"We still have work to do between now and 2019, but we're on a very, very strong financial picture," said Pittsburgh Mayor Bill Peduto.

LANCASTER, Pa. – Pittsburgh is poised to leave state fiscal oversight by 2019, according to Mayor Bill Peduto.

"We still have work to do between now and 2019, but we're on a very, very strong financial picture," Peduto said in a recent interview during the Pennsylvania Municipal League summit.

Pittsburgh, which has morphed from steel and heavy manufacturing to an economy driven by education and health care, has operated under two financial oversight boards: the Intergovernmental Cooperation Authority since 2004, and the state-run Act 47 workout program for distressed communities since 2003.

"I think 15 years of Act 47 will have proven that you can take a city that was facing a structural deficit that was nearly 25% of its total operating budget and turn it around to a city that has a continuing reserve fund and has a healthy debt ratio."

In the early 2000s, the city flirted with bankruptcy and its bonds were rated junk.

Over a decade, Pittsburgh has received numerous upgrades, most recently in early 2014 when S&P Global Ratings elevated its general obligation rating to A-plus. Moody's Investors Service revised its outlook to positive on Pittsburgh GOs in October 2014 while maintaining its A1 rating. Fitch Ratings assigns an A rating and stable outlook.

"It's the light out of the Fort Pitt Tunnel," said Peduto, invoking a popular vehicle crossing at the confluence of the Allegheny, Monongahela and Ohio rivers. "I think people who have done it will understand that picture."

After about 15 years of "struggling to be able to keep our heads above water," Pittsburgh expects to have a debt ratio below 10% and reserve funds around 15% by 2019, said Peduto. "And we're on track to have that for at least another decade."

Peduto and other Pennsylvania mayors are pushing state leaders in Harrisburg for a variety of revenue options to serve cities disparate in size and emphasis.

"We have a host of different revenue opportunities that are different in Philadelphia than they are in Pittsburgh, than in the third-class cities," he said.

"Putting together almost a menu will allow municipalities to pick and choose, so that no one group is impacted negatively, that it's more spread out and more fair; and not necessarily have Harrisburg create these taxes but creating the opportunity for the local government to create them."

State Auditor General Eugene DePasquale, a Pittsburgh native and former state representative from that region, said failure to grip local pension plan underfunding jeopardizes urban success stories throughout the commonwealth.

"If we don't solve this, all the great things going on in our cities – great happenings in downtown York, Lancaster, Pittsburgh booming, Philadelphia and even some of our smaller towns -- all are going to be under threat if they don't solve this municipal pension issue."

Gov. Tom Wolf told the Pennsylvania Municipal League gathering, while declining specifics, that his office is working a local pension-funding bill.

DePasquale's office last month began an audit of Pittsburgh's pension plans. Its previous audit of the City of Pittsburgh Comprehensive Municipal Pension Trust Fund, released in March 2015, showed that despite "laudable actions" by Peduto's administration to shore up pension plans and amid an improving stock market, the fund's overall funding ratio dropped from 62% in 2011 to 58% in 2013.

Pittsburgh's population has dropped from about 700,000 in 1960 to 320,000 today.

Subscribe Now

Independent and authoritative analysis and perspective for the bond buying industry.

14-Day Free Trial

No credit card required. Complete access to articles, breaking news and industry data.