Pittsburgh can teach a thing or two to world leaders at its G-20 Conference

As the leaders of the world's largest economies gather in Pittsburgh for the G-20 Conference, they might want to look out of the windows of the David L. Lawrence Convention Center to learn how a cash-strapped city is making the best of a tough economic environment. Pittsburgh is about $720 million in debt -- a lot of red ink for a city with a population of just 311,218 (down from 424,000 in 1980), which ranks below Toledo.

Pennsylvania took control of Pittsburgh's budget in 2003, mandating spending cuts and tax increases. Though Pittsburgh does have an operating budget surplus today, it still has $1.3 billion in legacy costs, including $899 million owed to its pension fund, according to Bloomberg News.
Like many cities, Pittsburgh paid for future retiree benefits by borrowing money. But the city has not issued new debt in three years and is reducing its overall debt level, Scott Kunka, Pittsburgh's finance director, tells DailyFinance. The city also has received four upgrades from the bond ratings agencies.

"Beginning with fiscal 2005 (ended December 31), the city has generated sizeable surpluses each year from a combination of the implementation of new revenue sources, expenditure controls, conservative budgeting practices, and debt restructuring," a report from Moody's Investors Service noted last year.

Pittsburgh, in fact, is weathering the downturn better than most parts of the U.S. Dubbed America's Most Livable City by the Places Rated Almanac, Pittsburgh has a 7.8 percent unemployment rate -- far below the 9.7 percent national average -- and a lower-than-average foreclosure rate. "The conventional wisdom is that Pittsburgh was shielded from the big booms," Kunka says. "The region already felt its gigantic shock with the collapse of the steel industry" in the 1980s, he says. "The economy slowly and painfully shifted."

One reason Pittsburgh was chosen to host the G-20 was to highlight how it's attracting environmentally sustainable jobs -- ironic, considering the region's historic ties to the coal industry. The city is now getting kudos for its green initiatives; although exact figures on employment aren't available, interest from workers displaced from traditional industrial jobs is strong. The International Union of Operating Engineers helped train 2,000 green-collar workers last year, says Lindsay Baxter, Pittsburgh's sustainability coordinator. And unions are partnering with local colleges to help workers get footholds into these burgeoning fields.

Even companies that are part of Pittsburgh's industrial past, such as PPG Industries (PPG), are on the bandwagon. PPG says that its 2008 sales from green products were approximately $3.8 billion, up 24 percent over the previous two years, as buoyed by demand for environmentally friendly products including paint and windows.

But even though Pittsburgh's green accomplishments are laudatory, its financial problems remain serious. Pittsburgh's pension system lost more than $100 million between January 2007 and last November, Bloomberg News notes, and is now only 29 percent funded. The city spent nearly 20 percent of its annual revenue last year on debt service -- a high percentage for a city of its size.

Once the hoopla of the G-20 dies down, Pittsburgh has many challenges to tackle. But it seems to have its priorities straight. "We're not not increasing taxes," Kunka said."We are not laying off people."
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