Allegheny Institute Blog

News reports show a 10,600 rise in total jobs in the Pittsburgh region from September 2005 to September 2006. On the surface that is not a bad showing. However, total private employment remains below the September 2000 level and the increase over the last year represents a less than one percent gain.

More importantly, the growth of jobs in the Pittsburgh region remains narrowly confined to three private sector categories that account for virtually the entire rise over the past year and since the pre-recession highs of 2000, namely, education, health care and leisure and hospitality. Over the past 12 months, leisure and hospitality along with education and health care posted an 8,800 pickup in employment and accounted for all of the net increase in private sector jobs. Most of the other categories recorded tiny gains or small declines.

In short, the Pittsburgh area economy’s health is being supported almost exclusively by health, education and leisure and hospitality. And while any job growth is a good thing, the narrowness of the gains in Pittsburgh suggests a fundamental flaw in the ability of the economy to generate private investment and business starts outside these few areas. And it is notable that even in the private portion of education and health care, a sizable amount of the gains are attributable to government spending and grants.

This pattern is unlikely to change appreciably unless or until the state and local governments begin to modify the tax and labor climate that is necessary to attract new businesses and boost new startups.

Let’s not downplay the “helpless” attitude that local and regional officials took when it came to the Federal government’s involvement in funding the North Shore Connector. Everyone from our U.S. Senators, U.S. Representatives, to state and county officials said that the money was committed, planning in place, and that the Connector was a go. If nothing else, their argument was that inertia would get the tunnels built.

But there are examples of powerful elected officials getting money moved. Remember the infamous “Bridge to Nowhere” in Alaska? When the heat was applied, the specific allocations to the bridge were dropped. It might still get built, but there is no mandate to do so.

We even have a small example occurring here in Allegheny County. Instead of using money to build an interchange from I-79 in Collier Township, a project deemed “not feasible” by PENNDOT, the money will go for streetscape improvements in several South Hills communities. At $2 million dollars, the funds represent about 1 percent of the Connector’s present price tag, but came about because of local efforts to move the money. As noted by newspaper accounts, “the money would be attached to a House transportation bill in November or December, and must be used within 18 months after the bill's passage”.

A small project, yes, but it represents a microcosm of what could have happened if those pushing the Connector would have done a little more than accept the cards as dealt. The money could have been moved for more beneficial transportation improvements, still buying elected officials good will and giving unions the work they crave. Instead, we have an extremely narrow and unpopular project whose benefits fall on a select few.

As the saying goes, when it rains it pours. As the end of the year approaches, the Port Authority (PAT) is facing yet another budget shortfall. They have begun exploring ways to cut costs such as closing the Wabash Tunnel. However, outsourcing remains off the table, thanks to a labor deal brokered by Governor Rendell. Thus, they are left waiting for whatever funds the Governor can flex their way and hoping that his task force can convince the Legislature to dedicate more taxpayer funds to the transportation monopoly.

Still yet, their fiscal troubles have not stopped them from embarking on an aggressive capital construction binge that has seen the rehabbing of the Wabash Tunnel (now on the chopping block) and the South Hills parking garage (which is very underutilized). The next white elephant to be constructed is the North Shore Connector—a $435 million project.

Of course, the $435 million price tag for the Connector is just the beginning. It does not take into account cost overruns. It is not clear if it includes the costs it must pay to other authorities for the use of those authorities’ land. For the privilege of using space in parking lots owned by the Sports and Exhibition (SEA) and Stadium Authorities, PAT is being charged $2.1 million.

The SEA wants to be compensated for the lost revenues that will occur as machinery and materials being used to dig the tunnel are sitting on their parking spaces. The director of the SEA claims that PAT had agreed to the $2.1 million price in November 2003 as terms of a “cooperative agreement”.

PAT directors are not happy with this arrangement. They see the Connector as primarily benefiting the SEA and the development that the Connector will help spawn. Maybe the SEA is not convinced of the “benefits” of this project, and wants the money on a timely basis.

Either way this is just the beginning of the unexpected costs and overruns that are awaiting PAT as they embark on this boondoggle.

In an effort to cut costs the Port Authority (PAT) has turned its sites on the $40 million hole in Mt. Washington as a place to start. Has PAT given up on the Wabash? After all they said that the tunnel would “positively impact traffic flow” coming into and out of the City. As it was being rehabilitated from a train tunnel to an HOV lane, PAT touted it as being able to carry about 4,500 cars per day. Less than two years, and more than $40 million later, it’s on the chopping block.

It is estimated that only about 120 vehicles use the Wabash during the day during the morning and afternoon rush hours—far short of projections. Annual operating costs, paid to a private company, are $780,000 to keep the lanes flowing in the proper direction (it is only one lane and traffic flows only one way at a time) and keep it clear of accidents and snow. Thus a trip through the tunnel is costing taxpayers about $13 just in operating costs. Throw in capital costs, and it is easily the most expensive ride in town.

The justification for reopening it as an HOV lane was Federal money. PAT was able to secure federal funding to build the West Busway, $321.6 million in a “full funding agreement” in which federal funds would cover 80 percent of the project. They had included rehabbing the tunnel as part of the project. Another part of the plan was to restore the bridge across the Monongahela River—it was rejected in the court of public opinion, and then because of inadequate funds.

PAT went ahead and finished the tunnel, adding a ramp to West Carson Street, under the guise of “using or losing” the Federal funds and jeopardizing their chances at any federal funding for future projects. Now they are stuck with this albatross and are looking to close it down to save operating costs.

If any of this sounds familiar, it should. These are the same arguments that PAT has pulled out to build another questionable tunnel—the North Shore Connector.

Knowing the public support for the Connector is minimal at best, the Port Authority continues with its plan to build the $435 million boondoggle. Their reasoning is that if they don’t, they will lose Federal funding—80 percent of the project—and may not be able to get money for future projects. The use it or lose it argument that worked so well with the Wabash Tunnel.

The Port Authority is looking to close the Wabash because ridership has never reached its lofty projections and they can no longer afford the operating costs. With its pie-in-the-sky ridership projections, it is likely that the North Shore Connector will not live up to expectations. PAT’s recurring budget deficits also make it likely they will not be able to cover the increased operating costs associated with the Connector. The similarities between the Wabash and North Shore Connector are such that history may be ready to repeat itself.

Only in Pennsylvania would the General Assembly pass a tax, fix its shortcomings through amendments, and then let the second largest City continue to abuse the worst part of the law for just a little while longer.

The state had long permitted municipalities to levy a tax on people who worked within the municipality’s boundaries, regardless of where they lived. The rate was $10 and it was called the Occupational Privilege Tax. Responding to calls from municipalities, particularly the City of Pittsburgh, who claimed that the tax was too low and not adjusting to inflationary growth, the state allowed the tax rate to grow to no more than $52 annually. It was renamed the Emergency and Municipal Services Tax, and municipalities were allowed to exempt those making less than $12,000 a year.

The complaints started soon thereafter: low-wage earners did not like the fact that the $52 came out all at once at the beginning of the year like a perverse New Year’s gift; ambulance services were complaining that taxpayers thought the tax was going to benefit the ambulance companies, which was not the case; and those who were able to get refunds were still liable for the old $10 tax since the new legislation did not eliminate the old $10 tax liability.

Now the state Senate has passed legislation to make the following changes: the tax will be collected quarterly instead of all at once; the permitted use for the tax revenues are outlined and expanded to include homestead and farmstead property relief; and the tax will be re-branded as the “local services tax”.

Pittsburgh has received a gift from the state if the House passes the bill and the Governor signs it in that they won’t have to change the collection status until 2010. The City is afforded special treatment that no other city in the state, even those in distressed status, will receive. Proponents said that Pittsburgh is counting on the money up front in the beginning of the year and the change would cost them. In clearer terms, the preferential treatment is allowing Pittsburgh to obtain money that they are not entitled to because it is known that many workers, particularly low-wage earners, won’t take the time to fight for their refund at the end of the year. The 2007 budget put collections at $9.1 million, down from $14.5 million in 2006. Now it looks like the City can put the money it would not be entitled to back in.

Let’s hope City officials remember this episode should they ask for new or expanded taxes in the future.

Representative Kucinich of Ohio is concerned about Giant Eagle buying 18 Tops Markets in the Cleveland area. He worries that more Giant Eagle stores will bring higher prices, presumably because of reduced competition in the market area. Interesting that the Congressman finds competition useful in the private sector in holding down prices and if he would check, it also creates better products and service at the same time.

Meanwhile, the Congressman is an avowed and ardent opponent of education vouchers. On his website he demeans vouchers in the strongest possible terms and states that he consistently votes against them because they threaten the public school system. If he would just apply the lessons he has learned about the benefits of private competition to education, he might come down off his ridiculous high horse concerning vouchers. As the former mayor of Cleveland, he must be aware of the absolutely dreadful public education system in that city.

No amount of taxpayer money will fix those schools. It has been tried and failed over and over there and in other cities. But rather than being willing to acknowledge that competition might help the schools get better, he decries vouchers as undermining public education. But that is the way with liberals, inconsistency of argument and rationale are not required or expected.

If the Congressman is truly interested in the well being of Ohio’s children as he purports to be, then he should be willing to support a system of vouchers that has been proven to work in countries around the world as well as in the US. Given how bad Cleveland’s schools are any move in a positive direction should be welcome. Of course, there is the teachers union and its support to worry about. What are the lives of children compared to that?

As news reports continue to extol the building of residential units in the downtown corridor, the rising vacancy rate for office space goes strangely ignored for the most part. Thanks to a Tribune Review story about a recent real estate company survey we know the downtown office vacancy rate rose sharply to 20.4 percent by the end of the third quarter from 17.8 percent at the end of the second quarter.

Nationally, vacancy rates in central business districts had fallen to an average 13.9 percent at the end of the second quarter of 2006 and are going through a “classical recovery cycle.” However, analysts note that the generally accepted equilibrium is around 12 percent. Thus, the rate in Pittsburgh’s downtown market is nearly double the national equilibrium rate. But that is not stopping new taxpayer subsidized office construction by PNC.

This trend is likely to be maintained as office space continues to open up on the fringe of the Golden Triangle in places such as the North Side and Southside Works. Compounding the problem for the owners of the office buildings in the Golden Triangle is the competition from buildings that received taxpayer subsidies. The Southside Works, built with a tax increment financing plan and other large outlays of taxpayer money, has been trying to lure downtown office users to the Southside.

To make matters worse Mellon Financial has consolidated its office space, vacating the Union Trust Building and leaving only a few tenants in the 11-story building.

What can be done to lower the vacancy rate? The simple answer is to improve the business climate in the City. The new payroll preparation tax, which has replaced the mercantile tax and the business privilege tax, means that firms that were once exempt, such as financial and manufacturing firms may find it worthwhile to relocate. With a very high parking tax, many firms will choose to locate in suburban areas where parking is free.

Finally, the City needs to refrain from government driven development. Subsidies should not longer be doled out to every developer that comes asking. Subsidizing new developments at the expense of existing ones creates an over supply of office space and drives down the value of existing buildings. These buildings pay less in property taxes, reducing revenue to the City. And since the new buildings are not paying the full amount of property taxes to the taxing bodies, the City is put into a further bind and has to rely on other taxes, worsening the tax climate in the City.

Under pressure from local media, the Port Authority released its 2005 wages for union employees as well as the expected wage rates and salaries for all 2006 personnel. As expected, apologists for the Port Authority (PAT) were waiting with their excuses—too much overtime, but it’s cheaper to pay overtime than to hire new drivers. What they fail to mention is that wages and benefits continue to drain the budget as PAT once again faces another large budget deficit.

It was reported that the top PAT operator earned more than $90,000 in wages for 2005. This figure includes more than $41,000 in overtime, which means this operator made slightly more than $49,000 or approximately $24.50 per hour for straight time work. It was noted that the top hourly rate for bus and trolley operators was below that at $22.18 per hour. This was excused as being the 24th highest union wage. Obviously, this is done to PAT in a favorable light.

But this type of wage comparison has major shortcomings. First the data shows the highest bus and trolley wages earned by any driver, not the average for all drivers—a more useful comparison. Secondly there is not mention of the cost of living differences between cities that rank higher in the study. Finally there is no mention of the efficiency of these other systems versus PAT’s. PAT’s ridership has been quite flat despite the additions to the busway (East Busway extension and West Busway) and light rail systems (Overbrook).

According to the most recent National Transit Administration data (2004), the average PAT bus driver wage was $20.50 per hour. This was much more than drivers earned in Los Angeles ($18.87), Atlanta ($16.88), and Charlotte ($16.16). It was less than what drivers earned in San Francisco ($25.44), Boston ($24.26), and Chicago ($21.17). But
these are not adjusted for the cost of living. The following table shows how the Port Authority stacks up to various wages in other cities that are adjusted to maintain current living standards, if the driver moved to Pittsburgh.

City Average Hourly Wage ($) Adjusted Hourly Wage ($)*
Port Authority $20.50 $20.50
Columbus 20.51 18.65
Cleveland 18.79 17.61
Denver 18.15 16.78
Chicago 21.17 16.78
Kansas City 16.91 16.69
Boston 24.26 16.66
Charlotte 16.16 16.26
Atlanta 16.88 16.12
San Francisco 25.44 13.81
Los Angeles 18.87 11.04
* Rate necessary to maintain current living standard in Pittsburgh.

Clearly, the Port Authority adjusted hourly wage rate is higher than any of the cities listed above. Any claims that the wages paid to PAT drivers are in line, if not lower than comparable cities, is misleading. Moreover, transit drivers in transit systems other western Pennsylvania counties earn only $13 to $14 per hour. Finally, PAT drivers have some of the most generous benefits of any workers anywhere.

PAT drivers are very well paid by any measure—far better than their compatriots around the country. Only in Pennsylvania and Allegheny can this distortion of wages from the competitive market level be tolerated.

The Pennsylvania Economy League loves the “bigger is always better” approach to solving problems. That’s especially true in the Pittsburgh area. They were in favor of the Regional Asset District that shifted funding for many cultural and recreational facilities to a Countywide sales tax. When trying to find a way to build two new stadiums, they pushed for a 10-county sales tax add on and a new regional authority to administer the money. Glad we ducked that one, thanks in large part to the efforts of the Allegheny Institute.

Now they are weighing in on the transportation problem in the state by proposing transportation regions with the authority to impose a gasoline tax. For a group that is so concerned about duplication of services, we wonder why they carried out this six-month study at the same time the Governor’s Task Force is preparing its recommendations to be released in mid-November.

In any case, the proposal would take a lot of heavy-lifting: getting the state to sign off, getting the affected counties to agree, coming up with a method of approving tax and fee increases (simple majority of all? majority in each county?), and the sticky Constitutional issue of using gas taxes for anything other than roads. That brings us back to the heart of the issue, which is what the Task Force is trying to tackle.

Who knows: this suggestion might be one that the Governor’s panel itself comes up with. But we don’t know yet. Allegheny County voters might like the approach of spreading the pain of the Port Authority out to other counties, but it is likely to receive a cold reception beyond County borders. Many Southwest region counties have their own transit service, in some cases, using outsourced drivers. That would have been a good plan for the Port Authority but the Chief Executive and the Governor intervened in negotiations and no outsourcing will happen under terms of the new contract. Little wonder all the talk is about finding more money for Port Authority transit. There is no hope of cutting costs.

On September 28th, the Pittsburgh School Board decided to revoke the charter for the Career Connections Charter Middle School, citing an “unsafe building” as the reason for doing so. The middle school was temporarily holding classes in a Boys and Girls Club building while awaiting a zoning and occupancy permit from the City. The Club, also the sponsor of the charter middle school as well as a charter high school, holds meetings in a building that is only 7 years old.

What makes this decision curious is the history between the School Board and the Career Connections Charter Middle School (CCMS). CCMS had applied for a charter late spring of 2006 and was denied by the School Board. CCMS then appealed to the State’s Charter School Appeal Board and won a reversal in late summer. Soon after they moved into their temporary quarters, the school district began to question the school. The district budget director said, “They’re in a facility that is not an educational facility. They’re in a community club.”

But did the district use a thin excuse to eliminate competition? In an op-ed shortly following the revoking of the CCMS charter, Pittsburgh’s Superintendent defended the decision as a matter of holding up academic standards. He claims that if these standards are not being met by charter schools, then they district must act accordingly and shut them down. Given the short life of the school, how could any reasonable assessment of performance be made?

And whose academic standards is he referring to? The Pittsburgh City Schools have been well below state averages for reading and math proficiency and is one of the worst districts in the area. In 2005, the superintendent’s first year in the district, less than 50 percent of Pittsburgh’s eighth graders scored proficient on the state’s reading exam while only 45 percent scored at the proficient level in math. The same story line plays out for the other grades taking the test—scoring well below state and county test takers.

While the Superintendent claims that he is making changes to correct the district’s woeful academic performance—such as closing 22 schools, most of which were low performing, and implementing best practices in the curriculum—not enough time has elapsed to see if academic improvement is occurring. He has asked the public to be patient while the changes take effect, yet does not exhibit the same patience with CCMS.

The reason charter schools are popping up in Pittsburgh is that parents are fed up with inadequate performance and are looking for alternatives. Charter schools provide such an alternative—75 students were enrolled in the CCMS’s sixth and seventh grades. The Career Connection Charter High School has 300 students on its rolls.

While the Superintendent is correct in saying that “some charter schools will succeed and some will fail.” CCMS never had a chance to do either. The emergence of charter schools in the city will do two things. First, it will offer parents an alternative to the poor performing Pittsburgh School system. Secondly, this competition should put pressure on the district, as well as other charter schools to improve academic standards and properly serve the city’s children. As long as the district stifles the growth of charter schools, that will not be allowed to happen.

The state’s generosity program—where it drops tax dollars on hand-picked projects—continued with an $11 million subsidy to Millcraft developers for revitalization in the Fifth and Forbes corridor. This wasn’t the first grant to the developer (they got $4 million last year) and it likely won’t be the last as there is more to be handed out, likely very close to election time.

It is a campaign issue, with both sides jousting over what the investments mean. The administration’s spokesperson stated that “yes, we make an investment, but we get return in terms of additional jobs”.

Pardon us, but where are the additional jobs? There might be a lot of construction jobs that end once the projects are built, but what are the long-term employment effects? Job counts in the state, the Pittsburgh metro, and Allegheny County have barely budged from 2000 levels and if there is job growth, it is in areas like health and hospitality, not where the state has been doling out development dollars. For as many dollars that have been tossed around in Pennsylvania, one would figure we would be at the top of the country in growth. But we are not. And for the “investments” made by the state, economic development agencies are often unable to track the impacts to see if the leveraging of public dollars did any good at all.

Look at the nonsense of this state investment in Downtown revitalization: the City puts lots of investment to get the now-empty Lazarus building built; the URA plans to sell its properties at a discount; the people who will live Downtown will likely come from other areas of the City or the County; and taxpayers are assisting in the construction of luxury condos and hotel space that the City does not need. What a winner!

Inc. magazine released its ranking of state governors, at least those running for re-election this year, based on what they call “small business friendly” criteria. These criteria include tax and fiscal policy, work force and economic development, as well as spending on health care and education, and regulatory issues. They even gave bonus points to governors for being “good cheerleaders” for their state. But as is usual with these types of rankings, many of the criteria are not very useful in depicting the ranking the analyst is trying to achieve, making the governor ranking essentially meaningless.

For example, the governor of South Carolina was given the magazine’s lowest rating (one star), despite his push for a major tax cut. He was criticized for not raising the cigarette tax to pay for an extension of publicly funded health benefits to those employed by small businesses. Surely, there are other ways of helping small business owners with health costs besides shifting the burden to taxpayers. Apparently, according to Inc. magazine, taxes are as good a way as any.

On the other hand, Michigan’s Governor was given a three star rating while her state “was one of only three states to record net loss of jobs” in 2005 and the only state to do so without having been struck by a natural disaster. She also vetoed the legislature’s efforts to speed up the phase out of Michigan’s single business tax, a very onerous tax. The magazine did praise her for using $38 million in tax credits to lure internet giant Google to relocate its online advertising program to the state with the promise of 1,000 jobs.

Furthermore, the magazine gives three stars to the governor of Oklahoma essentially for being the beneficiary of high oil prices. With oil topping $70 per barrel, the state’s oil industry paid off handsomely. With this influx of cash, which as it turns out was only temporary as prices have fallen to under $60 in recent weeks, the governor extended health care benefits to workers at small businesses—again having state taxpayers pick up a tab. What will become of his extra spending now that the price of oil has started to fall? Will the taxpayers, including all businesses, be asked to make up the difference? The ranking methodology really is distorted on this point.

While there are some good things about the magazine’s rankings, like giving high marks for cutting taxes and extending tax credits to businesses, especially start ups, the list is fraught with applause for increasing government spending on things like a state funded spaceport (New Mexico) and subsidizing ethanol production (Kansas). They even give high marks to the Governor of Minnesota notwithstanding his use of taxpayer funds to build new sports stadiums in Minneapolis.

And what does the magazine think of Pennsylvania’s Governor? They give him high marks for being a “cheerleader” for the state’s economic development program—a program that has been doling out taxpayer money that “mostly benefits large corporations”. The magazine gives him high marks for convincing “PNC Financial Services to offer up to $100 million in credit lines to small businesses…” They fail to mention that PNC was the beneficiary of the Governor’s dip into the taxpayers’ wallets to give the banking giant $30 million to build a new skyscraper in Pittsburgh.

They also fail to mention his raising of the personal income tax or his backing of the legislative pay raise, which was ultimately repealed. Their reason for giving him only two of four stars, is because “he has been accused of paying no more than lip service to small business.” There is no mention of Pennsylvania’s stifling business taxes other than to say that he signed a measure in July to provide some tax relief for businesses. But as a recent Policy Brief noted, most of the positive changes to the business tax climate were enacted before the current administration took office and the Governor vetoed earlier business tax cut legislation saying it was too expensive. He also vetoed needed tort reform legislation. Funny that Inc. would miss that since Pennsylvania is consistently rated as one of the most litigious states.



http://www.inc.com/magazine/20061001/governors.html

If there was any doubt remaining as to the powerful control public sector unions have over the governance of the City of Pittsburgh, one need look no further than the case of the public works foreman and head of the “Redd Up” force who has been able to keep his job despite numerous run-ins with the law. And if there was any doubt left that the arbitration process is hopelessly slanted in favor of the unions, it should be gone now.

A quick history: according to newspaper reports, the employee in question was hired in 1990; in 1991 he pleaded guilty to criminal charges and received probation; in 1993 he pleaded guilty to another criminal charge and was given another term of probation; he was fired in 2000 but reinstated by an arbitrator a year later. Now he is charged with a drug-related charge that occurred when he was off-duty. He is still on the job.

What more has to happen in order for this employee to be seen as unfit for government employment? If he loses his job this time, we won’t be at all surprised if the union will try to get him reinstated. Now we can see clearly why there is such vociferous opposition to privatization and competitive bidding by union employees and why there was a desperate attempt to stop the adoption of Act 47 distressed status. The unions are doing whatever they can to maintain their power and protect their friends. What an outrageous example this recent episode represents. Trying to dismiss an employee who makes the City look bad is hard when the arbitration process rewards criminal behavior.

What a position for the union to be in! Powerful enough to determine the rules mechanisms of City employment, yet too weak to do the right thing when one of their ranks makes them look foolish. Maybe if the person in question was a Republican he might get fired and stay fired.

The bigger question for Pittsburgh residents: where is your outrage at this perfidy and why are there no citizens groups demanding change? Unless or until that happens, Pittsburgh’s well-deserved reputation as a union owned and union controlled town will continue with the full and knowing compliance of its residents.

The City can forget meaningful progress in solving its deep-seated problems as long as the culture of public union supremacy reigns.

How generous of the Regional Asset District Board. Their proposed 2007 budget of $76.9 million includes $2 million for the David L. Lawrence Convention Center as a temporary measure until the great gaming savior delivers annual monies to take care of the operating deficit of the center.

Look again at the brief history of the center and its funding mechanisms: when the old center was torn down and the larger one built, more of the hotel tax—a perfectly sensible user fee—was put toward debt service, eating up the dollars available for tourism promotion and covering the operating deficit. Boosters then hatched a plan for a car rental tax, which was never enacted. Now slots money will close the gap, but since there is not one slots parlor open in the state, the RAD leaders, under pressure from the elected leaders who appoint them, have ponied up $2 million until that money materializes.

The RAD leadership states that since collections of the sales tax are up and the debt service to the Mellon Arena is dropping that this is merely a $600,000 outlay. Tell that to any of the other regional assets or groups that applied for funding that were turned away that the mechanism that funds libraries and parks now has to contribute to the convention center because regional leaders and their “bigger is always better” attitude put the region into this situation. Those groups ought to question just how well bookings are going at the center.

Let’s hope that the gambling train is moving along this time next year because if it isn’t, the RAD board will once again be funding the center’s operations. And though the RAD tax dollars might have gotten a small boost from the All-Star game that padding won’t be there next year.

So who will be right in predicting slot machine revenues? The Pennsylvania Gaming Control Board has issued the first five slots licenses to horse tracks around the state, but not before causing a stir by releasing estimated revenues at each track.

The discrepancy causing the most concern was with the Meadows Race Track in Washington County and its new ownership group Millennium Gaming. Gaming Control Board (GCB) estimates were $100 million to $170 million below that of Millennium Gaming, threatening their slots license application, before they ultimately prevailed and were granted the slots license.

But the spread between the two estimates was cause for debate. Can each track earn significant revenues to cover the promises made by the Governor? As the GCB chairman noted, “Somebody has to prove that [this casino] will be financially viable". Since slots were touted as a way to pay for everything from a hockey arena to airport debt, politicians that pushed slot casinos forward would be on the hot seat.

But not to worry, the Department of Revenue has come to the rescue. An official with the Department claims that slots revenue will be higher, not lower, than the original prediction of $1 billion annually to offset property taxes and that overall slot machines will raise in excess of $3 billion per year. So which is it—will slots revenue meet, exceed, or fall short of predictions?

To explain the differences between the estimates, the GCB chairman notes that the Department of Revenue’s predictions did not look at the same levels of competition among casino operators as did the GCB, because not every applicant will be granted a license. Thus, he expressed confidence in the Department of Revenue’s projections over that of the Control Board.

No one can predict what actual revenues will turn out to be, which makes this guessing game look pretty silly—all the more reason for the state to have auctioned off the licenses and gotten its money up front.