Pittsburgh City Council Post-Agenda on ACFR and 2026 First Quarterly Financial Report - June 24, 2026
Pittsburgh City Council Post-Agenda: ACFR and First Quarter 2026 Financial Report – June 24, 2026
This post-agenda session featured two panels: the City Controller’s Office presenting the 2025 Annual Comprehensive Financial Report (ACFR) and the Office of Management and Budget (OMB) along with the Department of Finance presenting the first quarter 2026 financial performance report. Council members discussed the city’s financial health, structural deficits, fund balance trends, and potential revenue and expenditure actions.
Presentation by the City Controller’s Office
- Controller Heisler and her team presented the 2025 ACFR. The general fund brought in $687 million in revenue and had $732 million in expenditures, resulting in a net loss of $44.6 million. This compares to a $7.1 million gain in 2024. The primary cause was the loss of American Rescue Plan Act (ARPA) funds, which had transferred $46.5 million to the general fund in 2024 and zero in 2025. The controller stated, “ARPA dollars masked the city’s spending problems and the mask is off.”
- Revenue outperformed budget on most major taxes, but real estate taxes were down compared to 2024 due to a lowering common level ratio. Interest earnings declined as ARPA funds were no longer in interest-bearing accounts.
- Expenditures increased by less than 2%, with notable increases in streets and sanitation, culture and recreation, and economic development. Salaries and overtime remained a concern, especially in public safety. Fleet maintenance averaged over $1 million per month. Capital spending totaled $115 million funded and $123 million spent, with over half on mobility and infrastructure.
- The unassigned fund balance (rainy day fund) was $166.1 million at year-end 2025 (22.7% of expenditures), down from $199.9 million in 2024. Budget projections show it declining to $73 million by 2030 (10% of expenditures). The city code minimum is 10%; GFOA best practice is 17%.
- Gross bonded debt increased $8 million to $512 million. Debt service in 2026 is budgeted at $78 million, dropping to $48 million in 2027. The pension fund reached $931 million, 78% funded, up from 35% in 2003.
- The controller recommended separating out fund balances in budgeting, reflecting transfers to non-city funds as expenditures, and prior-year roll-forwards as assigned fund balances. She also urged discussions with the state to increase revenue streams, such as raising the local services tax (currently $52/year) and implementing regular property reassessments at the county level.
Presentation by OMB and Finance
- Acting OMB Director Rhea Price and Finance Director Jen Gula presented the first quarter 2026 report. The city is projecting a $24 million deficit for the full year. Revenues are estimated at $707 million against the adopted budget of $721 million; expenditures are projected at $731 million against $721 million.
- Revenue shortfalls are expected in licenses and permits, charges for services (especially EMS revenue), and interest earnings. EMS revenue was significantly down, though OMB noted a collection lag and that $2.4 million was collected early in the second quarter. Interest earnings were budgeted too high due to lower balances and Fed rate cuts.
- Expenditure overruns are driven largely by $36 million in reappropriations rolled from 2025, which gives departments overspending authority. Many departments are projected to exceed their budgets, including the Mayor’s Office, Innovation & Performance, Planning, Public Safety, EMS, Police, DPW, and DOME. Reasons include large reappropriations, utilities, premium pay, and fuel costs.
- Without action, the deficit and other transfers out could deplete the unassigned fund balance to under $100 million (13.8%) by year-end 2026. OMB noted that the reappropriation amount has ballooned from about $3 million in 2017 to $36 million now.
- Capital spending in Q1 was low due to construction season, but inclusive of all years, $23 million was spent. ARPA spending in Q1 was $4.2 million, with about $16 million remaining to be obligated by the end of 2026.
Discussion Items
- Council members repeatedly questioned the treatment of transfers out (e.g., to the URA, Stop the Violence fund) as not counted as expenditures in the budget, which understates the true deficit. OMB agreed that this accounting practice needs to be corrected.
- Several council members expressed concern about the deficit trajectory and the need for both cost containment and revenue growth. Controller Heisler noted that the city needs to generate enough revenue to cover expenses or reduce spending to avoid depleting the rainy day fund.
- Council President Lavelle mentioned a state bill (SB 2488) to increase the local services tax from $52 to $156, which faces pushback but could provide additional revenue if passed. Council members expressed support for a will-of-council to Harrisburg.
- Councilor Warwick sought clarification on whether the $24 million deficit includes rollover funds; OMB confirmed that if rollovers were excluded, there would be no deficit in that calculation, but the structural imbalance remains because of the large reappropriations and transfers out.
- Councilor Gross highlighted the need to better communicate the city’s financial picture to the public, especially the difference between cash and accrual accounting. She also questioned the increase in contract rollover amounts and suggested that departments focus on completing prior-year work before taking on new initiatives.
- Councilor Coghill asked about the empty poles in certain neighborhoods for veterans banner program and raised the issue of using city-owned poles for such programs, which was addressed by a public speaker earlier.
- Councilor Mosley discussed the need for partnership with Allegheny County on homelessness and substance use services, noting that the city’s Office of Community Health and Safety (OCHS) and ROOTS program are expanding their hours with a new $800,000 contract from the county.
Key Outcomes
- No formal votes were taken; the meeting was informational. Council will use the ACFR and quarterly report data to inform the upcoming 2027 budget process.
- Council committed to continuing the post-agenda quarterly meetings to maintain budget oversight throughout the year.
- The OMB noted that the first quarter projections are conservative and typically improve as the year progresses, but the structural deficit remains a concern.
- Council will explore options for cost containment, revenue increases (including state-level changes), and better budgeting practices such as recording transfers out as expenditures.
Meeting Transcript
Good afternoon and welcome to Pittsburgh City Council's cable cast post agenda on the annual comprehensive financial report or ACFER and the 2026 first quarterly financial and performance report for June 24th, 2026. And we should have more council members with us shortly. But I would like to allow our the first panel from our city controller's office to introduce themselves and to open with some opening remarks if you like. Thank you, Councilperson Strasberger. I just want to first acknowledge my colleagues who join me at the table today. Um Deputy Controller Pete McDevitt, who is at the table for the first time from the controller's office rather than council budget. Um Jamie Zala, the chief accounting officer for the city of Pittsburgh, and Namita uh Dwarkinath from our controller's office solicitor. Um the way we thought we'd do this today is to go through our slide deck and then um have a conversation and dialogue. So uh the controller's office, as folks know, has four primary functions: internal auditing, which helps the support the city towards uh with targeted evaluation and guidance, accounts payable, we pay the city's bills, inspection and engineering, which confirms the work was done, and our accounting division, which manages our books and produces the annual report financial report of record, the annual comprehensive financial report, which we'll be talking about today. Each year, our office puts out the ACFAR city code requires us to create a general purpose financial statement by May 1, and our office goes beyond that and creates a document that meets the standards of the government financial officers association, including component units, additional statements, footnotes, and statistical tables. So, what's different between the ACFAR and the budget? The budget is a plan, the ACFA shows the results. These are the two main financial documents that the city produces each year. The budget is the chief policy document of the city, and it outlines what the city plans to accomplish through which policies and programs it funds. The ACFR shows the audited results in line with government accounting standards board of how well the city is spending following its spending plan, excuse me. For your awareness and the public's, um, the ACFAR differs from OMB, the reports that OMB distributes because those reports reflect a cash basis, which is the amount of money and when money is moved from and to and from accounts. It tells us what everything we did within a year costs us. This lets us know the true cost of government in a fiscal year. An accrual basis is also called GAP, which stands for generally accepted accounting principles. Think about our 2025 water bill. The bills were received in 2025 but paid in 2026. But the ACFR shows it in 2025 because it was the year we used the water. Now we'll just have a conversation about the big picture with the general fund in 2025. We brought in 687 million dollars in 2025, and we had 732 million dollars leave the general fund. This is a net loss of 44.6 million dollars. To compare, we had a 7.1 million dollar gain in 2024. Highest percentage of our money comes from. This will continue to be our most stable source of revenue as it's the least susceptible to an economic downturn. However, it is still vulnerable to a lowering common level ratio. Interest earnings, which are reflected under miscellaneous, make up a smaller proportion in 2025 due to the loss of ARPA funds in interest-bearing accounts. In terms of revenue, the city did quite well with revenue generally last year and outperformed budget on most major taxes. Despite outperforming budget, real estate earnings were still down compared to 2024. And as I mentioned, our interest earnings also went down as a result of no longer having ARPA. Where money goes, in 2025, we spent more on streets and sanitation than we did in 2024. We increased our contributions to culture and rec as well as economic development. We spent slightly less on general government costs, including the bureaucratic functions that keep things running every day. In general, city expenditures were up a relatively modest amount, less than 2%. Salary increases, as noted on the deck, include overtime, which our office has continued to caution about. Salaries and overtime are not interchangeable, and having less staff who work more, particularly within public safety, leads to worse outcomes for both employee retention and quality service provision. Property services, including utilities like the water bill are also notably increased. And as a reminder, 2025 was the first time we paid a full water bill. Our office has been quite vocal as well about the fleet, which is why we highlighted it and included it in this year's presentation. We spent, excuse me, we spent an average of more than a million dollars a month to maintain our fleet in 2025, with unanticipated costs reaching more than half of planned maintenance costs. A newer, safer fleet avoids high cost repairs and allows for better strategic planning. We did see a large influx of new vehicles in 2025, especially for police, resolving a multi-year backlog. Fire continues to lack adequate vehicles, and costs and lead times continue to go up due to the monopolization of the fire apparatus industry. Capital project spending. In 2025, we funded just over 115 million in capital projects, and we spent almost 123 million, with over half going towards mobility and infrastructure projects. We're able to spend more than what was funded in the capital program because, unlike money in the operating budget, capital funds will continue to roll forward until they're spent. So this shows us catching up a bit on old projects.
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