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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Our People In Uniform

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Pittsburgh Chief of Police Nate Harper accepts condolences and gratitude in front of the City-County Building, and is even asked for an autograph.

The period for public viewing of the caskets of Pittsburgh's fallen heroes is now underway concluded, unless otherwise informed. People are invited to pay their respects on the 1st floor of the building until 10:00 AM Thursday morning, when a funeral procession at noon will head north on Grant St. and wind around to the Peterson Events Center in Oakland. (Post-Gazette map)

Meanwhile, off the coast of Somalia, the American container vessel Maersk Alabama was today boarded and taken by pirates. The crew has since retaken the ship -- but as the pirates fled they were able to take the ship's captain hostage. More officers in uniform are being called upon to protect us, and the story is developing. (NYTimes)

Last Week's Financial Fireworks, Part I

Several interesting discussions took place on Wednesday, April 1st, during City Council's standing committee meetings.

First came the administration's request of the Council to sign off on an agreement with the ICA which would place $45.3 in something akin to an irrevocable trust fund; or "set-aside money" for repayment of debt, according to Finance Director Scott Kunka.

Kunka explained that although the financial markets have conspired to make it impossible to leverage $5 million savings off of this in the manner outlined in the 2009 budget projections, another refinancing opportunity has been identified for 2012 that also would make profitable use of these funds.

Councilman Patrick Dowd responded during his turn that it was "good to hear you acknowledge that at long last", and that "that was my expressed concern at the time" -- October 2008, during annual budget hearings. The majority of Council approved Mayor Ravenstahl's budget over Councilmen Dowd's and Peduto's objections.

Since the money was transferred to a different city account right as those talks were taking place, Dowd asked Controller Michael Lamb if the agreement has essentially been enacted already.

"We haven't done that", Lamb clarified -- it is not secured under terms of the agreement which has yet to be consummated.

Kunka tried to make some clarifications about what appears in the "draft agreement". Councilman Doug Shields cut in out-of-turn to implore Kunka to cease calling it a "draft" agreement. "No one signs and executes a 'draft' agreement", Shields insisted. Some cross-talk ensued.

Kunka at length rallied to clarify that the Finance Department has created an account for the vehicle, but hasn't put the money in it yet. Dowd asked Kunka that if by putting the money into that account, would that be what the ICA had once referred to as the "fund in the nature of an irrevocable trust" which is designed to "lock the money away" for debt.

"That's your characterization, Doctor Dowd" began Kunka -- which prompted Dowd to clarify,"Councilman Dowd. I'm a Councilman."

Councilman Jim Motznik then jumped in out of turn to deplore the "personal attacks" at the table.

Peduto gently tapped the gavel, begging "Guys guys guys guys," and explaining for the record that there have been no "personal attacks" made.

Dowd asked Kunka who would get to decide to use the money in that fund and what it would be able to be used for; he pointed out that the 5-year forecast calls for it to be used for "certain obligations" but that alone. He also wanted to know the deadline for using this money, since the ICA potentially could cease to exist in 2011. Dowd also revealed a hard-line position in favor of "locking it away" for debt.

Kunka opined that to lock the money is "really not prudent". And as to putting it away under a formal financial defeasement agreement, "Why put it in another account with new fees?"

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Dowd yielded for the moment and Shields took his turn. After arguing with the City Solicitor at length over the meaning of "draft agreement" -- this appellation for the agreement obviously irritated him -- Shields also contended that the $45.3 million transfer that had already taken place in 2008 was illegal. "But here we are."

Nonetheless, the Council "graciously" approved the 2009 budget, Shields said, in part because some members recognize the possibility of a force majore which would require breaking into the piggybank. What he wanted to know was, much like Patrick Dowd, what are the proposed parameters for who gets to make those decisions.

Kunka insisted that the preparatory transfer that had already taken place was not illegal and that the parameters for the funds is clear in the agreement -- it would take the "City's" and the ICA's joint approval, and it would only go to pay down debt.

Shields said rather this agreement would merely "a-ssure" people (as opposed to en-sure) that Pittsburgh has set aside money to pay down debt -- and critically, a role for Council is not specified. He alluded to some "tax issues in Alabama", and complained that the administration has held up the Council's duly budgeted hiring of a city attorney for three months, who might help in these matters.

Shields demanded a motion to hold the bill until these matters were addressed. No second was forthcoming at that time. Finance Chair Councilman Bill Peduto cut him off for time purposes and proceeded to Councilwoman Darlene Harris's turn.

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Harris asked Lamb directly, was the initial money transfer illegal? Lamb said, "No, we move money all the time."

Kunka chimed in that other cities are talking about layoffs, and we're talking about how to spend "an extra $45 million the City's been able to accumulate."

Harris began asking if the Council would have to approve an expenditure from the special $45M debt assurance account, and Kunka answered that the administration would be limited by Council's appropriation. They can't spend money if the Council doesn't ask for something generally. Also, it itself can be used to make annual debt service payments.

So the way that would work (if I understand correctly) is that money would be withdrawn by the Mayor and the ICA from the ordinary debt service fund for anything the City decides to spend money on, and then money would be transferred from the $45M special account to replenish the ordinary debt service account. So in the final analysis, yes the fund could be expended on anything the City routinely desires, at the Mayor's and the ICA's joint discretion.

Councilman Ricky Burgess began by saying he's "a great fan of Mr. Shields." That's he's "extraordinarily knowledgeable", and a real "treasure" to the City of Pittsburgh for these reasons. He then asked Controller Lamb directly if he has a problem with the agreement.

"I don't have a problem with it per se," responded Lamb. "I think we should lock it away," meaning in a real irrevocable debt defeasement account -- this would enable the city to truly write debt off its books, which he described as a "technicality". The suggested method may be "Okay from the Finance Department's cash-management system", but not from "the point of view of City financial reports." But aside from that "philosophical" issue which he does not get to decide, the agreement on the table is not problematic in itself.

As to Burgess's question what would happen if the ICA sunsets and dissolves, Lamb (or was it Specter?) said he believes actually the City Controller steps into that role.

"Okay," began Burgess. "You three say we can approve this. If the Controller had a problem, I'd say no. Or Specter." Or the administration's Director Kunka, the third. And so Burgess left the impression he'd be supportive of the agreement.

Then he floated a proposal of the approximate type he has made in the past and says he will continue to make in the future -- that all future casino revenue should go right into debt service. Does anyone at the table have sympathy for that idea, Burgess asked?

"Sympathy would be the right word, yes," said Kunka, smiling broadly.

Lamb clarified that $10 million of that was already factored in to the 5-year plan. Burgess appreciated that input, but suggested that anything in excess of that sum also should go toward debt service.

Motznik chimed in to agree with Burgess's comments, and to emphasize that the City is "saving a lot" on this deal. He asked that for casino revenue, maybe it should be split between debt and pension funds. "We're all gonna be using that pension fund one day."

Councilman Peduto used his turn to say he voted against the 2009 budget for these very concerns. He agrees with Lamb on the "philosophical" distinction of the need to lock money away. Furthermore, by not mentioning a role for Council, he opined that Part 2 and Part 5 of the agreement could run afoul of the Home Rule Charter. He said he would support Mr. Shields's recommendation to hold the legislation.

Back again to Dowd: he said, "the agreement is the crux of the 5-year plan", it's "foundation". He supports the fund "in concept", but the way it's being done is with a "lack of accountability." "We're just handing it over and hoping." There is "no mechanism for holding the Mayor or the ICA accountable" for what they choose to spend it on.

Furthermore, Dowd alleged there's not sufficient detail as to what debt is going to be repaid. If 2012 "is so ripe and good, we should tie it down." In short, it's missing a time frame, a series of bonds, and projected savings calculations. That gets back to accountability.

Harris declared her intention to vote yes on the preliminary vote, but to get together with Shields and Peduto during the week-long interim before final action to attempt to improve the agreement with respect to their reservations about it.

Councilwoman Smith said the same thing.

Councilwoman Payne asked, "I thought accountability was in that it could only be used for debt."

Kunka said, "The point is, we don't -- we want to have the flexibility."

Shields motioned to hold the legislation up again. "We all want to see things moved along," he allowed, but if the legislation does not change in a week, "then it'll be a recommital" at final action, meaning back to the drawing board anyway. He said the ICA was open to making certain alterations, but it would take some time and serious attention. This time Shields's motion got a second from Dowd, so it was voted upon.

On the motion to hold: Ayes 3 (Shields, Peduto, Dowd), Nos 5 (Motznik, Payne, Harris, Burgess, Smith). Kraus not present.

On the ensuing motion to grant preliminarily approval to the agreement: Ayes 5 (same as nays above), Nos 2 (Shields and Dowd). Peduto abstained in the spirit of trying to "work with the administration."

Next on the agenda would come: whether or not to levy payroll preparation taxes or certain fees on certain non-profits, the possibility of instituting revenue-neutral budget conciliation, and a proposed audit for the 2007 PWSA bond swap deal.

How to Help

Officials have set up something called the Pittsburgh Fallen Heroes Fund to accept donations from those wishing to support the loved ones of officers Eric Kelly, Paul Sciullo and Stephen Mayhle.

Mayor Ravenstahl says the public can designate how the money is spent, if they'd like.

"We encourage them to include that information, for example: 'For the children,' 'For the mothers,' 'For the widows,' et cetera, Ravenstahl added. "They can designate on the college fund for the children if they so choose." (KDKA)

A link to a fund website should be available through the Fraternal Order of Police site soon; keep checking patiently. Meanwhile, donations can be sent to the following address:

Pittsburgh Fallen Heroes Fund
Greater Pittsburgh Police Federal Credit Union
1338 Chartiers Avenue
Pittsburgh, PA 15220

Sunday Monday: Life Marches On...**

Tomorrow Today -- Monday, April 6th -- City Council will hold a public hearing on proposed amendments to the city's Code of Conduct (i.e., "New ethics legislation") at 1:30 PM. *-UPDATE: Hearing to be rescheduled (Trib). Links:

Ordinance with proposed amendments (PDF)

Commentary on 'City Ethics', and the Council's new amendments

Notes and commentary on the Post-Agenda (mid-post)

This hearing won't be anywhere nearly as well-attended as more notable public hearings have been (Exhibit A, Exhibit B), but all the same if this issue speaks to you, do drop in and avail yourselves of your 1-3 minutes of face time with the Council.

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No slight to anyone else -- but if I had to nominate one blog post by which to judge the local Internet's reaction to the awful news, it would be this one.

Meanwhile, in due time, the incident will compel us toward yet another contentious debate about gun control -- one side rightly motivated to demand stricter regulations on assault weapons, and the other side almost as rightly offended by first one's attempt to "capitalize" on tragedy. Infinonymous opens this discussion for any of you who are interested, but only after taking a merciless look at the sick mind that committed these heinous acts.

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By way of transition...

But here's a thought. Instead of making what is expected to be a $4.1 million investment that fattens the bottom line of an out-of-state surveillance company, why not invest that money into the hiring and training of cops who are willing and able to work with the people in troubled neighborhoods to make those communities better? (P-G, Tony Norman)

Yes please. I am especially not a fan of those security cameras which will be operated by "community groups". And Tony's right -- we don't really have a ton of evidence on crime fighting efficacy.

MORE NEWS...

- City Council declined by a margin of 3-4 in a preliminary vote to spend $15,000 to audit the $414 million, poorly-understood-by-everyone-at-the-time, possibly legally questionable Water Authority bond deal. Council members Shields, Peduto and Dowd voted in favor; Council member Motznik, Payne, Deasy Smith and Harris voted against. (P-G, Rich Lord)

- City Controller Michael Lamb suggests levying a payroll preparation tax (h/t Ed Heath) on certain non-profits instead of just asking them quietly behind closed doors for a tiny voluntary donation. Almost everyone is speaking positively about the idea. Almost. (P-G, Rich Lord)

- Remember that week we were all concerned about the McArdle Roadway? Well, it's due to get a $1 million fixup, but there's a legitimate question of whether or not that's sort of throwing o.k. money after bad. (15211.org)

ALSO: I should add that City Public Works Dir. of Operations Rob Kaczorowski informed us a few weeks ago that hillside and drainage remediation AND transition to a concrete driving surface were both actively on-the-table of federal stimulus talks -- though concrete would require driving huge slabs of concrete into the earth, which sounds to me personally like making a burdensome project extra-super burdensome. But hey, if we're being stimulated.

- The URA is considering a $300,000 grant for one of the three hotel projects in the works in East Liberty. Also on the agenda for Tuesday is some business with Millcraft. (P-G, Mark Belko)

- The P-G Edit Board continues not to get it on this issue. I want City/County consolidation also, much in the same way I desire peace in the Middle East. But I'm not about to fly to the Holy Land, sequester the principals in a room, and clunk their heads together like Moe from the Three Stooges. The sooner we forget this whole approach, the sooner we can start building agreements from the ground up. (P-G, Edit Board)

And now...

OZYMANDIAS for MAYOR

Let him solve our problems.

The first MAYORAL DEBATE between Luke Ravenstahl, Patrick Dowd and Carmen Robinson is scheduled for TOMORROW, April 6th at 7PM on PCNC. Party time, party time.

**-UPDATE: Debate canceled for obvious reasons. (Trib, Jeremy Boren) Debate rescheduled for May 4th.

PCNC is a strange channel. Fully concluding all three debates a whole month before the election is a peculiar arrangement. The fact that we can submit video questions for one of them over the Internet is truly laudable.

FINALLY...

After writing this post, I briefly informed Comet Senior Political Analyst Morton Reichbaum of news that Patrick Dowd publicly implicated the Zappalas, Mossie Murphy, others, Greg Zappala, Mossie Murphy and others in a shady and rapacious municipal bond swap deal.

"Mossie Murphy?" Mort started. "God, I haven't heard that name in a hundred years."

"He was like a -- a political pundit, years and years ago," Reichbaum remembers. "How he ever got involved in stuff like this, I don't know."

I asked him on which television, radio, or print media outlet we might have found him. "All over the place. Kind of like Bill Green," Mort replied.

"You know, now that I think of it, he was real palsy-walsy with a lot of guys in City Hall. A real Pittsburgh character. You know who would know more about him," Mort suggested -- and he enjoys talking like this -- "your friends Bill Green and Jon Delano."

Now, we may well have However, we both fell prey to a case of mistaken identity. This 2006 Trib article makes mention of a this Mossie Murphy that is a "son of the legendary Pittsburgh rainmaker and political consultant".

Complaints originating in Northhampton County, PA in regards to bond "swaptions" tied to Maurice "Mossie" Murphy and Merrill Lynch have been discovered by the Comet here.