Pittsburgh is facing concerning but manageable financial challenges amid declining revenues, an end to federal pandemic relief money and broad economic uncertainty, city Controller Rachael Heisler said Thursday.

“I am very concerned about where things are headed,” Heisler said as she released the 2024 Annual Comprehensive Financial Report, which outlines the city’s financial position.

In the coming years, she said, Pittsburgh will have little flexibility in its budget, with its reserve fund projected to shrink by about $130 million by the end of 2029.

The city ended last year with a $4 million surplus. and a rainy day fund of nearly $200 million.

A steep decline in the city’s reserves could translate to fewer roads being paved, even less money to upgrade the city’s aging vehicle fleet and other service reductions, Heisler said.

But she doesn’t believe the city is on the way to a level of financial distress that would trigger state oversight — and she doesn’t think the situation is too dire to be addressed.

“Right now, I don’t believe we are headed for a tax increase,” Heisler said. “I think this is manageable.”

Last year marked the final year that federal covid-19 relief money from the American Rescue Plan Act was transferred to the operating budget.

That money helped Pittsburgh — and communities across the nation — withstand the worst of the pandemic as well as the inflation and plummeting property values it caused.

Without those federal dollars, Heisler said, the city’s spending would’ve outpaced its revenues over the last two years.

“The gap is not impossible to fix,” she said, urging the city’ leaders to spend wisely and find creative ways to boost revenue.

Mixed bag on taxes

Pittsburgh last year saw its amusement and parking taxes — both of which had been hit particularly hard by the impacts of covid-19 — rebound to pre-pandemic levels, Heisler’s report shows.

But real estate taxes remain down, the city’s debt payments jump in the next two years and it remains unclear whether the city will be able to continue collecting the facility usage fee, a tax levied on out of-town athletes and performers that is facing legal challenges before the Pennsylvania Supreme Court.

Data from the first quarter of this year indicate tax revenues will likely “be down significantly below budget this year,” Heisler said.

She cited the example of the payroll preparation tax, which is down about 16% from the same time last year.

Patrick Cornell, the city’s chief financial officer, told TribLive after Heisler’s announcement that officials are analyzing those first-quarter figures to determine whether they could be skewed by delayed deposits or other fluctuations.

But largely, he said the information the controller’s office released matches what he’s been tracking.

“The numbers the controller presented are absolutely what we’ve been looking at on our side,” he said, adding that 2024 was “a solid year.”

No magic wand

Heisler said Pittsburgh relies heavily on its residents to prop up the budget. Earned income and property taxes made up roughly half of the city’s revenues last year.

She urged nonprofits to provide payments in lieu of taxes to support the city budget.

“We need to have a financial relationship with our large nonprofits,” Heisler said. “We do well when they do well, and they do well when we do well. The current relationship is not tenable.”

Officials also need to look for ways to grow the tax base, Heisler said, by spurring economic growth and incentivizing students who flock to local universities to find jobs and buy houses in Pittsburgh after graduating.

“We need to be managing growth, not decline,” Heisler said.

Mayor Ed Gainey and his Democratic challenger in this month’s primary election, Allegheny County Controller Corey O’Connor, have sparred over the state of Pittsburgh finances.

Gainey has acknowledged challenges but maintains the city is on secure financial footing, while O’Connor has painted Pittsburgh as being on the road to financial ruin.

City officials cannot wave a magic wand to address macroeconomic problems that impact the city’s bottom line, Heisler said, acknowledging the national housing market and economic instability spurred by President Donald Trump’s evolving tariff policies are beyond the city’s control.

O’Connor on Thursday criticized Gainey for ending 2024 with a “so-called surplus” far below the $28 million surplus the city had predicted.

O’Connor said he would look to incentivize economic growth and cut wasteful spending, arguing Gainey should not have increased the mayor’s office budget and spent $6 million for an outside firm to conduct a citywide comprehensive plan when money was tight.

Heisler reiterated her ongoing concerns that the city appears to be on pace to outspend its budgeted overtime for public safety and public works personnel this year. She also voiced worries that the city is underinvesting in its vehicle fleet.

During recent mayoral debates, O’Connor has seized upon both of the controller’s warnings to argue that voters should not grant Gainey a second term, but the mayor has responded that the city’s strong bond rating reflects satisfaction with its fiscal strength among analysts.

The Gainey campaign did not immediately respond to O’Connor’s comments.