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The Honorable Members of CouncilCity of Pittsburgh, PennsylvaniaIndependent Auditor’s ReportPage TwoOpinionsIn our opinion, based on our audits and the report of the other auditors, the financial statements referred toabove present fairly, in all material respects, the respective financial position of the governmentalactivities, the aggregate discretely presented component units, each major fund, and the aggregateremaining fund information of the City as of December 31, 2015 and the respective changes in financialposition, and the respective budgetary comparison for the General Fund and Community Development Fundfor the year then ended in accordance with accounting principles generally accepted in the United Statesof America.Change in Accounting PrincipleAs described in Note 1 to the financial statements, the City and its component unit the Public ParkingAuthority of Pittsburgh (Parking Authority) adopted Governmental Accounting Standards Board (GASB)Statement No. 68, “Accounting and Financial Reporting for Pensions,” and GASB Statement No. 71,“Pension Transition for Contributions Made Subsequent to the Measurement Date,” which require theCity and Parking Authority to record its net pension liability and related items on the government-widefinancial statements. Our opinion is not modified with respect to that matter.Other MattersRequired Supplementary InformationAccounting principles generally accepted in the United States of America require that the management’sdiscussion and analysis and the pension and other postemployment benefits schedules on pages i throughxiv and 95 through 98 be presented to supplement the basic financial statements. Such information,although not a part of the basic financial statements, is required by the Governmental AccountingStandards Board, who considers it to be an essential part of financial reporting for placing the basicfinancial statements in an appropriate operational, economic, or historical context. We have appliedcertain limited procedures to the required supplementary information in accordance with auditingstandards generally accepted in the United States of America, which consisted of inquiries ofmanagement about the methods of preparing the information and comparing the information forconsistency with management’s responses to our inquiries, the basic financial statements, and otherknowledge we obtained during our audit of the basic financial statements. We do not express an opinionor provide any assurance on the information because the limited procedures do not provide us withsufficient evidence to express an opinion or provide any assurance.Other InformationOur audit was conducted for the purpose of forming opinions on the financial statements that collectivelycomprise the City’s basic financial statements. The introductory section, combining and individual otherfund financial statements and schedules and statistical section are presented for purposes of additionalanalysis and are not a required part of the basic financial statements.The combining and individual other fund financial statements and the Capital Projects Fund budgetarycomparison are the responsibility of management and were derived from and relate directly to theunderlying accounting and other records used to prepare the basic financial statements. Such information

The Honorable Members of CouncilCity of Pittsburgh, PennsylvaniaIndependent Auditor’s ReportPage Threehas been subjected to the auditing procedures applied in the audit of the basic financial statements andcertain additional procedures, including comparing and reconciling such information directly to theunderlying accounting and other records used to prepare the basic financial statements or to the basicfinancial statements themselves, and other additional procedures in accordance with auditing standardsgenerally accepted in the United States of America. In our opinion, based on our audit and the proceduresperformed as described above, the combining and individual other fund financial statements and theCapital Projects Fund budgetary comparison are fairly stated in all material respects in relation to thebasic financial statements taken as a whole.The introductory section and statistical section have not been subjected to the auditing procedures appliedin the audit of the basic financial statements and, accordingly, we express no opinion or provide anyassurance on them.Emphasis-of-MatterAs more fully discussed in Note 1(B), the City is still currently considered a distressed community underthe provisions of the “Municipalities Financial Recovery Act” (Act 47) of the Commonwealth ofPennsylvania and continues to operate under a financial recovery plan. Our opinion is not modified withrespect to this matter.Maher DuesselPittsburgh, PennsylvaniaApril 28, 2016

MANAGEMENT’S DISCUSSION AND ANALYSIS

Management’s Discussion and AnalysisAs management of the City of Pittsburgh (City), we offer the readers of the City’s financialstatements this narrative overview and analysis of the financial activities of the City for the fiscalyear ended December 31, 2015. We encourage readers to consider the information presentedhere in conjunction with additional information that we have furnished in our letter oftransmittal, which can be found at the beginning of this report, and in the basic financialstatements and supplementary information.Financial Highlights GASB No. 68 required state and local governments to restate net position to include NetPension Liability directly in the financial statements starting in 2015, as opposed to afootnote disclosure in prior years. This change has greatly increased the overall liability inthe Statement of Net Position.The liabilities and deferred inflows of the City exceeded its assets and deferred outflows atthe close of the most recent fiscal year by 1.3 billion. As of December 31, 2015, the City, inits statement of net position, has a net position unrestricted deficit of 1.4 billion. Theaccumulated deficit results principally from the City’s Net Pension Liability of 851.3million, outstanding general obligation bonds being issued over the years to finance projectsthat do not result in recording assets; specifically, to fund the payments to the Pension TrustFund ( 187.7 million outstanding as of December 31, 2015), the City’s borrowings to financeeconomic development efforts (including projects to the City’s Authorities, principally theURA), and maintenance expenditures on City infrastructure and equipment needs.The City’s total net position increased by 33.3 million dollars in 2015 from 2014. Thisreflects the City’s continuing effort to control costs.As of the close of the current fiscal year, the City’s governmental funds reported combinedending fund balances of 170.4 million, a decrease of 12.6 million from the previous year.Approximately 41% of this total amount, 69.1 million, is available for spending at thegovernment’s discretion (unassigned fund balance).At the end of the current fiscal year, unassigned fund balance for the General Fund was 69.1million (compared to 53.7 million in 2014) or 16.8% of total General Fund expenditures anddebt service transfers for 2015, up from 13.1% in 2014 and down from 17.3% in 2013.The City’s gross bonded debt amounted to 493 million at the end of the fiscal year.Overview of the Financial StatementsThis Management’s Discussion and Analysis is intended to serve as an introduction to the City’sbasic financial statements.The financial section of this report consists of three parts: Management’s Discussion andAnalysis, the basic financial statements (including notes to the financial statements and detailedbudgetary comparison schedules), and combining and individual fund statements. The basicfinancial statements present two different views of the City through the use of government-widestatements and fund financial statements:i

The first two statements (pages 1-3) are government-wide financial statements that provideshort-term and long-term information about the City’s overall financial status.The remaining statements (pages 4 through 20) are fund financial statements that focus onindividual parts of City government and report operations in more detail than the governmentwide financial statements.The governmental funds statements describe how general government services were financedsuch as public safety and sanitation.Fiduciary fund statements provide information about the retirement plans for City employees inwhich the City acts solely as a trustee or agent for the benefit of others. Fiduciary funds are notreflected in the government-wide financial statements because the resources cannot be used tosupport City activities.The financial statements include notes which provide an explanation for certain financialstatement line items and also provide more details for this information. The statements arefollowed by a section of required supplementary information that further explains and supportsthe information in the financial statements. In addition to these required elements, a section withcombining statements provides details about the non-major governmental funds that arepresented in single columns in the basic financial statements. The following diagram, labeled A1, shows how the required components of this comprehensive annual financial report arearranged and relate to one another.Figure A-1REQUIRED COMPONENTS OF THE COMPREHENSIVE ANNUAL FINANCIAL sion inancialStatementsSummaryNotes Information

Figure A-2 summarizes the major features of the City’s financial statements. The remainder ofthis overview section of Management’s Discussion and Analysis explains the structure andcontents of each of the statements.Figure A-2Major Features of City’s Government-Wide and Fund Financial StatementsFund StatementsGovernment-wideStatementsGovernmental FundsFiduciary FundsScopeEntire City government(except fiduciary funds)The activities of the City thatare not proprietary orfiduciary, such as police, fire,and recreationInstances in which the City isthe trustee or agent forsomeone else’s resources, suchas the retirement plans for CityemployeesRequired financial statements Statement of net position Statement of activities Balance sheet Statement of revenues,expenditures, andchanges in fund balance Statement of fiduciary netposition Combined statement ofchanges in fiduciary netpositionAccounting basis andmeasurement focusAccrual accounting andeconomic resources focusModified accrual accountingand current financial resourcesfocusAccrual accounting andeconomic resources focusType of asset/liabilityinformationAll assets and liabilities, bothfinancial and capital, andshort-term and long-termOnly assets expected to beused up and liabilities thatcome due during the year orsoon thereafter; no capitalassets includedAll assets and liabilities, bothshort-term and long-term; theCity’s funds do not currentlycontain capital assets, althoughthey canType of inflow/outflowinformationAll revenues and expensesduring year, regardless ofwhen cash is received or paidRevenues for which cash isreceived during or soon afterthe end of the year;expenditures when goods orservices have been receivedand payment is due during theyear or soon thereafterAll revenues and expensesduring the year, regardless ofwhen cash is received or paidDeferred inflows andOutflows recognizedDeferred inflows recognizedGOVERNMENT-WIDE FINANCIAL STATEMENTSThe government-wide financial statements report information about the City as a whole usingaccounting methods similar to those used by private-sector companies and are designed toprovide readers with a broad overview of the City’s finances. The government-wide financialstatements include not only the City itself (known as the primary government), but alsocomponent units of the Urban Redevelopment Authority (URA), Pittsburgh Water and SewerAuthority, Public Parking Authority, and the Stadium Authority. Financial information for thesecomponent units are reported separately from the financial information presented for the primarygovernment itself. These statements can be found in the financial section of this report.Although there are a number of government-wide financial statements, for the purposes of thisreport only two will be highlighted since they are closely related: the statement of net positionand the statement of activities.iii

The statement of net position includes all of the City’s assets, liabilities, deferred inflows, andoutflows, except fiduciary funds. Net position - the difference between the City’s assets anddeferred outflows of resources and liabilities and deferred inflows of resources - is one way tomeasure the City’s financial health, or position. Over time, increases or decreases in the City’snet position serve as a useful indicator of whether its financial position of the City is improvingor deteriorating.The statement of activities presents information showing how the government’s net positionchanged during the most recent fiscal year. All changes in net position are reported as soon asthe underlying event gives rise to the change that occurs, regardless of the timing of related cashflows. Thus, revenues and expenses are reported in this statement for some items that will onlyresult in cash flows in future fiscal periods (e.g., uncollected taxes and earned but unusedvacation leave). Additional non-financial factors such as changes in the City’s real property taxbase and general economic conditions must be considered to assess the overall position of theCity.The primary features of government-wide financial statements are reflected in Figure A-3.Figure A-3Government-wide Financial StatementsGovernmental ActivitiesMeasurement Focus: Economic ResourcesAccounting Basis: AccrualStatement of Net PositionAssets Deferred Outflows- Liabilities - Deferred Inflows Net Position Statement of ActivitiesNet Program (Expense) Revenue General Revenues Change in Net PositionGovernmental activities - Most of the City’s basic services are included here, such as thepolice, public works, recreation, and general administration. Property and earned incometaxes, charges for services, and state grants finance most of these activities.FUND FINANCIAL STATEMENTSThe fund financial statements provide more detailed information about the City’s mostsignificant funds, not the City as a whole. A fund is a group of related accounts that are used tomaintain control over resources that have been segregated for specific activities or objectives.Funds are used to keep track of specific sources of funding and spending for particular purposes.The City, like other state and local governments, uses fund accounting to ensure and demonstratecompliance with finance-related legal requirements. However, not all funds are the result of Citypolicy; some are required by state law. The funds of the City can be divided into two categories,governmental funds and fiduciary funds, and are explained in greater detail below:iv

Governmental Funds - Most of the City’s basic services are included in governmentalfunds, which focus on (1) how cash and other financial assets can readily be converted tocash flow in and out and (2) the balances left at year-end that are available for spending.Consequently, the governmental funds statements provide a detailed short-term view thathelps you determine whether there are more or fewer financial resources that can be spentin the near future to finance the City’s programs. Governmental funds are used to accountfor essentially the same functions reported as governmental activities in the governmentwide financial statements. The relationship between governmental activities (reported inthe statement of net position and the statement of activities) and governmental funds isdescribed in a reconciliation that follows the governmental fund financial statements.However, unlike the government-wide financial statements, governmental fund financialstatements focus on near-term inflows and outflows of expendable resources, as well as onbalances of expendable resources available at the end of the fiscal year. Such informationmay be useful in evaluating a government’s near-term financing requirements.Because the focus of government funds is narrower than that of the government-widefinancial statements, it is useful to compare the information presented for governmentalfunds with similar information presented for governmental activities. By doing so, readersmay better understand the long-term impact of the government’s near-term financingdecisions. Both the governmental fund balance sheet and the governmental fund statementof revenues, expenditures, and changes in fund balance provide a reconciliation to facilitatethis comparison between governmental funds and governmental activities.The City maintains individual governmental funds. Information is presented separately inthe governmental fund balance sheet and in the governmental fund statement of revenues,expenditures, and changes in fund balance for the General Fund, the Capital Projects Fund,the Community Development Fund, and the Debt Service Fund, all of which are consideredto be major funds. Data from the other six governmental funds (non-major funds) arecombined into a single, aggregated presentation (other governmental funds).The City adopts an annual appropriated budget for its General Fund, Capital Projects Fund,and Community Development Fund. A budgetary comparison statement has been providedfor these funds to demonstrate compliance with these budgets.The basic governmental fund financial statements can be found on pages 4-15 of thisreport. Fiduciary Funds – (Pension Trust Fund, OPEB Trust Fund, and Agency Funds) – TheComprehensive Fund accounts for the operations of the City’s pension plans for generalmunicipal employees, police, and fire, covering essentially all full-time employees.The OPEB Trust Fund is used to report resources held in trust for post-employmentbenefits other than pension benefits. The City is responsible for ensuring that the assetsreported in fiduciary funds are used for their intended purposes. All of the City’sfiduciary activities are reported in a separate combined statement of fiduciary netposition and a statement of changes in fiduciary net position. We exclude theseactivities from the City’s government-wide financial statements because the Citycannot use these assets to finance its operations.v

Fiduciary funds are used to account for resources held for the benefit of parties outside thegovernment. Fiduciary funds are not reflected in the government-wide financial statementbecause the resources of those funds are not available to support the City’s own programs.Agency funds are custodial in nature and do not involve measurement of results ofoperations.The basic fiduciary fund financial statements can be found on pages 16-17 of this report.Component Units – Combining statements of discrete component units can be found on pages18-20 of this report.Notes to financial statements - The notes provide additional information that is essential to afull understanding of the data provided in the government-wide and fund financial statements.The notes to the financial statements can be found on pages 21-94 of this report.Required supplementary information - In addition to the basic financial statements andaccompanying notes, this report also presents certain required supplementary informationconcerning the City’s progress in funding its obligation to provide pension benefits and otherpost-employment benefits to its employees. Required supplementary information can be foundon pages 95-98 of this report.Government-wide Financial AnalysisFor the City, liabilities and deferred inflows of resources exceeded assets and deferred outflowsof resources by 1.3 billion at the close of the most recent fiscal year.GASB No. 68 requires state and local governments to report Net Pension Liability starting in2015 which was 851.3 million for the City. This long-term obligation contributed significantlyto the deficit net position of 1.3 billion. This deficit is partially offset by investment in capitalassets less any related debt still outstanding used to acquire those assets of 91.5 million. TheCity uses these capital assets to provide services to citizens

Pension Trust Fund Disclosures: Schedule of Changes in the City's Net Pension Liability and Related Ratios - Pension Plan 95 Schedule of the City's Contributions and Investment Returns 96 Note to Required Supplementary Information - Pension Plan 97 Schedule of Funding Progress - Other Postemployment Benefit Plans 98