State declares Pittsburgh 'distressed'.(Pittsburgh)

Citing the findings of a state-commissioned review of Pittsburgh's finances and the testimony of several city officials, the Pennsylvania Department of Community and Economic Development announced December 29 that it would grant Pittsburgh's petition for distressed status under Act 47, a state law designed to assist municipalities in fiscal distress.

"As we have been saying throughout this process, and as a fifth independent study has now confirmed, the DCED declaration is a decisive determination that this city simply cannot cut its way to solvency," said Pittsburgh Mayor Tom Murphy in a statement. "This has been a difficult year for Pittsburgh, but things will get better. Today's declaration is a first step on our path back to a healthy and vibrant future for our city."

DCED Secretary Dennis Yablonky had 30 days from the date of the decision to appoint a recovery coordinator for Pittsburgh. This individual or firm will then have 90 days to formulate a plan to help the city overcome its structural budget deficit and emerge from distressed status. While Pittsburgh does not qualify for the loans and grants available to smaller jurisdictions under Act 47, distressed status offers the benefit of state-paid expertise to guide the city's recovery and may open the door for a wage tax on commuters.

Pittsburgh officials lobbied the state legislature last year to pass enabling legislation that would authorize the city to broaden its tax base, but these efforts stalled. In August, Murphy announced drastic measures to keep the city solvent, including service reductions and hundreds of layoffs. By November, Pittsburgh's credit ratings had dropped below investment grade.

"Clearly, the city is and has been experiencing a structural budgetary deficit for many years, leading to significant layoffs and a credit rating downgrade to 'junk bond' status in 2003 as one-time gap closing measures were substantially exhausted," reads the evaluation by Public Financial Management. "Further looking ahead to 2004, the city is anticipated to face a severe cash flow crisis, compounded by the reduced credit market access from the city's recent rating downgrades."

Print Get the Mag Weekly Updates