Allegheny Institute Blog

The region got a nice “attaboy” from a consultant on its efforts to develop land around Pittsburgh International Airport. The adjoining counties of Allegheny, Beaver, and Washington worked together to form a partnership to attract development, something that the consultant suggested in 2002.
Great work, but here’s the catch. “The Pittsburgh area still lacks a beltway system common in other cities and must further upgrade its freeway system” since “we live in a country where people depend on automobiles and trucks to get to and from and to get their goods to and from, and the reality of it is air cargo is 2 to 3 percent of total freight movement. Your solution to transportation issues is on the ground. It's not in the air.”
Wonderful. That must have deflated the hopes of the boosters in the room. The state and the region pump millions of dollars in infrastructure work around the airport, and the roads getting people and goods there are inadequate. The state is in the midst of what is characterized as a transportation crisis with bridges unsafe and some collapsing. Build a beltway? We doubt the consultant or any of the public and civic leadership will be here by the time the region gets a beltway. An interstate designation for the route to the airport and $45 million in improvements won’t do it.
So let’s suppose we take the consultant’s suggestions to heart and lobby for highway improvements and get them. What happens if the promised development does not materialize? Then what obstacle will we need to eliminate?

According to the Associated Press story covering last night’s gubernatorial debate, the Governor credited his administration with economic development that has “produced the highest job growth rate in state history, initiatives in public education that have already paid off in higher student test scores….”

Unfortunately, his inaccuracies go largely unchallenged because the media does not understand how the jobs numbers are being misinterpreted. His assertion that his administration has produced the fastest employment growth rate in state history is easily disproved. During the three year and eight month period from January 1996 to August 1999, Pennsylvania’s job count rose by 7.3 percent, a fairly decent showing. However, during an identical length period since the Governor took office-- January 2003 to August 2006--Pennsylvania jobs have climbed only 2.3 percent. That is less than a third the rate posted during the Ridge administration. So much for creating Pennsylvania’s fastest job growth rate.

He seems to get away with this claim because the state’s total employment is at its highest point and analysts are unable or unwilling to see the difference between level and growth rate. But even the fact that the state’s employment has reached a new high is little to brag about. Consider that in August 2000, the private sector job total stood at 5,005,500. In August 2006, private sector jobs have risen to 5,052,400, a very slender up tick of 47,000 or 0.9 percent. That’s an average of less than 0.2 percent per year and not a successful performance by any reasonable standard.

As far as education reforms already boosting test scores, the recent release of the 2006
SAT results show a different picture with Pennsylvania’s average score falling from 2005 and still well below the national average.

The sad part is most voters do not care about the facts.

The transportation reporter for Pittsburgh’s “liberal” newspaper chose to take a cheap shot at the overwhelming majority of people in western Pennsylvania who recognize the North Shore tunnel project as a complete waste of tax dollars. In Sunday’s edition he writes, “extension of the light-rail system to the North Shore has become the new whipping boy for opponents still yapping about the necessity and cost of PNC Park and Heinz Field.”

What arrogance. PNC Park and Heinz Field were shoved down taxpayers’ throats after they clearly rejected using tax dollars for the new stadiums in the November 1997 referendum. A Plan B was rapidly put in place and, with the arm-twisting of the Governor, the legislature agreed to spend $150 million to build the new facilities. This despite the fact proponents of the stadium tax and elected officials repeatedly told voters before the referendum that there was no Plan B.

Before the referendum when it was suggested by the Allegheny Institute that the RAD money be used for the new stadiums the response was that the RAD money could not be used for major new construction. Regional Asset tax dollars are now being used to service bond debt issued to build the stadiums. The deception and duplicity by officials has been nothing short of breathtaking. No wonder people are still “yapping”. They were callously and arrogantly ignored even after they spoke loudly in the referendum.

To further illustrate his lack of command of simple analysis, the reporter says we should be happy to have the North Shore money because compared to projects in New York, San Francisco and Seattle; the Pittsburgh project is relatively cheap on a per mile basis. The reporter does not bother to tell us how many passengers the other systems are forecast to carry. It is a virtual certainty that the connection between Long Island and Manhattan or the Second Avenue subway will carry dozens of times more riders than the ginned up numbers for the North Shore Connector.

If a “reporter” is going to editorialize in a belittling way against those he disagrees with, that reporter should show that he has command of the facts and understands them in their proper context.

Pittsburgh has sent delegations of elected officials and civic leaders on junkets to other cities (most recently Charlotte and Minneapolis) in order to learn “best practices” and apply them here. This week the City played host to a similar group from Birmingham, Alabama and an article in the Birmingham News notes that Pittsburgh was the latest in a string of visits by the group, following St. Louis, Baltimore, Charlotte, and Nashville.

What could Birmingham, whose metro area has grown 3.5 percent since 2000, learn from Pittsburgh, where population has fallen 1.8 percent since then? Some of the observations published in the article surprised us. Here are some of the quotes from the visitors:

“One thing I learned is that Pittsburgh gets lots of support from the state and county…” If the person was referring to the massive economic development dollars or RAD taxes funneled in to help the City, they are correct. But such a statement is a stark contrast to what City officials have professed over the years and as the City entered into distressed status and oversight. Calls for a commuter tax or for the state to take over debt and pension obligations were among the few requests from the City.

“[The group] visited a former department store that is being converted into a condominium complex”. Here’s one practice we hope the folks in Birmingham don’t embrace—to wit: decide that shopping will save Downtown, pour large sums of taxpayer money into a store that has carbon copies in the suburbs where there is free parking, give it a few years, watch the store close, blame the store closing on the failure to do even more government-directed development, and then declare the structure a success when a developer decides to convert it into housing. But it might happen since the article noted that “business and political leaders who attended said they envision Birmingham turning some of its abandoned brownfield industrial sites into thriving commercial properties”.

One attendee noted that “I hope our political leaders paid attention to how they do things in Pittsburgh”. If they do, keep an eye out for Birmingham: in a few years, they may have new stadiums, a new convention center, government-subsidized retail, and flagging population, no private sector job growth, be financially distressed, and more dependent than ever for the willingness of state and county taxpayers to underwrite their government. Maybe Birmingham would do better to focus on Nashville and Charlotte as examples of how to do things better.

You might have heard that there will be another teacher strike in Pennsylvania soon as the Hempfield Area School District braces for a walkout. That’s no surprise there since Pennsylvania regularly leads the nation in strikes by public school teachers, thanks to the very lopsided power arrangement that is tipped to the side of employees.

But here is the interesting angle that might have been missed vis a vis Allegheny County’s never-ending grappling with property assessments and the Executive’s insistence that a base year is the way to go because it will keep Allegheny County on par with the surrounding counties, including Westmoreland, where the Hempfield Schools are located. Westmoreland is on a base year and has not reassessed since 1973.

The school board has stated publicly that approving the five-year agreement would require a 3 mill increase each year of the contract. That would boost the district’s millage above nearby districts and increase the budget, which was $72 million in the 2005-06 year.

Obviously, having a base year does not protect taxpayers against rising tax burdens. Hempfield taxpayers are about to learn this if the contract is eventually passed. Similar experiences have taken place in Butler County, which has a base year, where tax rates have increased to pay for rising school costs.

The Executive’s argument that a base year will protect taxpayers is just an illusion.

The County Executive and State officials were bubbling over as they announced the hand out of $3.7 million to a pillow maker to expand its facilities and add 50 employees over the next three years. This is the same pillow maker that received a $400,000 grant and $1 million low interest loan in 2002 to move from a City location to a redevelopment site in Duquesne, in other words, within the County.

Now the latest set of grants elevates government development spending per job to new levels-- a stunning $75,000 per job. Consider that the interest on this amount would run about $5,200. It is extremely unlikely that the total of state and local taxes paid by these employees will ever rise to the level of repaying interest let alone the $75,000 principal.

If the County and state keep funding deals with negative returns, it won’t be many years before the whole state goes into receivership. This idiocy should be stopped but since it is political, it won’t.

Here go the Post-Gazette editorial writers again, acting like strong parents by urging the little children of Pittsburgh to take their medicine because the PG knows what is good for us. With the Federal government giving its go-ahead on the North Shore Connector, we are told by the PG editorial board that criticism should cease and “Pittsburghers should rejoice at the news”. Before the party gets started, let’s look at the paper’s arguments.

The PG notes the escalation in the cost of the Connector to $435 million now, before one shovel of dirt has been moved, but fails to neglect that the increase came despite dropping a link to the new convention center. This change means that the costs of the tunnels have grown by 40 percent while the ridership numbers that were contingent on the center have fallen significantly. And that does not take into account the negative impact on other FTA criteria regarding potential beneficiaries of the system. But the Feds, likely under tremendous political pressure, approved it anyway.

Contrary to the PG’s repetition of the silliness that the Connector is “one of the top transit projects in the nation”, this project was not even a top regional transit project. It received a top rating for political reasons. Powerful legislators pushed this project and other federal and local politicians were unwilling to take a stand against it.

The editorial repeats all of the usual, tired arguments: (1) “extending the line establishes a beachhead that one day may extend light-rail service to points north or west”, even though an extension to the airport would have to cross the Ohio River and an extension north would present enormous logistical difficulties. (2) That rejecting the federal money would have been tantamount to looking “a gift horse in the mouth”. The gift horse requires the state and local taxpayers to ante up 20 percent and divert 20 percent of the cost from other federal transportation funds. These are dollars that could have been used for truly needed projects.

And, finally and unbelievably, the PG argues that the Connector will be just as good for us as the two stadiums, since they have caused “new development nearby”. Where, we must ask, are all the new jobs? Why is the City in financial distress? The only benefit to the City is that state and county taxpayers have paid the overwhelming majority of the cost of the stadiums and convention center, the biggest white elephant of all.

People are getting to the attractions on the North Shore now and do not need the most expensive (per-mile) light rail project ever built in the USA to get there, but they will get it thanks to the fact that no one in a position to stop it was willing to oppose it.

But it is “progress”, according to the PG. “ Useless activity” is more like it. The project does nothing for commuters to the east, west, or north of the City. That’s the “bigger picture” the editors fail to see. Think of it this way: would the PG make the same arguments if it were the Mon-Fayette Expressway? Probably not. Is the PG at all concerned about the $48 per rider subsidy this Connector will cost?

Just like the earlier projects the PG have thrown support to (Lazarus comes to mind), the Connector will be placed on the list of big promises that delivered dreadfully inadequate return for taxpayers.

It is ironic that a newspaper in dire need of labor cost reductions continues to endorse wasteful government spending.

In responding to criticism of the public education system, the mindset of the Pennsylvania’s education establishment has been revealed. When posed with the fact that students in private schools often out perform those in public schools, the response is that public schools must teach all students, “not just the cream of the crop”.

This defense is an insult to those in the public school system, especially to those parents and students who do take an active interest in their education and strive for success. The implication is that those attending the public school system are not as bright as those in private schools and teachers are doing the best they can despite inferior students. This attitude is very condescending, but also indicative of the mind set of public school apologists.

The same attitude is revealed when confronted with SAT scores. When Pennsylvania’s scores fail to measure up to another state, the excuse is that a higher percentage of Pennsylvania students take the exam, thus resulting in lower scores. Again this is insulting to those who take the exam. The SAT exam is for those wanting to enter college and it’s a good thing that so many of Pennsylvania’s students aspire to higher education. But the low scores indicate that they have not been well prepared by the current system.

Other states with high percentages of students taking the test score higher than Pennsylvania’s students, so that excuse doesn’t wash. Nearly all Northeastern states have higher percentage participation rates than does Pennsylvania. The state with the highest percentage of students taking the test is Connecticut (1028), followed by New Jersey (1007), Massachusetts (1034), and then New York (1003)—each with more than 80 percent participation rate. All have scored higher than Pennsylvania (993) with a slightly more than 70 percent participation rate. What new excuses will the apologists come up with next?

The Port Authority certainly acts in a timely manner and with an eye on results. How nice that would be if we were talking about running a transit service. Unfortunately, we are talking about PAT’s shrewd announcement of a possible fare hike and service cuts on the day the Transportation Funding and Reform Commission visited Pittsburgh to hear from the public.

Talk about getting your users riled up. A proposed $2.50 base fare, route cuts, and layoffs are the issues that bring the transit advocates and transit dependent out. They deem these changes as unfair and put the pressure on the commission to drive the reform options toward solving an immediate crisis. It takes the heat off of PAT, who is viewed as a victim of the funding formula.

This possibly could come at the expense of long-term solutions that really change the fundamental cost-side problems plaguing mass transit, and, by extension, highway and bridge construction, another area of focus of the commission.

The County Executive—who has sole appointment power of PAT’s board of directors—said this of the PAT plan: “if public funding of transit at the state level doesn't get fixed and the costs of the authority [aren't reduced] -- it's both sides of the equation -- tweaking the fares is not going to fix the problem”. It is too little too late for the Executive to press for cost reductions. He failed in doing his part of reducing the costs of the authority by not pushing the concept of competitive contracting of routes when he was involved in negotiating the most recent contract and by failing to make appointments who don’t want business as usual.

Is it too much to ask for transit riders, who are paying a base fare of $1.75 since 2002, to see an increase? After all, drivers have seen gas prices double (based on regular conventional retail prices for the Atlantic region) from $1.29 to $2.60 today. There are people who can’t use public transit. Those who use transit might need to put more into the farebox if they value the service they receive.

If there is concern about working poor who use transit, the state could start a voucher program to subsidize those workers.

The Pennsylvania Gaming Control Board is at odds with Millennium Gaming, the owners of the Meadows harness race track, over the projected revenues from the track’s slots parlor. The Gaming Board estimates gross slot revenues from the track in the neighborhood of $123 million while Millennium Gaming is predicting at least $215 million and possibly a high of $296 million. Each side cites the validity of their consultants and is standing by their respective predictions. What hangs in the balance is Millennium Gaming’s casino license which the Gaming Board can choose to approve, deny, or defer.

The dispute came in the wake of the Gaming Board’s hearings to grant the casino license to the state’s horse racing tracks, which it expects to do on September 27th. The licenses have been priced at $50 million each. Why should the Gaming Board care if the gross (after payout) revenues are $100 million, $300 million or $0? The answer is that the state needs to maximize its own take of the revenues. Therefore the Gaming Board wants each casino to be as lucrative as possible. This is the dilemma created when the Governor and the Legislature decided to set the price for licenses instead of auctioning them off to the highest bidder.

Had they let the licenses go to auction, the state would have its money up front and not have to worry about each casino maximizing revenues. That would be up to the license owner. If the slots parlor was unprofitable then the owner could then have the freedom to sell the license, with the approval of the Gaming Board, to another party. The onus would be on the license holder to be profitable—not the state’s responsibility.

But instead we have petty bickering over demographics, potential competition, repeat customers, and the size of wagers. The state has a lot riding on the success of these slot parlors. Cities, counties, and municipalities have built budgets around the expected windfall from the slots legislation. Projects, such as a new hockey facility in Pittsburgh, around the state are depending on these revenues. If actual slots revenues fall short of their predictions the Governor and the Legislature would be in a very precarious situation. This whole episode points to the predictable mess government creates when it tries to interfere with the private market.

Don’t you hate being right all the time? This one was like a softball down the middle of the plate. We predicted that the Pittsburgh Mills retail development would have an impact on nearby existing retailers, many of whom were never granted favorable tax treatment like Pittsburgh Mills. It got a tax increment finance deal and other public dollars totaling $58 million to get the project built. We noticed that there was not sufficient population or income growth to sustain the large addition of retail.

Well, chalk up two more businesses that have succumbed to the Mills. Two restaurants in the Waterworks development closed their doors, the owner noting that business dropped by nearly 30 percent since the opening of the new upscale development. Closures such as these present a real nightmare to taxing bodies as they represent a net tax loss since the established businesses were not subsidized and paying real estate taxes in full.

Pittsburgh Mills has also had an impact on another nearby subsidized development, Deer Creek Crossing, which lost tenants to the Mills and is still waiting to get off of the ground.

But that’s not to say that Pittsburgh Mills is booming. It still deals with the same constraints facing the region in the way of sluggish population growth and the substitution effect of disposable income. A planned go-cart track never materialized, and its upscale bowling alley attraction has closed.

Businesses come and go on a daily basis. New developments supplant older ones, and the faddish state of retail and restaurants is constantly in flux. There is no denying that fact. But the give and take of the development game is a lot harder to swallow when tax dollars are being used as play money.

While Pennsylvania’s public officials scratch their heads trying to craft a funding solution to the Commonwealth’s crumbling roadways and its inefficient public transit system, which could top $2 billion, the Feds have green-lighted the North Shore Connector. This means that construction of the $435 million beast could start in two months and the state and Allegheny County will be on the hook for 20 percent of the funding.

Sadly, but not surprisingly, word came down from the FTA that the 60-day Congressional review period came and went without any objections. That’s par for the course on this one. Elected officials and civic leaders in this region gave lukewarm support to the tunnel as an unmovable object: the money could not be moved, they argued time and again. Too much time and money have already been spent, was another. If we don’t take the “free” Federal dollars, they’d go to another region. Even the FTA did not seem to care that the Port Authority had no documentation showing a commitment from the County to fund the project. Nothing was going to stand in the way of getting the tunnel built.

Well, the region’s leaders can congratulate themselves for staying on a short list of mass transit boondoggles and they can convince themselves that they did the right thing by making no waves. Let’s hope they keep that optimism when costs escalate and state and local, not Federal, sources are strained to operate the extension.

One of Allegheny County’s favorite spectator sports—property assessments—returned to the forefront with yesterday’s ruling by Common Pleas Court Judge Wettick. In a case applying to a couple who purchased a home whose value was well under the home’s 2002 base year assessment value, the ruling allows appeals based on current market value. The Judge’s opinion is based on provisions of the Second Class County Code, which, according to the court, trumps the provisions of the County’s Home Rule Charter.

Allowing market value appeals is in direct contrast to the County’s base year plan ordinance that prohibited appeals on current market value and instead tied all valuations and appeals to the 2002 base year. It should not have been a big surprise since the Judge noted in his March 2006 ruling on the base year that “appeals of assessments taken by property owners or taxing bodies are governed by a different statutory scheme”.

Predictably, the County Executive and others in the administration have decried the ruling, suggesting that Allegheny County is being held to a different standard than the other counties that use a base year. They have also insinuated that the door for school districts to appeal based on sales prices is opened. Here’s a clue: if Allegheny is being held to a different standard, it could be because it arrived at the base year after trying to bend the assessment system to minimize political damage. They concocted the base year only after trying several others instead of continuing on the path to annual assessments.

That ignores the fact that school districts in other counties raise millage rates, it is just that the tax bite is not as severe as it is in Allegheny County.

Now we have a system where the Executive claims he will stand by the base year, the courts allowing appeals based on market value, the appeals board has delayed hearings, and taxpayers not sure what to do. And we were to believe that the base year was to be more predictable? Could have fooled us.