PITTSBURGH - The
state yesterday ruled that Pittsburgh is financially distressed, a
designation that will give the city a state-appointed recovery
coordinator within 30 days and an economic recovery plan within four
months.
The designation by the Pennsylvania Department of Community and
Economic Development had been expected since a consultant hired by the
state said earlier this month that the city likely met the criteria
under what is known as Act 47.
To be declared distressed, cities must meet at least one criterion
under the act. Pittsburgh, which has a projected deficit for next year
of $42 million, meets three criteria: City spending exceeded revenues
for at least three years; the city had a 5 percent deficit for two
successive years; and it had at least a 1 percent deficit for three
years.
"Act 47 is not a state takeover," said Community and Economic
Development Secretary Dennis Yablonsky in a statement yesterday. "The
state's role is to provide strong oversight and develop a partnership
with the city in order to ensure that residents receive vital services."
Mayor Tom Murphy had asked for the designation, which could empower
the city to levy some new taxes on its own rather than getting state
approval before doing so.
"As we have been saying throughout this process... the DCED
declaration is a decisive determination that this city simply cannot
cut its way to solvency," said Murphy, a Democrat, in a prepared
statement. "We will continue to work in good faith to develop the
modernized tax structure that this city must have to survive and grow."
Murphy has said that the city must stop relying on property taxes as
a primary source of revenue. Pittsburgh's major steel mills, once a
primary source of property-tax revenue, are gone; and the city economy
is now fueled by hospitals and universities, which are wholly or
partially exempt from property taxes and some other taxes.
Murphy has tried unsuccessfully to get the legislature to approve a
new payroll tax, among other levies, so those who work in the city will
pay more for its services.
Pittsburgh's credit rating hit junk-bond status in October.
Since it was enacted in 1987, Act 47 has helped 19 municipalities
that were in danger of filing for bankruptcy. The act gives elected
leaders such financial tools as a recovery plan, a wage tax on
nonresidents, and state loans and grants.
