Tube City Almanac

July 27, 2008

City Controller Responds to Finance Questions

Category: Another Viewpoint || By

City Controller Ray Malinchak sends along his thoughts on recent comments made by an Almanac reader:

First, kindly do not attribute the shutting off the street lights statements to the city elders. Only one elder made the statement -- the city controller. Not one other elected official contributed to, or endorsed this (alleged insane) option (idea).

In addition, an alternate abhorrent option was offered to terminate staff and thereby reduce expenditures by $500,000. Please be advised that the city is self-insured and will have to reimburse the Commonwealth for all unemployment benefits. Also, the city is obligated to pay other termination benefits specified by collective bargaining agreements. Hence, it would take over a year for the city to realize any benefits from staff reductions.

I do not recall it being revealed that the controller responded to Mayor Brewster's delineation of $500,000 of unforeseen divergences. Mayor Brewster accurately described a list of unexpected and unbudgeted discrepancies totaling about $500,000. However it was not revealed that the controller indicated that a $1.25 million reserve (in CDs and interest bearing devices) is insufficient to retire a $1.5 million Tax Anticipation Loan due by year end. Therefore, the mayor has to discover another $250,000 to satisfy this additional deficit.

It is not over yet, next kindly move on to historical and consistent deficits each year since I have been controller (i.e., budget expenses that exceed revenues). These "customary" deficits are usually more than $600,000 each year as documented by the independent and publicly available annual audit reports. The controller projects more than a $600,000 deficit for this year.

Finally when you add up the above grief, it totals $1.35 million in contrast to the $500,000 deficit reported that was ascribed exclusively to unexpected and unbudgeted expenses.

Now back to insane ideas (options) to reconcile a projected $1.3 million deficit:
  • increase the earned income tax back to 2 percent

  • increase property tax by about 30 percent

  • terminate a significant number of employees

  • reduce all energy costs, liquidate about $2 million of assets (if the city has any liquid assets of that magnitude), or

  • slither into the Act 47 "Municipalities Financial Recovery Act"?

None of the above is palatable -- even shutting off street lights. In conflict with reality, several public officials have vowed that they would never raise taxes or support Act 47 proceeding or reduce public services. Can one translate that into supporting mitigation of public illumination?

Act 47 lists ten separate entities that can request a determination of municipal financial distress from DCED Secretary Dennis Yablonsky. The first entity listed is the DCED itself and the last or 10th listed is the Chief Executive (i.e. mayor) of the municipality. Unfortunately and stealthily, the city has already satisfied one criterion for Act 47, e.g. a deficit for three consecutive years of more than 1 percent of the budget, excluding one-time revenues.

Mayor Brewster has preformed magnificently to date in keeping distant from drastic measures. Can this continue? Only time and the pending early intervention study by Delta Financial will determine the financial destiny of our beloved city.


This is where the late Nick Perry would say, "The preceding was a response to a recent editorial on this station. Responsible replies are welcome."






Your Comments are Welcome!

So… What happened with the garbage incinerator?
John - July 28, 2008



No Sunshine just more Gloom

Now the Crisis is even worse than first imagined! If it sounded like the $500,000 deficit was bad news now it’s reported to be $1,300,000!

This deficit is easy to understand since the Tax base for the city has shrunk in the past years

Business Listed in the 1960 “Old Home Week”
National Tube Works 6,300 Employees Gone
Reliance Steel Products 400 Employees Gone
Firth Sterling 1,000 Employees Gone
Fort Pitt Steel Casting 500 Employees Gone
Menzie Dairy 300 Employees Gone
Etc. Etc.

Will we still be around to celebrate “Old Home Week” in two years July 2010? (If there’s one planned)

Right there with that miniscule list 8,500 paychecks that cannot be taxed or Earned Income/Property taxes providing that they lived in the city

I’m not telling anyone any thing that they did not already know, this isn’t breaking news.

First off Shutting off the streetlights isn’t an “Option”. If it gets to the point of shutting off the streetlights we might as well all pack up leave because chaos will rule and few will be safe at night.

I also agree that the other options are not very exciting either.

Living in a town or city is like an investment fund in ones future.

If your not a lifelong resident of McKeesport and have no choice to move because of Family and Friends and sentimental reasons then your able to “Town Shop” if you plan on relocating just like picking an investment fund.
How close is it to work
How safe is the environment
How near and convenient is shopping
How are the schools
What are the taxes a year and what is the value of services provided for the amount of taxes paid
Do they have operating Street Lights
Etc.

Well it seems that the patrons are sparse when it comes to shopping for our town, and usually when a business/store sees a decline in sales the change their marketing strategy.

Maybe we need to change the Marketing Strategy that we are currently using to Market the city for industry.

Can’t we go to trade shows and hawk the city?

It’s hard to believe business would not want to come because we have so many wonderful assets, Renzie Park, Carnegie Library, a world class Marina, Bike trail just to mention a few

The “Not in my backyard“ Business I mentioned before may not be too far from the truth

Lets see how many cities would want:
A noisy dirty steel mill opening in their town
A Foundry
A Dairy in the middle of a residential area where the trucks start their milk runs 5 am
A train running through the middle of Town
An Abattoir in the middle of a neighborhood

Hmmmmmmmm when these Nimby businesses were in town we did not worry about shutting off the streetlights, matter in fact they were on all the time ! (pun)

Smoke meant prosperity!

Aren’t there businesses out there that no one wants? Of course we would have to be a little picky we would not want a Bhopal in our backyard just a Nimby.

The Cold Financial Truth was stated in the “questions” but we need “solutions” which are harder to address than the questions

I just hope it all works out and my streetlight can stay on otherwise I’ll have to change my handle to “The Omega Man”!
Cox's Jimmy - July 29, 2008



What is projected to be spent to operate McKeesport this year? How about $950.58 for each of the 22,000 heartbeats. That’s if the $20.9 million budget is balanced. The looming $1.3 million deficit amounts to $59.00 for each heartbeat.
Ray Malinchak, Controller - July 29, 2008



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