Gainey's 2025 austerity plan plays well with Pittsburgh council budget director

Pittsburgh City Council’s budget director indicated Wednesday that Mayor Ed Gainey’s austerity plan for 2025 makes sense given the fiscal pressure facing the city.

Presenting an overview of Gainey’s budget and financial forecast to City Council, Peter McDevitt acknowledged that several city departments will likely ask for additional resources during the budget process.

But, he said, there’s nothing the city can do to meet those requests right now.

“Without a sudden influx in revenue, we don’t have the bandwidth to add anything,” McDevitt told council. “They’re going to have to get by with what they have.”

Facing shrinking revenues, an end to federal covid-19 relief money and difficult financial years ahead, Pittsburgh won’t have extra money in its 2025 budget to fund new projects or provide all the resources its workers may want, McDevitt said.

As a result, Gainey didn’t have much wiggle room in crafting a $665 spending plan for next year that focuses on little more than core services .

McDevitt agreed that the Gainey proposal would cover necessary costs without requiring a tax hike or major cuts in services or personnel.

Gainey’s proposal continues for a second year a pause on new capital projects. McDevitt estimated that the money set aside for the city’s vehicle fleet is less than half of the ideal amount.

But McDevitt said such austerity is a responsible approach when money is tight. The budget may not include flashy new initiatives, he said, but it will pay the bills.

“It’s not exciting, but it’s going to get us through the next year,” he said.

Uncertain impact

McDevitt said it’s particularly important that the city doesn’t try to stretch its resources too thin given that a new presidential administration could impact how much Pittsburgh receives in federal funding.

“We need to make sure the city is going to be self-reliant,” he said. “I would advise that we move forward cautiously and not overextend ourselves with the hope that we might receive assistance from the federal government over the next four years.”

He urged city officials to be wary of taking on too much new debt in the next few years, as the city is relying on floating bonds to fund much of its capital budget.

Gainey’s proposed $665 million operating budget reflects a roughly 3% decrease from this year. The proposed capital budget of less than $120 million, meanwhile, is almost 25% less than this year’s nearly $159 million.

McDevitt said that money won’t go as far as it used to. The rate of inflation, he said, has outpaced the city’s revenue growth, meaning the city is losing spending power.

Adding to the pressure, the city’s revenue projections decline in the coming years. With Downtown property values slipping, the city is bringing in less in real estate taxes, one of its largest funding streams. Federal covid-19 relief money is drying up at the same time.

McDevitt said the city’s real estate tax revenues will remain “a bit of a question mark” unless Allegheny County conducts a complete reassessment. But he said he was hopeful that a tax incentive program aimed at reinvigorating Downtown will help reverse the trend of lowering property assessments in the coming years.

‘Room to breathe’

While he urged caution, McDevitt said the city will likely see a brighter financial situation in a couple years.

The city in 2027 will pay off off a chunk of debt it had incurred in prior years, freeing up about $31 million extra in the operating budget.

“We will have more room to breathe,” he said.

In the meantime, McDevitt said, there are also positive aspects to the 2025 budget proposal.

The city next year will continue investments in key areas, like traffic calming and road paving, which is set to see a $3 million increase in its budget compared to this year.

Pittsburgh’s Department of Innovation & Performance is expected to complete upgrades to equipment in all city facilities, McDevitt said.

And a three-year effort to upgrade the fire bureau’s equipment will wrap up next year with new hoses and a thermal imaging system.

Kiersten Walmsley, council’s assistant budget director, highlighted a $1.2 million investment in a new automated red light enforcement system, money for eight additional litter inspectors and a 3% pay raise for most city employees.

The city next year plans to tap into the Stop the Violence Trust Fund to pay salaries for 10 additional social workers to expand the Office of Community Health and Safety’s reach and availability.

Budget meets requirements

The budget proposal meets legal requirements that the city maintains a fund balance of at least 10% of the city’s expenditures, but that ratio is expected to dip to 10.1% in five years.

McDevitt said it’s not a cause for serious alarm now, but something officials should monitor closely.

Another requirement that Gainey’s proposal meets is not taking out debt beyond 12% of the overall budget.

McDevitt said both metrics are crucial to ensuring Pittsburgh doesn’t slip into financial distress.

Though the city is keeping debt to within its legal limits, debt service payments constitute the second-largest expense in the operating budget, Walmsley said, behind only personnel expenses.

To be fiscally healthy, McDevitt said, the city should rely less on floating debt and more on bringing in revenues.

Gainey on Tuesday officially presented his budget council.

Council will now host public meetings with each city department and bureau to discuss the budget in detail.

During this process, council can amend the budget.

Members expect to take a final vote on the budget Dec. 17.