Budget dogfight shows Matt Smith, Frank Dermody have issues with Peduto

Both gentlemen hail from our suburbs; one from Mt. Lebanon, the other from Oakmont.

Both are Democrats, at the apex of the party’s two legislative pyramids.

Yet if the city’s secondary financial oversight board is still stonewalling over $20 million in casino money, they must somehow be at odds with the City of Pittsburgh.

“They’re creating a $20 million deficit and I don’t think they realize that they’re doing it,” [City Finance Director Paul Leger] said. “By June I would have expected about $7 million in the kitty. If we don’t have $7 million in the next several months we’re in trouble. (P-G, Robert Zullo)

Contentiousness with the Intergovernmental Cooperation Authority (ICA) had been easier to explain when Republicans held its majority, and when Mayor Ravenstahl brought his own special style to bear.

Now, with a Democrat in the Governor’s mansion and a reasonable partner on Grant Street, we are not sure what is the problem.

Nominally, the bone of contention is the City’s frustrated attempts to complete the installation of joint financial management software with the County.

In case you don’t subscribe to Eat That, Read This, we’ll reproduce its smart analysis of that situation here (cleaning it up a little) but be forewarned it’s a shaggy dog tale which you may as well scroll past…

On the surface, it makes efficiency sense for the city and the county to use the same payroll software system. And in theory, a joint resource software should save us all money as well.

So back in 2011, Mayor Ravenstahl and County Controller Mark Patrick Flaherty signed an agreement, and the city and the county jumped in together to upgrade our respective payroll systems within a “resource planning software” called J.D. Edwards. County staffers were tasked with this upgrade process, but in order to help make the transition assuredly successful, the county contracted with a company called Denovo. (As an aside, it should be noted that while Pittsburgh contributed $300,000 to the county for its staffers’ help in this process, we ended up paying $1.5 million to Denovo staffers for their end of the bargain. Why? because Denovo “charged approximately $155 an hour plus meals, flights and hotel rooms, while County employees earned roughly $30-70 an hour.”)

Both City Controller Michael Lamb and County Controller Chelsa Wagner were proponents of the joint J.D. Edwards payroll system upgrade, assuring that this was not only a necessary process, but an easy one to boot. “This system is ready to go. I use the analogy of a house that’s been built, but nobody has moved the boxes in,” said Wagner rosily at an ICA meeting last summer.

But the underlying truth is that the city and the county, each with their own distinct set of responsibilities, actually have completely different personnel structures, adding an increasingly chasmic complexity to what was supposed to have been a straightforward process. And little by little, as the implementation process rolled on, the inexorable reality of this fundamental difference became ever more apparent–to the tune of over $1.2 million.

Shocked by the bill, the city hired the law firm Deforest, Koscelnik, Yokitis and Berardinelli to draft a report exploring why this cost us so much, and who was to blame. They concluded that “the original bid was premised on the belief that the county’s payroll setup could be used for the city, but this ended up being incorrect, resulting in significant additional design, analysis, resources and training time” and noted that ”between March 2013 and January 2014, Denovo … received eight change orders that totaled more than $988,000, all but two signed by Chuck Half, a former City employee who served as project manager on the endeavor.” “It was literally one guy,” said Chief of Staff Kevin Acklin about former staffer Chuck Half, but Half defended himself, saying that the change orders “were the result of joint decisions with officials in the city’s personnel and finance departments as well as the City Controller’s office.”

Mayor Peduto decried the process’s overall “gross mismanagement, lack of oversight, and sheer waste of resources.” It has been, by all accounts, a slow-motion trainwreck, in addition to a Rashomon-style drama, each actor with his or her own take on the matter, but in the end we can highlight a few valuable lessons here: … Ravenstahl’s folly of neglecting to build in multiple points of sign-off oversight and his lack of seriousness when tasked with staffing the endeavor. The pitfalls of cobbling together complex City and County systems that don’t easily dovetail as nicely we’d like them to. Folly of not building in multiple points of sign-off oversight. The crucial role that a proactive, professional controller plays. And, of course, look before you leap. (ETRT)

Got that? Don’t worry, it doesn’t matter much.

The point is that everyone now agrees we should have the software, and we can all see that in each other — it just proved to be a lot harder to do in the way that everyone then thought best.

Screen Shot 2015-03-27 at 8.41.37 AMThe logic of punishing City residents, commuters and businesses for errors made by politicians and bureaucrats who aren’t even in power anymore is just silly. The casino money is legitimately owed to the City, we all know it is eventually going there anyway, and nobody needs to be “convinced” to pursue modern financial software any longer. Why leave streets a mess and slow down development over spilled milk?

In the past when it came to this sort of obstruction or frustration, City Democrats got in the habit of blaming either ICA Director Henry Sciortino (a journeyman bonds trader and slippery intermediary) or else ICA Chair Nicholas Varischetti and his appointer, State Sen. Joe Scarnati (a rural Republican who would probably rejoice if Pittsburgh suffered a plague of locusts).

But with a 3-2 advantage, why hasn’t the balance of power shifted? Why aren’t the City and our nearby State Democratic leaders cooperating? Why is Varischetti still the Chair?

The Comet can imagine four reasons:

  1. Maybe the ICA has become addicted to holding onto our casino money to skim the interest to pay staff like Sciortino
  2. Maybe Scarnati or the Varischettis are influential enough to be owed favors like controlling even the Democrats’ appointments to the ICA board…
  3. Maybe Sen. Smith and Rep. Dermody are conservative blue-dogs who sympathize with the notion that today’s City dwellers must be scourged for being moochers whose parents ought to have busted the public sector unions back when the regional Great Steel Depression devastated our tax base…
  4. Maybe new Governor Tom Wolf just hasn’t gotten his arms around this situation yet.

We don’t know. Any ideas, readers? This kind of thing really shouldn’t be that hard anymore. We should all be on the same team, making progress.

20 thoughts on “Budget dogfight shows Matt Smith, Frank Dermody have issues with Peduto

  1. Jerry

    I’m no fan of Ravenstahl. He was a horrible mayor, and should never have even had the job. But just as a thought experiment, what if we stopped blaming the City’s current problems on him? He has been out of office for more than a year. How about this:
    > Mr. Peduto, who took office in 2014, halted the project a year ago over what he called waste, mismanagement and cost overruns … and announced [the mayor’s office] would contract with a new consultant to finish the project.
    So? What’s the status of that?
    > Just hours after Mayor Bill Peduto’s administration formally announced it would move forward with an automated payroll system that the city’s overseers at the Intergovernmental Cooperation Authority have been pushing for years, the ICA board shot down a request to release millions in gaming revenue the authority has withheld since last year.
    So the City agreed to move forward with the payroll system, gave the ICA board a few hours to think it over, and then blew up when the ICA didn’t immediately agree? Doesn’t that seem a bit impetuous?

    1. bramr101 Post author

      On your last question… would it have made a difference if we waited a few days, or weeks, or months to “blow up” in response? Or if we said Simon Says? If there’s no good reason to withhold it, then it’s games. The ICA always invents excuses to sit on it for years too long. Our $20 million could turn into an extra $1.5 million for somebody really easy, when it could be going to work for taxpayers instead.

      1. Jerry

        I’m just saying, the ICA might need a few days to review the actual plan that the city announced. Despite the ICA’s history, it’s not an unreasonable thing. And that is what they’re supposed to do, isn’t it?

      2. Anonymous

        No Jerry, it isn’t reasonable. Don’t you know yet that anyone that doesn’t do exactly what Peduto wants is an obstructionist or a Ravenstahl leftover or something similar? In the new Pittsburgh there is not to be tolerated things like checks and balances or democracy.

      3. bramr101 Post author

        They’ll bend the knee or I’ll destroy them.

        No but seriously, this isn’t chiefly about this one decision, chapter or volume. I’ve been suspicious for years already why despite partisan split, legislative Republicans always seemed solely in charge at the ICA. Even under Corbett, Ann Dugan was the only voice of dissent while the two Dem legislative appointees kept silent. (Though really Anon 8:14, “democracy” is an odd argument to advance when it comes to the ICA.)

  2. Anonymous

    Ha – “impetuous” is definitely the right word for Peduto and the administration he has built…but more on that another time.

    Look – Henry Sciortino’s salary was, at last reckoning, 171k (with 58 days of vacation and personal time) yearly. What has the ICA really achieved since 2004, except to feather Henry’s nest? If we’re keeping score, that is the bulk of their yearly operating budget.

    What is the ICA doing with the interest that the withheld gaming revenue has generated since that game began? They won’t say. Shouldn’t we know?

    But here’s the rub – Peduto has long been an ICA champion. He didn’t create this monster, but he has helped to keep it dressed in finery. Prior to switching offices on the 5th floor, he was more than happy to leverage the ICA’s questionable actions as opposition fodder against Luke.

    It’s really not in fashion, but Pittsburghers need to recognize that the Ravenstahl Administration was pretty solid when it came to budgetary matters. That was what they spent their time on, and they really helped turn things in the right direction. They were realistic about the challenges the city faced and continues to face. Things like the tuition tax and the Parking Authority lease plan were not perfect solutions, but they were forward-thinking strategies that were meant to address difficult problems the city faces – which have since gone ignored, but for tissue-thin platitudes. From what I have seen, The Chadwick folks have a lot of growing to do in this area, if they turly want to continue the good fiscal progress the city has made.

    And again…the ICA problem is not a simple GOP/Dem problem. It’s not an “anti-city” problem. It’s more than that – it’s a small group of folks who are making out like bandits thanks to taxpayer funds…they are not interested in the progress they are tasked with, they are interested in keeping their spot at the trough. Luke’s people tried to change that, and now Bill’s people have the same problem and they will have to try and change it as well. We all hope should they make some progress…

    1. Anonymous

      Looks like my numbers are old, now that I see that 2013 PG article…but the points about the ICA and Sciortino’s compensation definitely remain the same.

    2. bramr101 Post author

      There are more than a few portions of that comment I really appreciate. I wouldn’t call Peduto an ICA champion, he’s been an Act 47 champion, but it was made into layered oversight so in for a penny, in for a pound. And I don’t think preceding mayors were notably solid on finances only because “finances” were conceived then to be balancing operations with bonded debt aka Wall Street, at the relative exclusion of “pension obligations”. Yes, financial industry-set recommended minimum payments to the pension trust were slightly exceeded recently, but that bar had been set way too low for too long. Act 47 helped us get a lid on new pensions going forward, but the ICA hasn’t often been a pal in helping us address those pension contracts remaining and outstanding. “How about a revenue stream?” asked Ravenstahl, not unreasonably.

      On such matters, Sciortino was clear back in in 2009: “First of all, the board runs the ICA.” That’s true and significant. Even still, when the policy is abusive, the banditry gets irritating.

  3. Anonymous

    I’m starting to think that the only way the rest of us will finally get to stop hearing about Luke is if we vote Bill and his followers out of office.

      1. MH

        Those bike lanes are great. The narrowing by Phipps made that safer for everybody cycling, walking, or not driving like a complete tool.

      2. Brian Tucker-Hill

        Up to a certain high limit (at least around 20,000 vehicles per day), a “road diet” where travel lanes beyond two (plus maybe a third at major intersections) are removed (for bike lanes or any other purpose) tends to be at worst neutral with respect to throughput, and sometimes is positive. And that also tends to reduce lifecycle costs.

        Of course ultimately it could be even better to turn back the clock and free up a portion of the land used for four-lane urban roads for use as developable land instead. But short of that rather drastic remedy, bike lanes and such are a reasonable alternative.

  4. Anonymous

    MH can you explain how voting Bill (and all his henchmen) out of office in favor of some new, better candidate would be akin to selling the streets? This comment makes zero sense.

    1. MH


      Anyway, I’m pointing out that the pension-funding plan supported by Ravenstahl was to sell Pittsburgh’s parking assets to outside investors, that this sale was to include metered parking (i.e. the part of the street closest to the curb), and that Peduto was leading the effort to block this. I assumed, I still think reasonably, that this is would be a clear reference to anybody following things and reading here since 2010.

      See here for a story about the streets.

      1. Brian Tucker-Hill

        For what it is worth, I still think that was an opportunity to offload a lot of risk in terms of future technologies which may greatly reduce the value of prime parking locations, and at a very favorable price. In fact, Uber and CMU are now working here in Pittsburgh to realize those risks.

        But, water under the bridge.

      2. Anonymous

        Leasing the parking assets to strike a mortal blow against the pension deficit was a good idea. It was a SOLUTION to one of our major ongoing problems – it was not a callous attempt to allow Big Money to take control of the city, as it is often categorized. When Bill and the rest killed it off, they didn’t have a solution to replace it with…except smoke and mirrors, and a swift kick of the can down the road. No one in the conversation anticipated that Bill would have to catch it on the other end…but he still doesn’t really think it’s his problem to solve. Bill was banking on turning things over to the state then, and it’s still his plan now. I for one have very little faith that the pension deficit will EVER be addressed through some kind of state reform maneuver – and neither does anyone who is willing to look at state political demographics with a level eye. The Lease was the closest we’ll ever get to a solution there. The only thing left to do is cringe and chuckle at the speed at which the “solution” – revenue from on-street parking enforcement expansion – is smacked down whenever anyone trots it out again. Happens every time. And sadly, there was a lot to like about the Lease deal itself, also after some public meetings, they even sweetened the deal considerably.

  5. Gabe

    MH, Peduto’s effort to block this was to turn it over to the state which, we now know, would have been a complete disaster. Bill was not even part of the actual solution until the very end when he found himself on the same side with Burgess in opposition to the plan. Only then did he join Dowd and the rest to block the sale and save the pension.

    1. MH

      I’m still don’t understand how it didn’t get turned over to the state. There’s some kind of distinction among assets that I don’t have enough business school to get.

      I also don’t get why that would have been a disaster. The city is already only as independent as the state wants it to be. In an actuarial sense, all these small, separate pension plans are nuts. I don’t think it helps anybody but the fund managers.

      1. Anonymous

        I think you need to pay closer attention to state politics…it has nothing to do with business school.

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