Tuesday, January 31, 2006
“Overtime Hits City Budget Hard”
Overtime Solution is Overdue
The City’s personnel and contractual problems are no better exemplified than by the case of the fire department. In 2005, $12 million in overtime was paid to firefighters, more than half of the $21 million expended Citywide. Many firefighters made more than $100,000 with the overtime pay.
During the time leading up to the passage of the Recovery Plan and the creation of the Oversight Board, we documented the fact that Pittsburgh simply had too many employees in the fire department in comparison with cities of similar size, in the “rust belt” and in regional hub cities. Our work found that the average Pittsburgh firefighter with five years experience was paid $7,000 more than a similar firefighter in a city like Columbus or Omaha. If the City were to cut back to the level of spending at a better performing city, it could have saved tens of millions of dollars annually.
The issue with the fire department stems from contractual language that requires a minimum number of hours that stations must be staffed. So it is not so much an understaffing issue as it is a contractual issue. That’s not surprising given the City’s history with fire contracts and tradeoffs made in the name of political expediency.
When the fire contract is reopened in 2007, the insistence must be on getting shifts aligned, stations at an effective level, and a contract that repairs the City’s bank, not further fractures it. That’s why the study commissioned by the Oversight Board (ERASE study) has to be front and center with its recommendations on levels of staffing, “floating” personnel to solve the overtime issue, and changes to workweek arrangements.
The City’s personnel and contractual problems are no better exemplified than by the case of the fire department. In 2005, $12 million in overtime was paid to firefighters, more than half of the $21 million expended Citywide. Many firefighters made more than $100,000 with the overtime pay.
During the time leading up to the passage of the Recovery Plan and the creation of the Oversight Board, we documented the fact that Pittsburgh simply had too many employees in the fire department in comparison with cities of similar size, in the “rust belt” and in regional hub cities. Our work found that the average Pittsburgh firefighter with five years experience was paid $7,000 more than a similar firefighter in a city like Columbus or Omaha. If the City were to cut back to the level of spending at a better performing city, it could have saved tens of millions of dollars annually.
The issue with the fire department stems from contractual language that requires a minimum number of hours that stations must be staffed. So it is not so much an understaffing issue as it is a contractual issue. That’s not surprising given the City’s history with fire contracts and tradeoffs made in the name of political expediency.
When the fire contract is reopened in 2007, the insistence must be on getting shifts aligned, stations at an effective level, and a contract that repairs the City’s bank, not further fractures it. That’s why the study commissioned by the Oversight Board (ERASE study) has to be front and center with its recommendations on levels of staffing, “floating” personnel to solve the overtime issue, and changes to workweek arrangements.
Monday, January 30, 2006
A Bank Policy Worthy of Widespread Emulation
Mirabile dictu, there is major bank in the United States that is putting the protection of one of the core principles undergirding our way of life ahead of profits. BB&T, the nation’s ninth largest financial holding company announced on January 25, 2006 that it “will not lend to commercial developers that plan to build condominiums, shopping malls and other private projects on land taken from private citizens by government entities using eminent domain.”
The Chairman said, “The idea that a citizen’s property can be taken by the government solely for private use is extremely misguided, in fact it’s just plain wrong.” How refreshing to have a head of a major corporation who not only understands the Constitution and basic rights, but also has the gumption to take an action that supports that understanding.
If there were more financial institutions willing to take the BB&T position, much of the miscarriage of justice that is being perpetrated as a result of the unconstitutional use of eminent domain could be stopped. Financial institutions that provide funding to projects on property taken in such a manner are helping facilitate the efforts of developers and unscrupulous politicians who have little regard for basic property rights.
What a wonderful example BB&T has set. Contrast that to the recent example of a large Pittsburgh institution that has asked for nearly $50 million in taxpayer money to build an upscale development in downtown Pittsburgh. Could this be another indication of the differences among the states in philosophy about the role of government in the economy? Note that BB&T is headquartered in Winston-Salem, N.C.
Mirabile dictu, there is major bank in the United States that is putting the protection of one of the core principles undergirding our way of life ahead of profits. BB&T, the nation’s ninth largest financial holding company announced on January 25, 2006 that it “will not lend to commercial developers that plan to build condominiums, shopping malls and other private projects on land taken from private citizens by government entities using eminent domain.”
The Chairman said, “The idea that a citizen’s property can be taken by the government solely for private use is extremely misguided, in fact it’s just plain wrong.” How refreshing to have a head of a major corporation who not only understands the Constitution and basic rights, but also has the gumption to take an action that supports that understanding.
If there were more financial institutions willing to take the BB&T position, much of the miscarriage of justice that is being perpetrated as a result of the unconstitutional use of eminent domain could be stopped. Financial institutions that provide funding to projects on property taken in such a manner are helping facilitate the efforts of developers and unscrupulous politicians who have little regard for basic property rights.
What a wonderful example BB&T has set. Contrast that to the recent example of a large Pittsburgh institution that has asked for nearly $50 million in taxpayer money to build an upscale development in downtown Pittsburgh. Could this be another indication of the differences among the states in philosophy about the role of government in the economy? Note that BB&T is headquartered in Winston-Salem, N.C.
Thursday, January 26, 2006
Self Indulgence at City Council
Once again Pittsburgh City Council has demonstrated its loose grasp regarding what’s important as it carries out its responsibilities. In a unanimous vote, the all-Democrat Council has recommended that Republican U.S. Senators Santorum and Specter vote against Supreme Court nominee Samuel Alito—an utterly futile, self-indulgent action.
This is the same City Council that twiddled its thumbs and pointed fingers as the City slid into financial decline. Council showed itself incapable of making the needed hard decisions to rein in the City’s overspending and ruinous taxation precipitating state oversight of the City’s finances. But why should we be surprised at the Alito vote? After all this is the same body that supported striking parking attendants against the City’s own parking authority and once proclaimed “Boy George Day”.
Why would a council, grappling with pressing local issues, find it necessary to weigh in on the confirmation of a Supreme Court Justice, which it is powerless to affect, unless the desired effect is grandstanding for its constituents? They are obviously not concerned with upsetting Republicans since there aren’t any on Council and very few in the City. But surely they ought to be worried about possibly annoying Republicans who hold the majority in both legislative branches in Harrisburg and the state’s Republican Congressional delegation, folks whose help the City is constantly beseeching.
Council’s partisan, self-serving, impotent action reveals an extreme liberalism in political philosophy and a lack of seriousness required of governing bodies.
Once again Pittsburgh City Council has demonstrated its loose grasp regarding what’s important as it carries out its responsibilities. In a unanimous vote, the all-Democrat Council has recommended that Republican U.S. Senators Santorum and Specter vote against Supreme Court nominee Samuel Alito—an utterly futile, self-indulgent action.
This is the same City Council that twiddled its thumbs and pointed fingers as the City slid into financial decline. Council showed itself incapable of making the needed hard decisions to rein in the City’s overspending and ruinous taxation precipitating state oversight of the City’s finances. But why should we be surprised at the Alito vote? After all this is the same body that supported striking parking attendants against the City’s own parking authority and once proclaimed “Boy George Day”.
Why would a council, grappling with pressing local issues, find it necessary to weigh in on the confirmation of a Supreme Court Justice, which it is powerless to affect, unless the desired effect is grandstanding for its constituents? They are obviously not concerned with upsetting Republicans since there aren’t any on Council and very few in the City. But surely they ought to be worried about possibly annoying Republicans who hold the majority in both legislative branches in Harrisburg and the state’s Republican Congressional delegation, folks whose help the City is constantly beseeching.
Council’s partisan, self-serving, impotent action reveals an extreme liberalism in political philosophy and a lack of seriousness required of governing bodies.
Tuesday, January 24, 2006
Giving Away Money to Slots Operators
What is the value of a slot license in Pennsylvania? The answer to that question should come from a free and open market. After all, when commodities or corporate shares or art works are offered for sale, there is an auction process that determines the value and sales price. However, in Pennsylvania, the market was not allowed to operate for slots licenses. Instead the legislature arbitrarily set the purchase price at $50 million. Evidence to date indicates this price was far too low and the Commonwealth squandered a great opportunity to generate revenues that could have funded tax cuts.
In Pittsburgh there are four candidates for the City’s stand-alone parlor. An auction would have allowed an open competition for the license. Instead these potential owners are trying to curry favor with the Gaming Board by offering elaborate packages designed to benefit the community, with some offering $1 billion in economic development associated with the parlor and another promising a new arena. The three groups that do not get the license will undoubtedly claim foul play in the decision process. An open auction would have made it clear to all who the highest bidder was.
Two of the bidders have estimated that the parlors could earn up to $550 million per year in revenues. Even with taxes of up to 50 percent and payments to the community these casino operators expect to earn a very large profit. Not bad for a $50 million license fee. An auction process could have benefited all citizens of the Commonwealth, not just the lucky few who are granted a slots license. Instead, the winning candidate will have been handed a lot of money that rightly should have been captured for the citizens and taxpayers of Pennsylvania.
What is the value of a slot license in Pennsylvania? The answer to that question should come from a free and open market. After all, when commodities or corporate shares or art works are offered for sale, there is an auction process that determines the value and sales price. However, in Pennsylvania, the market was not allowed to operate for slots licenses. Instead the legislature arbitrarily set the purchase price at $50 million. Evidence to date indicates this price was far too low and the Commonwealth squandered a great opportunity to generate revenues that could have funded tax cuts.
In Pittsburgh there are four candidates for the City’s stand-alone parlor. An auction would have allowed an open competition for the license. Instead these potential owners are trying to curry favor with the Gaming Board by offering elaborate packages designed to benefit the community, with some offering $1 billion in economic development associated with the parlor and another promising a new arena. The three groups that do not get the license will undoubtedly claim foul play in the decision process. An open auction would have made it clear to all who the highest bidder was.
Two of the bidders have estimated that the parlors could earn up to $550 million per year in revenues. Even with taxes of up to 50 percent and payments to the community these casino operators expect to earn a very large profit. Not bad for a $50 million license fee. An auction process could have benefited all citizens of the Commonwealth, not just the lucky few who are granted a slots license. Instead, the winning candidate will have been handed a lot of money that rightly should have been captured for the citizens and taxpayers of Pennsylvania.
Friday, January 20, 2006
Hand Wringing Over the Penguins
True to form, as soon as the announcement came that Mario Lemieux was putting the Penguins on the market, pundits and fans began repeating the claims that Pittsburgh will be devastated by the loss of the Penguins to another city. The only hope for keeping them in the ‘Burgh is for the Isle of Capri gaming resort to be awarded the Pittsburgh slots license. And that has to be viewed as less than 50/50 bet.
But the reality is that losing a hockey team is not devastating for a number of reasons. A look at what happened in other cities that have lost hockey teams will illustrate this point. Consider three U.S. cities whose hockey teams moved away; namely, Minneapolis, Atlanta, and Hartford Connecticut.
The Minnesota North Stars left in 1993 and the city got a new team in 2000. In the seven years between the North Stars’ departure and the Wild’s arrival, private employment in Minneapolis expanded by 21 percent. Since 2000, employment has been flat. In Hartford, the Whalers left in 1997. During the seven-year period from 1990 to 1997 prior to the departure of the team, Hartford private employment fell by 7.5 percent. Since the team’s departure, Hartford’s employment has held steady.
In 1980, the Atlanta Flames left for Calgary. A new team, the Thrashers arrived in 1999. What happened in the intervening years? The Atlanta area grew rapidly through the 1980s and added nearly 600,000 more jobs-- a 41 percent increase-- between 1990 and 1999. Since the Thrashers arrival job growth in Atlanta has been near zero.
Obviously, none of these numbers necessarily reflect causality. Many factors that affect employment are at work in all the cities. But that’s the point. The presence of a hockey team has almost no effect on a regional economy. Thus, the hand wringing about the negative economic consequences of the Penguins leaving is seriously misplaced.
Understandably, many fans and civic boosters are unhappy at the prospect of losing the Penguins. But that is not sufficient reason for the taxpayers to come riding to the rescue with a big wad of money to build a new arena.
True to form, as soon as the announcement came that Mario Lemieux was putting the Penguins on the market, pundits and fans began repeating the claims that Pittsburgh will be devastated by the loss of the Penguins to another city. The only hope for keeping them in the ‘Burgh is for the Isle of Capri gaming resort to be awarded the Pittsburgh slots license. And that has to be viewed as less than 50/50 bet.
But the reality is that losing a hockey team is not devastating for a number of reasons. A look at what happened in other cities that have lost hockey teams will illustrate this point. Consider three U.S. cities whose hockey teams moved away; namely, Minneapolis, Atlanta, and Hartford Connecticut.
The Minnesota North Stars left in 1993 and the city got a new team in 2000. In the seven years between the North Stars’ departure and the Wild’s arrival, private employment in Minneapolis expanded by 21 percent. Since 2000, employment has been flat. In Hartford, the Whalers left in 1997. During the seven-year period from 1990 to 1997 prior to the departure of the team, Hartford private employment fell by 7.5 percent. Since the team’s departure, Hartford’s employment has held steady.
In 1980, the Atlanta Flames left for Calgary. A new team, the Thrashers arrived in 1999. What happened in the intervening years? The Atlanta area grew rapidly through the 1980s and added nearly 600,000 more jobs-- a 41 percent increase-- between 1990 and 1999. Since the Thrashers arrival job growth in Atlanta has been near zero.
Obviously, none of these numbers necessarily reflect causality. Many factors that affect employment are at work in all the cities. But that’s the point. The presence of a hockey team has almost no effect on a regional economy. Thus, the hand wringing about the negative economic consequences of the Penguins leaving is seriously misplaced.
Understandably, many fans and civic boosters are unhappy at the prospect of losing the Penguins. But that is not sufficient reason for the taxpayers to come riding to the rescue with a big wad of money to build a new arena.
Thursday, January 19, 2006
Rise Above Tunnel Rhetoric
Lest we have forgotten, the massive North Shore Connector is still looming in the background: this subterranean beast has been awarded Congressional approval and the Federal dollars that go with it. It also has financial commitments from the state and local governments. Its first round of bids came in higher than expected: it was re-bid in order to get a more favorable result. Though the bids were to be opened January 11th, there has been no word yet whether the desired result--a lower bid to get the project started--was achieved.
There is no doubt that the project has changed enough that the Feds ought to take another look at this boondoggle. Because of rising costs, the leg to the Lawrence Convention Center has been scrapped. The Connector--if it is to be built--will be a little used method that will serve North Shore attractions like the stadiums. Taking away the trolley as a way to serve conventioneers renders a lot of its "benefits" moot. It is a remote possibility that the promised jumping off to points North and West will come to fruition anytime soon.
It is time for state and local officials--many of whom have expressed the project as a fait accompli but might have to scrounge for more money if there are cost overruns on the Connector--to go to the senior Senator and request the money be moved to other uses. It happened in Alaska with the infamous "Bridge to Nowhere", so it can happen here. It is time to quit pretending that the Connector will be a good thing for Pittsburgh and to move the money to more pressing needs--attention to the bridges in the region might be a good start.
Lest we have forgotten, the massive North Shore Connector is still looming in the background: this subterranean beast has been awarded Congressional approval and the Federal dollars that go with it. It also has financial commitments from the state and local governments. Its first round of bids came in higher than expected: it was re-bid in order to get a more favorable result. Though the bids were to be opened January 11th, there has been no word yet whether the desired result--a lower bid to get the project started--was achieved.
There is no doubt that the project has changed enough that the Feds ought to take another look at this boondoggle. Because of rising costs, the leg to the Lawrence Convention Center has been scrapped. The Connector--if it is to be built--will be a little used method that will serve North Shore attractions like the stadiums. Taking away the trolley as a way to serve conventioneers renders a lot of its "benefits" moot. It is a remote possibility that the promised jumping off to points North and West will come to fruition anytime soon.
It is time for state and local officials--many of whom have expressed the project as a fait accompli but might have to scrounge for more money if there are cost overruns on the Connector--to go to the senior Senator and request the money be moved to other uses. It happened in Alaska with the infamous "Bridge to Nowhere", so it can happen here. It is time to quit pretending that the Connector will be a good thing for Pittsburgh and to move the money to more pressing needs--attention to the bridges in the region might be a good start.
Wednesday, January 18, 2006
No Benefits Stories
As predictable as night follows day, when there is a special event in Pittsburgh such as a playoff game, there will be stories about the economic benefits to the City arising out of hosting the event. Restaurants, hotels, and novelty producers will be interviewed to tell us how much business they are doing because of the special occasion. Experts will talk about multipliers to explain the millions of dollars in economic activity the City will experience.
Now that the Steelers are on the road for the third straight week one would have thought that it at least one media outlet would have noticed that large numbers of Pittsburghers have been traveling to other cities and leaving substantial sums of money in those towns. Must be millions of bucks being drained from the local area.
All this is by way of pointing out that the seemingly mandatory stories about benefits of one-off events are overblown. No one really believes that they make any real difference to the local economy. On the other hand some growth in permanent, full-time jobs that pay significant salaries and that do not require heavy taxpayer subsidies would be a really important story. Wouldn’t it be nice to be reading about those jobs?
As predictable as night follows day, when there is a special event in Pittsburgh such as a playoff game, there will be stories about the economic benefits to the City arising out of hosting the event. Restaurants, hotels, and novelty producers will be interviewed to tell us how much business they are doing because of the special occasion. Experts will talk about multipliers to explain the millions of dollars in economic activity the City will experience.
Now that the Steelers are on the road for the third straight week one would have thought that it at least one media outlet would have noticed that large numbers of Pittsburghers have been traveling to other cities and leaving substantial sums of money in those towns. Must be millions of bucks being drained from the local area.
All this is by way of pointing out that the seemingly mandatory stories about benefits of one-off events are overblown. No one really believes that they make any real difference to the local economy. On the other hand some growth in permanent, full-time jobs that pay significant salaries and that do not require heavy taxpayer subsidies would be a really important story. Wouldn’t it be nice to be reading about those jobs?
Monday, January 16, 2006
Day Surge Puts 41% More People In the City
Schizophrenia Over Commuters
Any marketing of Pittsburgh invariably touts its great hospitals and universities as hallmarks of the City’s leadership in education and health. Likewise, new taxpayer funded stadiums for professional sports teams and cultural attractions are prized as contributors to the City’s economic well-being. State, federal, county and city governments are major employers and create numerous spin-offs in the legal and other professions.
All of these have one thing in common. They produce jobs, many of which are filled with commuters. We build busways, light rail systems and highways to get people into the City where they help create wealth in the form of business and personal income, raise the market value of property, buy lots of stuff, and park at great cost. Thus, it is bizarre that while the City purports to want as many commuters and visitors as possible to come, with more always better, it simultaneously complains that commuters do not pay their fair share of the cost of City services.
Would the City like it better if no commuters or visitors came? Clearly, the answer is no. The City’s population cannot fill all the jobs of all the governments and businesses that operate and pay taxes to and enrich the City.
But, that’s not the worst of it. Commuters, visitors and non-resident owners of commercial property are already contributing far more to the City’s tax coffers than they use in services. The new municipal services fee, the business payroll tax, property taxes by non-residents, parking taxes, the non-resident share of the RAD tax and the amusement tax all add up to more than the City’s public safety budget.
It is not the fault of commuters, visitors and non-residents that the City cannot control its spending which, on a per capita basis ranks, among the highest of mid-sized U.S. cities. This is the same City that refuses to do meaningful privatization and cannot even agree to allow its purchasing department to be consolidated with the County to save money.
Cognitive dissonance and schizophrenia regarding the City are all too commonplace in the public policy arena.
Any marketing of Pittsburgh invariably touts its great hospitals and universities as hallmarks of the City’s leadership in education and health. Likewise, new taxpayer funded stadiums for professional sports teams and cultural attractions are prized as contributors to the City’s economic well-being. State, federal, county and city governments are major employers and create numerous spin-offs in the legal and other professions.
All of these have one thing in common. They produce jobs, many of which are filled with commuters. We build busways, light rail systems and highways to get people into the City where they help create wealth in the form of business and personal income, raise the market value of property, buy lots of stuff, and park at great cost. Thus, it is bizarre that while the City purports to want as many commuters and visitors as possible to come, with more always better, it simultaneously complains that commuters do not pay their fair share of the cost of City services.
Would the City like it better if no commuters or visitors came? Clearly, the answer is no. The City’s population cannot fill all the jobs of all the governments and businesses that operate and pay taxes to and enrich the City.
But, that’s not the worst of it. Commuters, visitors and non-resident owners of commercial property are already contributing far more to the City’s tax coffers than they use in services. The new municipal services fee, the business payroll tax, property taxes by non-residents, parking taxes, the non-resident share of the RAD tax and the amusement tax all add up to more than the City’s public safety budget.
It is not the fault of commuters, visitors and non-residents that the City cannot control its spending which, on a per capita basis ranks, among the highest of mid-sized U.S. cities. This is the same City that refuses to do meaningful privatization and cannot even agree to allow its purchasing department to be consolidated with the County to save money.
Cognitive dissonance and schizophrenia regarding the City are all too commonplace in the public policy arena.
