Looking Inside WalletHub’s City Ranking List

Pittsburgh was one of 150 cities analyzed by WalletHub’s Best Run Cities list. Out of 150 cities, it was ranked 103rd overall. The organization used “six key categories” (financial stability, education, health, safety, economy, and infrastructure/pollution) and used 25 separate metrics under those categories. Scores ranged from 0 to 100 “with 100 representing the most optimal city management” according to the organization’s methodology explanation.

One could see tasking “city management” with debt per capita (a metric under financial stability) and possibly even safety metrics (crime rates) but high school graduation rates? Or Average life expectancy? Or average commute time? Sure, on many of these measurements some public sector hand is involved, but WalletHub utilizes “the total budget per capita amount for each city” in order to measure effectiveness and rank the cities.

So Pittsburgh’s 2016 budget ($518.9 million) and its population (305 thousand) results in per capita spending of $1,701 but why assign that spending to items that the City does not directly manage or fund?

That WalletHub’s highest score for Pittsburgh out of the six categories came on education (15th out of 150 cities) is dubious due to what the organization measured and how its spokesperson addressed its findings in the media.

Education, like the other five categories, had a possible 16.66 points in play. Two metrics were used: first “Great Schools Score: Full Weight (8.33 points)” and second “high school graduation rate: full Weight (8.33 points)”. A quick look at the website of Great Schools shows that the District was given a rating of 3 out of 10. A look at the Pennsylvania Department of Education website on cohort graduation rate shows that for 2014-15 the four year cohort graduation rate for the Pittsburgh Public Schools was 70.44 percent. In 2013-14 it was 73.59 percent, in 2012-13 it was 77.43 percent.

Yet in a published report on reaction to the rating a spokesperson from the organization said “the city offers a good education system with a top high school graduation rate at 90 percent, 13th best overall”. Obviously something is amiss.

So Pittsburgh’s best ranking comes from service the City itself does not directly manage and seems to be measured inaccurately by the organization doing the ranking.

Other scores were, in descending order, 19 (health), 36 (safety), 48 (infrastructure/pollution), 76 (economy), and 144 (financial stability).

Gambling on Revenues

Given last year’s contentious budget debate, the Pennsylvania Legislature and Governor were very quick to settle a budget for the current fiscal year (2016-2017).  So quick in fact, that they didn’t cement the revenue side of the ledger.  While they did enact new taxes to help cover the increase to spending such as on internet downloads, or expand existing taxes on cigarettes, they also proposed revenue sources on services that may or may not materialize—the largest sums coming on the coattails of the gaming industry.

According to a recent news report, the Legislature counted on selling licenses to the twelve Pennsylvania casinos, for $1 million each, to sell liquor on a 24/7 basis (currently liquor sales end at 2AM and begin at 6AM).  The problem, as the article notes, is that casinos are not interested in purchasing these licenses.  They cite liability concerns as well as staffing costs as reasons for turning the licenses down which means that the proposed revenue stream just took a $12 million hit this fiscal year alone.  As one CEO was quoted, “Who advises these legislators?”  And that’s a great question, if casinos aren’t clamoring for expanded liquor sales, why was the proposal put forth?

The Legislature is also counting on money from the expansion of gaming in Pennsylvania.  HB 2150 outlines the case for expanding gaming to include online gaming (see Policy Brief Volume 16, Number 27) and the expanding of slot parlors to international airports and other off-track betting parlors.  But as of late July this bill, which passed the House of Representatives on June 28th, is sitting in the Senate Committee on Community, Economic and Recreational Development.  Not only has it not yet been passed, it may not pass in its original form.  In another article, the bill’s primary sponsor claims that when the Legislature reconvenes in September, that the provisions in HB 2150 that legalizes online gaming is a better lock to pass than the expansion of gaming into off-track betting parlors.  Even if the online portion becomes law, will all twelve casinos jump aboard?  It is not clear that this is an avenue that many, if any casinos, are willing to go down at all.  And if they do, our Policy Brief notes that the state may not realize the amount of tax revenue they are counting on.  And if the off- track parlors do not pass, the hole to the projected revenue stream becomes even larger.

So for all the congratulations Legislators have been giving themselves for passing a budget that was not too long after the deadline, they still do not have the revenue side shored up.  They are relying on gaming to carry the weight of the revenue increases.  But given the casinos’ cool response to increased liquor sales and the incomplete gaming expansion bill, there may be more holes than they care to patch come September.  This is one gamble they may lose, and that will not be good for Pennsylvanians.

School Tax Rates Rise in 22 Districts

For the 41 school districts that operate on a July-June fiscal year in Allegheny County (Pittsburgh operates on a calendar year) and levy a single real estate tax rate (Clairton taxes land and buildings at separate rates) 22 of them raised millages for the 2016-17 school year.  Woodland Hills had the biggest increase of 2.95 mills, about 13% above the 2015-16 rate of 22.4.  Data on tax rates is collected by the Allegheny County Treasurer’s office.

The average millage rate for those 41 districts stands at 21.52 mills this year.  On a $100,000 property, that translates into $2,152 in school real estate taxes.  Homesteads qualify for varying amounts of property tax relief via slot machine gaming receipts.

If we look back to 2013-14 when school districts in Allegheny County reset their millage rates to comply with state law requirements following the Allegheny County reassessment, the average millage rate has risen five percent (from 20.48 mills).  Seven districts have increased millage by more than 10%, nine districts have not changed millage rates at all since that time, and two districts are levying lower rates in 2016-17 than they were in 2013-14 (both districts did increase tax rates this year).

 

 

 

 

ICA Reforms on Way to Governor

The proposed reforms for the Intergovernmental Cooperation Authority (ICA) contained in state legislation have passed both chambers of the General Assembly.  We wrote about the reforms (here and here) and much of what the legislation will do is to improve reporting (it is a shame it will take a separate piece of legislation to accomplish something that should already be done) and define gaming money–this is the host fee money from the Rivers Casino that would be paid to the City but by language in Act 71 of 2004 the ICA intercepts and directs toward specific purposes.  We point this out due to the fact that the casino announced last week that it does not want to pay this anymore and has filed a lawsuit on the issue.

Rivers Wants to Stop Flow of Local Share Assessment

According to published reports, the parent company of the Rivers Casino has filed a lawsuit seeking to end the local share assessment that it pays to Pittsburgh under the terms of Act 71 of 2004.  That lawsuit is with the Supreme Court, which is curious in and of itself since it does not appear the lower courts got to consider the lawsuit as is customary.

There is some complexity due to the fact that the law established three categories of slot machine recipients (1, 2, and 3) and local share assessments (host fees) have to be paid to both the county and the municipality where the slot machine facility would be located.  Rivers is a category 2 facility, located in a county of the second class and a city of the second class.  There are three other category 2 facilities as of June 30, 2015 (see page 17 of this report).  A successful lawsuit against the municipal share in Pittsburgh would probably have an effect on the other category 2 facilities in the state.

Rivers isn’t seeking to end the local share to Allegheny County (the law says a category 2 facility in a county of the second class pays 2% of gross terminal revenue, and Allegheny County is budgeting $5.5 million for 2016) but wants to target what would be considered the municipal share.  The Act spells out requirements for facilities located in second class cities, second class A cities, third class cities, boroughs, and townships and, by and large, the requirement is for 2% or $10 million, which ever is greater (Pittsburgh, the only second class city in the state, has its money intercepted by the Intergovernmental Cooperation Authority for specific purposes outlined in the Act).  If Rivers had gross terminal revenue of $500 million, $10 million would be 2%.  However, last year’s revenue was $272 million, so $10 million represents 3.7%, whereas 2% would be $5.4 million.  Then original projection for Rivers was $427 million in gross terminal revenue in 2009.

 

 

A Budget Impasse Will Not Stop State Spending

Is another prolonged Pennsylvania budget impasse in store? Today is the June 30th deadline for enacting a Fiscal Year 2016-17 budget and there appears to be a gulf between the positions of the Governor and the Legislature about how to raise the money to fund $31.5 billion in General Fund spending for the next fiscal year. This seems to suggest the very real possibility of a budget impasse that could last several weeks or longer. Although the fact this an election year would normally provide impetus to both sides to get a budget done before Labor Day.

 
But even if the budget is not completed for several weeks, there is no real concern for state employees or state government departments. As we learned a year ago during the months long impasse, Pennsylvania will continue to keep all employees on the payroll (thanks to a court decision during the Rendell administration) and departmental funding will continue at levels contained in the budget enacted for the previous fiscal year. Only the school funding and funding for social service agencies were suspended.

 
Because of the hardships and angst that many school districts suffered as a result of the lack of state appropriations last year and the school boards’ backlash against Harrisburg, the pressure to get the budget completed by August 15 so that funds can be disbursed will be enormous. And if no budget is forthcoming, the Legislature will rush through ending legislation that enables school funds to be appropriated even if a budget has not been finalized and approved. In that case only social services will be left out in the cold because of the budget impasse.

 
In light of all this, is it any wonder there is no hand wringing about the failure to meet the Constitutional requirement to have a budget done by July 1st? Court decisions have rendered the Constitution irrelevant and toothless on this key issue. When the courts toss out the Constitution, what basis is there for state laws?

Life Span, Audit Requirement Changes in Proposed ICA Bill

In a unanimous vote, the Senate has approved legislation that will make changes to the statute that created the oversight board for Pittsburgh, Act 11 of 2004.  The legislation now heads to the House of Representatives.

We have written plenty on the oversight board since its creation twelve years ago, and the legislation addresses two topics we have covered in recent years.

1. The Life Span of the ICA:   We wrote in 2010 about the term of existence of the oversight board, which is contained in Section 204 of the statute.  That section says that after seven years, if there were three consecutive budget and five-year plan approvals by the board, then the Secretary of DCED would certify that the ICA could be dissolved.  Under the proposed legislation, there is new language placing a limitation on dissolving the ICA.  It must be in place until either the Act 47 distressed status for Pittsburgh is removed, or June 30, 2019, whichever comes later.  Language in Act 222 of 2004 prohibits cities of the second class (Pittsburgh) from raising its earned income tax to fall on non-residents (a commuter tax) so long as the oversight board is in existence.  In addition, the state amended Act 47 in 2014 to place time limits on how long municipalities could remain in distressed status, so it is a real possibility that Pittsburgh could be out of Act 47 and ICA oversight in three years.

2. Audit Reports–This year we wrote that the ICA had not filed audits required under Section 207 of the statute with legislative committees or the PA Bulletin.  The proposed legislation stipulates that those reports–non-existent up to this point, presumably–will have to be filed with the appropriate committees by December 31st following the conclusion of the fiscal year, which for the ICA runs the same as the state and, for the 2015-16 year, ends tomorrow.

 

Some Wilkinsburg Furlough Details Emerge

Earlier this year when we wrote about the partnership between the Wilkinsburg School District and the Pittsburgh Public Schools we speculated about what would happen with teachers at Wilkinsburg.  With the District closing its middle and high schools, enrollment would be falling and teachers would not be needed there.  But with students from Wilkinsburg going to Westinghouse, the enrollment there would increase and clearly more teachers would be needed, but it was not clear how many and if any Wilkinsburg teachers would be hired (the agreement between the Districts said PPS could consider hiring them, but were not required to do so).

According to a newspaper report, Wilkinsburg has given furlough notices to 20 teachers.  Some of those furloughs went to elementary school teachers who are “…being bumped by a high school teacher with more seniority because that high school teacher also has elementary certification” according to the acting superintendent.  Unless those employees also have a high school certification they probably would not be considered for employment with PPS.  That is where the state’s $3 million in transition funding for the transfer will likely come into play.

The most recent state audit of Wilkinsburg (covering a period from 2010 through 2013) said that Wilkinsburg employed 127 teachers.

Residency Issue Will Be Settled By Court

It has been nearly four years since the General Assembly amended language in the Second Class City Code (applicable to Pittsburgh only) pertaining to a residency requirement for Pittsburgh police (see this Brief detailing the change).

We wrote then that the debate over whether to allow Pittsburgh police to live outside the City limits would be heated.  The debate has now reached the state Supreme Court, following arbitration, a home rule charter amendment on residency, and lower court decisions. 

The arbitrator’s decision said that police would still be abiding by a residency requirement, but one that would let them reside anywhere within a 25 mile radius of Downtown Pittsburgh.  That would open up a significantly larger area than having to reside in the City of Pittsburgh limits, which is what would be the standard given the home rule charter amendment.

County to Provide Borough’s Police Service?

Allegheny County Council plans to hear a proposal this week for the County police to “provide basic police and law enforcement services” for the Borough of Wilmerding.  Based on the municipality’s website it currently gets police service provided by North Versailles Township, a neighboring municipality.

The agreement would be completed under the terms of the Intergovernmental Cooperation Act, which states “Two or more local governments in this Commonwealth may jointly cooperate, or any local government may jointly cooperate with any similar entities located in any other state, in the exercise or in the performance of their respective governmental functions, powers or responsibilities”.  The law defines local government as a county, city of the second class, second class A, third class, borough, incorporated town, township, school district, or any other general purpose unit of government.

Whereas it is common for municipalities to contract out to another municipality for police service or to be part of a regional (multi-municipal) force, many municipalities rely on the state for police service, which brings up multiple issues that we have written about before.  That the County police is primarily responsible for ” public safety and security services at the Pittsburgh International Airport, the Allegheny County Airport, and Allegheny County parks as well as investigative services to all of the municipalities within Allegheny County” this would be a departure from that traditional position.