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Political Capital: City officials weigh how much to spend on city infrastructure

"Just because you want a Cadillac, and you found a bank willing to give you a loan for one, doesn't mean you can afford a Cadillac."

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Mayor Luke Ravenstahl wants to borrow $80 million to spend on city improvements. - PHOTO BY LAUREN DALEY

Pittsburgh Public Works Director Rob Kaczorowski can't figure out why anyone would oppose the city borrowing $80 million to help shore up its crumbling infrastructure.

"I just don't get it," says Kaczorowski. "Let me assure you, I can spend $80 million all by myself on things that need done, and then get back in line for more. That's how many issues need to be addressed.

"The people of this city deserve to have these things taken care of," he adds. "I hope we don't end up not doing them because of politics."

But if it weren't for politics, some in the City-County Building wonder, would the city be doing them at all? 

 

Hardly anyone denies the need to spend more money on city assets like roads, parks and police cars. Pittsburgh City Councilor Bill Peduto, who chairs council's finance committee, agrees that the city needs "way more" than $80 million.

What's more, while City Controller Michael Lamb has questions about the plan, he also agrees borrowing money to address such projects is the norm "in a typical city." 

But Pittsburgh is not a typical city. The city has been under the purview of state-appointed overseers since 2005, thanks to a debt burden then estimated at more than $800 million. 

Since that time, the city has managed to reduce its debt burden by about $280 million, instituting a "pay as you go" approach in which capital projects were done only when the city had cash on hand to pay for them. The last time the city took on debt was 2006, the year Mayor Luke Ravenstahl took office after Mayor Bob O'Connor died. Ravenstahl has frequently touted his administration's prudent financial management as a major accomplishment.

But when Ravenstahl called for an $80 million bond issue in November, it raised eyebrows -- in part because of reports just two months earlier that he was planning to run for re-election in 2013. Ravenstahl plans to spend $42.5 million of that money next year; combined with $30 million in money from federal and other sources, the city could spend $72 million next year alone. Skeptics say that such spending is being timed to lay the groundwork for Ravenstahl's re-election bid. 

"Look, every time there's a mayoral election, streets get paved," says Peduto.  "If the mayor's not paving streets because there's an election coming up, well, congratulations because you're the first."

The mayor's office counters that this is the perfect time to borrow. Cathy Qureshi, of the city's budget office, notes that the interest rates charged on municipal bonds are at or near historical lows. That means the cost of borrowing is cheap -- something that will change if rates rise. 

And Quereshi says the city has reduced a lot of the debt hanging over it: While the city carries $580 million in debt obligations this year, under the proposed debt structure if the $80 million is borrowed, the amount would increase slightly in 2012 to $607 million, before dropping back in 2013 and 2014 to $550 million and $490 million respectively.

But city council budget director Bill Urbanic says it's still unclear what the city's long-term debt would like under the new borrowing. The city is expecting to see a large drop-off in its debt obligations -- known as a debt cliff -- beginning in 2018, with an even larger drop in 2019. Under the proposed borrowing, there still appears to be a dramatic reduction in those years, but not as significant as originally expected.

Mayoral spokesperson Joanna Doven says a lot of the criticism of the bond issue this time is motivated by simple politics. Both Lamb and Peduto, she notes, are widely said to be pondering their own mayoral bids in 2013. "This administration is not the one playing politics here," says Doven. "Not only is the bond issue what we have to do to address the city's concerns, it's the right thing to do, the responsible thing to do for the people of this city."

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Both Peduto and Lamb maintain their concern is for the well-being of the city. While Lamb acknowledges that floating bonds makes sense, "If we don't execute it property, then we could back into the same types of trouble that we just got out of."

Peduto adds that city has to be careful to allow some flexibility for future leaders, whoever they may be.  

But he says, "Just because we need to spend that amount of money doesn't mean that we can afford to. Just because you want a Cadillac, and you found a bank willing to give you a loan for one, doesn't mean you can afford a Cadillac."

 

In recent days, the mayor's office has been engaged in a back-and-forth with other city officials. 

Lamb and critics in council say the mayor should provide a specific list of projects that will benefit from the funds. 

"We need to borrow to take care of some of the city's needs," says Lamb. "But we need a capital budget with specificity about where we are spending that money."

Ravenstahl provided a capital budget this fall, though as with previous budgets, it offers only brief summaries of how money will be spent.  For example, the line item under building maintenance -- for all city-owned buildings -- jumps from $500,000 to $4.5 million. The budget merely asserts the money will be spent "for continual repairs and enhancements to prevent deterioration of facilities." 

Not good enough, says Bill Urbanic, city council's budget director: "There is a matter of accountability here that must be addressed. You've asked the public to borrow a large amount of money, and you're asking future generations to pay it back, so you really need to spell out exactly how you're spending that money."

The Department of Public Works responded with a lengthy list of projects needing attention. The list of building repairs, for example, included "balustrade restoration" at the City-County Building for roughly $250,000, while a new roof for Fire Station 34 will cost $80,000.

The problem: Taken together, the city's list of building repairs totals more than $22 million -- far more than the $4.5 million the mayor wants to spend. And that, says Urbanic, leaves councilors and the public to guess at what projects would actually take place next year. 

"You can't just give us a list of $100 million in projects," says Urbanic. 

"I know there are projects that need attention," says Lamb. "But what exactly is this money going for? There has to be a specified purpose."

Others have raised similar doubts. In a Nov. 22 letter to Ravenstahl, Councilor Natalia Rudiak, a Peduto ally, contends that the administration is skirting a 2010 law requiring specificity in budgeting.

"I am reluctant to support the type of debt that you are asking us to incur as long as the transparency law that would illuminate how these funds are to be spent goes ignored," Rudiak wrote. "[R]isky borrowing -- which includes ordinarily responsible borrowing that was made without any oversight or policy guidance -- is what caused this city's financial emergency. … I do not intend to repeat those mistakes."

 

Some progress has been made: Peduto has insisted that, before agreeing to any bond issue, he wanted a "debt policy" outlining how the city would manage its debt, and setting a limit for how much money it can owe at any one time. City officials reached an accord on that policy, though neither Peduto nor the administration would comment; Peduto says details of the plan will be released Dec. 7, when this issue hits the streets. The policy neither bars the $80 million bond Ravenstahl is seeking, nor guarantees its passage, Peduto says. But it does ensure "that we're not limiting the ability of future mayors and councils to borrow."

Nor does it seem likely to limit council from second-guessing mayoral funding priorities. Urbanic, for one, says that if the administration "wants to build a spray park, for example," for use by kids in the summer, it must "put that in the [capital budget]. And if something happens that they can't do that project and they want to move the money to another project, then you have to come back to council. They should come back to the elected representatives of the people to make sure there is proper accountability."

But Doven says Urbanic and council are overstepping council's authority. Planning and carrying out the projects the city needs is the mayor's job, she says, and Ravenstahl "hired a group of professional directors" to coordinate the effort.  

One of those directors, operations director Duane Ashley, says council needs to back off.

"They want to know how many boards we're using and how many nails are going into each board, and that's not their job," says Ashley. 

If the bond issue is rejected, he predicts, "These same people who are complaining about the mayor borrowing this money will be complaining about the mayor again in the spring -- when there's no money to do the things that need done."

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