one gives it credit

This was the kind of year that makes you yearn for the good old days. Like, say, the mid-1980s.


Sure, our sports teams sucked back then...about as much as they do now. And yeah, there was that whole "collapse of the steel industry" thing. But in one respect, those days look pretty good today. Pittsburgh's bond rating -- the creditworthiness of its government as measured by financial experts -- is worse now than it was 20 years ago.


Think about it: The 1990s, a decade in which the nation saw almost unprecedented economic growth, have somehow left city finances as badly (or worse) off as in the 1980s -- a decade which saw the wholesale destruction of the region's economy.


In recent months, the Standard & Poors bond-rating agency gave the city a junk-bond rating, the worst Pittsburgh has ever had. Moody's Investors Service followed suit, dropping the city's rating to Baa1 -- a rating as bad (or "Baad," as the case may be) as it was in the mid-1980s.


Since the city currently has no plans to borrow money at all -- we'll just be letting our streets go to ruin instead -- those ratings won't hurt your pocketbook immediately. And for many locals, times are much better than they were in the 1980s. Local unemployment is one-half to one-third what it was during the dark days of the Reagan Administration. Businesses haven't been suffering much either: In the 1980s, for example, Mellon Bank nearly collapsed under the weight of its bad loans; today the firm turns tidy profits.


In some ways, though, that's what makes the city's financial plunge all the more remarkable. It's not catastrophic failure we've struggled with this year; it's success. And in true Pittsburgh fashion, we don't seem to know how to handle it.


For decades, the fairy tale we've lulled our children and CEOs to sleep with is: Pittsburgh is resilient. We're survivors. We've outlasted floods and financial catastrophes, Indian marauders and killer smog.


But this time is different. This time, our problem isn't all the firms that have left -- the Gulfs, the Westinghouses, the Rockwell Internationals. Our problem is with the employers who've stayed: Most of our largest employers pay no business taxes, either because they are non-profits or because they've finagled their own tax exemptions from Harrisburg or Grant Street.


And it is success that allows commuters to buy themselves pricey new homes in the suburbs, thereby taking themselves off the tax rolls, except for a nominal $10 a year levy. Pittsburgh offers wages high enough for them to relocate outside its borders, and most of them do.


So we're doing better, but the city of Pittsburgh, the place we call home in one way or another, is doing worse. It has, in fact, been deemed financially distressed by the state -- a designation which may or may not bring some financial assistance but which certainly carries a lot of embarrassment.


I mean, it's one thing to admit Pittsburgh couldn't defend itself against global trade, or against the combined industrial output of Japan, South Korea and Brazil. It's another to admit that we've been beaten by Cranberry. We're no longer crushed by oppressive steel companies and their hired guns, by the smoke and haze of the city's satanic mills. If only. We're getting trounced by the Watefront Dick's Sporting Goods.


One suspects, in fact that Pittsburgh thrived not in spite of hardship but because of it. Turn-of-the-century sociologists who visited Pittsburgh noted that for all the smoke and haze, the wives of Pittsburgh steelworkers still found a way to keep their linens white. It was an outward sign of how the people who lived here committed themselves to their homes, even though they never would have chosen to live there. Pittsburgh "came back" because a lot of people didn't have anywhere else to go.


Not any more. Now we can choose our communities, and feel little responsibility to the places we left behind. The average city job -- the ones that bring suburbanites into town -- pays $40,000 a year, according to government statistics. The average city resident, though, makes a little under $30,000. Pittsburgh residents are bearing the tax burden so the city can provide commuters with wages one-third larger than their own. That's exploitation that would do 19th-century steel barons proud.


But at least the steel executives didn't convince themselves it was our fault. Many commuters, by contrast, have blamed the city's problems on "greedy" firefighters and the like. (Though if wanting more money is a sin, residents of communities like Upper St. Clair and Fox Chapel ought to be careful about casting stones from their glass McMansions.) Others note that Mayor Tom Murphy has already sucked up regional tax dollars by building new sports stadiums -- even after voters rejected a 1997 referendum to pay for them with a sales-tax hike.


There's merit to such arguments, of course. But there's also a good deal of selective reasoning. In prosperous communities like Upper St. Clair, for example, a majority of voters approved the 1997 tax increase. The people who were willing to pay more in taxes for pro-sports playgrounds are considerably more hesitant about shelling out for things like public safety. They talk instead about inept management and overpaid employees...although, as sports fans will note, the same concerns apply to the teams that backers of the 1997 tax hike wanted to underwrite.


As we lurch into 2004, what does the future hold? Pittsburgh's firefighters will probably have to give up some of their paychecks. Murphy may have to give up his job. Being designated as financially distressed may help, but it won't be a panacea. Even if the city levies a commuter tax, as many hope it will, the law says commuters can deduct what they already pay in wage tax to their own hometown. In many suburbs, tax rates are already such that commuters would pay little or nothing to the city. Others could easily adjust their tax burdens to keep money out of the city's hands too. Business "leaders" will almost certainly continue looking for loopholes even while pledging their love of the city.


In the end, those employers and the people who work for them will have to acknowledge that they have done very, very well for themselves -- even as the city they claim to love has been dying. If we're going to have the kind of city we still get nostalgic for -- one with healthy neighborhoods and cultural attractions -- we're going to have to choose to make sacrifices that were once forced upon us in the "good old days." If we don't strengthen the bonds between city and suburb, the other kind of bond will never be anything other than junk.

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