Mayor Tom Murphy, responding to state requests that he make "drastic" cuts to city spending, said the city has already cut all it can, and needs new revenue by the summer to avoid running out of cash.

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"Strict controls to reserve cash have and will continue to be maintained. But it is impracticable to believe that a $40 million cash shortfall can be mitigated through spending controls," Murphy said in a letter issued yesterday to the city's state-appointed Act 47 recovery team.

Without new revenue, "simply maintaining basic safety and city services and fulfilling our contractual obligations will exhaust our cash well before the end of the year," the mayor wrote.

The recovery team named under the state's Act 47 distressed cities statute -- Pittsburgh law firm Eckert Seamans and Public Financial Management of Philadelphia -- wrote Murphy and council President Gene Ricciardi Feb. 13 calling for interim cuts to city spending to save money through the rest of the year.

The team said the spending cuts, including a freeze on hiring and on spending on supplies and equipment, were needed because new revenues may not be approved in time to help the city this year.

In a five-page response yesterday, Murphy said city departments have already cut most discretionary spending, other than required training and education costs; cut staffing, except for the Fire Bureau, which is shielded from layoffs; and trimmed capital spending from $30 million to $8 million annually.

Lenders will not make loans to bridge the $40 million shortfall unless the city repays them during 2004, adding more pressure for new state revenue soon, Murphy wrote. The only new revenue the recovery team can recommend under Act 47, in addition to increases in existing city taxes, is an earned income tax on commuters.

"The city's cash position now dictates that the remedy must be achieved before summer. Act 47 gives us the means to enact a recovery plan within months," he wrote.

Murphy then asked for further clarification on interim city spending and services, which City Council also called for yesterday.

Council was poised to take final votes on issuing $450,000 in legal fees in a lawsuit filed by police officer Robert Swartzwelder, who successfully sued the city for civil rights violations, and $500,000 to the Kingsley Center to complete a new community center on the East Liberty/Larimer border. But council suspended the votes until today to make sure the costs are acceptable under the recovery team's guidelines.

The recovery team is separate from a state-appointed five-member oversight board on city finances. That board has until mid-April to recommend budget reforms to the Legislature and is empowered to compel the city to adhere to spending plans for the next seven years.

The Act 47 team will not issue its recovery recommendations until 90 days after it agrees to contract terms with the state. That contract is still not signed, adding more confusion to the mix for council members.

"Is this to slow the process down, to allow the oversight board to catch up? Is there something going on in the background that we're not aware of?" Ricciardi asked. "Everyone should find it very strange and puzzling that there has not been a contract signed."

Once the recovery team gives council guidelines on spending, council's budget chairman Alan Hertzberg said, the pending payments for legal costs and the community center are likely to win final approval today.

The vote to hold the bills was 8-0 with Twanda Carlisle absent. Carlisle, who represents East Liberty and Larimer, gave council a memo saying she had a previously scheduled appointment and could not make the regularly scheduled meeting yesterday.

The Kingsley Center's $7.8 million office complex/gym/pool/classroom facility is about one month short of being completed, executive Malik Bankston said yesterday.

The center advanced private funding with agreement from the city that it would provide some $1.2 million, most of it from Community Development Block Grant funds. Bankston said the city recently signed a contract to provide the first of two $500,000 allocations from community development funds for administrative, operating, maintenance and construction costs.

The Feb. 13 letter from the city recovery team said the city should spend capital funds only on emergency projects and invoke contract clauses for "emergency termination" of projects that are already under way. Council members have asked the coordinators to explain that request more fully today, but Bankston said the new community center should not be affected.

The East Liberty/Larimer area has not had its own recreation center or pool since the late 1970s, he said, and the city started working on the new center long before the Act 47 process started.

"I've been listening to the arguments about everyone biting the bullet and participating in re-prioritizing government. We have not been especially well-serviced for a very long time, and as far as I'm concerned we're paid up in advance. We gave at the office," Bankston said.

Councilman William Peduto said the recovery team has also asked him to hold off voting on merging the city and Allegheny County 911 dispatching centers for one week, until March 3, to allow the team to review the plans.

Council approved a resolution by Sala Udin in a 8-0 vote calling for more seats to be added to the five-member financial oversight committee, with requirements they be filled by black or female appointees. With all of the current members white males, it is "nearly impossible for the people of this city to honor the process," the resolution says.