The Mayor just appointed City Council's most junior member to the board of the Stadium Authority, an Authority that was created in 1965 to "provide increased commerce and prosperity, and to promote cultural, physical, civic, social, and moral welfare to the general public".  No doubt its role as the owner of Three Rivers Stadium did most of the above-the jury on how "moral welfare" was promoted is still out.

 

Consider that the new appointee had just become eligible to drive in the Commonwealth when the stadium was demolished, eleven years ago this month.  Since then, the Stadium Authority no longer owns any stadiums, that role taken over by the Sports and Exhibition Authority (the SEA performs administrative duties and gets reimbursed by the Stadium Authority) so the Stadium Authority is now relegated to playing land developer and constructed a parking garage in the land between the new stadiums. 

 

The Authority's financial statements make it clear that "the garage has not and will not generate revenues fully sufficient to cover expenses and debt service".  It took on a $20 million loan to construct the garage, and the financial statement states that the last payment will be December 1, 2028, somewhere around Super Bowl LXII.  Long-term leases involving the Authority and parking spaces last until 2050, just around the time the current Steelers' quarterback can begin collecting Social Security. 

 

A 2005 report to the ICA said that "operationally, the Stadium Authority could be operated by another City authority such as the URA".  That same report showed that as of 2004 the Authority had total assets of $9.4 million and liabilities of $9.4 million.  In 2011 total assets were $35 million and total liabilities of $44 million. 

 

Sure makes that admonition on the Stadium Authority's website in 2001 that its "existence and function will conclude with the planned demolition of Three Rivers Stadium" look funny after all these years. 

 

 

Notwithstanding its incredibly good fortune in being the home of vast natural gas deposits that are propelling much of the economic growth being experienced currently, the Commonwealth of Pennsylvania is losing its ability to compete for capital and jobs. The state has antiquated and seriously inadequate laws regarding property assessments, it faces enormous future government spending to keep its pension promises to teachers and state employees, it is a perennial leader among the states in teacher strikes, it is one of two states that still owns liquor stores, one of the state's two largest transit agencies is in undeclared bankruptcy, and its bridges and roads are ranked among the worst in the nation. 

 

Meanwhile, Wisconsin and Indiana have passed legislation that dramatically curtails the power of unions and their ability to drive jobs away and raise the cost of government. Neither state allows teacher strikes and in the case of Indiana has greatly expanded a voucher program to allow students choices other than failing public schools. Two things Pennsylvania has notably been unable to get done or in the case of banning teacher strikes has not come close to doing.

 

So, while we can congratulate ourselves for Marcellus related jobs and incomes gains and laud the powerful growth in education and health employment, it must be remembered that the extent of the state's dependence on education and health for jobs cannot be the basis for sustained, long term economic health.

 

Pennsylvania must address the pension crisis, the teacher and transit worker right to strike, the state of transportation infrastructure and continue its recent efforts to contain the spending that grew so profusely under the previous administration.  And if it really wants to get bold, it could eliminate the dues withholding for public sector employees and begin to talk seriously about doing with prevailing wage requirements on public construction projects.  But in a state that cannot even get itself out of the liquor selling business, the much desired reforms enumerated here are probably best regarded as fantasies.  

 

A few days before the "Big Game" the state of Indiana is poised to become the first rust belt state to enact a Right to Work law.  Both houses of the state legislature have passed the bill and it now goes to the Governor for his action.  Indiana would be the 23^rd state in the union to be a Right to Work state. 

 

It has been over a decade since the last state to join the ranks of the Right to Work fraternity, Oklahoma, did so.  The New Hampshire legislature passed a Right to work bill in 2011 but it was vetoed by the Governor

 

As we pointed out last summer, private sector union membership in PA fell from 15% to 9% yet the issue of Right to Work cannot make it to the floor of the General Assembly.  And the ever-present listings of "best places to do business" like Forbes shows that Right to Work states are consistently better performing than their non Right to Work counterparts.  But will the change in Indiana put pressure on Pennsylvania to act? 

 

A newspaper article over the weekend provided an in-depth and interesting take on what it means to homeowners who have their street split down the middle between two taxing jurisdictions.  In this case the purpose of pointing out the split is the looming reassessment in Allegheny County, with new values expected to take effect countywide in 2013, and Butler County, which has not reassessed since 1969 (that was the last year of a full reassessment, but the County did change its predetermined ratio [the ratio between assessed and market value] in 2009). 

 

Noting that home #1, within Allegheny County, pays more in taxes than home #2, who lives in Butler County (about $3,000 more), the Allegheny County Executive opined that by not reassessing for ten years "[Allegheny County] brought stability into the system, and people could predict what their taxes were going to be."  The Executive stopped short of saying that owners could predict their taxes would be "high". Stability and predictability were two themes the Supreme Court considered before tossing out Allegheny County's base year plan, uniformity trumping both.   

With two "real world" examples-the current assessments of both homes mentioned in the piece are available on the respective real estate websites for both Allegheny and Butler counties-we can see how the current millage rates (2012 for county and municipal, 2011-12 for schools) of each county and the municipality and the school district affect each home.  Keep in mind that neither property has been officially reassessed in some time (home #1 since 2002, home #2 since 1969) though home #1 should be getting a reassessment notice in the coming months. 

 

Home #1-Allegheny County, Pine Township, Pine Richland School District Current assessed value: $391,900 ($376,900 for County tax purposes after applying homestead exemption, and according to the PA Department of Education the average home in the school district received $200 off school taxes as a result of Act 1 gaming refunds [also a homestead exemption]) County Taxes: $376,900 x 4.69 mills = $1,763 Municipal Taxes: $391,000 x 1.2 mills = $469 School Taxes: $391,000 x 21.9084 mills = $8,566 (less $200 from Act 1) = $8,366 Total: $10,598   Home #2-Butler County, Cranberry Township, Seneca Valley School District Current assessed value: $55,480 (no County homestead exemption, and the PA Department of Education puts the average Act 1 tax reduction for a homestead in Seneca Valley School District at $100) County Taxes: $55,480 x 23.63 = $1,299 Municipal Taxes: $55,480 x 13 = $715 School Taxes: $55,480 x 105.60 = $5,808 (less $100 from Act 1) = $5,708 Total: $7,722

 

The Allegheny County home is paying $3,000 more in taxes as a result of a higher County tax bill ($464) and a higher school tax bill ($2,758).  The Butler County home is paying more to the municipality than their neighbor.  Both are paying more than 75% of their total tax bill to fund public education. 

 

So obviously the Butler County home, according to the County Executive, must be free from worry about their taxes.  A quick look back to 2005-that's when Allegheny County adopted its base year-shows that Butler County increased its taxes then cut them in 2009 after a change to the predetermined ratio; Cranberry increased its taxes this year, and Seneca Valley school district had increases in 2006, 2007, 2010 and 2011.  It is planning an increase for the coming school year according to its preliminary 2012-13 budget.

 

Just down the street in Allegheny County, home #1 will see a higher County tax bill this year as a result of the millage hike; his municipal taxes have not changed since 2005; and his school tax bill went up in 2010 and is expected to go up again according to the preliminary 2012-13 budget.  Home #1 might see a tax cut when rates rolled back once the windfall provisions are applied and the new values go into effect. 

 

Can we once and for all stop the talk that reassessments lead to tax increases?  There is enough hard evidence of tax increases happening without them to believe otherwise.

 

 

 

 

 

No, we're not talking about a City-County merger: that idea has not surfaced since the 2008 Nordenberg report was unveiled and got a lukewarm response.  Nor are we referring to the proposed idea of the County Executive to create a SEPTA 2.0 in southwestern Pennsylvania out of PAT and other regional carriers: when the Exec traveled to Harrisburg this week to talk mass transit, he just pleaded for more money for the Port Authority.

 

Instead the subject is a possible merger between US Airways and American Airlines, and what, if anything, it would mean for Pittsburgh International Airport.  One analyst stated there could be a "moderate increase" in Pittsburgh's business but conditioned that upon whether "landing fees can come down".  Duplication of flight destinations or maintenance could mean less potential for positive effects.  Another analyst bluntly stated "don't believe for a second that it's going to do anything to increase any kind of traffic out of Pittsburgh."

 

In 2001 US Airways had 12,000 employees in Allegheny County, representing about 2% of total employment and making it the fourth largest employer in the County.  Ten years later it does not even appear in the County's financials on its list of top ten principal employers.  Passenger volume fell 33% through the decade while operating expenses rose 22%.  On a per passenger basis, operating expenditures have climbed from $3.42 to $6.23.  Fees dropped in the 2012 fiscal year but the airport's "cost per enplanement" was still characterized as high when the fee reduction was announced. 

 

The newly installed County Exec, after declaring he would be leading the charge in PAT labor negotiations, has made his way to Harrisburg to lobby for more funds for all but bankrupt Port Authority.  He will argue that the looming $64 million deficit and the cuts in service it will require could have serious negative effects on the region's economy.

 

What he will not tell the legislators about is the lack of progress by PAT in getting any meaningful concessions from the transit unions or retirees. Therein lies the principal root of PAT's financial problems but nothing significant ever gets done to lower immediate cost other than lay off employees and cut bus service.  The Exec has not once indicated he will press for major concessions by the retirees or union members. Hence the legislators should politely indicate the way out of their offices to the Exec.

 

More money for PAT now will only beget the cries for more money next year.

 

Really hard to enact bills need to be passed by the state government to address PAT's fiscal situation.  We have outlined those on many occasions. Eliminate transit workers' right to strike, eliminate PAT's monopoly in Allegheny County, and amend state law to allow PAT to declare bankruptcy.   There is no other way to reduce the enormous burden of legacy costs that are driving the Authority into the ground. 

 

The question is, do the Governor and the General Assembly have the intestinal fortitude to face down the Exec and the unions and do what needs to be done?

 

The County Executive has stated he will be the driver of the bus, so to speak, on the next PAT contract, noting that he's "going to be leading the charge".  The current four year contract between PAT and the ATU rank and file expires June 30^th (first level supervisors expires July 31^st).  Seems like only yesterday the current labor contract was being negotiated: those negotiations involved the former County Executive, the former Governor, PAT and ATU officials, and other national unions when meetings were whisked away from Pittsburgh to Washington, DC.

 

The status quo on the expiring contract is as follows based on the December 2, 2008 contract ratification notice: ATU bargaining unit employees got a 3% pay increase on January 1^st of this year following increases in the three previous years; they are paying 3% toward health care but that level of contribution was met on January 1, 2011; a $500 monthly pension supplement is firmly in place; and employees were segmented into various groups based on age and length of service to determine eligibility for post-retirement medical insurance.

 

Outsourcing has not been made mentioned in a contract negotiation since 2005, but an outside vendor is operating a bus route as a result of service reductions in March of 2011 (PAT vacated routes and the vendor was granted approval to operate them). 

 

Those could be considered the "micro level" issues; big picture items include what the state does in regards to transportation issues (roads, highways, transit); fundamental changes to the PAT structure (the right to strike, monopoly powers, bankruptcy provisions for legacy costs); and the opening of the North Shore Connector and how the public views service and fares on that extension in light of any planned service reductions system wide due to the budget situation. 

 

 

 

 

In light of the reassessment-delayed until 2013 when new values will be fully implemented-and the County's 21% 1 mill tax increase-to go into effect immediately and to be paid on the upcoming tax bill-it is worth noting that the median home sale price in Allegheny County rose 43% over the last eleven years from $84k in 2000 to $120k in 2011.  The dollar volume of sales rose to $2.2 billion from $2 billion in 2000 but the total number of sales declined from over 18k in 2000 t0 14k in 2011.  That's according to the year end report of sales complied by RealStats.

 

The data also covers the adjacent four counties of Beaver, Butler, Washington, and Westmoreland which comprise but do not fully account for the Pittsburgh metro area.  The median sales price for the five county area in 2011 was $125k.  Washington County had the biggest percentage increase in median sales price (60%) while Beaver had the smallest (22%).

 

Using that $125k 2011 value as a proxy for the metro area, Pittsburgh would fall into the grouping with regions like Cincinnati ($126k), Spartanburg ($124k), Buffalo ($123k), Rochester ($123k), Las Vegas ($122.7k), and Wichita ($120.9k) based on the median sales price in the 3^rd quarter of 2011 according to the National Association of Realtors.  Since 2008 the median sales price in Las Vegas fell from where it stood at $220.5k; many of the other metros in that $130-120k range were there or close by in 2008. 

 

The Port Authority (PAT) unveiled its plans for service reductions this week, noting that if actions are not taken to close a $64 million budget gap a cut in service that would lower the number of bus and trolley routes from 102 to 56. 

 

If it seems like familiar territory, it should.

 

Let's place the cut in historical context, at least back to 2002 available data from PAT. As of September 2002 PAT operated 235 routes.  That year, according to the National Transit Database there were 73.8 million unlinked trips on PAT.  Service cuts came in September of 2002 and September of 2004; intervention by the Governor in 2005 staved off one round of service cuts;   another round in June of 2007; the implementation of the transit development plan came in 2010 and 2011 and reduced routes through planning; another service reduction came last March and left PAT operating 102 routes, which was 133 fewer than what was operated in 2002. 

 

There is not yet NTD data available for 2011 to show the impact of the cuts last March and the results of the transit development plan; in 2010 PAT delivered 66.1 million unlinked trips, about 11% lower than 2002. 

 

Right on cue, the Port Authority has rolled out the latest doomsday scenario of service cuts and layoffs.  No doubt the huge projected budget shortfall, if unaddressed, will require enormous cutbacks.  But as sure as robins returning in the spring, there is no talk of addressing the underlying causes of the financial disaster that PAT has become.

 

Whipping up rider and business sentiment in an effort to persuade Harrisburg to increase its subsidy-despite the looming $700 million state revenue shortfall for the current budget year-is the overused and cynical modus operandi.  Where are the brave elected leader voices demanding that retirees with their enormous legacy costs and current employees with their $25 per hour jobs with Cadillac benefits and efficiency killing work rules make some sacrifice to save jobs and bus service?

 

That's not how the game is played in Pennsylvania. Rather, it's lobby for more money to feed the voracious maw of employees, past and present. And when Governors and County Execs manage to get more money from the state as happened so many times in the past, especially under the previous Governor, what is the lesson learned by employees and retirees? Hold out, make no concessions, more money will be coming from the state or Feds.  If the state blinks in the current round, the unions will have their convictions reinforced and the game of chicken will be repeated next year. 

 

The state should set an amount of subsidy per rider, adjusted for inflation of no more than the 2011 level and keep it there permanently.

 

On the other hand, the state shares a lot of responsibility for PAT's financial condition by caving in to union demands in the past, by refusing to eliminate the right to strike and being far too deferential to requests for funding for money pits such as the North Shore Connector and by permitting the monopoly status of PAT to continue when competition was sorely needed.  It can begin to take some responsibility for its failure to prevent the problems that have being brewing for years.  Change the law so the Port Authority can declare bankruptcy-the only way it can deal with its massive and growing legacy costs.  Appoint an independent board including several non-Allegheny County members to oversee the organization. Remove the monopoly to allow other carriers access to the County and eliminate the transit workers right to strike.

 

In the meantime, concessions must be forthcoming and permanent.  Some additional monetary help might be granted on a temporary basis if the retirees and employees make a strong, good faith effort.  But the additional help must be accompanied by other legislative actions including those recommended above. The Commonwealth needs to take bold steps to deal with PAT and not kick this can down the road again.