Pittsburgh Controller Rachael Heisler discusses the city’s budget during a press conference in her Downtown office on Wednesday, May 1, 2024. (Photo by Pamela Smith/PublicSource).
The mayor and controller are at odds over city budgeting as federal funds run dry. Will the future feature layoffs, service cuts and potholes?
by Charlie Wolfson, PublicSource
A growing chorus of current and former Pittsburgh officials see a financial crisis in the city’s future and say big changes are needed to prevent layoffs and service cuts. The mayor’s office, meanwhile, maintains the city is in a strong position and does not plan any cutbacks.
While real estate tax revenue crumbles and federal COVID-19 relief funds dwindle, even the optimists in City Hall forecast lean years ahead. But a difference of opinion has emerged on just how bad it will get — ranging from a tight-but-stable budget predicted by the mayor’s office to deficits and depleted reserve funds predicted by the controller and some council members.
“We have been buoyed by the [relief funds] for the last four years,” said City Controller Rachael Heisler during a Wednesday press conference to release her office’s report on the city’s finances in 2023. “The reason we won’t have an operating deficit in 2024 is because of the [American Rescue Plan Act]. We need to start having a realistic conversation both with the public and with the leaders in this building.”
Mayor Ed Gainey’s administration has nodded to coming financial challenges but maintains that the city’s budget will remain balanced. The city announced April 5 it would create a task force to generate recommendations on city finances, and acknowledged its Finance Department now expects revenue for the year to come in short of its December projections.
“They’re not the kinds of gaps that are going to have what I believe are a material impact on our ending financial position this year,” Deputy Mayor Jake Pawlak said in an interview. “We expect to end the year with a surplus again.”
Heisler, in her first year on the job tasked with providing independent oversight of city finances, paints a much bleaker picture of the city’s future. In a letter to City Council last month, she urged members to amend the budget to reflect a worsening situation.
She said Wednesday that real estate tax revenue was $10 million below budget last year and deed transfer tax revenue was $21 million short. With new collective bargaining agreements increasing personnel costs, she said last year’s financials represent a “drastic demonstration of expenses outpacing revenue.”
Differing forecasts
Heisler’s office produced a five-year forecast for the city’s finances that differs significantly from the budget council approved in December. The controller’s forecast predicts operating losses of more than $23 million both in 2025 and 2026, with the city’s reserve fund dropping precipitously from more than $100 million at the beginning of this year to a deficit by 2027.
The gloomy projections assume the city will have to pay massive refunds to Downtown property owners who have received reduced tax assessments via appeal and performers and athletes who have paid a facility usage fee that a court ruled unconstitutional.
Mayor Ed Gainey gives his 2023 budget address in City Council Chambers on Nov. 13, at the City County Building in downtown Pittsburgh. (Photo by Stephanie Strasburg/PublicSource)
Heisler’s office projects the city will need to pay $10 million in real estate tax refunds over the next two years.
Heisler also said she thinks the administration’s projection for interest earnings is too high; her forecast calls for about $10 million in interest earnings in 2025 and 2026, compared to $30 million predicted by the mayor’s team.
Pawlak said Heisler’s projections were made with faulty assumptions. “The assumptions they’re making are simply not borne out by the 2023 financials or the first quarter financials,” Pawlak said. “They could happen, but we take the view that we evaluate, on an ongoing basis, real, hard data.
“There are maybe informed guesses about refunds here but nonetheless they’re not reflected in the data we see.”
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