Archive for March, 2011

Pittsburgh’s Finances – A Must Read

Thursday, March 17th, 2011

Posted by Bill Peduto

rpn-fork-road1City Finances 2011 – How We Got Here

You may have been reading articles about the city’s budget missing $25 million (see here and here). You may have also read about short term problems in getting the Administration to implement last years Pension Plan (click here). If you are aware of these issues, then you are probably also aware of the breakdown with the Administration over the joint purchase of a Financial Management System with the County (here and here). So, what does all of this mean and how is it all connected?

As you know, City Council, the Controller, Act 47 and the Oversight Board worked together last year in order to meet state requirements for the funding of our troubled pension plan. Although there was a strong effort to get the Mayor to join us, the Administration held fast that the ONLY solution was through the leasing of our parking assets for fifty years to a Wall Street consortium. Independent economic analysis proved this would be one of the most costly options the city could choose. The plan approved by Council and others would raise parking rates a portion of that proposed by the Mayor and use those funds to get the pension plan to over 50% funded. Unfortunately, the Mayor-appointed Parking Authority has taken no action and now the required funding of the pension plan is in jeopardy.

200278367-001The Missing Capital Budget and How to Hide It

During the budget debate, the Mayor proposed spending $25 million from the capital budget in 2011 (see here). This coincided with the Controller’s Comprehensive Annual Financial Report (click here) from earlier in the year and with the Act 47 approved Five Year Plan (here) from 2009. However, with funds needed to purchase Police vehicles last month and needed infrastructure projects ready to begin, the Mayor’s Office stated that the capital budget funds had been allocated. In any other city, this would be easily determined by utilizing an ERP system (explanation here). A modern, transparent financial management system is standard in all major cities and corporations. But, not in Pittsburgh government – yet.

Late last month, the Oversight Board took action against the city for failing to implement an ERP system (click here for more). Despite work on the project since 2007 and the implementation with the County being the first priority of the 2009 Act 47 Five-Year Plan, nothing had been completed. The Oversight Board held $13 million in city gaming revenue and required that the city sign an agreement with the county – so Pittsburgh could have transparency in budgeting. The Mayor’s Office never sent an agreement, so the Controller and Council sponsored the agreement. We are ready to approve it today. Without a Financial Management System it is impossible to adequately track transfers from accounts, reimbursements from other government agencies, or potential shortfalls or surpluses. An EPR system is absolutely critical in order to maintain the separation of powers and assure proper checks and balances of city government.

rpn-connect-the-dot1Pensions, Parking, Debt & Accounting – Bringing it All Together

Without the approval of the Parking Authority to enter into a new Intergovernmental Cooperation Agreement with the city, the city’s pension fund will not meet the requirements agreed to by Council, Controller, Act 47 and the Oversight Board. Without the funds from the Parking Authority, the city will need to come up with nearly $15 million in new money. By not spending funds allocated to the Capital Budget for needed long-term needs and by transferring the funds from accounts with surpluses to other accounts, a short-term fix could be made to come up with those missing funds. In other words – robbing Peter to pay Paul. Finally, without a modern, transparent Financial Management System, these types of actions can occur without oversight – even with TWO Oversight Boards. The perfect storm of financial mismanagement – the type of games that caused this city to become financially distressed to begin with. A failed system that has to end today.

Solutions

debt_and_pension

Today, City Council has the opportunity – the responsibility – to end politics as usual in Pittsburgh. We can approve an agreement with Allegheny County to create a joint City-County Financial Management System. Implementing an ERP will provide the city with an open, real-time system for all financial matters. We can work with our Oversight Boards to audit all past transfers and assure that they meet government standards and our five-year plan. We can begin to compel the Ravenstahl Administration to implement the Pension Plan that was approved by Council, the Controller, Act 47 and the Oversight Board. We can begin to create a six-year plan for our Capital, Debt and Pension costs – one that will assure we meet our needs and our budget. And, we can look beyond six years into the future – when our debt payments become much lower and the opportunity for long-term financial stability becomes a reality. We can do all of this today – more importantly – we must.

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Act 47 and ICA Comment on the City’s Financial System Proposal

Saturday, March 5th, 2011

rpn_city_county_blogThe city of Pittsburgh’s current financial management system is aging, outdated and in dire need of replacement. The Act 47 coordinators have been urging the city to adopt a reliable, enhanced financial data processing and report platform (commonly referred to as Enterprise Resource Planning, or ERP) since 2004. Moreover, the amended Act 47 recovery plan approved in 2009 called for a city-county partnership on a financial management system. On February 25th, the Intergovernmental Cooperation Authority demanded that Mayor Ravenstahl’s office produce legislation authorizing the city-county partnership within 10 days. Mayor Ravenstahl made a counterproposal to partner with a Pittsburgh Water and Sewer Authority (PWSA) system instead. The Act 47 coordinators sent Deputy Finance Director Cathy Qureshi a letter detailing the problems that they had with the PWSA partnership proposal including the following: 

- The material provided to them was not a comprehensive ERP proposal.

- The proposal did not address the requirements of the Act 47 Recovery Plan.

- An ERP requires an internal support team and the costs for this was not addressed in the proposal.

- Providing an effective training program was also not addressed.

- Developing a more comprehensive proposal, carefully evaluating it independently and in comparison to the County alternative, and executing that approach would set the process back by many months after years of delay.

On March 3, 2011, the Intergovernmental Cooperation Authority sent a letter to Pittsburgh City Council and asked that it be included in the record of that day’s proceedings. It voiced their ‘significant concerns at the prospects of “starting over”’. And, it ends with, “The ICA continues to encourage the City to implement the ERP System contemplated by the IGC Agreement and remains committed to supporting the City’s acquisition of an ERP System that is comprehensive and transparent.”

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