Allegheny Institute Blog

As the state’s fiscal year draws to a close, legislators are ready to approve a $26 billion budget for the next twelve months. The proposed budget represents an increase over this year’s budget, a reported 7 percent rise.

Year over year increases would not be business as usual if we adopted an expenditure limitation. In fact, the state Senate passed such as measure last November that would have used a combination of inflation, population growth, and/or personal income growth as the yardstick by which to measure spending increases. Overall budget growth would have been legally required to stay under the measure.

Let’s go back to the 2005 fiscal year as a starting point: that year, the budget was $22.8 billion. The next year, spending grew to $24.6 billion, and to the now proposed $26 billion before the General Assembly.

If the state had adopted a spending limit that year, growth in future years would have been limited to 4 percent. Based on recent changes in the Northeast Consumer Price Index (3.6 percent) and the increase in the state’s population (0.3 percent), the budget could grow at a rate commensurate with real world factors and not the whims of elected officials answering the needs of bureaucrats or special interests. With a 4 percent limit, this year legislators would be talking about spending no more than $24.6 billion, over a billion less than what is on the table.

Fiscal Year Actual State Budget State Budget Under Cap Savings
2004-05 $22.8 billion $22.8 billion
2005-06 $24.6 billion $23.7 billion $900 million
2006-07 $26 billion $24.6 billion $1.4 billion

The $2.3 billion in total savings could provide the basis for a nice income tax reduction, capital stock and franchise tax cut, or property tax rebates without the mess of relying on legalized gaming. It would do more to force choices among competing priorities. And if the Governor and legislators were more aggressive, they could hold spending to a rate of less than the cap, producing more savings.

Though it is clear that he granted an extremely favorable deal with the City firefighter union in 2001 to win their political endorsement, the former Mayor of Pittsburgh won’t be charged with a crime. Instead, he will be asked to participate in further inquires from the U.S. Attorney General’s office, including lending his suggestions as to how the state’s public safety collective bargaining law should be improved.

That’s like asking Bonnie and Clyde how to strengthen bank security.

Of course the law, Act 111, needs scads of improvement. Our 2005 report looked at the law and the laws in neighboring states and found that 111 is clearly stacked in favor of public sector unions. It makes no sense to have the parties go to arbitration without any meaningful mediation or fact-finding; or that the parties get to pick the arbitrators; or that there is virtually no criteria guiding the process on salaries, benefits, and the like. The process needs to work more like a court of law with a neutral arbitrator and the ability to start from zero salaries and benefits.

Despite those facts, don’t look for any movement toward changing the law, even with the Feds peeking in. There has nary been any state-level inquiry into how to improve Act 111 since the late 1970s. The members of the General Assembly clearly are not interested in touching it. A spokesperson from the House Speaker’s office even stated that “as of right now, there are no changes [to the act] being looked at.” She could have added that as long as the current Speaker holds his office, Act 111 will never be reformed.

As such, the U.S. Attorney’s trading criminal charges from the 2001 deal with the fire union for making Act 111 better was a bad deal.

There is a movement afoot to reduce the size of Pittsburgh City Council from its current size of nine to five. With public outcry over Council’s spending habits, particularly those of Councilwoman Carlisle, some reform of Council or its operations is needed. But it is not the call for change that is interesting; rather it is who is pushing for the change—the City firefighters’ union and City Republicans. Strange bedfellows indeed.

Each has their own agenda for reducing the size of Council. The firefighters’ union is still upset that the Act 47 designation has reduced their collective bargaining power. They may be interested in loading council with members who would be more favorable to removing the designation, thus restoring power to the union—a power they enjoyed when conspiring with then Mayor Murphy to land a sweetheart contract in 2001.

City Republicans haven’t sniffed a meaningful elected office for decades and would love to win a seat on Council. But would a smaller Council increase their chances of gaining a seat? If Council districts are redrawn, it will more than likely be by Democrats who will make sure they are drawn to disadvantage the City’s small Republican voter base. A smaller Council with larger districts will not increase Republicans’ chances of winning an election. Indeed, the chance of Republicans having a high enough registration to win a Council seat will go down.

Both groups claim that their motives are “good governance”. But reducing the size of Council is estimated to save about $600,000 annually. This is just a drop in the bucket of a $420 million budget. If these groups wanted to change City government for the better, they should begin to push for privatization and outsourcing of services. They could also put pressure on the Legislature to reform Act 111 and eliminate prevailing wage laws. Any of these actions would reduce the cost of city government.

While Council’s spending is certainly an issue that needs to be addressed, it is not nearly as important as workers’ compensation abuse, an under funded pension system, or burdensome debt payments. Yet these topics are swept under the rug and never rise to the level of Council discussion. While avoidance of the real potential cost savers is a clever diversion, it is ultimately self-defeating. The piper must eventually be paid.

With the City’s many problems, it is interesting that City Republicans would team with the firefighters to target the size of Council. If these groups were really serious about helping the City, they would forget about the size of council and start addressing the real reasons Pittsburgh is in financial distress.

The firefighters’ position is understandable. They want to protect their lucrative pay and benefits—and their far out of proportion political power. Republicans, on the other hand, need a better thought out rationale than “good governance”—a buzzword concept that is not addressed by reducing the size of Council.

The Census Bureau’s estimates on population changes have been heavily covered in the local media due to the fact that the City of Pittsburgh’s population fell by 4,000 people from July 2004 to July 2005. The City’s population now stands at just over 316,000 people and it is possible that the City could be home to less than 300,000 people by the end of the decade if that rate continues.

What a precipitous fall. Since standing at 676,000 six decades ago, the City has lost close to 360,000 people. Major economic transformation contributed to much of this change, but heavy-handed government and civic intervention beginning in the 1950s certainly did not help.

There’s something to be said about the relationship between government spending and taxes and the attractiveness of a City. In 2004 we did a study that examined similarly sized cities to Pittsburgh (300-380,000 people) and line items in their 2002 budgets. Pittsburgh, along with Cincinnati and St. Louis, consistently ranked at the top of the list for per-capita spending and taxes collected. They spend well above average on the public safety functions of police and fire protection.

What has happened to their population count? Since 2000, those three cities have lost population with Pittsburgh falling 5.3 percent. Cincinnati lost close to 7 percent, St. Louis at just over 1 percent.

Conversely, cities that we found spending and taxing at a fraction of the rate of Pittsburgh—cities like Colorado Springs, Arlington, Raleigh, and Tampa—have added population over the five-year period.

This is not to imply a causal relationship, but there seems to be a correlation between a low-spending, taxpayer-friendly government and the attractiveness of a city. The cities that are growing have the added bonus of being located in Right to Work states with low levels of public sector unionization. Pittsburgh and Cincinnati have pursued strategies of subsidizing stadium and convention center construction while not tackling core problems. They languish, while the others flourish. Go figure.

Now this is just what Pennsylvania’s businesses need: A cleverly disguised income redistributing tax increase. Of course, it goes by the more politically palatable name of minimum wage hike.

The legislature is closing in on a bill that will boost the state’s minimum wage to $7.15 per hour by July 1, 2007; January 1, 2008 if the Senate version passes. The current minimum is the Federal rate of $5.15.

Let’s cut through all the rhetoric about how working families need a pay raise and look at reality. According to the Department of Labor and Industry, approximately 423,000 workers currently earn between $5.15 and $7.15 per hour—the current and proposed minimum wages in Pennsylvania. Let’s assume that the average wage paid to this group is half way between at $6.15 per hour. That means that after the new minimum goes into effect, the annual wage bill of Pennsylvania’s businesses will rise by almost $900 million, an average of over $2,000 for the 423,000 workers.

But that is not the end of the story. Workers currently earning $5.15 per hour will get a wage jump of $2.00, pushing their employers’ annual cost upward by about $4,000 for those working full time. Now this leads to something called wage compression. Workers who were making say, $7.25 per hour prior to the minimum wage because they had learned skills sufficient to boost their production value above the very low skill, entry-level positions, will find themselves earning little more than people whose market value was previously 30 percent below their own. They will undoubtedly not be very happy about that and will push for higher wages to reflect their superior productivity.

And it gets worse. Obviously, there is no way companies in highly competitive sectors such as eating and drinking, leisure and hospitality, or retailing can afford to absorb wage increases of this magnitude. Certainly, small Mom and Pop businesses that are struggling to get by already will not be able to afford the mandated wage hike. To the extent they can, businesses will try to pass as much of their higher cost along to customers. In that case, the minimum wage boost can be viewed as a higher consumption tax.

To the extent that the enlarged wage costs cannot be passed along to customers, businesses will have to make decisions about personnel cutbacks and/or benefit reductions. Now here’s the really ugly part. Workers who are currently making more than minimum, and getting some health coverage or other company paid benefits, could see those cut back so the company can meet the higher payroll mandated by the state. Wonder how they will feel about that?

It’s the seen and the unseen problem writ large. The workers receiving a nice fat pay jump courtesy of the Governor and legislature will be happy and the politicians will gloat over the marvelous thing they have done for the “little guy”. Meanwhile, consumers who are picking up the higher wage cost through increased prices, the workers who are losing jobs or benefits, and the businesses that might close their doors altogether will get little notice. That’s the way governments that don’t believe in or trust competitive, free markets and who are wedded to statist policies work. That’s also the way governments where politicians focus on the squeaking wheel to the detriment of the body politic as whole operate.

Experience shows us that more often than not, income-redistributing policies lead to a lowering of aggregate production and incomes relative to where they would be absent the policies. That’s the minimum wage story. Government mandated redistribution for a supposed greater good. The public gets suckered every time.

It must be late June. The Pirates are out of the pennant race before the All Star game. Again.

The Steelers will open training camp soon and the sports pages can shift coverage to them and recent Pirates draft choices and how they are doing in the minors.

Remember the heady days when Mayor Murphy and Governor Ridge shoved Plan B down our throats? The new ballpark was going to provide the revenues needed to enable the Pirates to field a competitive team. Six years into playing in the new ballpark and the Pirates are no closer to fielding a winning team than they were in 1995 when Kevin McClatchy and his group bought the team.

Over $200 million in taxpayer money invested; the loss of property tax revenues for the parcels of real estate used to build the stadium and the forgiveness of $60 million in team debt by the URA. Taxpayers will never see a return on their investment.

Why? All because it was claimed the Pirates would leave if they did not get a new stadium. But the team could not just move. Under a 1985 loan agreement they had to give the Mayor time to find a buyer who would keep the team in Pittsburgh at the Pittsburgh market value. In short, the threat to leave was hollow and meaningless. Nonetheless, the politicians defied the will of the voters anyway and diverted tax dollars to build PNC Park.

So, here we are with a pitiful excuse for a ball team and owners that have been greatly enriched because of the generosity of elected officials using taxpayer money. Amazingly, some still wonder why voters are cynical.

Garbage workers in Pittsburgh are once again raising the specter of a walkout during the week of All Star game festivities in the City--a strike that would produce great embarrassment at a time when the nation is focused on Pittsburgh. How is it that civic and political leadership have not denounced this threat as unprofessional, unacceptable and destructive of the City’s best interests?

Instead, we get assurances that every effort will be made to get a contract settlement before the strike deadline. But what that means is that the City is having a figurative gun held to its head through this All Star week strike threat and is under enormous pressure to acquiesce to union demands.

City, County and civic leaders should let the citizens of the area and the nation know that this behavior is intolerable. First, anyone who walks off the job should lose his job. Second, if the garbage workers go out on strike, the City should have private contractors in place ready to pick up the garbage in critical areas to prevent the worst of the public relations nightmare from happening.

Doing less is irresponsible. Telling the garbage workers in advance that the garbage will be picked up during their strike should go a long way to dissuading them from walking out.

The City needs forceful leadership. This garbage strike threat provides the perfect time to exercise the strong leadership so desperately needed. Mayors must not allow themselves to be bullied.

For all the talk about the free market working in the redevelopment of Downtown, there are state and local dollars aplenty finding there way in through the cracks to the developers. That’s no real surprise. In some cases, like the PNC Tower, the project will get money from both sources. With the Millcraft development on Fifth and Forbes seeking only state dollars, the Mayor and County Executive are being called upon to lobby the state for the help.

Why does Millcraft need the help? One of their officials noted that “it costs as much to build in Pittsburgh as it does, potentially, in New York City, if you take out the land value”. Really? It costs as much to build a structure here as it does in one of the most expensive places on earth? What could explain such a claim if accurate? Could it be the favorable labor policies that ensure contractors are paid prevailing wages on a project if it gets public subsidy?

While it might be as expensive to build as in New York, Millcraft is convinced that people won’t pay New York prices for housing in Downtown. That’s where the subsidies come in according to Millcraft. The taxpayers’ generosity—to the tune of $18 million—will help keep Downtown housing affordable, say $150,000 to $200,000. That’s well above the median housing price in many communities and would be considered a luxury for a lot of folks. It is no better than using tax dollars to construct a building that will house condos and a boutique hotel, as will be the case with PNC Tower.

To be sure, there are plenty of people who pay $200,000 an up for housing, and some of them do it in Downtown and other city-based condominiums. Millcraft is working in a situation where there is not an influx of new residents, the City is losing population (over 4,000 between July of 2004 and July of 2005), and a lot of their prospective tenants are likely going to relocate from other locations in the City or region. Demand is not high. So it is no surprise the developers are grabbing the money when they can.

Attempting to resuscitate the $21 million South Hills parking garage, the Port Authority will enter into a lease arrangement with the Village Square Giant Eagle to take up to 300 spaces for an annual lease rate of $56,000. Recall that the garage has 2,200 spaces and is only utilizing about 250 spaces right now on a daily basis. Opening up 300 spots for Giant Eagle means that instead of four floors of the garage being shuttered, three floors will be shut down.

Now consider the lengths to which a Giant Eagle employee will go in order to park at the garage—about a half of a mile away and with two heavily-traveled roads between the garage and the store with no sidewalks or pedestrian crossings—and it will be easy to understand why we’ll never see the full component of cars parked in the garage. Weather, traffic, and time will all conspire against getting employees to use the garage. Instead, look for them to find parking space closer in other retail lots. Maybe managers will lead the way and park at the garage, but we suspect not. Eventually, the Port Authority will probably have to offer to run a “free” shuttle between the garage and Giant Eagle.

Also consider the economics of the deal. Taking 300 spaces for $56,000 amount to $186 per space, or $16 per space per month. In reality, there are probably 200 cars are parking there now 300 days a year at $2 per day, meaning the authority is getting $120,000 per year for those vehicles. The lease with Giant Eagle will add $56,000, meaning revenues for the garage will be about $180,000 per year. With the garage costing $21 million to build, annual depreciation (10%) is $2.1 million. The annual opportunity cost of invested capital is at least $1.2 million. We must add operating and maintenance costs, say $500,000. Can you say at least $1.5 million in losses annually?

Is it any wonder that PAT has the financial problems it has?

Under what is surely intense prodding by the Governor, the Gaming Board is trying to resolve its seemingly endless squabbling over how many supplier districts to create before the June 28 deadline. After that, a new state group will assume responsibility and likely push back any slots license awards by a year or more.

For many track owners, especially those who have paid a bundle in anticipation of slots at the tracks, the delay will be incredibly expensive. For the applicants for the slots license in Pittsburgh who have undoubtedly already spent millions preparing their proposals and doing the public relations work necessary to get a license, a year or more of further delay will be horrific. And the Penguins deadline will arrive with no casino money to build a new arena.

The writers of the gaming legislation have only themselves to blame. Why on earth was it necessary to include the supplier middleman role? Casinos can buy their machines perfectly well from the manufacturer or existing suppliers. But no, the legislators wanted to extract another few dollars from the process and allow some friends to make money. This greed might end up biting them big time if the Gaming Board doesn’t resolve the problem in the next few days.

But the supplier kerfuffle is of a piece with the wrangling over who will get the slots license in Pittsburgh. Instead of having a bidding process with the proceeds going to the community where the casino is located, we are now caught up in a mindless debate over which development plan is better.

Obviously, all the bickering at the Board and the squabbling in Pittsburgh do not bode well for the future of the slots industry in Pennsylvania.

Just maybe we could get lucky enough for the whole slots idea to pass into oblivion so that we could start to focus on real solutions to our state’s problems. The dangling of hoped for slots revenues as a way to fund schools, promote economic development and pay off City and Authority debt has caused us to lose sight of an important reality. The money must come from somewhere and most of it will come from Pennsylvanians who will have less to spend on other things. The hidden costs will eventually show up in slower growth and fewer jobs outside the casino industry.

And that does not take into account the massive social costs gaming inevitably brings.

Since the idea of gaming is so attractive to the Governor and the legislature, they are not going to let it die. What they need to do is revisit the gaming law. Get rid of the in-state supplier nonsense. Require an open auction for the licenses. And set aside at least 10 percent of the net casino take to cover the additional social and criminal justice costs that are almost certainly going to arise out of the presence of slots gaming.

Pennsylvania continues to slouch toward the French economic disease. A disorder wherein narrow but strong special interests dictate public policies that are inimical to the welfare of the population as a whole. June 14, 2006 brought the latest example of the perfidious pandering of the Pennsylvania Legislature, namely a property tax relief plan that will borrow $200 million from the Lottery fund to provide some tax reductions and rent rebates for low-income residents over the age of 65. Otherwise the package is devoid of meaningful change. The so-called backend referendum requirement is so full of exemptions that it will never result in voters having a say about their taxes.

This is a travesty foisted on Pennsylvania to allow officials to pander to seniors--the state’s biggest voting bloc. Disgraceful hardly begins to describe the Legislature’s action.

There is little or no help for middle-income homeowners and nothing for commercial property owners.

It is a big win for the Governor who can now claim that he has fulfilled a campaign promise to bring major tax relief. The stupefying part is that the leadership in the House of Representatives went along with this bill. It is worse than nothing. There will be no need to revisit this issue for quite some time once the Governor signs the bill into law. As a result, meaningful property tax relief in Pennsylvania has been put on a very cold backburner.

If the House vote truly represents the will of the people of Pennsylvania, the state must reconcile itself to being an economic also ran forever.

Two GOP state Senators have released their plan to ease the burden of property taxes in Pennsylvania. The crux of their plan is to expand the scope of the sales tax to include items that are currently exempt. While specific details are not yet available as to which items would be taxed, this plan will appeal to those who favor tax shifting to real reform.

However, unlike many of the tax shifting plans that have sprung up over the last few years, this one contains real protection for property taxpayers—namely a “super back-end referendum” on any school spending increases. Those who live in Allegheny County understand all too well the burden that school districts have placed on residents with their unabated spending increases. Teachers hold districts hostage with strikes and school boards give in to keep the peace while taxpayers see larger bills. The only recourse for taxpayers has been to vote out school board members, who are usually replaced with others who keep the cycle going.

Previous attempts at property tax reform have included referendum clauses, but they were very weak and contained so many loopholes as to render the requirements useless. Without a strong referendum process in place, whatever property tax shifting scheme is thought up by legislators will quickly become inadequate, as school expenditures will continue to climb.

Forcing accountability upon the district and its board, which can be achieved with a comprehensive referendum requirement, is a great start. However, it is only part of the remedy. The right to strike for teachers must also be eliminated. Furthermore, if lawmakers want to rein in school district spending, they must not impose mandates unless they come with complete state funding. These three changes will go a long way to reducing school property taxes and restoring order to a property tax system long out of control.

The public’s contribution to the light rail extension known as the North Shore Connector continues to increase. Now we are told that the absolute drop dead date for determining whether the project will go forward is June 23rd. That is when the FTA will green light or kill the project by infusing another $18 million toward their more than $300 million already in, or walking away.

Of course, this move will not only push the total cost up to $428 million, it will require a new round of contributions from the state ($5.8 million), the County ($1.2 million), and even the cash-strapped Port Authority ($10 million).

While the County Executive has expressed lukewarm enthusiasm for the project, he has broken his word that the County would not contribute any more money to the Connector, noting that it is too hard to walk away from what the Feds are offering and this is the only way to get light rail to the airport and the North Hills.

That’s a lot of hot air. Taking the light rail to the North Shore and then connecting it to the airport makes no sense since the T is already situated on the South Side and Station Square. It also makes no sense since the Connector’s boosters have told us time and again that the Federal government will never dangle this much money for a project again. Given the lengths officials have patched together dollars to meet this budget, how will they do it again?

Let’s be clear: the Executive is responsible for the money the County puts in, as well as what PAT contributes since he appoints all the board members. He can’t take the position that the deal was done before his time. If the project were to go away, the state and local money could be put toward other uses for the pressing transportation needs in the region. Call this what it is: a sop to the unions and contractors.

http://www.pittsburghlive.com/x/pittsburghtrib/news/cityregion/s_457756.html

Finally, someone has admitted it—team owners push for building sports arenas with taxpayer money to increase their own wealth at the expense of taxpayers. While we always knew it, supporters of such a strategy would dance around the issue or hide under the “quality of life” excuse. In the ongoing saga of the Pittsburgh Penguins, a source familiar with the selling of NHL teams has validated our view: “Buyers are looking for situations in which they could operate an arena without having to pay for it, while making money from other events, naming rights, concessions, parking and advertising.”

The Penguins have been pressing for a new arena since the team was bought from bankruptcy by its current ownership group. The mantra has always been competitiveness on the ice and how the team cannot keep up with big market teams like Detroit or New York. Before the NHL went on strike, Forbes magazine valued the team at $114 million. With the lockout over and a new owner-friendly collective bargaining agreement in place, that value is estimated to be the same. Considering that the team was purchased in 1999 for $85 million, that is not a bad return on investment (34 percent increase).

However, with a new arena, industry insiders estimate that the team could be worth nearly $150 million—a return on investment of $65 million (76 percent) for the current ownership group. A new arena makes perfect sense for owners—the old ones reap the benefits when it is sold and the new ones make money from its operations—without having to pay the approximately $300 million cost.

What a sweet deal. Even politicians benefit from being known as the ones who saved the franchise. Fans gain as they can continue to spend their entertainment dollars watching grown men play a child’s game. Taxpayers, however, are left on ice, as the money used to build this facility cannot be used to lower taxes, pay off government debt, or make the City’s pension system solvent. $300 million can go a long way to fixing the City’s or region’s problems, instead it will go toward lining the pockets of the owners.


http://www.pittsburghlive.com/x/pittsburghtrib/news/cityregion/s_457111.html

“We will finally have economic growth in the [Allegheny] valley”
“[The project] is going to be a financial boon to the valley”
“We may eliminate Harmar real estate taxes by 2008”

Believe it or not, these public pronouncements were made not in response to a new manufacturing or high-tech business development, but to the announcement that the retail center known as Deer Creek Crossing would proceed following County Council granting a TIF to pay for part of the project costs. That was two years ago.

Who knew another mall could do so much? But how empty these comments seem today. Instead of fulfilling its promised wonders, the development has stalled after losing its development leadership for the second time. The first developer quit the project after shepherding the development through its first set of tax increment finance approvals and court challenges that went all the way to the state Supreme Court.

After that developer withdrew, another developer took up the reins but recently decided against going forward. The owner of the land where the development is to be built was asked to take an equity stake in the project, but passed. Not a ringing endorsement of the potential of the project.

Why the hesitancy? It is really no surprise at all. Back in 1999 we wrote about the possible negative side-effects of adding more subsidized retail to the mix in Allegheny County. Then, in 2004, a study commissioned by the County Department of Economic Development showed that a lot of the activity that might occur at Deer Creek would be siphoned off from other retailers, many of who were not showered with favorable tax treatment. The affected stores could close as a result. We also pointed out that nearby Pittsburgh Mills, which also received a tax increment finance deal, would offer a lot of competition for Deer Creek when it got off of the ground.

In a bit of irony, the 2004 Deer Creek study noted that the development would be competing with a big box component of the Mills project known as the Village at Pittsburgh Mills. The study stated that “[the Village] will likely have more leasing difficulties and may need to shift its merchandise mix or reduce its size given Deer Creek Crossing’s superior location”. In fact, two of the anchor stores specifically mentioned in the study will be part of the Village at Pittsburgh Mills development. Looks like Deer Creek will be the one to make accommodations.

Talk about needing to remove the egg from one’s face. In this case, there is plenty to go around for a lot of faces. This is one more example of what happens when government interferes too heavily in private sector projects, especially when the government ignores the criteria spelled out for its possible involvement.

Pennsylvania Education Secretary Gerald Zahorchak has asked the Pittsburgh Public School District to oversee the operations of the Duquesne School District. Nothing in Pittsburgh’s past suggests that they are capable of righting their own ship, let alone that of another failing district. While the new Superintendent of Pittsburgh Public Schools brings optimism with his consolidation plans and revised curriculum, he has yet to really accomplish anything.

The Pittsburgh School District spends more per pupil than any other district in Allegheny County and yet has some of the worst academic results to show for it. However, its students do outperform those of Duquesne—not a ringing endorsement. What will they teach the administration at Duquesne? How to spend more and achieve less?

Instead of looking to another public school system to repair Duquesne’s, state officials should be looking to the private or non-profit sector for help. Maybe the Diocese of Pittsburgh, which already runs a very successful education system, would be willing to take over the district. How about transferring the district over to a charter school company? One company currently operates in the area and claims more than 110 of Duquesne’s students in its schools.

The reason that this idea will not be tried is that the educrats in this state are afraid that it will be successful. Once it can be proven that a district can be privatized, student performance improved, and costs lowered, taxpayers around the state will be clamoring to follow this path. Teachers’ unions are not about to let that happen. Instead they will be content to let the students of Duquesne flounder in academic misery. From their point of view, it’s better to let another public system take over, even if that system is no different than the one being replaced.

Ever wonder why so many companies shy away from Pittsburgh as a place to start a business? One of the main reasons has to be the obstreperous and in-your-face public unions with their “who cares about the City as long as we get what we want” attitude. The same unions City Council fawns over and cossets endlessly.

The President of the garbage workers has just driven home how completely out of touch the City’s unions are. He is quoted as saying, “We intend to walk out July 8 unless we have a contract or at least some movement toward a contract. I think there’ll be a lot of national attention on Pittsburgh, with the All-Star game here, and I couldn’t think of a better time.”

That’s just marvelous. Let’s show all the visitors and the national TV audiences how filthy and smelly a City can get during the hot summer when garbage isn’t collected. Pittsburgh already has enough trouble dealing with its image as a result of years of kowtowing to unions, especially the government worker unions. Now the garbage collectors want to demonstrate to the world how utterly spineless elected officials in the City have become when it comes to dealing with the unions.

But as someone once observed, people get the government they deserve. The City’s voters back the unions even to their own detriment as taxpayers and jobseekers. It will take a very courageous leader indeed to step up and say this race to the bottom cannot continue. Maybe, just maybe, some voters will hear the message.

However, as long as the Governor signals his willingness to bail out the City with state tax dollars, the City government will sit on its hands and put off taking the necessary steps to address union control of the City.

http://www.post-gazette.com/pg/06157/695957-53.stm

Leadership Pittsburgh’s recent graduating class had an assignment: come up with an idea that would move Pittsburgh forward. F’s for the entire group. They trotted out the tired old idea of merging the City of Pittsburgh into Allegheny County. Regional boosters love the idea and tout improved economic development, better image, and improved efficiencies as reasons to love the notion. Just get rid of all these municipalities and watch Pittsburgh/Allegheny County take off. Perhaps they should first explain why the single City/County government in Philadelphia costs so much and has a terrible problem with its population and jobs leaving.

But they have missed the point entirely, as these civic minded, well-intentioned groups almost always do. The reason for the City’s and County’s dismal growth, and for that matter the region’s as a whole, is not fragmented government. The problems can be found in the pervasive unionism that determines the business climate as well as a regulatory climate that treats businesses as villains and unions as heroes. Merging City and County governments will not spur economic growth, although it may improve the ease with which corporate wealth fare is handed out.

True economic growth and improved job opportunities will be achieved only after union friendly regulations such as prevailing wage and Act 111 are eliminated. Furthermore, fostering a better business climate can be helped along by cutting tax rates, such as the state’s capital stock and franchise tax and the City’s parking tax. Why didn’t the Leadership class focus on these job and business growth killers?

As far as improving efficiencies in providing government services are concerned, there is no evidence that full scale mergers improve efficiencies. Two years after the merger of Louisville and Jefferson County, KY, —the example often held up as the model—government expenditures were virtually unchanged. The major reason of course is the unions involved. With two different unions, with differing pay scales and work rules, reconciling differences will be costly as the unions will favor the pay and work rules that benefit them the most.

Improved government efficiencies can be brought about through privatization or outsourcing of services. Study after study has been done recommending the City privatize its refuse collection to save money. This notion has been resisted at every turn by unions and their supporters on City Council. Even when tried, as with fleet maintenance, private providers are hindered from implementing changes that would lower costs substantially. Again, the graduates from Leadership Pittsburgh failed to mention this option as a way to lower government costs.

Moreover, virtually every Allegheny County municipality has a per capita cost of providing government services below Pittsburgh’s and they are not weighed down by huge debt burdens, enormous unfunded pension liabilities and unfunded retiree health care benefits. Nor do they spend a million dollars a month on Fire Bureau overtime or $8,000 per employee for Workers Compensation. Both of these figures prompt financial officials in other cities to shake their heads in disbelief because they are so far out of line with normal and prudent outlays. Maybe the Leadership class ought to examine some of the more egregious City spending habits before recommending that other taxpayers be saddled with them.

Perhaps some broader based research to see how other areas have fared and why so many of these mergers get turned down would be of some help as well. Taking advice from PUMP is of no use. They have rarely been right about anything.

Instead of coming up with innovative ways to improve the City and help pull it out of financial distress, the graduates from Leadership Pittsburgh are carrying water for the Allegheny Conference, which continues to confuse activity with progress. They see merging the City with the County as a way of spreading the City’s financial problems over a larger population. As the president of the Fraternal Order of Police responded, having the City ask you to merge would be like “your poor, drunk uncle was going to come and live with you.” County residents are wise enough to avoid that disaster.

“…I’m willing to do it again as long as we get this right.” This quote, from the President of County Council on the never-ending assessment debacle, is probably the understatement of the year. The administration has contorted property assessments numerous ways to “get it right”. Of course, in this case, “right” means “politically safe” and generating the fewest complaints instead of correct and accurate assessments that reflect reality and ensure fairness for taxpayers.

The quote refers to the latest episode: the Appeals Board isn’t sure what the Administration and Council mean by their base year plan.

That’s very telling. If Board members—people who are appointed to hear disputes on the County’s assessed values—do not understand the plan, how are ordinary citizens supposed to? After all, the Executive has made many public statements noting how straightforward his plan is.

After trying to cap assessment increases and “trending” increases to other factors, the Administration and Council declared 2002 as the base year and declared any sales taking place after that would be irrelevant as far as assessments are concerned. Now there is the sticky issue of schools bringing appeals on properties that sold in the base year or just before, in 2001 using comparables from that period to show under valuation. How are those to be handled?

It was predictable. Assessment pandering begets more pandering. One can see what will transpire—defenders of the “base year” plan will simply tell the Appeals Board to minimize the negative fall out of the plan. While the Board and elected officials are conferring, they might also want to figure out how they are going to correctly assess any new houses, or commercial properties, that are built in future years and how they will adjust to 2002 values.

As we have said all along, the best, though not the most politically expedient, approach, would have been to implement the original 2006 assessments as they were originally produced. Those values were closer to recent sales prices on properties in the county, and it would have transitioned the County into the annual assessment process as originally envisioned. Spending the money necessary to get the assessed values right would have gone a long way to finally fixing the assessment problem. All that has happened is that the Council and Administration have bought a little time. Eventually, this problem will come back full blown as a court case or public outrage over unfairness as taxing bodies have to continuously raise millage rates because assessments are not allowed to rise to reflect market gains.


http://www.post-gazette.com/pg/06153/695161-85.stm

The Greater Pittsburgh Visitors and Convention Bureau is no more—it will be called VisitPittsburgh from now on. The Bureau decided to change its name to reflect what it does, namely trying to get visitors to the region, and eliminate what it saw as confusion that it does not actually run the convention center (probably much to its relief).

Recall that the agency that actually does run the convention center—the Sports and Exhibition Authority—changed its name from the Public Auditorium Authority to better reflect its role. Do more people know today what that entity actually does than they did ten years ago?

Whether the change will indeed get more people to visit Pittsburgh remains to be seen. Surely it was not just the name of the Bureau. But there is nothing like a name change to get local officials worked up with optimism.

So will the Bureau’s action entice other local agencies to change their names to better reflect their mission? Here are some suggestions:

The Pittsburgh Stadium Authority should become “The Mayor’s Personal Development Authority” since the Mayor makes all the appointments, it has no stadium to run, and has final say over all development on the North Shore.

The Port Authority should logically become the “Allegheny County Transit Authority” since it has no role in the region’s ports, but could be called “The Authority Where Our Drivers Make Top Wages” or “The Authority where Drivers Run the Show”. Or, to celebrate its embarking on the North Shore Connector and its operation of the Wabash Tunnel “The Authority for Wasteful Spending”.

http://www.post-gazette.com/pg/06152/694750-53.stm