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Hello and welcome to the Pittsburgh City Council budget hearings.

I am Councilwoman Erica Strasberger and I chair the committee on finance and law.

For this hearing, we will hear from the Office of Management and Budget, including the Operating Budget Division, the Capital Budget Division, the C D BG Division, and the Procurement Division.

And while we are awaiting other council members to joining us, I'll ask our budget director, Pete McDevitt to give a brief overview of the department.

Thank you, Councilperson.

The mission of the Office of Management and Budget is to ensure the effective and efficient use of available resources in order to sustain the delivery of quality services to the residents of the City of Pittsburgh.

OMB is organized into the following core teams to strengthen citywide financial and grant management.

There is the management division, capital and asset management, community development, operating, and special revenue and procurement.

Most of that is moving uh three one one from the mayor's office to OMB.

And a quick summary of non-personnel changes.

Overall, there is a 281,578 decrease in non-personnel operating budget.

Uh that includes a hundred and eleven thousand dollar decrease in professional and technical services.

There's a three hundred and six thousand dollar increase in property services, uh and that's for the first vehicle target cost and increased land and building um due to the increases for deposits into the building improvement fund, BIF operating and capital accounts and increased two hundred ROS property maintenance, um a ninety-seven thousand dollar increase in other uh services for insurance premiums and a five hundred and seventy-five thousand dollar decrease in supplies.

Uh and in the capital budget, uh OMB has a handful of capital projects.

Those pretty much all flow through the community development team for C D B G uh dollars and ESG program, Hopla.

And that's it for that.

And uh for trust funds, OMB has the community development trust funds for for those C D B G dollars.

Um and the bridge asset management program trust fund flows through OMB as felt as well as the facilities trust fund and the lead safety trust fund.

That's all I have.

Thank you.

Pardon.

Uh from members and directors of the department, can you please introduce yourselves and then proceed with your presentation?

Jake Pollack, Deputy Mayor of the City of Pittsburgh and Director of the Office of Management and Budget.

Patrick Cornell, Chief Financial Officer.

David Hutchinson, Assistant Director for Capital and Asset Management.

Kelly Russell, Assistant Director for Community Development.

Thank you very much.

And very quickly, we've been joined by Councilmember Barb Warwick.

Thank you.

Great.

Thank you.

Um thank you, Madam Chair and Council members, for um the opportunity to present.

We're going to begin by uh providing an overall summary of the proposed uh 2026 uh operating and capital budgets as a whole, as you uh you know are aware the Office of Management and Budget um coordinates the process by which that budget is prepared and address some high-level topics and then uh from there flow into discussions of individual items that fall within the actual uh uh unit of OMB.

Um and I would like to begin there by acknowledging the will of council that was adopted yesterday uh to uh call for further conversation between uh the administration and uh council as we work to conclude this year's budget process.

Um the uh we we are happy to engage in a conversation with members and and council leadership uh around outstanding concerns that have been raised across council's budget hearings with individual departments over the last month uh in the hopes of reaching uh conclusion um that everyone finds satisfactory.

Uh much of my presentation on the overall budget today will focus on areas that we believe are central areas of concern um based on the discussion at previous budget hearings and to address why uh it's the perspective of OMB that the uh issue that that the existing budget proposal um is balanced and meets the the needs of the city in 2026, understanding that there are concerns from council, just to provide that as a starting point for those discussions around the continuing areas of concern.

Um so I'll start with looking at the five-year financial forecast.

Um the uh first slide here presents the five-year revenue forecast.

Um we are expecting a 680 million five hundred and twenty-seven thousand uh eight hundred and thirty-seven dollars in revenue in twenty twenty-six.

That number is um uh very close to what we projected it would be a year ago, so we believe that um over the long haul our financial projections um in the forecast are are holding true.

Uh the major trend to look at, and I think this is called out on a later slide is that uh year over year real estate tax revenue is declining, which is a unique uh situation for the city to be in, and um you know we'll be discussing how that factors into the proposal that we assembled.

Looking at expenditures, we've uh proposed a 678 million 33,68, excuse me, dollar um expenditure for the year producing a surplus in 2026 of uh just under 2.5 million dollars.

This slide also shows that um the three main criteria for uh a uh compliant budget, which is a positive operating result, a fund balance as a percent of expenditures of greater than 10 percent, and I'm sorry, of uh yes, of greater than 10 percent and debt service as a percent of expenditures at less than 12 percent is adhered to.

We get very close to that debt service line in 2026.

This is a known issue that we've been talking about for a number of years.

2026 is the year in which we pay off uh significant debt that was refinanced during the height of the COVID shutdown.

So we've been anticipating high debt service in 2026 for uh you know nearly six years at this point as a city, and you'll see that number drops off dramatically beginning in 2027.

So while we move close to that line, we we think that that is uh under those circumstances a comfortable position to be in.

Um to do a comparison of growth, and and this is the main driving issue that um you know the city is confronting financially.

If we look at revenue growth projections over the course of the five-year plan, um we see revenue growth at uh just over one percent in each year from 2027 through 2030.

I'll reiterate something I mentioned a moment earlier.

The reason for the driving factor for that for the city of Pittsburgh, which is uh, you know, there are other municipalities where this is also an issue, and then also other factors that contribute to that.

But the driving reason that our forecast shows revenue growth that is that modest is the uh way in which our forecast takes into account the common level ratio and the a court order that shows the starting point by which property tax appeals are calculated going to a lower and lower value every year.

That is so that is a uh a factor that is imposed from from the outside, in this case by a court order based on a dispute between a taxpayer and Allegheny County and how that level is calculated.

Um a fundamental premise to the budget that we have proposed, and this is the reason that I'm getting into this, is that uh condition is unsustainable not only for the city of Pittsburgh, but for every municipality in Allegheny County.

And as a result, we anticipate that while what be while there is not a date known yet by which that will be resolved, we don't expect it to remain the case through the course of the entire five-year plan.

We are showing it here because we don't have another data point to offer, but we believe that we will see at some point, either through reassessment or further litigation a change in that condition that will uh allow property tax revenue to stabilize and begin increasing again.

And so for that reason, um, while the budget we are proposing has a narrow margin for error, uh, we believe that over the course of the five-year plan that there is time for council and the future administration and the city as a whole to incrementally adjust to these challenges as new information becomes available.