Last Week's Financial Fireworks, Part II

The resolution authorizing the City of Pittsburgh to enter into an agreement with nonprofit institutions to document a commitment made by these organizations to provide limited voluntary financial assistance to the City for the years 2008, 2009 and 2010...

...in lieu of, I presume, the possibility of instituting other mechanisms of revenue collection on some of them during those coming years #cough# taxes #cough# service charges...

... was held pending its own special post-agenda discussion by the Council, which has been scheduled for April 30 [.pdf].

Highlights:

Theresa Smith was the first to speak against consummating the voluntary agreement. She said she would feel "hypocritical in accepting this money today" in light of the fact that the Council recently set aside legislation making it easier for seniors to receive a tax break owed them under State Act 77.

Bill Peduto very much approved of the idea of a special meeting: he said he has "files and files" of data on our present arrangements with the nonprofit community and what those might instead become, and was keen to have the forum to lay it all out.

Darlene Harris offered, "When I see commercials in the middle of a Superbowl, and the City isn't getting anything..." and she just trailed off in exasperation. She was in no hurry to approve the agreement before the Council.

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Then the previously tabled ordinance (Dowd's originally) providing that the City Treasurer take responsibility for according State Act 77 property tax breaks to eligible seniors, instead of having them apply for it separately each year, was revived for its own post-agenda discussion: a week sooner, on April 21 [.pdf].

Prompted by this renewed interest, Ricky Burgess mentioned his shelved legislation requiring "revenue-neutral budget conciliation". He is leery of the financial implications that the facilitation of this existing tax break, as one example, would have on the city's new 5-Year Plan.

Patrick Dowd, in response to Burgess's keen interest in keeping the 5-Year Plan scrupulously balanced with itself, said, "I feel like this budget is based on false revenues and hidden expenditures."

Dowd leveled the following criticisms of the plan and its utility:

1) Pittsburgh employs no facilities maintenance plan -- even though every year, Pittsburgh does wind up allocating significant resources to fix up its public buildings. The strategy for doing so year-by-year is never presented, and the expenditures appear nowhere in our annual budget document.

2) Payments coming in from other entities are over relied-upon to inflate the budget. Ratepayers from the Penn American water company, Dowd said in particular, are required to prop up the budget each year. Past payments from the city's School District were also mentioned.

3) The City, he alleged, has been annually declaring certain incoming moneys as "revenue" -- even though these are really "pass-through" moneys which are predestined to leave the city's hands and go on to their intended targets.

"The reason we're in this situation," Dowd said in conclusion, referring to the acuteness of our continued financial jeopardy, "is because it's a shell game". Neither Burgess nor anyone else said anything in response to those criticisms. Revenue-neutral budget conciliation has yet to be scheduled for any further discussion.

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Lastly, bonds. Water Authority bonds.

The "forward bond swap took place in 2007," as Dowd described the genesis of the deal -- what came later was "the second sort-of-necessary component" to yield $2 million in short-term savings in 2008.

It was merely this back-end of the bond swap, in other words, that Dowd voted to approve as a Council member.

Aside from that, he acknowledged a lot of discomfort talking about it at the table, since he has already raised the issue so vociferously through the press as a component of his mayoral campaign. Relatively briefly and sheepishly, he urged the Council to empower the Controller put a $15,000 contract up for bid for the purposes of fiscally auditing Water Authority bond "swaptions", including at least the swap of 2007-2008.

Jim Motznik was the first to protest: "I don't support using tax dollars" to conduct the audit, he said.

"The Water and Sewer Authority should vote on it. If they voted it down, I'm sure there was a reason."

Darlene Harris then called attention to Dowd's vote in April of 2008 to approve what he just had termed "the second sort-of necessary component" of a "2007 forward swap deal". She had a great many notes arrayed before her, to which she referred to underline and italicize that arguable inconsistency.

"On April 29th, you said..." Harris would begin, time and again. It was almost always April 29th, but she sounded genuinely miffed.

Harris also bemoaned how long it was already taking the Controller's office to get around to an audit of Animal Rescue services she had requested, and still other audits in line.

Doug Shields on the other hand said upon his turn, "I don't have a problem with it."

Referring back to the time the deal was struck, Shields recalled, "We asked what's the deal. They didn't want to give us the information then."

Shields then let loose an interesting bit of data as he was explaining his position. "If the Budget Director thought it was okay to loan $45 million to the Water Authority..."

Some background: Scott Kunka serves both as Mayor Ravenstahl's Budget Director, and at the pleasure of the Mayor as a Water & Sewer Authority board member. $45 million is the same sum we remember from Ravenstahl and the ICA's proposed debt assurance account. There have been rumors floating around that yet another Water Authority bond machination was the original intent of what Kunka has been describing as the City's "extra" $45 million -- that is, until the Mayor appointed Dowd to the Water Authority board late last year, and the deal subsequently was discarded.

"There's some smoke there," offered Shields, by way of wrapping things up.

Bill Peduto then recalled for us that when the deal in question originally came to Council, he was "shouting at the Budget Director, at [State Rep. Don] Walko," who chairs the Pittsburgh Water and Sewer Authority (PWSA). Apparently, useful information was not forthcoming in as timely a manner as Councilman Peduto would have liked.

"We are the government," Peduto clarified, perhaps for Councilman Motznik's benefit. "We must oversee that."

Peduto further alleged that the audit "will also look at" a bond deal/deals struck in the autumn of 2006.

The discussion having come back around to his turn, Dowd repeated his defense of the familiar criticism that has been making the rounds, which was now arising from a fellow Council member at the table: that he voiced support for the bond deal along with a unanimous Council in April 2008.

"If you don't do it in '08", Dowd reiterated, by which he meant go through with the back-end of a forward-bond swap from the previous year, "You don't get the savings projected in '07."

Dowd also clarified that the audit he is proposing would be performed by an outside agency via an RFP, not by Controller Lamb himself -- so it would not delay other pending audits.

Harris then objected that "using words like bankrupt" (which Dowd has been known to use in the media) is "damaging to the PWSA". She warned of the bad impact this could have on the Authority's credit rating, and thus its ability to sell bonds in the future.

After further assailing "that inaccurate information" of Dowd's, and pointing out again that the City Controller is backed up on audits, Darlene Harris concluded, "It's just a bad time."

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Doug Shields opined that "rating agencies take public comment with a grain of salt -- it's whether you've got a market, and the underlying financials."

Shields went on, "as far as the bond markets go, I trust them as far as I can throw them." And once again, on the audit, "I don't think it's a bad idea."

Theresa Smith said of Dowd's proposed audit, "I think it's a good idea," but "I do think we need to wait until some of the audits come back."

The preliminary vote to perform the audit went as follows: Ayes 3 (Shields, Peduto, Dowd), Nays 4 (Motznik, Payne, Harris, Smith), Kraus not present, Burgess not present. The final vote probably will be conducted on Tuesday.
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