County Finances Stable, But Debt, One-Time Fixes Require Close Watch, Controller Says

(Pittsburgh) May 12, 2016Allegheny County Controller Chelsa Wagner’s annual comprehensive report on
County finances identified a $16 million surplus in the fund dedicated to supporting public transportation, and
showed that proceeds to this fund from the Alcoholic Beverage and Vehicle Rental taxes increased by
$5 million in 2015. Wagner called for these funds to be put into service for transit improvements immediately.

“The taxpayers are pouring greater resources into the dedicated transportation fund without seeing
clear improvements in service or a vision for the future of our transit system,” Wagner said.

The County’s needs in the area of public transit are two-fold, and the transportation fund surplus
can begin to address both, she said.

“First, current service is lacking to both areas where cuts were made during the funding crises of earlier
this decade and to high-demand areas in the urban core. Second, we need to develop a vision for the
next generation of transit investments like light rail expansion, which can drive increased ridership and
serve more communities. A portion of the surplus funds available today should be invested in
planning for this expansion and for leveraging federal funds for this purpose.
We must target our resources where the impact can be greatest.”

Wagner this week released the County’s Comprehensive Annual Financial Report for the year
ended December 31, 2015. This report contains the government-wide financial statements
and fund financial statements of the County.

“I am proud that our Comprehensive Annual Financial Report has been repeatedly awarded for meeting the highest nationally recognized standards
of municipal financial reporting, and that my office is able to bring to the taxpayers of Allegheny County and those
who would invest in our community the most complete view of the County’s financial position,” Wagner said.

Wagner said that the report shows the County’s financial status overall as stable with encouraging growth
in a number of areas, but with lingering concerns including the use of one-time revenue sources to
balance the budget, high levels of payments on debt, and investment losses to the pension plan.

A revenue increase of $8 million over 2014 was mostly due to an additional $9 million in funding from the state,
primarily for Children, Youth and Family services programming. While property tax revenue also increased
by $6 million, about half of this is currently set aside pending the resolution of appeals. These increases more
than made up for one-time revenue of $5 million from a property sale and a $2.5 million bonus payment for
gas drilling leases which was included in general revenue for 2014.

Meanwhile, expenditures increased by $34 million, driven by an increase in debt service payments of
$10 million, with other increases occurring in improving the condition of County facilities,
efforts to market the County’s parks, as well as technology enhancements.

Wagner said that while the County is wise to be aggressive in paying down debt, bringing the
County’s debt load to its lowest level since 2011, the more than $72 million spent
on debt payments remains cautionary.

“Our debt payments for 2015 amount to about $700 for each resident of the County,”
Wagner said. “While necessary investments sometimes require debt, the drain on resources from
debt service in the out years must always be considered carefully.”

Wagner said that despite the increase in spending, the County’s unassigned fund balance of $41 million,
or 5.7 percent of revenue, remains in the range recommended by financial rating agencies.

“The County has made investments this year in enhancing assets like our parks and County facilities
and technology while improving its fund balance,” she said. “However, we would be seeing a much
different picture without the use of one-time ‘fixes’ that are unlikely to be available in future years.”

An $8 million credit from Highmark on health insurance payments and the use of $4 million
in Hotel Tax receipts for Parks expenditures are not sustainable, and their inclusion in general revenue
could imperil the fund balance and the County’s financial ratings in future years, Wagner said.

Wagner said the County’s pension fund remains troublingly underfunded at 56.6 percent as compared to the
80 percent funding level that is considered healthy. Despite increased contributions in each of the last two years,
this represents a decline from last year due to decreased investment returns.

The County was fortunate to have been able to weather the long state budget impasse through transfers from
Capital funds to meet its most acute needs, including Human Services payroll and foster care, even as
400 provider agencies could not be paid during the impasse, Wagner said.

“This truly shows the importance of maintaining fund flexibility and a sufficient level of unassigned funds
to meet pressing needs. We depend on Harrisburg and Washington to provide funding for essential priorities,
but as the troublesome political dynamics that caused these unfortunate circumstances seem unlikely to
change much, we must be equipped to act when necessary,” Wagner, a former three-term state legislator, said.

The full Comprehensive Annual Financial Report for the Year Ended December 31, 2015
can be viewed here

Lou Takacs, Communications Director