Allegheny Institute Blog

Has there ever been an act of bureaucratic inanity in Pennsylvania to compare with the awarding of a slot supplier license to minor children? According to Mr. Decker, the chairman of the Board, the awarding of the license was entirely legal because the state law creating gaming in Pennsylvania does not prohibit such an action.

What a nonsensical justification for an idiotic Board action. Especially in light of the fact that the parents of some of the children are not eligible to be licensees.

But any right thinking person has the power to use good judgment. The correct way to have dealt with this obvious end run by ineligible applicants was to simply deny the license on the grounds of age. These children are not old enough to make legally binding decisions as a business owner must do. They cannot buy cigarettes; they cannot even decide which divorced parent they want to live with. Yet they are being given a middleman license.

Any self-respecting appointee who is supposed to be representing the public’s best interest could have easily seen that his duty would be to deny the children a license. If the parent, who is not eligible to have a license, wishes to file a lawsuit—let them go ahead. The light of day shining on such a manipulator would not be good publicity for a person who obviously depends on connections with powerful people or who gives a lot of money to politicians who could be embarrassed by the negative publicity surrounding such a suit.

But given the performance of the Gaming Control Board to date, it does not come as a surprise that such an obvious slap in the face of common sense and good governance would come out of the group. Leaves one to wonder just who is calling the shots for these people.

The mission of the Pittsburgh Film Office, according to its website, is to promote Southwestern Pennsylvania as a prospective location for shooting film and television productions. It is a non-profit organization that receives public dollars to help its mission. In that regard, it is no different from the numerous state and city-based film offices around the country trying their best to lure a share of Hollywood money.

The recent history of the Film Office has been tumultuous. Its primary funding source—the hotel tax—disappeared when the new convention center’s bills came due. Its finances have been the subject of a County audit and its director the target of an investigation over ties to an industry figure accused of embezzlement (the Film Office was cleared of any wrongdoing).

Now the Office has raised the ire of a City Councilman and members of the Pittsburgh film community by putting together a plan that allows the director to actually move to Los Angeles to mine for opportunities for Pittsburgh.

Personnel issues aside, is the Film Office effective? Its website filmography shows 122 film and television productions shot in Pittsburgh with about half of those occurring before 1990 when the Film Office was created. Somehow, nearly the same number of productions were shot without their help. Then again, hotels, office buildings, and sports venues used to be built without government intervention as well.

Supporters of the Film Office cite economic impact studies, the most recent number for Pittsburgh cited as $273 million. Verifying the true impact is likely as elusive as tracking the job results of the state’s numerous economic development programs. Much of the film production business and related job categories would probably exist without the presence of a taxpayer-funded film attraction agency.

Even though the Office’s critics are calling for a “bold new approach for film production” in the region, don’t expect an approach that scraps the state’s and city’s involvement in film. The state itself is offering $10 million in incentives in this year’s budget along with other favorable tax treatments to attract production here. A better way to do it would be to make the organization solely dependent on private funding from those that directly benefit from the film business.

After months of speculation as to who would be the highest bidder for the Pittsburgh Penguins, the suspense is over. A real estate developer from Hartford, Connecticut has emerged as the winner with a bid of $175 million. His bid was $5 million more than the second place finisher—one with local ties. Who won the bidding war is not as interesting as how high the winning bid was—$175 million for a last place team. This bid arose despite the teams financial struggles for the last few years, including the post-salary cap year.

The St. Louis Blues, who finished with a record similar to the Penguins, were sold for $150 million just a few months ago. The Blues play in a facility that is only 12 years old, which was built primarily with private money, and has many of the revenue generating amenities that the Penguins’ new ownership will want. While it can be argued that the bid being offered for the Penguins is due to the young stable of players with tremendous upside, it is more of a reflection of the anticipated revenues from a new facility.

The current ownership of the Penguins has lobbied hard for a taxpayer subsidized facility so the team could be profitable. Under threat of relocation, as is the norm with the highjacking of taxpayer money, the team has secured a promise from elected officials for such an arena. Even though they are going through with the sale, the promise of a new arena has increased the team’s value tremendously. Current ownership purchased the team for $85 million in 1999 and stands to make at least $90 million in seven years—a return on investment of 105 percent.

For the new ownership group the risks are minimal. They will get a new arena and all of its revenue generating streams as well as a team with promising young players. If the arena deal falls through in Pittsburgh, they will be able to move the team to a taxpayer funded facility in another city. Either way, taxpayers end up subsidizing wealthy owners. No wonder team owners scream so loudly for new facilities: they get all the benefits while taxpayers pay the tab.

Now comes news reports that toddling children are to be become licensees to supply slot machines to casinos in Pennsylvania.

The silliness arising from the state’s incredibly screwed up gaming legislation just keeps coming. And little wonder. The law was put together by legislators who were looking to create moneymaking opportunities for as many of their friends as possible. Nor did they rule out making some money for themselves as potential investors in a casino.

Because of a politically motivated refusal to sell the licenses though a bidding process, and the preposterous insistence on having middlemen suppliers for the slots machines, the process toward actually having operating casinos is mired in public relations wars between seekers of licenses and one scandalous, unflattering story after another emanating from the Gaming Board.

This whole gaming affair is an object lesson in what happens when legislators who have no notion of how markets work try to establish a system they can milk for personal and political gain.

Incredibly, it was reported July 20 that Speaker Perzel is considering appointing Rich Stannizo, a prominent labor union official, to the state Oversight Board for Pittsburgh. What is up with this? With this appointment, the Oversight Board will have become totally useless as a watchdog for City finances.

This action follows the House and Senate Republican leadership leading a minority of their party to vote for the Governor’s spendthrift budget. Votes that were needed to pass the budget. Something is dreadfully amiss when a party’s principal leaders are so far out of step with the rank and file of their own party. The only real question is: how do they get to keep their leadership positions?

Could this happen anywhere but in Pennsylvania?

If a proposed ballot initiative to limit government spending growth passes this November, Maine will be the latest state to institute Tax and Expenditure limitations to control the growth of state and local government. If successful, the state and its local units, including school districts, will have to adhere to population growth and inflation as the limit for spending increases. And all increases to taxes and fees will have to be submitted to the voters for approval.

Could Pennsylvania ever benefit from such a proposal. Of course, voters of the “Pine Tree State” could petition for the measure, whereas we do not enjoy the same privilege. It would take an act of the General Assembly to permit such a vote, and the collective breath was long ago let out on that hope.

The usual opponents have lined up against the measure—the Maine AFL-CIO, the Maine Education Association, and the Municipal Association. They feel that “drastic cuts” are soon to follow and that “anyone who cares about students, programs, and schools” will oppose the measure.

What nonsense. As we well know here in Pennsylvania, unchecked expenditures have done little to improve student performance and have led to tax increases that are driving people out of their homes and to low tax locations. How about some control for the taxpayers, who not only have to pay exorbitant taxes but have to contend with work stoppages by teachers? Entrusting school boards and other elected officials has not worked thus far, and Pennsylvania would take a giant leap forward by adopting a tax and spending limit.

As was pointed out in an earlier AI blog, a spending limit at the state level would mean that instead of spending $26 billion this year, the total expenditure would be closer to $24.6 billion. The state spends enough on wasteful and duplicative programs that it could find the savings if it were law. Putting the same onus on local governing units and school districts would bring some sanity and fairness to the presently unworkable situation.

Improving the area’s infrastructure is an impediment to economic development? That is the opinion of one Mon Valley mayor regarding the Mon-Fayette Expressway. According to the Mayor of Braddock, “talk about building the highway has discouraged investment in communities such as Braddock along the highway’s proposed path.” To celebrate the notion that the project will not come to fruition, the Mayor is throwing a party.

The purpose of the Expressway is to link Pittsburgh with the transportation arteries serving other areas of Southwestern Pennsylvania in order to foster regional economic development (Policy Brief Vol.2, No. 17). The southern portion of the Expressway from Fayette County into southern Allegheny County has been built and is operational. However, the northern leg from southern Allegheny County into Pittsburgh and the eastern suburbs through the Mon Valley is being contested and it is not clear if or when construction will begin.

A study by an anti-growth organization claims that there is a lack of public money available to build it and thus it is likely to be killed. While construction costs have escalated since the project was proposed years ago, there has been no official word from PennDot that the Expressway’s northern portion will be abandoned.

But does the Mayor actually believe that the Expressway is causing his Borough’s problems? Braddock has been in decline for decades as the businesses have either closed or scaled back. Could any of them have benefited from better access to the southern part of the county, I-70, or even Pittsburgh? It is more likely that improved access to a major highway will help rather than hurt the tiny Borough’s economic development chances.

Consider that Braddock has been under Act 47 state oversight since 1988 and nearly 20 years later, its fortunes have not improved. The town is still dominated by dilapidated structures and empty buildings. The Expressway has had less to do with the Borough’s struggle to attract investment than has its tax rates which include a commuter tax, a poor school district, high crime rate, or a rapidly declining population—details that elude the Mayor.

Instead he will throw a party for the hoped for demise of the Expressway. But considering that the Borough is financially distressed, the party is pot luck.

According to recent news accounts, the Pittsburgh school system might be hired to run the Duquesne city schools---a school district whose academic performance is so bad that it should have been disbanded years ago and its students given vouchers to attend other schools, public or private. However, because of purported financial problems it is looking for cost savings through contracting with Pittsburgh City schools for administrative services.

This is laughable on many fronts. Given Pittsburgh’s abominable financial and operations management why would anyone turn to them for administrative assistance? One need only remember the many custodial staff who made over $80,000 per year to realize the ineptitude of Pittsburgh school management. Surely, there are far better run districts in Allegheny County that could have been contacted to provide help.

Second, how is that a school system with 775 students and a $12.9 million annual budget is financially strapped? In most parts of the state and nation, $16,645 per pupil is more than enough money to provide a good education. Of course, that observation must exclude Pittsburgh schools where they also spend upwards of $17,000 per pupil.

Presumably that could be the explanation as to why Duquesne would opt to go to Pittsburgh schools for assistance. They already know how to under educate students at an exorbitant price tag.

On second thought this situation is not laughable. It is depressing. One can only wonder how supposedly intelligent people could allow the Duquesne schools to come to such a pass. Undoubtedly, a lack of accountability, obsession with education fads, political correctness and arrogance have all played a substantial role.

Too bad a little common sense and commitment to giving taxpayers some reasonable product for their money never seemed to enter into the picture. Probably because the lion’s share of the tax dollars spent by Duquesne schools came from state and federal taxpayers. Tax money that came without sufficient accountability for its use. For years, Duquesne’s students have been pawns in the games played by the inept staff, board and state department of education who have been simply incapable of recognizing or dealing with the disaster they have created.

It is long past the time to shut the disaster down and give pupils a chance to get an education elsewhere. Instead, the board is looking to Pittsburgh schools to provide administration. How sadly predictable.

Not surprisingly, the Port Authority Board voted 5-2 on the morning of July 13th to approve the main construction contract for the $435 million extension of the trolley under the Allegheny River and to the North Shore.

It now means that the project—originally conceived as a $360 million link that would also go to the Convention Center as well as the North Shore—will be an overly expensive link from Downtown to the stadiums, which were built with taxpayer dollars.

Beginning with a Policy Brief in 2001, the Allegheny Institute has outlined the tangible and intangible costs this project would place on the region.

Never has a project that received such a tepid vote of support from the region’s elected officials gone this far simply because not one of those folks was willing to step up and take effective action. Sad to say, even the board members who voted against it did so because they were worried that the already bankrupt authority did not have the financial wherewithal to take on the Connector, not that the project was wrong on its merits.

Instead, the Connector was approved as a result of “false choice” arguments that supporters bought into, such as:
• Pittsburgh is getting free Federal money for this project and it can’t be shifted to another project
• Too much time and money already invested in the planning process
• This is the first leg of the expansion of the light rail system to points north, east, and west

Of course, appeals by the project’s beneficiaries (construction unions and professional engineers) did a lot to keep the Connector going. That’s ultimately what won the day yet again—a small group of interested parties seeking to get their piece of the action. It makes a mockery of the term “public infrastructure”. This large project will benefit so few.

It is not a stretch of the imagination to argue that one day the North Shore Connector will hold the “exalted status” now given the Big Dig and the now forgotten “Bridge to Nowhere”, as well as other local testaments to special interest pandering and greed.

A prominent civic leader in Pittsburgh responding to a RAND study that shows the City’s high school drop rate is 35 percent said “.. very few of our children are really achieving to their maximum potential. I pray this is a call to action for the adults in the Greater Pittsburgh area.” Responding to the same report, some school board members chose to bury their heads in the sand and complained that the report is not accurate.

The latest call to action is another in a long list going back several decades. And there have been billions of dollars worth of actions taken. The result; academic performance continues to be abysmal in most City high schools. Rather than questioning studies that show high drop out rates and low graduation rates, the school board members should question how it is that Westinghouse High can have graduation rate of 61 percent when only 16 percent of 11th graders are proficient in reading and 9 percent are proficient in math.

The fact is that Pittsburgh schools have been academically underperforming for decades and hand wringing by public officials and civic leaders have marked every new piece of evidence of how bad things are. Thus it is that Pittsburgh schools have an operating budget that spends almost $17,000 per student, one of the highest in Pennsylvania if not the highest. And real improvement seems as far away as ever. Meanwhile, tens of thousands of children are having their lives ruined in terms of getting an education that can offer them a reasonable shot at becoming productive adults.

If the adults in Pittsburgh and on the school board were not so wedded to their statist mind set and were willing to try some really different approaches there might be some hope. But the citizens of the City and its school board representatives are stuck in the 1930s and are completely unwilling to consider vouchers or other competition inducing steps.

There are rumblings that County Council members are having reservations about approving more money for the North Shore Connector in what could be the project’s “11th hour”. On July 13th, the Port Authority Board is scheduled to vote on accepting a bid that would get the project started in September. The Feds have given their blessing, with a 60-day Congressional review period likely a mere formality.

The Council is getting its back up because it will have to authorize an additional $1.5 million to keep its share of the match in line with rising costs, which will likely not be the end of cost increases. No doubt that Council has been hearing from voters that the project is a boondoggle and does absolutely nothing to alleviate the traffic woes of those outside the extension area.

For certain, Council could have acted in 2004 when $71 million was shifted from other regional projects to the Connector.

So what happens if the project falls apart if Council decides not to acquiesce? All we have heard—most recently from PAT’s chairman—is that the Federal government might come and ask for its $40 million investment back that it spent in the planning process. Really? As far as we know, the next time the Federal government asks for planning dollars back will be the first time. And, if it were to happen, that might not be such a bad deal in the long run to save on the logistical and economic nightmares that the Connector will place into the region’s lap. And taxpayers would save about $160 million (from the shifted money and the state and local matches) in funds that could be used for needed highway purposes.

Let’s hope that Council’s awareness helps to thwart this project as every argument made for its construction is pure tripe.

As the region basked in the glow of the festivities surrounding the All-Star game, site selection consultants were brought in to tour the city and offer their opinions about the area and its chances for economic development. Apparently unwilling to step on their host’s toes, they had nothing but nice things to say about the region.

However, compliments don’t necessarily translate to actual growth. For years the economy of this region has been trailing cities such as Atlanta and Charlotte. While Pittsburgh stagnates, leaders search in vain for possible causes and ways to treat them. In past years, they were told that there are not enough young people, so they built more bike trails and stadiums to improve the “quality of life”. When told that there was not enough to do in town, they tried to makeover the City’s retail sector with TIFs and other corporate handouts. Not enough public transportation? Build a tunnel under the river to connect the stadiums with downtown, even though the two are only a short walk apart.

These ideas and visions have cost and will continue to cost taxpayers hundreds of millions of dollars and yet economic growth is still quite sluggish compared to the national rate.

In the past, consultants have been brought in to tell policy makers that there are not enough “shovel ready” sites or the sites are not big enough to attract new businesses. The latest advice is to increase downtown housing to attract younger people into the City and that while the number of “shovel ready” sites has improved there are not enough “pad ready” sites.

Now developers are launching downtown housing developments. Unfortunately, it is far more expensive than most young people can afford. In short, nearly every possible idea for stimulating the attraction of businesses and young people has been given a try. All except the ideas that would really make a difference in the region’s attractiveness.

A couple of weeks ago the Chief Executive of Allegheny County and the Mayor of Pittsburgh went on a junket to Charlotte to try to learn how to consolidate City and County services. Apparently, they did not garner any wonderful secrets since they have not held a press conference to regale us with all the cost saving, service enhancing changes they will be working on.

But they could have learned some things if they had bothered to get out of their meetings and drive around Charlotte and Mecklenburg County. There they would have seen what a growing, prosperous area looks like. Housing starts 15 times the pace of Allegheny County along with massive new construction of commercial, industrial and retail space—all without TIFs and other huge taxpayer handouts. They would have also learned that employment gains in the Charlotte MSA just keep coming with another 30,000 new jobs expected this year, dwarfing the miniscule growth in the Pittsburgh metro area. Moreover, the job growth is widespread across many sectors.

Moreover, economists in the Charlotte region project 50,000 new residents per year moving to the MSA for the next several years. (Charlotte Observer, July 9, 2006) Little wonder building of homes and commercial space there is so strong.

Not only is Mecklenburg County thriving, but the surrounding counties are enjoying substantial gains in people, jobs and business activity as well. All this growth with all those independent municipalities and cities. How can it be? According to so-called experts here, only consolidated regional government will spur economic prosperity.

Of course, the so-called experts refuse to look at what is really wrong with Pittsburgh and Allegheny County that causes population to decline and job gains to be anemic or non-existent. What they should have learned on their trip to Charlotte is something they could have learned without leaving their offices. Charlotte and the counties in the Charlotte metro area including those in SC all lie in Right-to-Work states. They do not have public sector unions dictating how governments--and transit systems--are run. They do not have teachers unions who can strike to hold school boards and taxpayers hostage in order to get them to capitulate to outrageous demands. And they do not have Act 111, which enables public safety unions to bankrupt municipalities. All these things they either already knew or could have easily learned sitting at their desks.

As a result of the things Charlotte MSA doesn’t have that Pittsburgh does, property taxes are lower and business costs and operating environment are much more conducive to companies moving in or expanding. In short, a recipe for private sector growth that does not require heavy government subsidies.

All the talk about consolidation and government structure are nothing more than diversionary tactics to avoid having to face the reality of the failed economic system that has been transmuted from free market entrepreneurism to special interest power politics wherein the government and its elected officials actually believe that a little tinkering is all that is needed to get job growth moving again. Which means they can endlessly avoid tackling real obstacles to prosperity while blaming the suburbs or Washington or anyone but themselves. This may be convenient ploy but it represents a complete failure of responsibility to lead on the part of elected officials.

One thing officials in Allegheny County and many other Pennsylvania and rust belt states can be thankful for is that there are states with fast growing opportunities that can absorb the jobseekers from their own state who would otherwise be building up a sizable pool of unemployed. At least they speak the same language down South. Well sort of. But with all the new arrivals from the North there is always someone to talk to.

There’s nothing like a little gushing from a former Pittsburgh resident to try and perform a lyrical “sleight of hand” on the record of the previous Mayor. That Mayor’s spokesperson recently wrote a letter to the editor touting all of the positive achievements done by his old boss and to “set the record straight”. From the letter, one would think that the Mayor himself—without help from other local, state, or Federal officials or civic and non-profit groups—moved mountains and alone had the vision to reform Pittsburgh.

Since the spokesperson has placed the burden on his old boss’s back, let’s assess how heavy the load really is.

New stadiums, new trails, and shiny new corporate headquarters—what have they really done for Pittsburgh? Of course there is no mention of the cost to taxpayers who will likely never see a return on their investment. Nor is there any mention that Pittsburgh’s finances are overseen by not one, but two state-level agencies. Population continues to decline with the City losing 4,000 people from 2004 to 2005, there has been no net growth in employment (as evidenced by wage and EMS tax collections), Downtown looks no better, and the Mayor’s department store plan has left the Golden Triangle with two more structures to rehab and convert to other uses.

As to the spokesperson’s comment that “being Mayor is not a popularity contest” he fails to realize that the Mayor just narrowly escaped Federal indictment for using the arbitration process as a cover to win re-election. At the end of the day, trading horses with the fire union to serve another term was not leadership, it was a power grab aimed at a reliable voting bloc. That was not the right thing to do, and it ended up adding more to the City’s already bloated bottom line.

These are the facts, and no amount of glossing over can change them. Leave it to a PR person to tout the benefits while ignoring the costs.

We have to wonder about those who refer to Pittsburgh as a “thriving, vibrant City in which to live, work and play” when they do those things in a City 200 miles to the South.