Pittsburgh States Its Case

Pittsburgh deserves to exit Pennsylvania’s workout program and have the distressed tag removed, its recovery plan coordinators told a state panel.

“Pittsburgh has implemented a strategy to address its legacy costs of retiree pensions, retiree health care, workers' compensation and capital needs with funding and management tools to moderate growth,” recovery plan coordinators PFM Group Inc. and Eckert Seamans Cherin & Mellott LLC said in a report to the state Department of Community and Economic Development.

DCED official Fred Reddig, who chaired Thursday’s meeting, said department Secretary C. Alan Walker would rule on whether Pittsburgh could exit the distressed communities program, commonly called Act 47 after the 1987 law that created it. Reddig gave no timetable.

Elected officials, including Mayor Luke Ravenstahl, and industry leaders also spoke on behalf of the city at the meeting, held at Pittsburgh City Hall.

According to DCED statistics, 27 communities have entered the program since its inception in 1987, and six have exited. The DCED turned Pittsburgh’s request for an exit in 2007, saying the city had more work to do.

Pittsburgh has reduced its debt from $824 million in 2006, when Mayor Luke Ravenstahl took office, to $581 million. Finance director Scott Kunka projects that amount to $490 million in 2014. The city and its recovery coordinators expect to completely pay off existing debt by 2026.

Regardless of how the DCED rules, Pittsburgh will remain under the budget oversight of the Intergovernmental Cooperation Authority, which oversees Pennsylvania’s second-class communities. The state categorized its cities by population tiers.

PFM managing director Dean Kaplan and Eckert Seamans partner James Roberts authored the report.

Moody’s Investors Service, in a September report on financial distress in communities throughout Pennsylvania, cited Pittsburgh’s progress.

“In contrast to the most distressed cases, the cities of Philadelphia and Pittsburgh, the commonwealth’s two largest cities by population, have shown considerable resilience since the onset of leaner times in 2007,” Moody’s said. “Improved governance and financial management have resulted in sufficient financial reserves despite some draws in recent years. A sizable concentration of employers specializing in health care and higher education has partly insulated both cities from the steep rises in unemployment that accompanied the recession elsewhere.”

Moody’s rates the city’s general obligation bonds A1, while Fitch Ratings and Standard & Poor’s assign A and BBB ratings, respectively.

Ravenstahl told the panel that allowing the city to exit Act 47 would remove a “black cloud.”

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