MAYOR PRESENTS PROPOSED FY 2011 OPERATING BUDGET AND FIVE-YEAR PLAN

Sent 11/08/2010 @ 12:08 pm

Fifth structurally balanced budget will not raise taxes or cut services for the next five years

After 2016, unmanageable pension payments will require difficult decisions to be made

Mayor Luke Ravenstahl today presented his proposed FY 2011 Operating Budget and updated Five-Year Financial Plan to Pittsburgh City Council. The $456 million budget, with expenditures of $447 million, reflects a strong financial footing in the near term with structurally balanced budgets for the next five-years. The budgets for years 2013 to 2015 will be structurally balanced by relying on the City’s fund balance.

By 2016, the City’s fund balance will be depleted. In addition, the City must make a $91million dollar minimum payment to the state pension system. That’s about a quarter of the City’s entire budget, and more than it costs to operate any City department.

“Unfortunately, by year 2016, to say that our City’s financial situation will be troubling – is an understatement. After 2016, I cannot tell you how we will be able to deliver to residents the core public safety services they need without severe cuts and tax increases. And the pension payments after 2016 are even more staggering. With a fund balance that is dried up, we must make a $127 million pension payment in by 2017. That’s less than seven years away.”

By 2030, pension payments will peak at $160 million dollars.

The budget and updated plan continues to utilize a pay-as-you-go capital improvement program for the fifth year in a row. In addition, the City reduced its operating costs by eliminating vacancies and creating operational efficiencies. The 2011 estimated operating budget is $4.5 million less than the 2010 estimated operating budget; $212.5 million to $208 million, respectively.

With the exception of operating costs, the City’s top expenditures include employee pension and benefits costs, totaling $133 million, and debt-service costs, totaling $88 million.

“It remains true that our City cannot absorb the costs of state takeover from 2016 and beyond,” Ravenstahl said. “Indeed our long-term financial health is directly connected to solving our legacy costs. Despite these bleak forecasts, I remain hopeful and optimistic that City Council will work together with each other – and with me – in order to protect our City’s future.”

City Council has until the end of the year to pass or make revisions to the budget.

Budget Highlights
2011 Revenue
A payment in lieu of taxes agreement has been reached, pending City Council approval. The Pittsburgh Public Service Fund has agreed to pay the City $2.6 million for years 2010 and 2011, representing a total of $5.2 million.
2011 Debt and Expenditures

The City’s debt service is fully funded, and the City will retire $45 million of outstanding bonds with the issuance of a Build America Bond, pending City Council approval.

The government backed-bond will enable the City to net $6 to $10 million, by retiring high-interest debt. The government will pay 35 percent interest of the bond.

The City’s “debt cliff” is maintained in 2017 and 2018.
2011 Capital
$52 million Capital Budget:
$25 million from City PAYGO funds; $16 million in CDBG; $11 million from other sources
$5 million for vehicles
$3.3 million for demo, *700,000 less than last year
$9 million for street resurfacing
$7 million for URA economic development initiatives