Gainey administration says it's prepared to make needed adjustments to avoid falling off a fiscal cliff
PITTSBURGH (KDKA) -- Is the city of Pittsburgh about to fall off a fiscal cliff?
Warnings from the city controller paint a concerning picture. Now the Gainey administration says it's prepared to make the needed adjustments, but tax revenues are declining and pandemic aid is drying up.
In 2003, straddled with a ballooning deficit, the city laid off hundreds of police officers, parks and public works employees and closed down swimming pools and recreation centers. To avoid those dark days, City Controller Rachael Heisler says the city needs to take action now.
"We are in a period of legitimate concern in terms of city finances and avoiding the conversation is not going to make the problem go away," Heisler said.
"The longer we wait the more painful the choices will have to be," she added.
The city controller and KDKA-TV's own review of city financial documents paint a scary picture. Plunging Downtown property values and other liabilities mean a steep drop in tax revenues and point to lean times ahead. But the Gainey administration says it's prepared to weather any storm without impacting the public.
"No, I don't think we're facing a budget crisis," said Deputy Mayor Jake Pawlak. "I acknowledge we have some adjustments to make."
Heisler has warned the city is about to be hit by two tsunamis.
The first being those assessment appeals by Downtown office buildings that emptied out during the pandemic and have never recovered. Downtown makes up 25% of the city's taxable real estate -- about $30 million a year, but the appeals are cutting those assessments and those tax payments in half in some cases. Since December, records show the city has already lost $3.3 million in tax revenues and must refund those building owners another $7.2 million, and the appeal decisions are still rolling in.
The second is the so-called jock tax. For the past 20 years, the city has raked in $70 million levying a fee to visiting athletes and performers who've come to Pittsburgh. But now the courts have ruled it unconstitutional. Not only will the city not be getting an anticipated $4.4 million in revenue this year, but will likely be refunding a large part of that $70 million.
In a letter to the mayor and council, Heisler asks them to open the budget to reflect these revenue losses and start making the necessary cuts.
"I think collectively as a city we all need to tighten our belts. I think there will likely be austerity measures before the end of this year," Heisler said.
But Pawlak says the city anticipated a drop in real estate revenues this year and budgeted appropriately. It also has foreseen problems looming in 2025 and 2026 when the city will no longer be able to use federal COVID relief money to supplement its budget. Still, he says the administration will have balanced budgets and the city will be in the black.
"They're things we've seen coming for some time," Pawlak said. "And they're things we're confident we can handle appropriately without putting the city's finances in a bad position or in any way having to cut core services or reduce what Pittsburghers have one to expect from their city government."
The Gainey administration has formed a committee, including the controller, to review the city's financial condition. It will determine if a crisis is imminent and whether action is needed sooner rather than later.
