Elected officials in Pittsburgh Wednesday raced to beat a Jan. 1 deadline by approving a $387 million fiscal 2004 operating budget that includes tax increases. The vote came one day after Pennsylvania Gov. Ed Rendell said he would consider lifting the city's newly-designated distressed municipality status.
City Council passed by a 5 to 4 vote a balanced budget that includes job cuts and hefty increases in deed transfer, property, earned income, and parking taxes, according to Councilman Tucker Sciulli, who opposed the spending plan. These tax hikes go into effect June 1 unless the city gets aid through Act 47. Mayor Tom Murphy, who has veto power, had 10 days from the council's vote to review the budget.
On Tuesday Rendell made his announcement to the Senate as he struck down a measure that would have created a financial oversight committee for Pittsburgh but did not address the need for new sources of revenue for the beleaguered city. The governor has said he would veto any bills that do not call for new revenue for Pittsburgh.
However, if state lawmakers approve "a control board with a procedure that could lead to the quick adoption of revenue sources if the experts on the board deem them necessary, I would sign that legislation and we would consider taking the city out of Act 47," Rendell said in his speech.
On Monday, Murphy expressed relief and thanks for the state Department of Community and Economic Development's decision to designate Pittsburgh as a financially distressed municipality under Act 47, a state statute enacted in 1987 to rescue Pennsylvania communities from insolvency.
The statute was originally intended to rescue small towns and boroughs from the collapse of the steel industry. Pittsburgh, nicknamed the "Steel City" and with about 335,000 residents, is the state's largest municipality to be approved for distressed status.
Rendell, in speaking to the Senate, recalled taking the helm as Philadelphia's mayor in 1992, when the state's largest city faced a more severe financial crisis than Pittsburgh does today. Slashing $250 million from operating costs and additional revenue from a 1% sales tax approved by the legislature helped the Philadelphia stage a turnaround.
"I believe the roadmap for recovery for Pittsburgh must include every conceivable cost-cutting option, some restructured contracts and additional revenue sources," he said.
Under Act 47, Pittsburgh is entitled to aid from a state-appointed coordinator who has 90 days to craft a recovery plan tailored to its needs. Act 47 could also provide quicker access to the implementation of a commuter tax and could control spending on future union contracts.
On Tuesday, Murphy introduced a $407 million budget including increases in earned income and property taxes effective June 1 unless new revenue is generated through Act 47. This plan replaced a $396 million budget Murphy unveiled in November. Revenue under the original budget fell about $40 million short of expenditures.
Eight of the nine council members present at Tuesday's preliminary vote were deadlocked in a 4-4 split over Murphy's new budget. Councilman Jim Motzkin, who abandoned his own budget proposal after failing to win enough support, accused the mayor of "playing chicken with taxpayers" before the final vote.
