Tapping in on the Marcellus Shale bonanza is the Mon Valley community of McKeesport, which just announced a deal to allow drilling on 27 acres near a park (which is designated as a regional park and qualifies for funding from the Regional Asset District, $10 million from 1995-2010) in return for a $10k annual fee and 12.5% in royalties.

 

One member of Council said that "It's another revenue stream for the city...it can really boost our budget in portions we've never seen before."

 

What are the unseen spending areas that the Councilman refers to?  The 2008 audited data that we collected for our most recent report shows that McKeesport spent $974 per capita-the countywide municipal average was $629-and had higher per capita spending levels on general government, public safety, sanitation, recreation, debt service, and already carries three times the debt than the average municipality.  The only area where McKeesport spent less than average was on highways.

 

After spending on police, parks, refuse, administration, and debt-and at a higher rate than the typical town in the County-is there really any other service area the municipality needs to engage in?

 

We've written about the Redevelopment Capital Assistance Program (RCAP) before: it is one of many arrows in the state's quiver aimed at eliminating blight and stimulating economic development.  The General Assembly not long ago authorized increasing the cap on how much the state could borrow to fund projects through this program, and in July the Governor handed out $600 million through the Commonwealth.

 

Just yesterday City Council discussed entering into various cooperation agreements with the Urban Redevelopment Authority, who acts as the applicant for RCAP dollars.

 

Perhaps City, state, and URA officials are aware of some good economic news as several RCAP requests were amended to reflect increased dollar amounts:

 

• A grant for Phipps Conservatory was increased from $250k to $500k
• A grant for the Pittsburgh Ballet was increased from $750k to $1,250k
• A grant for the Pittsburgh Zoo and Aquarium was increased from $875k to $2,000k
• A grant for the Carnegie Library modernization project was increased from $7,500k to $8,500k

 

And although it was not specifically amended, a grant for the Connelly Tech project-which was announced as an $8 million project in July-is now up to $12 million.

 

County Council is considering whether to form an independent panel to examine the possibility of pulling several authorities into County government or privatize them altogether.  One of these agencies is the Kane Regional Hospitals, the County-owned system of four nursing care centers.

 

Might the analysis be beaten to the punch by the circumstances facing publicly-run hospitals? 

 

An article in the Wall Street Journal notes that with rising costs, increasing complexity and regulations, and other factors government owned hospitals and care centers might be disappearing altogether as governments consider selling them.   

 

According to the article about 1k of the nation's 5k hospitals are owned by a government agency.  There were 16 fewer of these public hospitals in 2008 than were there five years earlier and one analyst opined that "by nature of their small size, independence, and political entanglements [many] are poorly equipped to survive."

 

This is not to imply that the Kane system is among them.  In the 2003 sunset review it was argued that the Kanes exist because "residents who lack resources to access private healthcare have historically turned to Allegheny County to provide that care".  The Kanes outsourced several components of their operations and in 2006 an action plan was put into place where two centers became comprehensive living centers with independent living units.  Surplus land was sold off and the Executive stated that "the changes I am implementing at the Kane Centers will not only respond to the changing needs of our population, but they will also enable us to erase the Kane Centers' deficit for 2006 and operate the Centers at a break-even level for the foreseeable future". 

 

Since that time there are still roughly the same number of employees (1,179 in 2009), the same number of beds (1,344 in 2009) and occupancy remains in the high 80s. 

 

Realizing that the County's departmental sunset review is well overdue (the Charter requires one every four years, yet the Manager's office has not completed one since July 2003) three of the Republican members of Council (the Council is responsible for taking action on the Manager's recommendations in the review) have put forth an ordinance that would get the ball rolling on this fundamental duty.

 

Under their proposal the Manager must have the review that was due in July of 2007 done in six months from the effective date of the ordinance. The Manager would then have to submit a departmental evaluation schedule by October 1 of this year.  Each department would have to be reviewed at least once every four years (it could be reviewed more than once in that time period) and the schedule would have to be communicated in writing to the Executive and the Council.  The due date for the sunset review would be July 1 of 2011 and every four years thereafter.  If a review cannot be done, a six-month extension would be granted. 

 

Currently the Charter and the Code prescribe no sanctions for failing to have a sunset review on time.  The proposed ordinance would tie Council's role in confirming or denying appointments to the completion of the review, disapproving of all new and pending appointments to County authorities (PAT, Airport, Housing, etc.) until the review is received. 

 

In a recent piece on education funding an analyst noted that "two-thirds of public school employment growth has been teachers (41%) or teacher aides (23%).  The remaining one-third was comprised almost entirely of support staff in schools and district offices". 

 

Has the Pittsburgh Public Schools followed this trend?  A quick look at audited information on the job makeup in the District provides the answer.  In 2000, there were 5,302 employees; 3,377 (64%) were identified as teachers, leaving 1,925 employees of the District doing something other than teaching: serving in administration, as principals, librarians, health service, food service, or operations.  We'll call these folks non-teachers and in 2000 there were 1.75 teachers for every 1 non-teacher.

 

Fast-forward to 2009.  There are 417 fewer employees overall.  The number of teachers is lower (2,315, down 1,000 or 31%) because there are fewer students.  Compared to 2000, teachers now make up less than half of the total District employment, meaning that the majority of District employees fall into the class identified as non-teachers.  The teacher/non-teacher ratio is now 0.90/1.  In the employment category of administration the "clerical and other nonprofessional" sub-category has doubled in size to 826 employees in 2009.  So what explains the rapid growth in this job classification and why has it happened during the time period when enrollment has continued to plunge?

 

Under a proposed state law, retired police officers could return to work on a part-time basis (800 hours a year) without jeopardizing their pension benefits.  Such a bill might be welcome news to a cash-strapped city like Pittsburgh, which is always looking for ways to effectively deploy its 900-member police force. 

 

Retired officers could perform various functions: "monitor surveillance cameras, man the front desks at police stations, staff the property room, perform confidential clerical work, take reports over the telephone, transport mail from station to station, work missing-person cases, run background checks on police recruits, teach courses at the police academy, operate the citizens police academy, help with traffic control and serve as community liaisons", according to one of the City's commanders.  Do that, and more police could be on the streets.

 

"To me, it seems like a can't-lose proposition all the way around" according to the commander.

 

The only question: weren't civilians supposed to be performing these tasks?  The Act 47 team put forth data that showed Pittsburgh was very high on its ratio of sworn-to-civilian personnel (13.7) and said that "this data indicates there are opportunities for civilianization in Pittsburgh's Police Bureau-placing civilian employees so the latter can be reassigned to patrol and more traditional police activities".  Presumably the team meant non-police personnel, even retired, when they pushed for civilians. 

 

Or perhaps since the state law was silent on permitting retirees to work part-time the Act 47 team never considered the option. Maybe there is room for both, but it is a safe bet that the wage for a civilian is going to be less than what would be for a retired police officer.  The point of getting civilians into those positions was to save money, especially on overtime and premium pay. 

 

And the City should have to show some major commitment to following through on the original Act 47 plan for civilianization which, as of the 2009 revision, was plodding along very slowly.  Where the expectation existed for 38 civilian opportunities only 2 officers had actually been redeployed. 

 

 

The plan was simple enough: find out what the 13k parking spaces at Pittsburgh International Airport could net in a lease deal and, if the numbers were attractive enough (in the neighborhood of $400 million) sign an agreement and take the up front cash to settle the airport's outstanding debt of $500 million, all of which is related to the construction of the facility in the 1990s.

 

By paying off the debt it was hoped that the airport's fees (cost per enplanement) would fall from one of the highest, $15.80, to less than $1.  The fees drop and airlines would then be enticed to add new or expand existing service at the airport (though in a May 2009 newspaper article industry observers and airline officials were tepid on the pull lower fees would have, characterizing cuts as "no airline saying we'll fly there if it's really cheap", "It's going to help, but it's not a panacea", and "There are too many other factors at play that we look at in making those types of decisions").

 

That's why news over the weekend that the privatization deal is dead because it would have not brought in the desired amount, would have led to rate increases to customers and employees, and the airport would have given up the revenue stream it enjoys from parking means that the hopes for a debt free airport and drastically lower fees is not going to come quickly or easily.  The Authority did not like what they heard-that a potential deal could have gone as high as $400 million according to their consultant-so the plan is off of the table.  As the Authority's executive director noted in December "we will not give it away...But if it's a very attractive number that does the intent as far as reducing the cost per passenger, then we've done our job."

Now the Airport Authority will continue to pay about $62 million in annual debt service through 2018 when the debt is expected to be retired.  The Authority is also entitled to $107 million from gaming money for debt reduction (it was $150 million but the County grabbed $42 million for debt it claimed it was owed on the airport's construction).

 

It is curious as to why the Authority would not have combined the gaming money with what they could have fetched in a lease deal to at least take a big bite out of the outstanding debt.  Presumably that would have shortened the time period to retirement by a few years.   

 

A letter to the editor in today's PG waxed poetically about the positive attributes of the public transit system that she saw on a recent visit to the cities of Golden and Denver, Colorado.  "I noticed the bus came every three minutes. It's free and gets passengers from one end of the street to the other...[her son] can take a bus that runs about every 15 minutes to Denver, a trip of about 25 miles for $2. Denver still has a thriving shopping area, and for a Saturday there were a lot of people downtown."

 

After theorizing what fare hikes and service cuts would do she opined that "perhaps the Port Authority can contact Denver to see how it is managing, since it seems to be doing a much better job."

 

The writer might be shocked to know that officials from Denver's Regional Transportation District did indeed visit Pittsburgh a few years ago to talk about what really makes their system successful-that it has parted ways with the traditional model of public transit as a monopoly that characterizes most systems in the U.S.  Under state law 50% of the RTD's transit service is contracted out to private carriers.  We even wrote about the arrangement in a 2005 Policy Brief and showed that the contracting out was done without layoffs but by attrition.

 

Such a notion was met-and has been met since the RTD officials came here-with a dismissive attitude from the transit union who view contracting as giving "their work" away, from skeptics who recall the years prior to the formation of PAT in the early 1960s, and from management and staff that did not want to pursue the idea.  But evidence from our 2005 analysis showed that operating costs from the contractors was much lower than the "in house" operations and helped control long term costs at the District.

 

Even better, when RTD drivers went on strike in 2006 the system did not completely shut down as contracted drivers kept some of the service going.  The then-Governor of Colorado even admonished those on strike.  Here a strike shuts down the system completely and public officials jump through hoops to find money to avoid making the hard choices. 

 

So yes, PAT should contact Denver for solutions as the writer suggests, but don't expect an adoption of best practices.   

 

Facing a budget deficit of $47 million the Port Authority (PAT) says it will cut service hours by 35 percent, lay off 500 employees and eliminate service to 50 communities.  The reasoning behind the 35 percent service reduction when projected revenues are only off by only 14 percent has not been adequately explained.  One explanation is surely the outrageous level of health care and other benefit costs, especially those related to retirees that cannot be cut.

 

In any event here's a better plan than the one PAT is talking about. First, the Legislature and the Governor should remove PAT's monopoly over transit service and order the agency immediately to allow other transit providers to offer service, especially in those areas where PAT is planning to eliminate service.  Moreover, the Legislature should eliminate the right of transit workers to strike.

 

Finally, PAT should ask all City and County officials, as well as civic and business leaders, to admonish the transit unions to make immediate pay and benefit concessions in order to save many jobs and lower the number of service hours that have to be cut.  The retirees should be asked to make some sacrifices as well.

 

The continual slashing of service is no way to run a railroad, especially when PAT has no competition to fill the service gaps.

 

The lesson here is that government granted monopolies of a needed service whose employees are permitted to strike will become bloated, grossly inefficient, a heavy burden on taxpayers and a poor excuse for a service provider. That is PAT in a nutshell.

 

Today the Mayor's spokesperson was quoted as saying that the parking lease for pension relief deal is something the Mayor is being forced into.  "Let's be clear: The mayor doesn't want to do this" was the exact statement.

 

Consider for a moment that the state is not (and never was) going to swoop in and rescue troubled pension systems like Pittsburgh; there is no magic wand to wipe away the $650 million in unfunded liabilities; there are few options to generate a lump sum of cash to put into the pension fund; there is no free lunch.

 

But to imply that the Mayor does not want to do the lease is disingenuous.  Recall that the state passed Act 44 last fall as a way to deal with municipal pensions.  It even had the makings of moving to a defined contribution system and away from defined benefit plans.  But the Mayor wanted no part of it and said, nearly a year ago, "just give us a chance to solve this locally. We can do it. ... Give us a two-year window to explore leasing [public] garages".

 

Out of that came the amendments to Act 44 and the granting of the Mayor's preferred alternative, the same one we are now told he is lukewarm on.