PITTSBURGH City declares 'distressed status'
Below its face, the transformation is incomplete. Pittsburgh has stumbled.
PITTSBURGH (AP) -- Pittsburgh entered its third postindustrial "Renaissance" period in the 1990s, kicking free the slag and the smokestacks that defined the Steel City for more than 100 years.
The rivers that hem the city reflect a different place today. High technology and high finance have replaced tracts of heavy industry. New sports stadiums and an environmentally friendly convention center by world-renowned architect Rafael ViIoly grace the riverbanks, and burgeoning construction projects on the city's South Side make it appear as though a flock of giant whooping cranes has come to roost.
Below the surface, however, Pittsburgh's financial moorings have eroded at a dangerous pace.
Early last week, Tom Murphy, a brash, one-time community organizer turned mayor, announced he had filed for "distressed status" on behalf of Pittsburgh under the state's Municipalities Financial Recovery Act.
If approved, it would mean state oversight in drawing up future union contracts and severe spending controls.
Stumbling
After a summer of municipal layoffs and closings from police stations to pools, the mayor's announcement surprised few.
"Still, it stinks," Rick Kozminski said.
Somewhere in its transformation from a place described by writer James Parton as "hell with the lid taken off," Pittsburgh has stumbled.
The city's credit rating hit junk-bond status last month. The 2004 budget proposed by Murphy on Nov. 10 is more than $39 million out of whack, and without help, the city will have spent all of its reserves and likely be out of cash sometime in January.
Murphy, who critics say has pushed development to the detriment of the city's neighborhoods, now acknowledges two mistakes: underestimating how long it would take for development to pay off and failing to lobby earlier to change a taxing structure, "written for a city that doesn't exist any more."
That city, during the 1950s, had nearly twice today's population of approximately 335,000.
City's tax base
But the city's appearance can deceive.
As many as 600,000 people are in the city on any given day to work or to catch a musical or a baseball or football game, yet an estimated 270,000 leave at day's end for homes in the suburbs or surrounding counties and do not pay city income tax. Nonresident workers do pay an occupation tax -- an annual $10 levy that has not changed since 1965.
Making the city's tax base even more sparse, 12 of the top 24 employers are affiliated with health organizations and universities -- institutions that own more than 12 percent of the total assessed property value in the city but are largely exempt from property and business taxes under state law.
A massive effort to reclaim blighted property has been funded through bonds with the hope that new housing and businesses built there would pay down the bonds and broaden the tax base, but to date there has been little left over to keep the city running.
The administration has been able to lure high-tech firms to replace the manufacturing sector that collapsed or moved overseas, though at a cost to the city without much cash to spare.
The budget has legally been balanced each year, but some of the methods were "gimmicky," said David Miller, former budget director under Murphy and now the associate dean of the Graduate School of Public and International Affairs at the University of Pittsburgh.
"It's much like selling grandfather's watch to pay the water bill," he said. "There's only so many tricks in the bag, and the string has run out on the city."
Finding alternatives
The mayor has lobbied throughout the year to raise the commuter tax and has sought new fees on for-profit businesses. Those measures must be approved in Harrisburg, where lawmakers are locked in a budget battle of their own.
There are also a number of lawmakers who have clashed repeatedly with Murphy, who acknowledges that he can be "difficult to work with."
A handful of state and city committees assembled over the year to determine a way out for Pittsburgh have recommended a combination of harsh spending cuts and new revenues.
The latter part has been strongly opposed by some suburban lawmakers who say the city continues to spend unwisely.
A measure sought by Sen. Jane Orie, R-Allegheny, would create a financial-oversight board for the city but authorizes no new revenues.
"There are alternatives that could have been taken a long time ago, and raising revenues is a last resort," she said. "It's not too late for the city. The city needs a strong oversight board."
Oversight board
Orie asked Elsie Hillman, a prominent GOP power broker from Pittsburgh, to assemble a committee and determine the city's options, but she didn't like the answer they came up with -- a mixture of spending cuts and new revenues.
Hillman told the Pittsburgh Post-Gazette that Orie left the city "high and dry."
Co-author David Roderick, the former president and chief executive officer at U.S. Steel Corp., said some Republicans are making a power grab.
"Some of the cuts we recommended are Draconian -- they are not fat; they are muscle and, in some cases, bone," he said. "There is no way to save the city without new revenues. Republicans are saying we'll take control -- create an oversight board -- but the city will starve."
Orie said the committee did not take long enough to review possible cuts.
She recommended selling off more city assets and looking into city authorities that oversee urban projects, though Murphy is still being criticized for selling the city's water authority to raise cash.
Another bill introduced by Republican House members seeks the creation of a five-member financial panel that would draft a 2004 budget for the city.
Even critics of the aggressive development that Murphy pursued say that someday the city may benefit from his efforts, but first it will have to get over the stigma of throwing itself at the mercy of the state.
After a public hearing scheduled for Dec. 9, the state Department of Community and Economic Development will have 30 days to determine if the city is financially distressed. A state overseer would then be appointed to craft a recovery plan that must still be approved by the city.