March of the ‘regressives’

Some public policy musings on which to chew for the weekend:

Has the Allegheny County Airport Authority re-upped any kind of “incentive” agreement with Qatar Airways’ cargo service at Pittsburgh International Airport (PIT)?

There’s been no public announcement. But you’ll recall that the authority did leave that door open. Which is troubling considering Qatar failed to come close to the cargo volume it promised in a deal heavily underwritten with public dollars.

Of course, that deal incentivized Qatar to fail, essentially paying it to not meet its volume goals.

Speaking of market perversions, those much ballyhooed – and also publicly subsidized – British Airways direct flights to London from PIT are just over a month old.

So, how are those flights doing?

Are they the be-all and end-all that those defending their $3 million in taxpayer subsidies claimed them to be?

Or will subsidizing past be subsidizing prologue and the flights either disappear or are severely curtailed after the two-year subsidy plan ends?

A day doesn’t go by in Greater Pittsburgh that somebody isn’t out on the hustings hustling for a $15 hourly minimum wage. Invariably, we hear that government raising the wage floor – in some jurisdictions by more than 100 percent – is a matter of “social justice.”

But as Investor’s Business Daily (IBD) recently reminded, wage floors by government fiat have had an unflattering – though wholly predictable – result in New York City.

An IBD editorial documents how 4,000 workers lost their jobs at full-service restaurants in the Big Apple just in the last three months of 2018.

Why? Because of a whopping increase in the state-mandated minimum wage.

“A study by the American Action forum concluded that minimum-wage hikes that went into effect in cities and states around the country this year will kill 261,000 jobs right away and 1.7 million jobs over the long term.”

Perhaps the “social justice movement” should be renamed the “social injustice movement” and “progressives” should be retagged as “regressives.”

Another darling of the “regressives,” both in Pittsburgh and Pennsylvania at large, is this notion that converting to “renewable energy” to reduce our “carbon footprint” by slashing carbon dioxide emissions is a win-win – for the environment and the economy.

Never mind that the mechanics and economics of such utopian efforts are preordained to deliver dystopian results. To that end, a 2016 study of the European Union experience to 2014 is most instructive.

Far from being cost-efficient, the EU’s 1 trillion euro efforts up to that time have been found to be cost-exorbitant, far out-pacing, say, using natural gas, by a factor as high as 50 times greater (when calculating capital costs).

Just as troubling, was that there was little evidence to suggest C02 emissions declined. In fact, when factoring in the emissions associated with manufacturing “green energy” components, C02 levels likely increased.

From the report’s conclusion:

“By government and EU diktat, this expenditure has been extracted in the most part by extra charges imposed on utility bills throughout Europe. Viewed as taxation on individuals this is very regressive — it imposes more burdens on poorer people whilst leaving wealthier people who are more able to pay less affected.

“It also burdens European industries with vast energy costs, making them increasingly uncompetitive, as has now been seen from the uncompetitive nature of steel making in several European countries.

“These renewable energy charges are also invisible in government accounts as a tax income at all, as it is a price imposed on consumers by industry.

“These regressive ‘green taxes’ have already led to significant fuel poverty … throughout Europe.

“Increased energy costs impact … European industries with many major corporations seeking more congenial manufacturing locations outside Europe to the detriment of European economies.”

Additionally, the study reminds that the renewable energy industry could not exist without the government-mandated subsidies and preferential tariffs.

“Without its government mandate, government subsidies and government interference, renewable energy would never be a chosen part of the generating mix — when viewed from the needs for the engineering viability of a nation’s electrical supply grid.”

Such a bill of particulars is a damning indictment of the designs of the quixotic “greens.”

That local and state government officials continue to pursue such programs disserves sound public policy.

Colin McNickle is communications and marketing director at the Allegheny Institute for Public Policy (cmcnickle@alleghenyinstitute.org).

What do latest Census estimates mean for the metro and Allegheny County?

Summary: A look at the U.S. Census Bureau 2018 estimates for the Pittsburgh Metropolitan Statistical Area (MSA) and Allegheny County which show another year of population decline.

Based on the Census population estimates as of July 1, 2018, the seven-county Pittsburgh MSA (Allegheny, Armstrong, Beaver, Butler, Fayette, Washington and Westmoreland) had 2,324,743 people. Compared to July 2017, population in the MSA fell by 5,540 people, or 0.2 percent. Compared to the nine metro areas with a similar population to Pittsburgh (2 to 2.5 million) only Cleveland saw a decrease from its 2017 reading.

Components of population change of a specific geographic area include natural increase (births minus deaths) along with net migration (net domestic migration plus net international migration). These are totaled along with statistical anomalies for demographic events that cannot be accounted for—what the Census Bureau refers to as a residual—to produce a population change value.

Two counties in the region, Butler and Washington, had population increases from their 2017 estimates. In both counties the rise was a result of positive net migration more than offsetting losses due to more deaths than births. Butler County had the largest overall population gain and the largest net migration gain in the MSA with 72 international migrants and 987 domestic migrants. All seven counties had natural losses with deaths exceeding births. Westmoreland County had the greatest loss at 1,624 with just 2,829 births compared to 4,453 deaths. In Allegheny and Armstrong counties the population losses due to net out migration exceeded the losses resulting from deaths exceeding births.

2017 to 2018 Population Change, Pittsburgh MSA

Allegheny County with its 1,218,452 residents accounts for more than half of the MSA’s population. The county lost 2,204 people (0.2 percent) between 2017 and 2018, accounting for just over a third of the MSA’s overall decline. There were 12,795 births but those were exceeded by 13,840 deaths. Net international migration was a positive 3,105 but net domestic migration was a negative 4,204. In historical terms the county’s current population estimate is roughly where it stood between 1920 and 1930 but far below its peak of 1,628,587 in 1960.

An Allegheny Institute 2007 report on Allegheny County’s population losses argued that the availability of quality, good-paying jobs and the quality and cost of living were key factors in an area’s attractiveness. That is just as true today. Economic factors, specifically jobs and the business climate that produce the job gains remain the keys to luring new residents and encourage existing ones to stay.

The public policy changes recommended in that report, many of which had to come from Harrisburg—such as ending teacher and transit strikes, prevailing wage and binding arbitration reform, stopping economic development subsidies and putting all tax increases on the ballot for voter approval—have sadly not come to pass. Instead there is even more emphasis locally on government-driven development (note that in Westmoreland County a community development official mentioned an amphitheater as a way to reverse population losses). Ending public sector union strikes are not even being proposed let alone being voted on. And taxpayers are no closer to having the right to vote to approve all local tax increases.

The 2007 report noted that property taxes in Allegheny County were much higher than in neighboring counties and may have an impact in attracting and keeping residents. Since 2007 Allegheny County and Washington County have undergone countywide reassessments and both have comparable base year valuations (100 percent pre-determined ratio of assessed-to-market value in 2012 and 2015, respectively). Currently, the combined millage rate (county, municipal and school) in Upper St. Clair (34.42) is twice that of Peters (17.55), two communities that border each other in the separate counties.

Thus, someone considering a property that is assessed at $150,000 in one of the two municipalities would see a difference in total taxes of just over $2,500 more in Allegheny County, with $1,800 of that resulting from the difference in school taxes. Or said another way, at current millage rates a property with an assessed value of $295,000 could be purchased in Peters with the same total tax bill of a $150,000 assessed property in Upper St. Clair. Perhaps part of the migration figures for the two counties is reflective of the wide differences in taxes.

Based on data from the 2010 Census—when the MSA population was 2,356,285, or 31,542 higher, and Allegheny County’s population was 1,223,348 or 4,896 higher—the years of increases or negligible losses lasted until about 2013. Since then population in the MSA and Allegheny County have fallen each year. That has implications for labor force, tax base and political representation as the 2020 Census approaches.

While there are areas of modest strength in the MSA, there can be no gainsaying the fact that, overall, the county and region are losing ground relative to the country and many comparably sized metro areas. This, despite the region’s great good fortune of being a major beneficiary of having natural gas deposits.

The Pittsburgh population question

So, what came first, Greater Pittsburgh’s lack of in-migration or a befuddled and misguided public policy climate that discourages people from moving into the region?

It’s an apropos question on the heels of the latest U.S. Census Bureau estimates that population in the seven-county metro area continued to decline in the year ended July 2018.

It’s even more appropriate as a couple of scriveners – and, rest assured, others will follow in short order – have begun to engage in group omphaloskepsis (the technical term for navel-gazing).

“Why, oh, why do people not move here?!” you can almost hear the wails. “We are too parochial!” “We are unwelcoming!” “Oh, to once again be (as the old WIIC-TV Christmas commercial went in the 1970s) “a whole world of people”!

But few, if any, of those penning their entreaties for more in-migration – whether it be for minorities, foreigners or just people of every and any stripe – seem willing to peel back the layers of the onion and dare to consider what might be the underlying cause of, at least in the city proper, this in-migration malaise.

Could it be – GASP! – four score and five years of one-party rule in the mayor’s office?

Could it be – PERISH THE THOUGHT! – a none-too-dissimilar stranglehold on Pittsburgh City Council?

Certainly it couldn’t be – NO, IT COULDN’T BE! – organized labor’s throttlehold on government services that only reinforces the truism that unions are a cancer-like cartel that, left to their own devices, gorge their hosts to expiration?

Maybe it’s – BITE YOUR TONGUE! – a public school system that spends more and more money with fewer and fewer results?

Perhaps it is – PAY NO ATTENTION TO THAT DYSFUNCTION BEHIND THE CURTAIN! – decades of “independent” municipal authorities being packed to do, not the people’s business, but that of their appointing pols and then feigning outrage at being held to public account?

Could it be – OH, NO, YOU DON’T KNOW WHAT YOU’RE TALKING ABOUT! – the penchant of city (and Allegheny County) leaders to pursue “equity for all” by steadfastly adopting public policies that lead to equity for none? (A lack of regular property reassessments by the county comes to mind.)

Surely it is not – OH, NO IT’S NOT, YOU RECIDIVIST NAYSAYER, YOU! – government’s penchant for handing out corporate wealthfare to barons of industry, sport and banking, right?

And this “could it be,” “certainly it couldn’t be,” “maybe it’s,” “perhaps it’s” and “surely it is not” exercise could go on and on. But the common denominator in such a listing is how government traduces the very precepts that make respective regions hospitable to all newcomers. Think fair play. Think free markets. Think government as a facilitator, not as an overlord.

The bottom line for Pittsburgh, if not Greater Pittsburgh, is that inimical government never leads to economic or population growth. And the latest Census Bureau estimates are a sobering testament to that.

Policies that lead to flight, of people and of capital, aren’t exactly conducive to renaissance.

But, and for those who fail to recognize that, it does lead to a bumper harvest of omphaloskepsis, if not a constant wetting of the lips to enable more whistling past the graveyard.

Colin McNickle is communications and marketing director at the Allegheny Institute for Public Policy (cmcnickle@alleghenyinstitute.org).

How are Pittsburgh’s pension investments faring?

At the most recent meeting of the City of Pittsburgh’s pension board the members received the investment report for the period ending March 31, 2019. The report shows that the total fund composite stood at $758 million.  The composite is comprised of the city’s dedication of parking tax revenue ($295 million) and its invested portfolio ($463 million).

The largest class of investments for the city are U.S. and non-U.S. equities ($261 million total at the end of March) with a mixture of six other fund composites related to hedge funds, real estate and cash.  Compared to March 31, 2018, the total investment portfolio grew 4.3 percent, from $443 million.  The only class to decrease was non-U.S. equities which fell from $86 million to $85 million.

While we have made the recommendation that new public sector hires be placed into defined contribution plans, this has not happened yet for Pittsburgh or the other 3,000 or so municipal plans.  As noted in an article on the investment performance of SERS, PSERS and other pension plans in eastern Pennsylvania, “current workers will be retiring with fully taxpayer guaranteed pensions for decades before those savings ease the cost.”  Until then Pittsburgh is putting more money than is minimally required into pensions–in 2018 $36.8 million above the actuarial requirement of $49.6 million came from parking taxes ($26.8 million) and the host fee from Rivers Casino ($10 million).

The main measurement for taxpayers and citizens to watch is the funded ratio, which is simply the actuarial assets divided by the actuarial liabilities.  For Pittsburgh at the end of March the combined assets of police, fire and non-uniformed plans was $758 million and the liabilities $1,299 million for a ratio of 58 percent.  That is still at the moderate distress level under Act 44 of 2009.

More investigation required: The OneJet fiasco

A Pittsburgh Business Times investigation offers a fascinating look at the mechanics of the public subsidies lavished on now-bankrupt OneJet. And, in the process, it raises more troubling questions about yet another failed government attempt to command the economy.

As the lead of the exclusive Paul J. Gough story goes:

“While air-transport network OneJet was flying high and gathering millions of dollars of investments from individuals, the airline also was building a reputation for late payments and delinquencies on $2 million in public loans, starting more than two years before it eventually defaulted in October 2018.”

But what’s so striking about local and state efforts to pick airline winners and losers for Pittsburgh International Airport is the blinders worn by those handing out such corporate wealthfare.

To wit, even though OneJet had been habitually late in its repayments on a $500,000 loan to the Redevelopment Authority of Allegheny  County (RAAC), the same agency gave it another loan, one for $1 million a year later, and OneJet continued the practice of making late payments.

The Business Times investigation also unearthed that the Pennsylvania Department of Community & Economic Development had to send nine delinquencies notices and “demand letter” before OneJet started paying back a $500,000 loan.

The Business Times says OneJet eventually made up its late payments and was current on its loan payments – until after it stopped flying in late August 2018. Of course, creditors forced it into Chapter 7 bankruptcy and that stiffed the county for just over $1 million and stiffed the state for nearly $416,000.

Additionally, terms of county loan required OneJet’s loan payments to be made through an automatic payment system. But that never happened.

Amazingly, the Business Times reports that OneJet’s payment issues “didn’t factor into the approval of OneJet’s second loan.”

Lance Chimka now heads the county’s economic development efforts. He was not with the redevelopment authority at the time the loans were made. But he told the newspaper “It’s in our interests if they succeed. We want all of our borrowers to succeed.”

But isn’t the first role of any such agency to protect the interests of taxpayers who were involuntarily turned into OneJet’s sugar daddy?

To be clear, according to the report, OneJet was current on repaying its first debt when the second loan request was made. And the county redevelopment agency did seek additional personal guarantees on the second loan.

The late-payment behavior persisted. And it is only because of those personal guarantors that some of the money is expected to be recovered.

As one would expect, Chimka defends his agency’s role in the OneJet mess:

“RAAC often invests where private institutions will not and is accustomed to assuming higher-risk profiles,” he told the Business Times. “Despite this unfortunate project, RAAC maintains healthy fund balances and will continue to invest in projects with regional economic benefit.”

Sad to say, OneJet’s “economic benefit” proved to be a mirage. And why should taxpayer dollars be treated so disrespectfully? If private institutions would not bankroll OneJet, why should taxpayers?

And if private institutions would not help OneJet, why wasn’t this a red flag for county officials? Or for state officials? What due diligence was done? Or was none done?

Given that some prominent private Pittsburghers also invested in OneJet, did county and state officials pony up money based on their recommendations? What due diligence did those private investors perform?

Using tax dollars to subsidize a private corporation is lousy public policy. But the OneJet fiasco hints of something far worse. The whole scenario is in dire need of a thorough public hearing.

And until everyone involved is forced to be held accountable, the public that was forced to subsidize this detritus should continue to demand answers.

Colin McNickle is communications and marketing director at the Allegheny Institute for Public Policy (cmcnickle@alleghenyinstitute.org).

Pittsburgh’s audited results for 2018

Pittsburgh’s 2018 comprehensive annual financial report (CAFR) has been released.  The CAFR contains an in-depth look at the fiscal characteristics and performance of the city’s budget year, its related entities and the city’s overall financial position.

Based on the city’s statement of revenues, expenditures and changes in fund balances in 2018, the city collected $570.1 million in revenues from taxes, fees and other payments and spent $545.1 million, resulting in a general fund excess of $25 million.  That exceeds 2017’s excess by $12 million.  When the city exited Act 47 the five year projections required by the act projected operating surpluses.  The city’s net change in the general fund balance was $3.3 million.

We have long argued that new sources of taxation and increases to existing taxes should be subject to approval by taxpayers in a referendum.  Of the city’s seven main taxes, only the deed transfer tax rate increased in 2018 (by 0.5 to 2.5 percent for the city’s share).  While the Affordable Housing Task Force recommended that this tax increase be placed on the ballot, the city council opted not to follow that suggestion.  Actual deed transfer tax collections were $34.1 million, roughly $4.3 million (14 percent) above 2017’s collections according to the CAFR. The remaining tax rates were unchanged in 2018.

We have also noted that spending should be tied to inflation and/or population changes.  Based on 2016-to-2017 changes in the consumer price index for Pittsburgh inflation was 2.3 percent.  Based on population estimates for the city in that same period population fell 0.9 percent.  If spending was benchmarked against an inflation-plus-population metric of 1.5 percent, the city’s spending results in 2018 far outstripped that.

General government, which includes elected offices, law and finance, grew 5 percent to $275 million.  Public safety, including police and fire, grew 6 percent to $207 million.  Public works grew 4 percent to $57 million.  Overall general fund spending grew 2.7 percent, a bit faster than inflation but greater when the population decline is taken into consideration.

Bringing spending levels in line with what is occurring with prices and city population would go a long way to improving the city’s long-term fiscal picture.

 

Things that don’t compute

State Rep. Elizabeth Fiedler has introduced a joint resolution proposing the Pennsylvania Constitution be amended to repeal the Uniformity Clause.

That’s Article VIII, Section 1: “All taxes shall be uniform, upon the same class of subjects, within the territorial limits of the authority levying the tax, and shall be levied and collected under general laws.”

Fiedler, a Philadelphia Democrat, citing the leftist Institute on Taxation and Economic Policy, says the Keystone State “has the seventh most unfair state and local tax system in the nation.”

Claims Fiedler: “Unfortunately, the Uniformity Clause … prohibits our commonwealth from adopting a more progressive personal income tax.”

Ah, the nub of the rub – “progressivism.” Let’s suck evermore money out of the private economy and hand it over to “The State.” After all, government is such the efficient allocator of scarce resources, right?

Simply put, uniformity is critical to the rule of law. And has been written in many places by a plethora of scholars, a lack of uniformity creates uncertainty by creating much more uncertainty.

And that’s the foundation for instability when it comes to creating sound public policy and facilitating economic vigor.

As one of the wags with whom engagement is regular put it, succinctly:

“This is universally bad for our commonwealth.”

And as Jake Haulk, president-emeritus of the Allegheny Institute, reminded:

“I guess (Fiedler) is unaware of all the special provisions allowed by the (state) Constitution for homestead exemptions and tax relief incentive programs. Look at the tax rate on gaming.

“Pennsylvania’s problem is not an unfair tax system; the problem is the subservient posture relative to unions, especially public-sector unions and crony capitalism,” Haulk says.

The Post-Gazette, in its second editorial on the subject, once again takes House Speaker Mike Turzai to task for seeking to add state oversight to the dysfunctional Allegheny County Airport Authority board of directors.

Opines the P-G:

“It’s a terrible idea partly because of the timing. Enlarging the board invites corruption and political gamesmanship as big-dollar contracts for the airport overhaul are let.”

Conveniently not mentioned:

The board vice-chairman resigned more than a month ago in a huff, a resignation made public a month after the fact, upset that he was being subjected to public scrutiny for his financial conflicts.

The board gave the authority CEO unchecked power to give airlines public subsidies.

The failure and/or underperformance of those given subsidies raises the basic question of what due diligence was performed to determine the recipients’ financial wherewithal.

That $1.1 billion Pittsburgh International Airport overhaul suddenly has a floating price tag.

Not forcing greater accountability on the Airport Authority will only invite similar dysfunction – or worse. Sound public policy demands it.

Colin McNickle is communications and marketing director at the Allegheny Institute for Public Policy (cmcnickle@alleghenyinstitute.org).

Pittsburgh International Airport domestic passenger count: 2008-2018

Summary: Pittsburgh International Airport (PIT) officials have been using subsidies to lure airlines in an effort to boost passenger counts.  While passenger numbers are up at PIT, they are more likely the result of an improving national economy than subsidizing airlines.  This Brief will look at how PIT fared with passenger counts and flights over the last decade when compared to similarly-sized airports.

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Earlier Policy Briefs discussed efforts of PIT officials to increase airport usage in terms of their penchant to use subsidies to lure airlines that failed miserably (WOW Air, OneJet, Qatar cargo) and how the airport has fared with its efforts to increase passenger counts (it has not kept pace with similarly sized airports).  With the U.S. Department of Transportation (DOT) releasing the 2018 data for domestic passengers, flights and load factors, this Brief will look at how PIT fared with these metrics over the last decade.

The data covers origination passengers—the starting point of a trip —and destination passengers –the farthest point of travel from the origin of a trip of 75 miles or more (as per DOT criteria).  PIT lost its hub status well over a decade ago when USAirways (now American) greatly downsized operations at the facility. Now PIT is primarily an origination and destination (O&D) airport.

PIT is ranked 47th in the country based on enplanements.  For comparison purposes in this Policy Brief, the data will include 14 other similarly-sized airports ranked from 37th to 52nd by enplanements.  These international airports represent the following cities:  Cincinnati; Cleveland; Columbus; Fort Myers, Fla.; Indianapolis; Kahului, Hawaii; Kansas City; Milwaukee; Raleigh; Sacramento; San Antonio; San Jose; San Juan, Puerto Rico and Santa Ana, Calif.

Since international activity has not yet been updated through the end of 2018, the data examined covers only domestic activity at the airports in the sample.

In 2008 total domestic O&D passenger count at PIT was just over 8.4 million.  Ten years later, in 2018, the total had grown by 7 percent to 8.98 million.  For all airports (1,229) across the country O&D passengers grew by 19.4 percent during same time. Within the similar-sized airport sample O&D passenger growth ranged from a high of 39 percent in San Jose to a low of -35.38 percent at Cincinnati’s international airport.  PIT’s growth ranked 11th among the 15 international airports in the sample with the bottom four—San Juan, Milwaukee, Cleveland and Cincinnati—suffering losses.

Of particular interest is that the number of O&D flights at all 1,229 airports across the nation declined by 10.4 percent over the decade.  From 2008, just before the recession took hold, through 2015 there was a steady decline in the number of flights being offered nationwide (18.76 million to 16.12 million). Over the last three years there has been a slight rebound to reach 16.8 million in 2018.

Of the 15 airports examined only two had increases in the number of flights between 2008 and 2018: Kahului (up 13.4 percent) and San Jose (up 9.9 percent).  The other 13 airports all suffered declines over the decade ranging from a drop of 4 percent (Santa Ana) to a loss of 60.6 percent (Cincinnati).

In 2008 the number of flights at PIT stood at 127,569 but fell to 99,680 in 2014.  The number of flights began to climb afterwards, reaching 114,845 in 2018. It’s an improvement but still shy of the pre-recession level.  The net decade drop in flights at PIT was the seventh worse at 9.9 percent but still better than eight others that experienced declines over the 10-year period.

The final metric examined is the “load factor.”  Load factor is defined by the airline industry as the ratio of passenger miles flown to the number of seat miles available—a measure of how full the flights are in terms of percentages.

For originating flights, the load factor for all 1,229 airports across the country was 84.46 in 2018, up nearly 5.9 percent from the 2008 level of 79.74.  This makes sense considering that the number of O&D passengers across the country has increased while the number of flights has decreased.  In the 15-airport sample San Juan had the highest load factor in 2018 (87.13).  However, its growth was the lowest at just 1.4 percent given that the load factor in 2008 was already high (85.95, also the highest in this sample for that year).

The smallest load factor in 2018 was posted by the flights from Kansas City at 80.29, up from 74.13 10 years earlier—a growth of 8.3 percent.  PIT’s load factor for originating flights in 2018 came in at 82.78.  It was 78.97 in 2008, an increase of 4.8 percent—the 11th best increase in originating airport load factor and the 9th highest load factor in this sample of 15 airports.

As noted in a previous Brief (Vol. 18, No. 17) which looked at a shorter time frame, 2015-2017, PIT’s gains in flights and passenger counts did not keep pace with the other 14 similarly-sized airports.  Taking a longer-term view of 10 years (2008-2018) shows much the same pattern.  The near 7 percent rise in PIT’s domestic O&D ranked 11th while the change in number of flights was 7th best even though it represented a significant decline.  PIT’s 2018 load factor of 82.78 was 9th best but the increase was only 11th best.

Yet the cheerleaders for the airport and the authority that owns it continue to claim major successes—successes that are, in fact, very modest in the context of similarly sized airports.  They continue to double down by subsidizing new carriers to come to PIT such as British Airways, WOW, OneJet, Via Airlines and Condor Airlines.  WOW and OneJet have ceased operations altogether, not just at PIT.  British Airways, Condor and Via are flying, although British Airways just recently started operations and its announcement of intentions to begin flights last year coincided with the elimination of Delta’s route to Paris (a formerly subsidized route, Policy Brief Vol. 18, No. 31). Via has already cut back service from four flights a week (to Birmingham, Ala.) to two after just two weeks of flying from PIT. The Airport Authority is embarking on a reconstruction at the terminal at a cost of at least $1.1 billion (it will probably end up much higher) to accommodate a demand they project will materialize.

The demand for air travel depends far more on growth of the local population and the strength of the economy than on luring airlines with subsidies.  As the national economy has picked up steam so has national air travel—including at PIT.

Still, if local officials want to boost demand for air travel, they need to concentrate on helping improve the regional economy rather than trying to artificially stimulate demand through subsidizing carriers so they can offer cheaper fares than they otherwise would need to cover costs.

More Airport Authority fun & games

Why did it take Allegheny County officials more than a month to reveal that the controversial vice-chairman of the county Airport Authority had resigned?

The Post-Gazette reported Monday afternoon, on the 29th day of April, that Robert Lewis resigned on March 22. March 22? Additionally, a county spokeswoman says Chief Executive Rich Fitzgerald already has been considering replacements.

So much for a public authority’s timely dissemination of public information.

In his resignation letter, as reported by the Pittsburgh Business Times, Lewis had the audacity to “express grave concern for how my colleagues on the board will continue to be able to make appropriate and necessary decisions without constant scrutiny and attacks.”

Never mind that the public has an obligation to scrutinize the actions of any public authority. So does the media, on behalf of the public.

The resignation is all the more curious considering it turned out that Lewis was one of three Airport Authority board members who had invested in OneJet — an airline, now bankrupt and no longer flying, an airline that stuck the public for most of the $1 million in public money it wriggled from the authority, which was forced to sue in an attempt to recover the money.

And Lewis’ investment was not chicken feed. It is reported to have been in excess of a quarter-million dollars.

Lewis and two other board members divested of their investments — but only after the board barred such clear conflicts. Why that was not considered to be a conflict from the get-go is a basic good-government question.

That said, the Lewis investment supposedly was A-OK because Lewis did not vote to ratify the OneJet subsidy. Which is more than a bit disingenuous considering the board gave Authority CEO Christina Cassotis sole power to dole out subsidies of any amount to any airline.

While all that might now be considered bad public policy under the bridge, the fact that there apparently was no public announcement at the end of March that Lewis had quit only affirms the need for greater transparency at the authority and the need for greater oversight.

As does Lewis’ obvious disdain for public scrutiny of his actions.

The Airport Authority’s plan to reconfigure Pittsburgh International Airport is not off to a good start.

It was in September 2017 that the authority, virtually out of the blue, sprung on the public a $1.1 billion plan to tear down or repurpose the existing landside terminal and build a new terminal to handle ticketing, baggage and security.

Public input was an afterthought – save for interior decorating, it seems.

Now, more than a year and half later, comes word that the stated $1.1 billion price tag was quite ephemeral.

Buried in a recent Post-Gazette story on some of the first contracts to be let for the project was this gem:

“(Airport Authority CEO Christina) Cassotis is expecting the $1.1 billion price tag to increase once architects finish the schematic design. She called the figure a ‘placeholder’ based on a ‘very, very early design.’”

Uh-oh.  That’s no way to run a railroad, let alone an airport authority.

So, what’s the final tally going to be?

How much is this project really going to cost?

If the Airport Authority’s Department of Loosey-Goosey really doesn’t know, the public is in for a very unsound public policy ride.

Airport Authority officials love to repeat (and repeat) that “no local tax dollars” will be used for this project. That is, the airport re-do will be financed by bonds using revenues from the airlines, concessions, parking and natural gas drilling.

But local, state and federal public money certainly flows to the authority and airport. And few doubt that, as the airport project cost bloats, even more public dollars will be tapped.

As House Speaker Mike Turzai (who’s been receiving lots of organized blowback for his proposal to make the authority’s board more accountable) reminded in a P-G commentary, there’s “$12.4 million in state gaming revenue that goes to the airport annually” and “more than $65 million has been given to the airport since 2004 through taxpayer-funded state grants and loans.”

Remember this the next time those at the Airport Authority engage in who-pays-what semantics. And also remember that the agency is a public authority, accountable to – GASP! — the public.

Colin McNickle is communications and marketing director at the Allegheny Institute for Public Policy (cmcnickle@alleghenyinstitute.org).

Notes on the state of things

Will Via Airlines be the next publicly subsidized embarrassment for the Allegheny County Airport Authority?

It was with the usual fanfare that the subsidy-happy authority announced it was paying a never specified premium (in addition to a “standard” one-year waiver of landing fees) to bring the small Florida carrier to Pittsburgh International Airport (PIT).

Via planned to fly from Pittsburgh to Birmingham, Ala., Memphis, Tenn., Hartford, Conn., and Austin, Texas, four times a week

“We’re happy. We’re thrilled,” said authority CEO Christina Cassotis in January. “They’ve got the right-sized aircraft. These are the kinds of markets they serve and we know these markets will perform when they get service.”

Or maybe not?

The Post-Gazette reported Friday that two weeks after beginning the Birmingham flights, those four-a-week flights have been trimmed to twice weekly. The airline is blaming a nationwide shortage of pilots. It hopes to return to its full schedule on June 28.

Until it doesn’t?

Via hasn’t exactly had a pristine customer service record. The U.S. Department of Transportation last year expressed “serious concerns” about the airline.

And, as another newspaper reported, “the LSU basketball team was forced to take a seven-hour bus ride back to Baton Rouge from Austin after its Via Airlines’ flight was canceled.”

Reviews of Via Airlines on Trip Advisor are simply horrid. By far, most of the reviews fell into the “Terrible” category.

Oh, well; sign ‘em up nonetheless, pay ‘em a premium and be “happy” and “thrilled.” Detect a pattern here?

And, by the way, shouldn’t a thorough vetting of Via had included a simple question such as this: “There’s a nationwide shortage of airline pilots that’s hitting smaller, regional airlines particularly hard; given that scenario, can you provide the service you are promising?”

Speaking of the Airport Authority and PIT, the Post-Gazette has editorialized that House Speaker Mike Turzai’s proposal to expand the Port Authority board of directors from nine to 13 members and include a modicum of state oversight “would mean greater risk of cronyism, political intrigue and other problems.”

As if the board’s to-date nonfeasance and gross conflicts of interest somehow are acceptable and don’t warrant a new check and balance?

Nowhere is sound public policy being perverted more than in the Pennsylvania dairy industry.

To wit, the Tribune-Review reports that Pleasant Lane Farms in Unity, Westmoreland County, has been awarded a public subsidy of more than $364,000 to build a cheesemaking facility to supplement milk production.

Milk prices have been depressed. There’s a glut of milk production. Public subsidies have created a hardly economic cycle of propping up prices that, in turn, maintains the glut that, yes, keeps prices depressed.

So what have the mavens of “The State” decided to do? Throw more subsidies at dairy farmers that only exacerbate the problem. Pleasant Lane Farms and others are receiving hundreds of thousands of dollars  from the new Dairy Improvement Program (authorized under the Legislature’s Act 42 last year).

Gov. Tom Wolf boasts that it “incentivizes the dairy industry to support the often costly and difficult process of modernizing or expanding their business model or operation.”

By making taxpayers unwitting venture capitalists.

Taxpayers have no business – zilch, none, nada – giving a private dairy farm $286,744 to construct a creamery for cheesemaking. Neither do they have any business giving the same dairy farmer $77,338 to market that cheese and to build an on-farm classroom and tour facility.

And then there’s a $400,000 loan from taxpayers, that will – get ready for this, folks, because it will put you over the top – allow the farm to increase its herd and produce even more milk.

What’s next, taxpayers building Pleasant Lane Farms a retail facility to sell its “state cheese”? And how soon before this farm is seeking even more subsidies because its increased milk production has yet again exacerbated the milk glut and continued to tamp down prices?

Private businesses – whether they be dairy farms, widget manufacturers or professional sports franchises – should pay for their own capital costs.

Sound public policy demands that the marketplace be preserved, not perverted. More’s the pity that government eschews the former while actively promoting the latter as “progress.”

Colin McNickle is communications and marketing directing at the Allegheny Institute for Public Policy (cmcnickle@alleghenyinstitute.org).