Friday, August 22, 2003

By Dan Fitzpatrick, Post-Gazette Staff Writer

Despite the protests, placards and impeachment talk on Grant Street, not everyone is angry about Pittsburgh Mayor Tom Murphy's decision to lay off 731 city workers, shut down recreation centers and eliminate the Richard S. Caliguiri Great Race.

Some, in fact, see the city's fiscal crisis as a good thing.

"It does force us to rethink how the city does business," said John Reoli, co-owner of the Pittsburgh Presse Deli, on Liberty Avenue Downtown. "Just because you have a government job doesn't mean you are exempt from layoffs."

It might be politically incorrect to argue the benefits of a fiscal crisis at a time when the city faces a $60 million deficit, neighborhood swimming pools are shutting down and people are losing jobs.

But to some of those who worry about the area's long-term economic well-being, the shock value of a crisis provides their best hope for structural change on Grant Street -- in the form of smaller government, consolidated services and a tax system that asks commuters and nonprofit organizations to assume more of the load.

Only drastic circumstances, they say, will force a true reassessment of what Pittsburgh spends and whom it taxes, leading to a long-term fix for the city's budget problems.

"One is much more likely to get fundamental structural change at a point of crisis," said Max King, director of The Heinz Endowments.

Seeing the city so strapped for cash is "like seeing a good friend sick or injured," King said. "In that sense, it is hard to say it is a good thing. But I do think there are significant benefits to the community that could come out of this process of dealing with [the city's budget situation] in a straightforward and forthright way."

Up to now, "I don't think it has been dealt with in a straightforward, forthright way," he said.

Jim Restivo, a Downtown attorney who examined the city's finances in the mid 1990s as part of the Competitive Pittsburgh Task Force, stopped short of calling the current crisis a "good thing." In fact, "it's a bad thing," he said.

But the Reed Smith partner admitted that "it may take this sort of financial crisis to cause people to make the hard decisions that perhaps should have been made earlier."

Pittsburgh is certainly not the first city to live through a fiscal crisis, nor will it be the last.

The lessons of history, though, show that a city's response to its budget problems has a lot to do with the amount of pain inflicted by a crisis. The more severe the situation, the more comprehensive the response -- especially if the area's national image is at stake.

In Cleveland, for example, a debate still rages about a 1978 fiscal crisis that forced the city to default on $15.5 million in loans, thus becoming the first U.S. city to renege on its obligations since the Depression.

In the wake of the crisis, which received national attention, the city's business leaders promoted George Voinovich -- who's now a U.S. senator -- as a replacement for then-Cleveland Mayor Dennis Kucinich -- who's now in the U.S. House -- and a candidate for president, and they spurred action on a number of development projects meant to turn the city around while improving its image nationally.

Bill Bryant, president of the business-heavy Cleveland Growth Association, said at the time: "There is nothing like a hanging to clear a person's mind."

Asked about that comment now, Bryant stuck to it.

"It did clear a lot of minds," he said. He listed the new roads, stadiums and Rock 'n' Roll Hall of Fame that resulted from the crisis's aftermath, not to mention an image makeover that inspired a nickname: "The Comeback City." The city that used to be the "brunt of bad jokes" became a city to study and learn from, he said, hailed in national newspaper articles for crawling out of its hole and rebuilding its Downtown.

"The crisis urged that on," he said. "It more than nudged it on; it grabbed it by the seat of the pants and made it a reality."

But Norm Krumholz, who worked for Kucinich and now teaches at Cleveland State University, still blames the business community for the default and disagrees with the view that the crisis helped Cleveland.

"Many in the business community said default was a wake-up call, it defined the bottom of how low Cleveland could go and meant the corporate community had to take a stronger hand, which it did almost immediately," Krumholz said.

But the crisis, he said, "didn't do the city any good at all. It resulted in a great deal of public investment which wasn't matched by private investment. We are still a very troubled city."

Another city that used a severe crisis to bolster its image was Philadelphia.

In the early 1990s, Pennsylvania's largest city was on the brink of bankruptcy, coping with a recession, a dwindling tax base and a deficit of $300 million. The city's credit rating sunk to junk-bond status, making it more expensive to borrow money. To deal with the problems in a comprehensive way, a state board was created to oversee the city's finances, raise money and analyze the plans then-Philadelphia Mayor Ed Rendell had for pulling the city out of the red.

Was Philadelphia better off for having lived through that crisis?

"I guess there is that argument that it had to get ugly before it got better, and that may hold some water," said Philadelphia attorney and talk show host Michael Smerconish. Had the city not dipped so dramatically, "the stage would not have been set for the Philadelphia renaissance."

Joe Vignola, director of the state board that still oversees Philadelphia's finances, said crisis is what spurred change in Philadelphia after years of inaction.

"That, unfortunately, is the way a lot of things happen in government," he said. "It may be broke, but if it's not a crisis, we don't fix it."

But is Pittsburgh's situation severe enough to spark fundamental change? Perhaps not yet.

Not only is the city's fiscal situation less dire than Cleveland's was in the 1970s or Philadelphia's in the 1990s, but its current situation is not unusual. Many cities around the country are struggling with the same financial problems and taking the same measures to deal with them -- layoffs, draining down of reserves, proposed tax increases.

"It's pretty common," said Chris Hoene, a research manager with the National League of Cities.

What's more, some continue to question the wisdom of using bad times to cut government services.

"Cities are required to provide these services, no matter what," said Mike Pagano, professor of public administration with the University of Illinois at Chicago. "They are responsible for health, safety and welfare. They can't just say, 'Let's give up our public health function.'

"Does a recession force them to be even leaner and meaner? I am sure it must. Whether in the process of doing that you are providing the same level of service is another question."

Despite those concerns, plenty of people in Pittsburgh view the layoffs, the pool closings and the service cutbacks as painful, but necessary measures.

"It ain't a good situation, but it may be what's needed," said Restivo.

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