Allegheny County Controller Chelsa Wagner today shed light on the County’s financial condition during her presentation of the 2014 Comprehensive Annual Financial Report. Despite an increased fund balance, the County remains reliant on one-time revenue sources and debt has increased by $36 million, now costing each County resident $728. Though improvements have been made, the County faces challenges that threaten its financial stability and viability, including an underfunded pension fund, a struggling Port Authority and a pending ALOCSAN project that will raise costs for ratepayers. In an effort to convey this information, and more, to taxpayers, Wagner also released her office’s Popular Annual Financial Report (PAFR), a user-friendly, digestible version of the Comprehensive Annual Financial Report that helps readers gain a greater understanding of the County’s financial status and operations, its successes and challenges, and how Allegheny County government works for each of us.

“Since taking office in 2012, I have diligently worked to improve the County’s financial status and have focused on three key areas – increasing the fund balance, decreasing debt and improving pension health,” Wagner said. “I’m pleased that there have been developments in these areas, but there is still more work to be done. We need to make a greater effort to plan for the long-term and take action today for a better tomorrow.”

The areas of greatest concern identified by Wagner include:

Fund Balance
The County’s unassigned fund balance is currently $38 million, an increase of $10 million from last year, which is 5.4 percent of General Fund revenues, slightly above the 5 percent level recommended by rating agencies. However, the Controller noted that even at $38 million, the fund balance doesn’t rest on a solid foundation. The County received two one-time revenue sources in 2014: Highmark gave the County $10 million to remain its sole insurance provider through 2015 and the County sold a building in Oakland for $4.8 million, totaling nearly $15 million in one-time payments. Additionally, due to the County’s 2012 property tax reassessment. A portion of the fund balance remains in limbo: $2.5 million has been reserved for more than 2,000 properties yet under appeal for 2013 taxes, and $3.6 million for more than 4,000 properties yet under appeal for 2014 taxes.

Furthermore, the County has set aside $13 million for future health care cost increases because its contract with Highmark, which includes rate caps, ends this year.

A low fund balance means the County has little financial cushion, is unable to invest in the future and must rely on debt and short-term fixes, causing cash-flow shortages, which result in decreased ability for the County to pay its bills and commit to public works or capital improvement projects.

The County’s long-term debt obligations amount to $896 million. Total long-term debt increased by $36 million in 2014, which breaks down to $728 accountability for each County resident. In 2013, total annual debt service payments increased by $12.5 million to $75 million, and although they decreased to $62 million in 2014, debt service is scheduled to be $73 million in 2015.

It is expected that the County’s total debt will return to $860 million by the end of 2015, decreasing to $700 per resident. Wagner expressed that this amount is still too high.

“In just four years, the County’s annual debt service requirements have increased by 46 percent.  The County’s total debt service, at more than $1 billion, falls into the laps of County taxpayers and future generations, who will be responsible for paying it off over the next 25 years.”

Allegheny County’s Pension Fund is faring comparatively well in relation to other governmental entities, however it is unfunded by $.5 billion is a significant debt to be grappling with.

The State’s enactment of Act 125 increased the vesting period from 8 to 10 years and capped overtime earnings subject to pension at 10 percent of annual base salary. Additionally, Allegheny County contribution rates were raised to from 8 to 8.5 percent in 2014. Despite these adjustments, the County’s funded ratio is only 60 percent, meaning the liability for all current retirees and active employees is not fully funded. Typically, a healthy pension has a funded ratio of at least 80 percent.

Other Challenges
Controller Wagner also noted additional challenges that financially stress the County, including the Port Authority and its need to grow public transit services, the Airport and its struggle to increase passenger volume, and ALCOSAN’s planned infrastructure improvements, which will more than double ratepayers’ costs over the next few years.

Wagner hopes that the PAFR will help taxpayers gain a greater understanding of the County’s finances and operations in an easily digestible way.

“Providing this important information in a user-friendly, easily digestible way increases transparency in County government by educating taxpayers and readers about where their money goes and how it’s used.”

The 2014 Comprehensive Annual Financial Report and Popular Annual Financial Report can be accessed here.