Mayor William Peduto Formally Submits 2018 Operating and Capital Budgets to Pittsburgh City Council

Mayor asking State to Remove City from Act 47 Financial Distress Status

PITTSBURGH, PA (November 13, 2017) Mayor William Peduto today submitted his proposed 2018 Operating and Capital budgets to Pittsburgh City Council, and announced he is asking the state to remove the city from Act 47 Financially Distressed status, which the City has been under since 2004.

Parallel to the submission of the budgets, the Mayor will be introducing legislation to Council to cement fiscal reforms learned through the Act 47 process to protect the City from entering distressed status again.

“As a councilman, I was the first member of Pittsburgh city government to call for entering Act 47, and I now call for us to finally exit the process,” Mayor Peduto said. “I do this somewhat reluctantly, as Act 47 oversight has been critical to us regaining our fiscal footing, but the time is right to do so. We need to continue the fiscal discipline we have learned the past 14 years and apply it to the City’s future.”

The legislation will include caps on pension enhancements; standards on debt service; retiring unspent capital projects; maintaining a healthy fund balance; and how budgets will be released post Act 47.

The Mayor is also submitting letters to Governor Tom Wolf and General Assembly leaders calling for a renewed effort to implement statewide municipal pension reform.

He has also issued a letter today to UPMC, Highmark, Carnegie Mellon University and the University of Pittsburgh to work with the City to collectively early next year to fund affordable housing, pre-K education and safe water initiatives.

City Council discussion on the budget is set to begin November 20, with departmental hearings beginning the following day. The first line-item vote on the budget is currently set for December 11 and a final vote is scheduled for December 19. By law, the budget must be approved by the end of the calendar year.

A copy of the proposed $554 million operating budget is available here.

Mayor Peduto’s prepared remarks on his budget submission to Council – as set for delivery – are below.

“I am pleased to be here with you today to present the proposed operating and capital budgets for 2018. Today we will highlight improvements in the City’s financial condition since we began Act 47 oversight and discuss some on-going challenges and risks that must be addressed to ensure the City remains on the path towards long-term financial sustainability.

I also want to share some of the strategic investments we have made over the last three years, as well as some key initiatives planned for 2018 and beyond. We have made a lot of progress in restructuring city government and improving the delivery of core municipal services, but there is always room for improvement. I am happy to share some of my priorities going forward.

When I assumed office in 2014, many thought that the City was ready to exit Act 47. While the City made a lot of progress in getting its financial house in order, two sets of decisions made in 2013 altered the City’s financial forecast. The first was the reduction in the millage rate after the County reassessment, and the other was the actions taken by the pension board to adjust mortality rates and lower the assumed investment rate of return.

Absent any further reforms, these two changes would have resulted in unbalanced budgets every year, and the City’s fund balance would have been depleted by the end of 2018. That was an unacceptable outcome for a municipality that had been operating under Act 47 for a decade, so I asked then Governor Corbett to keep the City under Act 47 oversight until we could implement more financial reforms and continue the progress on overall economic recovery.

In addition, we knew that we needed to contribute more to the pension fund, and that we needed to invest significantly more in our roads, bridges, and buildings.

With the framework of the 2014 Recovery Plan to guide us, the City has produced balanced budgets every year, achieved positive operating results, continued to put more money into the pension fund, maintained a healthy fund balance, and implemented a number of initiatives to improve city government operations.

Due to the progress we have made, I will be formally asking the state Department of Community and Economic Development requesting their approval to exit Act 47 oversight.

Just a few years ago, Pittsburgh faced an uncertain financial future. Thanks to the hard work of city employees, ongoing collaboration with City Council, and a more productive working relationship with the Act 47 Coordinators and new ICA leadership, the 2018 Budget and five-year plan continues our path towards long-term financial sustainability.

The 2018 Budget and Five-Year Plan strike a balance between the need to provide high-quality and efficient municipal services and invest in the City’s infrastructure while also being a prudent steward of the City’s finances. Continuing the objectives of the Act 47 Plan, the 2018 Budget and Five-Year Plan includes balanced budgets every year and maintains an adequate fund balance.

While our fund balance stays above the 10% target every year, we are still significantly below the GFOA recommended practice of 16.7%, so we must resist the temptation to reduce our reserves so we have an adequate amount of cash available to start the fiscal year and guard against emergencies and/or an economic downturn.

In addition to addressing debt, pension, and retiree health benefits, the City continues to pursue cost mitigation strategies for health care and worker’s compensation.

We have slowed the rate of growth in healthcare costs by moving to self-insured arrangement and by increasing our employee wellness program, which also have mitigated cost increases for our employees.

Through our commitment to workplace and employee safety we have reduced the number of injuries, both those requiring medical attention and those that result in lost time.

Though we have talked about legacy costs individually, it is important to see the overall financial impact of our efforts.

Debt service payments have decreased and workers’ compensation costs remain stable. Without these improvements we would not have been able to increase contributions to the City’s pension fund.

Since entering into Act 47, the City has decreased the size of its workforce by 26% while maintaining and even improving service levels. We have made a lot of tough decisions about programs and services while under Act 47 oversight and employees have been asked to make sacrifices in terms of compensation and benefits.

I am proud of the work that City employees do each and every day to make the City a great place to live, work, visit, and enjoy. Please join me in thanking them for all of their hard work throughout the year.

Though we have made a lot of progress to strengthen the City’s finances and prepare to exit Act 47 oversight, we cannot return to the practices of the past that led us to entering Act 47 in the first place. That’s why my administration will be submitting legislation to City Council to provide a framework for prudent financial management and ensure that we will continue to meet the financial management benchmarks we have achieved while under Act 47.

In a letter I am submitting to City Council I am asking them to approve these reforms by the end of the year so we can continue to adhere to solid financial management practices regardless of who serves on City Council or in the Mayor’s Office.

This budget reinforces our commitment to invest in core city services to provide safe, healthy, and thriving neighborhoods to ensure that Pittsburgh remains a great place to live, work, and raise a family.

The City has significantly fewer positions than it did in 2000, yet we need to deliver the same core services throughout City neighborhoods. Thanks to the efforts of our workforce, we are able to deliver more efficient and effective services with even fewer employees than before I took office.

Let’s talk about some of our key successes and initiatives we have planned for next year.

Since 2014 and through next year, we will have hired almost 500 police officers, which has more than tripled the amount of recruits from the previous six years. I am proud to say that we are on track to sustain a staffing level of over 900 police officers available for operations in 2018. While reaching that goal in 2017 was important, we need to maintain a consistent level of staffing going forward given workforce demographics and historical attrition, so we will add three additional recruit classes in 2018.

In addition to our plan to develop a strategic and long-term approach to fully staffing the Police Bureau, we have consistently added firefighter recruit classes to reach authorized staffing levels and reduce the need for callbacks.

For the period of 2014 through next year, we will have added almost 220 firefighter recruits, which is almost triple the number added for the previous 6 years. As a result of proactive succession planning, with multiple recruiting levels over the last several years, we have reduced the volume of callbacks and overall overtime.

In an effort to sustain a staffing level consistent with our operational needs, the City will add one additional Fire Bureau recruit class in 2018.

In 2017 we hired our first EMTs to reduce the workload of paramedics responding to basic life support calls. In just a few months we have seen the benefits of the program through the thousands of calls they have responded to, which allow Paramedics to focus on calls requiring an advanced life support response. EMS leadership has also reported a reduction in the number of mutual aid calls required from other suburban departments

In 2018 we will continue our multi-year plan to increase the number of PLI employees, especially inspectors. These additions help the City keep pace with increased development, and provide better service to residents and business owners.

PLI continues to invest in cross-training to allow staff to complete more inspections across different functional areas.

With these additions, I am proud to share that we are seeing a return on our investment. We’ve increased plan review staff from 5 in 2014 to 12 in 2018 which has produced real results. By investing in our workforce, we’ve been able to cut building plan review times significantly. This helps facilitate development in our City, as projects move through the approval process more efficiently.

Investing in PLI has also allowed us to issue more building permits in each of the last four years. During this time, we’ve increased the number of permits issued by over 15% and brought in almost 20% more revenue. This allows us to continue investing in the department and to provide better services to the public.

From 2018 through 2023, our long-term plan will invest an additional $44M for vehicles and equipment to deliver core services. These purchases include police vehicles, ambulances, fire trucks, public works trucks, and other equipment necessary to invest in our fleet to provide our employees with the vehicles and equipment they need to do their jobs.

The 2014 Act 47 Recovery Plan highlighted the fact that the City needed to invest more money in its infrastructure, including roads, bridges, and buildings. While investing more money in our infrastructure is a good thing, I also knew that we need to establish the proper organization, talent, policies, processes, and technology to ensure those investments were done efficiently and effectively. Several years later, I’m happy to share the progress we’ve made since 2014 and our plans for the next few years.

A few years ago I tasked the Office of Management and Budget with the responsibility for strategic planning and oversight for the development of a long-term investment and maintenance plan for all of the City’s assets. We have also created the Department of Mobility & Infrastructure, established the DPW Bureau of Facilities, and added staff to support both by taking a strategic look at our workforce and prioritizing our needs.

Not only have we added staff, but we are focusing on providing them with the knowledge and tools they need to succeed through the implementation of the Cartegraph asset management system and the current initiative to transform the facilities management function through the introduction of project management and work order processes based on leading practices.

With City Council’s support, we’ve made strategic investments in the facility optimization plan to guide our planning and decision-making for years to come, and are in the process of developing long-term maintenance and investment plans for all of our asset types.

Finally, we also continue to improve our capital budgeting process to ensure that our resources are allocated to high priority projects.

The 2018 Capital Budget allocates over $107M in funding for capital projects across the City.

The 2018 Capital Budget continues our efforts to reform the capital budgeting process and improve our assets and infrastructure. The majority of the capital projects funded 2018 will be targeted to strategic maintenance and investment in our assets and infrastructure, including roads, facilities, vehicles, and equipment.

Through prudent financial stewardship and responsible borrowing we have developed a realistic, long-term capital investment plan. We have seen what happens when we disinvest in our assets and infrastructure. Bridges become unsafe and must be closed or demolished; poor condition roads and sidewalk create mobility challenges; facilities have deplorable working conditions for our employees; and we end up spending more in the long-run to fix things when they break rather than focus on preventative maintenance. We need to invest more, not less in our capital program.

With these efforts we are positioned to responsibly increase our borrowing capacity over the next 6 years to increase investment in capital projects throughout the City and tackle the significant backlog of projects.

Across all funding sources, the six year capital improvement plan presented today includes nearly $647M in strategic investments for the period of 2018 through 2023. The 2018 Capital Budget will fund nearly 200 separate deliverables related to capital projects throughout the City.

There are meat and potatoes projects across all corners of the City – from the Middle Hill (D6) and South Side Flats (D3) to Elliot (D2) and Marshall-Shadeland (D6) – such as laying down new safety surfaces in playgrounds and painting or upgrading play equipment, which will ensure safe parks and play areas for our youngest Pittsburghers and their families.

The Wightman Park renovation project in Squirrel Hill (D8) will include improvements to the sports field and new play equipment as well as investments in green stormwater mitigation.

We will be increasing accessibility with ADA improvements to City facilities such as the Homewood Senior Center (D9), Brookline Park (D4), as well as the installation of hearing loops at Healthy Active Living Centers in the North Side (D1), Glen Hazel (D5), and Mt. Washington (D2).

The budget reflects thoughtful collaboration with community and authority partners on projects that will transform entire neighborhoods. As part of PennDOT’s upgrades on East Carson Street in the South Side (D3), the City is contributing $1.5M to expand pedestrian safety enhancements. The City is also collaborating with the URA on a project to reconstruct a large portion of Smallman Street in the Strip District (D7), and with PWSA on large-scale improvements to Four Mile Run in Schenley Park (D5).

The City is also participating in a cutting-edge project to help alleviate congestion in City streets. With $11M in funds from Federal Highway and a multi-million dollar commitment from the state, the city will deploy adaptive signal technology to some of our busiest corridors. These “smart spines” include technology that allows traffic signals to sense increases in car and pedestrian traffic so green lights can be adjusted on the fly to reduce wait times. The signals within a corridor or “spine” will also communicate with one another, so a sudden rush at one intersection can be properly managed by the other intersections as well.

The 2018-2023 Capital Improvement Plan includes $103 million for street resurfacing, with $16.4 million allocated in 2018. I am proud to say that the budget for street resurfacing has more than doubled since I came into office in 2014, but we continue to have a backlog since we should have been allocating $20 million every year to keep our streets in proper condition.

Although not part of the City’s annual paving program, projects such as the reconstruction of Smallman Street and implementation of the Federal Highway Administration’s Advanced Transportation and Congestion Management Technologies Deployment grant involve significant paving components.

We have accomplished a lot by increasing our investment, improving coordination with utilities, and using technology and data to better plan and manage the paving program to improve the condition of our streets. From 2018 to 2023, our new long-term plan will invest over $214M in improving facilities throughout the City.

Implementation of recommendations from the Facilities Optimization Plan will allow the City to better maintain its infrastructure and provide service delivery to residents. Over $900,000 will be dedicated to sport facility improvements in 2018 such as ballfield renovations, the installation of light activation buttons to aid in electrical usage, and the purchase of ADA-accessible bleachers for our outdoor hockey rinks.

We will continue to financially support upgrades to our recreation and senior centers, including design work to improve ADA accessibility at the Homewood Senior Center, and installing a new roof and elevator at the Warrington Rec Center in 2018.

Another major project on the horizon is a new public safety training facility. The design process for this facility will begin in 2018.

Though we have made great strides to improve the condition of City’s facilities, it’s important that we acknowledge that we continue to have a huge backlog of investment needs. According to the Facilities Optimization Plan, we need to spend $60 million immediately to get all of our facilities in “good” condition. Unfortunately, it will take us at least 5 years to address all of the current needs. I would like to work with City Council to find a way to accelerate this program and make these much needed investments

The structure and operations of city government today are much different than it was just a few years ago, and I believe the changes we have made are having a positive impact on how city government operates for the benefit of our residents, neighborhoods, businesses, and employees.

Before 2014, the Public Safety Department consisted of a Director and staff person. Today, we have a Department with strong, effective leadership that has integrated core functions such as community outreach, planning, emergency management, special events, and finance.

We established the Department of Innovation & Performance to deliver strategic technology services, drive innovation, and facilitate efficient and effective City services through data-driven analytics and continuous improvement.

In 2014 we announced a plan to begin to overhaul the Bureau of Building Inspection with the creation of the Department of Permits, Licenses, and Inspections. Over the last few years we have restructured the department, implemented new processes, and provided employees with the tools they need to do their jobs and provide exceptional customer service. We’ve made great strides, but there’s more work to do.

The Bureau of Neighborhood Empowerment was created to focus on strategies and initiatives in areas such as housing, education, small business development, and diversity and inclusion to improve communities and address the needs of targeted populations.

Building on these organizational changes, in 2018 we will be focused on the transformation and modernization of city government to position the City to meet the current and future needs of our residents, businesses, neighborhoods, employees, and other stakeholders. Some of the key initiatives that are reflected in the proposed 2018 Budget include the following:

Expanding the role of the newly created Department of Mobility & Infrastructure to improve the organization, planning, coordination, and execution of mobility and transportation projects, processes, and initiatives;

Transitioning the Personnel Department into a modern human resources department focused on recruiting, developing, managing, and retaining a highly qualified and diverse workforce;

Aligning the Community Development Block Grant (CDBG) program under the Office of Management and Budget to centralize all grant management and compliance functions;

Increasing the number of PLI staff and commencing implementation of the new permitting and licensing system to modernize this important function; and

Establishing a Bureau of Facilities in DPW to improve the maintenance and operation of City facilities.

Thank you for your help in bringing Pittsburgh back from insolvency. From today forward I pledge to work with you to keep us on the path of fiscal discipline, and continuing the transformation and modernization of Pittsburgh city government.”