Red herrings, poison-pillings & disrespect

Red herrings are procreating at an astonishing rate among those who are hell-bent on shutting down even talking about any degree of privatization at the long-troubled Pittsburgh Water and Sewer Authority (PWSA).

Pittsburgh City Controller Michael Lamb has joined the chorus of public officials, here and far, arguing that any talk of privatization is “misguided and premature.”

That assessment came last week as Lamb lauded the beleaguered authority for taking “significant steps” in lead line replacement and, now under state Public Utility Commission (PUC) auspices, having “a new focus” on “finance and customer service” and “long-term planning.”

Lest we forget, things had gotten so bad at the PWSA – it was on the precipice of collapse – that the state Legislature forced PUC oversight on the authority in 2017.

Even more important to remember is that the Legislature mounted that oversight effort to bypass PWSA’s political overlords. The water and sewer authority long had been dysfunctional, wracked by corruption and treated by several iterations of political leaders as a piggybank.

Lamb labeled as “false” – statements and narratives – that the efforts of Peoples Natural Gas to establish either a private water service (or to work in concert with the PWSA) somehow mean “we might as well just invite them in and work with them.”

Pay no attention to the realities behind the curtain, eh?

The false statements and narratives in this suddenly re-blossoming debate are coming from government types yet again trying to muzzle the debate by insisting that it is an article of faith that privatization of any public service automatically is bad.

Pittsburgh has such a long history of, for lack of a better phrase, “poison-pilling” such efforts – through bogus rhetoric, subservience to organized labor and some of the worst political posturing – that the phrase “It’s an embarrassment” doesn’t do it justice.

This notion – this false narrative – that private-sector delivery of a public service somehow leads to societal Armageddon is anathema to not only sound public policy but rational thinking.

How is it that hundreds of thousands of people in our region are served by private water companies and private garbage collectors in a most efficient and cost-effective manner, yet when such proposals are made within Pittsburgh’s city limits, they somehow will lead to horrid things?

Horrid things perhaps for the power base of pols but certainly not for the general public that has been disrespected for decades.

Speaking of disrespecting the general public, the administration of Pennsylvania Gov. Tom Wolf went to court last week in the latest attempt to keep secret the corporate wealthfare package being offered to Amazon.

Commonwealth Court was asked to reverse a ruling by the Office of Open Records that such “incentives” indeed are a matter of public record. How quaint – using public money to hide the prospective disbursement of public money.

Pittsburgh and Philadelphia are among 20 finalists for “HQ2,” what will be Amazon’s second headquarters outside Seattle. A decision is expected by the end of this year.

The Philadelphia Inquirer, citing that city’s chamber of commerce president, has reported the state alone has pledged $1 billion to the very profitable retailing behemoth.

Pittsburgh and Philadelphia officials similarly have refused to make public their Amazon offers and also have gone to court – again, using public resources — to block public release. Given that it is already mid-October, all jurisdictions likely will be able to run out the clock and keep the lid tight on their big secret.

Tut-tut, these public dis-servants have assured, should either Pennsylvania site “win” Amazon’s new operation, there will be a thorough public vetting of the offers through our duly elected representative bodies.

Duly elected representative bodies that, no doubt, will promptly apply the rubber stamp to an already signed, sealed and delivered package of taxpayer dollars, supposedly devised for the “public good” but sans anything resembling sunlight.

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

 

 

The water privatization bogeyman

A member of Baltimore City Council is imploring Pittsburgh residents to reject any attempts to privatize the Pittsburgh Water and Sewer Authority (PWSA).

But the reasons cited by Councilman Bill Henry are remarkable in that some of them actually indict the Baltimore system he claims to be superior.

In an Oct. 9 commentary in the Tribune-Review, Henry laments that when cities allow private corporations to take over public water utilities, “rates go up, wages and benefits for workers are cut and cities have less power to hold decision-makers accountable.”

“Water,” he maintains, “is a public good and human right.”

There have been some periphery discussions about the City of Pittsburgh and People’s Gas partnering to fix a PWSA badly broken by decades of political machinations. But city officials have been adamantly opposed to out-and-out privatization.

In Baltimore next month, voters will be asked to consider a ballot referendum that would ban such privatization efforts. “Baltimore will be the first city to ban the privatization of the public’s water,” Henry writes in the Trib op-ed. “Pittsburgh should be the second.”

Henry’s rationale?

“The purchase and operation of public water utilities by private corporations is often suggested as a solution to budget problems, aging water systems and increasing rates.

“Unfortunately, privatization tends to exacerbate these problems, not fix them,” he contends. “Low-income communities and communities of color suffer the most at the hands of ruthless corporate decision-making.”

Of course, in Pittsburgh, everyone “served” by the PWSA suffered – and will suffer well into the future — because of decades of mismanagement and corruption that allowed the water and sewer systems to rot.

Still, Henry argues that the kind of public-private partnership being bandied about with the PWSA-People’s coupling “is about asserting private interests over public goods and services.”

“When water is controlled by private interests, they put their revenue and the interests of their shareholders first. The rest of us come second, if at all,” Henry claims.

But this kind of “rationale” is all heat and no light. And Henry conveniently omits how Baltimore’s water system operates.

As veteran Baltimore reporter Mark Reutter noted, in an Aug. 6 analysis:

“Ironically, the (prospective) ban on privatization obscures the fact that Baltimore’s water and sewer system already operates much like a private entity with remarkably few checks and balances.”

Continued the much-needed point-of-order assessment:

“(Baltimore’s) municipal water policies are ostensibly intended to provide an essential service. But they’re also designed to capture maximum revenue to satisfy private bondholders and to fund capital projects determined by a relative handful of engineers and consultants.”

Reutter then goes on to explain how Baltimore’s water system works:

“Back in November 1978, city voters approved a charter amendment that designated municipal utility operations as ‘enterprise’ funds.

“The amendment removed the water and sewer systems from the annual budget process and required them to be financially self-sustaining.”

Furthermore:

“Ordinance 941, subsequently approved by the City Council, put a new mechanism in place for determining how much households and businesses would pay for water services.

“Rate determinations were placed in the hands of the Board of Estimates, and especially the director of Public Works, who sits on the spending board.

“If projected future costs outran projected future revenues, the board could raise rates at the recommendation of the Public Works director with the concurrence of the Finance director.

And if the enterprise funds encountered any revenue shortfalls, the Board of Estimates was required to establish new ratesat a level sufficient to recover any accumulated deficit, he notes.

And then there’s this, again from Reutter’s tutorial:

“In short, Baltimore’s water system became as profit-oriented as any private company (although, technically, it could not produce a profit, only a surplus.)”

In a nutshell, Reutter reminds that the government-controlled Baltimore system represents “a monopoly of hundreds of millions of gallons of water and thousands of miles of underground pipes free of any competition.”

The administrators of the water system are not required to justify their expenses and proposed rate hikes to state regulators.

By the way, they would be in any Pittsburgh public-private partnership or privatization scenario.

Reutter notes that the retail price of Baltimore’s water and sewer services remained flat for more than 20 years after the charter amendment and Ordinance 941 were approved.

“Then came a decade of reckoning,” he details.

It has nearly $3 billion in outstanding bonds for water and sewer improvements, many mandated by the federal EPA, with the bonds’ costs and interest coming “straight out of the pockets of ratepayers.”

Again, from Reutter’s in-depth analysis:

“Not surprising, then, the price of water and sewage in Baltimore City has more than doubled in the last 10 years and tripled since 1998. And there is no end in sight.” And water rates have risen in 17 of the last 19 years.

Reutter says that, in Baltimore, turning the issue of privatization into the bogeyman that it typically becomes “has also drowned out a rational discussion about how to finance costly infrastructure improvements.”

“And it’s put a damper on examining how well DPW is serving the public as opposed to fulfilling its obligations to bondholders.”

That is, the takeaway must be that privatization has become the proverbial strawman used to mask critical problems with continued monopoly control by government.

The headline on Reutter’s analysis? “Keeping Baltimore’s water system public won’t cure its accountability problems.”

Back to Bill Henry’s Trib op-ed:

The Baltimore councilman offers a straw argument all his own when he claims the Pittsburgh debate is all about “debt” when, in fact, it is about debt that must be incurred to rectify the failings of monopolist government machinations that came shockingly close to allowing the PWSA to collapse.

“Community control of public assets is critical to a healthy democracy and a healthy community,” Henry concludes. “The people and their elected representatives deserve to have a seat at the table and a say in what happens to their water.”

But when elected and/or appointed representatives run a water system into the ground, “the people” also should have every right to evaluate the privatization option.

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

 

Mt. Lebanon’s joke & Murphy’s bad advice

It just might be Allegheny County’s longest-running economic development joke. But the reality is far from funny.

“It” is a prime parcel of property at the south end of the South Hills community of Mt. Lebanon at the corner of Washington and Bower Hill roads. And it’s a prime example of what government interventionism doesn’t get you.

This saga dates back to 2002. It was decided that a parcel owned by the Mt. Lebanon Parking Authority should be developed. But time and time again, throwing good money after bad, sufficient private development dollars never materialized. And the public has paid the price.

The situation turned so sour that in 2013, a second developer, Zamagias Properties, defaulted on state loans it used to acquire that property. Which left taxpayers holding the bag for $1.78 million in loan guarantees.

But wait, it gets even more perverted: The very same Zamagias Properties that defaulted was allowed to keep the property. Don’t try this at home.

Slow-forward to this summer.

A new Zamagias proposal to build high-end condos at the site has been, you guessed it, stalled. A Zamagias official tells Mt. Lebanon Magazine, the official house organ of the community, that a lawsuit by the owner of a neighboring property has halted progress.

Do note that “progress” is a relative term. The site has seen some earth-moving and now sits shielded by a construction fence. Sometimes the weeds are high. Other times the fence redefines dilapidated. Welcome to Mt. Lebanon!

The magazine reports that “Zamagias is looking at other options, including considering offers from other developers to purchase the property,” an option the company official said would take about a year to close.

Another year. Ho-hum.

This project should serve as a textbook case for how local governments should leave economic development to the private sector. It’s attempt to command the economy has been an utter embarrassment.

As the Allegheny Institute noted nearly five years ago:

“Had the municipality simply sold the parcel off to the highest bidder and used the zoning process to guide development, (it) would already be enjoying an expanded tax base instead of staring at a still-vacant lot on (its) main thoroughfare.”

Instead, five years later, this fence-ensconced vacant lot is an overgrown monument to the hubris of pick-a-winner government economic development and the insanity of attempting the same thing over and over and over again.

There are no winners in such a continuing charade. And, invariably, taxpayers keep paying the steep price by having their pockets improperly picked.

Here’s some sage advice to the leaders of Swissvale, Rankin, Braddock and North Braddock:

Don’t listen to Tom Murphy.

The Post-Gazette reports that the former Pittsburgh mayor urged political leaders in these eastern communities to “Kick the door down” in pursuit of, as the P-G put it, “a new look” and “a big development.”

Murphy, of course, was the fella who wanted to bulldoze a large swath of downtown Pittsburgh two decades ago to satiate his central-planning whims.

That was stopped — but not before his more limited exercise in command economics crashed and burned.

In astounding disregard for anything resembling sound public policy, Murphy had the audacity to tout his supposed successes and urged a gathering of 50 political and business leaders to push ahead with their visions even if they don’t have the money.

“Imagine you have the money,” Murphy is quoted as saying.

The former mayor bragged that, again, as the newspaper narrative went, “Pittsburgh could have accepted its decline in the 1990s but he found ways to finance a new vision.”

Let’s see, there were the taxpayer-financed failures at Lazarus/Macy’s and Lord & Taylor (the latter of which eviscerated the historic charms of an old Mellon Bank building).

Don’t forget, either, the bait-and-switch of the North Shore Connector.

Then, of course, there was Murphy’s nose-thumbing at voters — who rejected his Stadiums Tax at the polls — by packing the board of the Regional Asset District to drain money for a purpose never intended.

Wow, now there’s behavior to emulate, right? Sorry, but no.

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

The Airport Authority onion

As a matter of ensuring sound public policy, it is long past time for state investigators to peel back the layers of the opaque onion that has become the Allegheny County Airport Authority.

Use of the term “state investigators” hardly is an incendiary phrase that pushes the envelope. It is most apropos given that under Pennsylvania law, it is the state Attorney General’s Office that is charged with auditing the agency that runs the show at Pittsburgh International Airport (PIT) and the Allegheny County Airport (AGC).

And make no mistake, ongoing developments at the authority warrant a look-see into how it has been conducting its business.

Of particular concern should be how the authority board has given CEO Christina Cassotis plenary power to grant subsides to airlines seeking to do business at PIT and what due diligence steps are taken to vet the finances of those receiving such subsidies.

The state AG’s office also should review how county and state agencies have augmented those subsidies: Who’s talking to whom and how have these deals been coordinated.

The most recent case in point that necessitates an outside and independent review is the OneJet mess.

The startup airline that catered to business travelers promised grand things as public officials armed it with $3 million in public subsidies. Those officials called it an “investment.” It was nothing more than a fleecing. There was lots and lots of rah-rah-sis-boom-bah-ing from not only Cassotis but airline industry consultant Mike Boyd.

“It would appear to me this should work very well,” Boyd told the Tribune-Review in May 2017. Cassotis touted how local officials outbid other airports/regions

to land OneJet.

But it didn’t take long for OneJet to go kerplunk. It failed, in stunning fashion, to live up to its agreement to produce the service it promised. And that prompted the Airport Authority to go to court to recover the lion’s share of its $1 million mistake. That case is pending.

Then it was revealed that the federal government filed a tax lien against OneJet for arrearages in excise taxes. But what’s striking is that those arrearages reportedly dated to before millions of dollars in public money was given to OneJet.

Which raises the question of how OneJet, or any carrier being considered for public subsidies, was and is vetted. Sound public policy demands due diligence.

And it also demands checks and balances. It was in April 2016 that the Airport Authority board gave Cassotis the power to grant subsidies – “up to any amount,” the Trib reported – without a board vote. That’s outrageous.

Since then, Cassotis has handed out public money to a number of airlines like Halloween candy. And every deal has been dubious. Sound public policy is being disserved.

OneJet, by the way, said when it suspended service that it would be back in business beginning Oct. 1. As of this writing, it is not. It’s not even taking reservations. And as the Post-Gazette reported Thursday last, OneJet has none of the required Federal Aviation Administration “air carrier operating certificates” to fly. Neither has it resolved the federal tax lien.

But more must happen than just a state Attorney General “audit.” The state Legislature must grant clear auditing authority to either the state Auditor General’s Office and/or the office of the Allegheny County controller.

Unfortunately, legislation that would allow the auditor general to do just that appears to have no legs in Harrisburg. It moved out of a state Senate committee at the end of last year but was tabled in the Senate in March, recounts the Allegheny Institute’s Eric Montarti.

The Airport Authority, among other county authorities, heretofore has balked at allowing the county controller to review operations. They routinely use the rationale that they are “independent” agencies not subject to the county controller and have their own outside auditors.

These, however, are the very same authorities that regularly allow their “independence” to be commandeered by the pols who appoint their members — elected officials who expect their bidding to be done or else.

Again, sound public policy demands checks and balances and transparency. Until that comes to the Allegheny County Airport Authority, reasonable people will view its operations as suspect. It’s time to start peeling that onion.

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

 

Make this call, Almono (& another shakedown)

The folks at Almono LLC should have a discussion with a fella by the name of Dave Ziel before they move forward with any plans to construct what surely would be a quite expensive “speculative building” on the grounds of the former LTV Coke Works in Pittsburgh’s Hazelwood neighborhood.

Ziel is the chief development officer of Urban Outfitters, described in one news account as the “hipster-leaning apparel chain” based in Philadelphia. It caters to fashion-minded customers aged 18 to 28.

Ziel’s company just inked a lucrative deal in Indiana County to build a huge fulfillment center said to be the size of 21 football fields in White Township’s Windy Ridge Business and Industrial Park.

The term “lucrative” cuts both ways, depending on which side of the Tax Break/Industrial Economic Development Complex you fall.

A plethora of dubious tax incentives clearly will trim costs that only the very profitable Urban Outfitters should bear.

But supporters defend the breaks saying 225 jobs will be created. There’s happy talk about 500 people being employed there down the road. About 600 short-term construction jobs will be created for a complex set to open in August 2019.

That’s “the most jobs created by a single employer in Indiana County in more than five decades,” recounted Indiana Gazette reporter Chauncey Ross in a Sept. 27 dispatch (a reference to the expected permanent jobs).

Expect to hear defenders employ that old standby “but for” argument: But for the tax incentives, Urban Outfitters would have built elsewhere.

More on that later.

But it’s something Ziel told Ross that should pique the interest of the officials of Almono, a partnership of the Heinz Endowments, the Richard King Mellon Foundation and the Claude Worthington Benedum Foundation, that is working to redevelop the 178-acre tract known as “Hazelwood Green” along the Monongahela River.

In addition to tax breaks, Ross reported:

“What also gave Indiana (County) a competitive advantage, according to Ziel, is the absence of huge, ready-to-occupy business centers that he said are seen sitting empty at almost every turn in Eastern Pennsylvania.”

Furthermore, Ross reported:

“The explosion of ‘speculative building’ prior to tenants coming in tends to oversaturate the region and limit the hiring potential in the east, Ziel said.”

To be fair, Almono’s Hazelwood Green project director, Rebecca Flora, told the Post-Gazette that “spec construction” – meaning to build without a signed tenant – is still in the ‘very early exploratory’ stages.”

And, indeed, the developments of Urban Outfitters and Hazelwood Green are quite different. The former is a retail operation’s fulfillment center (the fancy term for a product distribution center) and the latter is touted as a mixed-used development anchored by high-tech startups and those established tech companies looking to expand.

Nonetheless, there’s an object lesson in all of this that warrants an Almono call to Urban Outfitters’ Dave Ziel.

Build it and they will come? Not necessarily. And given that you can bet there will be some public money component bandied about, sound public policy deserves no less than picking up that phone.

Now, back to the Urban Outfitters incentive plan.

Make no mistake, this retailer is no slouch firm. To wit, it most recently reported quarterly financial results showing earnings per share skyrocketed 91 percent to 84 cents, beating Wall Street forecasts. Net sales of $992 million also exceeded expectations and represented a quarter-over-quarter gain of 13.7 percent. It’s now a corporation valued at $2.2 billion.

Thus, Urban Outfitters is doing quite well, well enough to move ahead with its $30 million Indiana County project. It should do so, however, with its own money, not diving into the public purse.

This profitable and growing concern has been given a very large tax break – paying real estate taxes on the current, undeveloped assessed value for 10 years, through the end of 2029. This being retail, and given the vagaries of the retail economy, who knows if it ever will pay property taxes based on the value of the new operation a decade hence.

And, yet again, taxpayers have been turned into venture capitalists. It’s a role they never should be forced to assume.

Urban Outfitters is self-described as “a lifestyle retailer dedicated to inspiring customers through a unique combination of product, creativity and cultural understanding.” And, hey, it even allows employees to bring their dogs to work.

That, of course, is its business. Woot-woot, and all that. But sound public policy dictates that taxpayers have no business subsidizing it.

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

More ‘public purpose’ machinations

So much for Pittsburgh’s municipal authorities being independent of the machinations of elected officials.

In late September, Pittsburgh Mayor Bill Peduto ordered four city authorities to report to him by Dec. 31 on the progress they’re making to, among other things, arbitrarily implement a $15 hourly wage for their employees.

Those agencies include the Pittsburgh Parking Authority, the Pittsburgh Water and Sewer Authority, the city Urban Redevelopment Authority and the city’s Housing Authority.

Such a measure already has been ordered for, and adopted by, city agencies under the direct control of Peduto and the city council. Among them — planning, public safety and public works.

The mayor expects the supposedly independent authorities to implement the higher $15 minimum hourly wage for full-time employees by January 2021. And should they not? Well, you can bet the pols will boot board members who refuse and appoint those who will do their bidding.

On Tuesday morning, on KDKA Radio, Allegheny County Chief Executive Rich Fitzgerald lauded the latest and past government moves to set the $15 hourly minimum.

To supposedly bolster his case, Fitzgerald pointed to this week’s announcement by Amazon that it will raise its hourly minimum for its workers and those employed by its Whole Foods subsidiary to $15. The executive also pointed to UPMC’s hourly wage initiative.

Of course, the problem with the Fitzgerald comparison is that it’s apples to oranges – government to the private sector.

And the problem with the mayor’s edict is twofold:

First, even though elected officials appoint authority board members, they have no business interfering with the wage rates for employees of those agencies.

The nod-nod, wink-wink that these authorities are “independent” is bad enough; a blatant directive to set wages at a certain scale is beyond the pale. But, sadly, that’s considered business as usual for pols and their puppet boards.

Second, but no less important, government officials have no business arbitrarily raising wage floors by government fiat. All wages should be based on skill set and productivity.

Period.

Speaking of public authorities, a comment made last month by the solicitor for the Allegheny County Airport Authority should be raising eyebrows and setting off alarm bells.

It came in the aftermath of the authority finally doing the right and transparent thing in forcing two conflicted board members to either divest in the troubled OneJet airline or resign from the authority board, and then barring any board member from becoming similarly conflicted.

The Tribune-Review reported that Solicitor Jeff Letwin “said he did not plan to ask the rest of the board members whether they’ve invested in airlines.”

How’s that work? Doesn’t the solicitor have a responsibility to ascertain whether the authority board members he advises are operating under not only board rules but eschewing perceived and actual conflicts of interest?

Of course, solicitors do have such a responsibility. But, alas, this is the same solicitor who saw no issue with two board members’ obvious conflicts – and apparently still does not — until some still unrevealed outside source forced the matter.

That said, “Ask nothing; know nothing” hardly is an example of sound public policy.

Speaking of OneJet, when it announced at the end of August that it was suspending all its flights in order to transition to larger jets, it said it would be back in the flying business come Oct. 1.

But October is here and there’s no indication that OneJet is coming back. An email to its customer care address was answered with an automatic reply, undated, that reiterated its plan to “expect inventory to reopen for sale beginning October 1.”

That’s air industry parlance for starting to book flights again.

But not only was its booking website not functional on Wednesday, it was still offering refunds through the end of 2018.

OneJet is being sued by the Allegheny County Airport Authority for nonperformance. The agency is demanding the return of the lion’s share of a $1 million public subsidy, part of an overall $3 million public-subsidy package.

It also was reported that OneJet had not paid federal taxes that dated to before it was offered the Airport Authority subsidy. And that continues to raise the question of a lack of due diligence. Surely, had there been a serious vetting of OneJet’s financial wherewithal, its tax scofflaw status would have been revealed.

So, who is responsible for this quite expensive lapse?

Who?

Well?

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

 

Train drain & a PNC payback?

There’s talk of attempting to improve passenger train service between Pittsburgh and Altoona. But it’s difficult to imagine the effort would fare any better than it did over a two-year span 35 years ago.

That’s when the Pennsylvania Department of Transportation (PennDOT) subsidized Amtrak with $547,000 in public money. But the service attracted only 30 or so daily passengers. The plug was pulled in 1983.

As the Post-Gazette’s Brian O’Neill recently reminded, that $547,000 would be $1.4 million in today’s dollars.

PennDOT now will spend $200,000 on a private consultant to gauge demand along the 117-mile route. Amtrak’s Pennsylvanian takes just under 3 hours to make the trek. One can drive to Altoona from Pittsburgh in just under 2 hours.

And lest one forget, it takes a painfully long 5 ½ hours to Amtrak it between Pittsburgh and Harrisburg. It’s a 3-hour drive.

The train consultant claims there surely must be greater demand these days along the Pittsburgh-Altoona corridor because of what she described to the P-G as a “passenger rail renaissance” in eastern Pennsylvania.

Never mind that rail always works best in the most densely populated areas, not in the largely rural western half of the Keystone State.

It’s never been good public policy to throw good money after bad. But, sadly, government officials keep doing their darnedest to do so.

PNC Financial Services has sold its 185-room Fairmont Pittsburgh hotel in downtown Pittsburgh for $30 million. The buyer is Xenia Hotels and Resorts, based in Florida.

The hotel was incorporated into the heavily taxpayer-funded 23-story Three PNC Plaza, of which the hotel took the top 10 floors.

You might recall that the project cost $178 million to build. But taxpayers subsidized construction with $48 million. There was $30 million from the commonwealth and $18 million in tax-increment financing.

Of course, taxpayers never should have been turned into venture capitalists for this or any other such project. And it was a particularly galling situation, considering it was a giant and most profitable banking corporation constructing the complex.

All that said, it should strike reasonable people as apropos to expect at least a modest return on their 10-year-old “investment.” After all, one can assume PNC is turning a profit on this deal. (Conversely, if it’s not, tax dollars were conscripted to help underwrite a very suspect deal.)

Interestingly, back in 2006, Bill Peduto, now the mayor of Pittsburgh, was the only member of City Council to oppose the such corporate wealthfare for the banking behemoth. PNC didn’t need the help, he said then. No kidding.

We should all trust that Mayor Peduto now will spearhead the effort to return some of the profit that PNC made on the backs of taxpayers to those taxpayers.

Yeah, right.

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

Another shakedown & the Huffaker Watch

No, no, no; 800,000 times no.

As expected, the Allegheny County Regional Asset District (RAD) board has

proposed a preliminary budget that transfers even more taxpayer dollars to benefit Pittsburgh’s wealthy barons of sport.

Now, there’s little doubt that the board will adopt the budget, as is, in November. But that doesn’t mean the tax-paying public shouldn’t question the dubious move.

You may recall that the city-county Sports & Exhibition Authority (SEA) — which owns the playgrounds of the Steelers, Pirates and Penguins on behalf of the public — asked the RAD board for a continuing annual appropriation of $1.16 million a year to help augment funds that pay for capital improvements and repairs to not only Heinz Field, PNC Park and PPG Paints Arena but also to the David L. Lawrence Convention Center.

The latter is the fully taxpayer-funded facility that regularly slashes its rental fee to host events that, by proxy, taxpayers have no business underwriting.

And this, for Steelers and Pirates franchises that, thanks to a system of hilarious off-setting “credits,” pay no rent on facilities mostly funded by the public.

While the RAD board did not agree to that $1.16 million figure, it did authorize an additional $800,000 for 2019 with the full expectation that it will become an annual line item. It rationalized this latest spate of corporate wealthfare four ways to Sunday.

To wit:

Not all of the additional money will go to the sports facilities, was one.

Because some of the money used to go to paying off the debt of the long-gone Civic Arena, it’s A-OK to now use it for the field, park and arena, was another.

And, yes, yes, yes, this new money is on top of the $13.4 million in RAD dollars that annually go to pay off the construction of Heinz Field and PNC Park – but, hey, only 7.5 percent of all RAD dollars generated from the 1 percent piggyback sales tax goes toward those facilities.

After all, too, went another rationalization, money that goes to the SEA represents a wee fraction of RAD’s forthcoming budget.

But that’s a lot of noise. The real issue remains that the city’s sports teams, already mammothly subsidized by the public, then given sweetheart lease terms and handed rights to develop publicly owned acreage, deserve not one cent more of taxpayer money.

For it is not merely economically indefensible – it’s also morally wrong.

The Allegheny County Port Authority, the agency that rides herd over the county’s mass-transit operations, has hired a “chief development officer.” And it is one pricey hire: David Huffaker will be paid $175,000 a year.

That’s about as overpriced as are the authority’s oversized and out-of-whack costs to provide bus service, as the Allegheny Institute documented in May (in Policy Brief Vol. 18, No. 18).

But there’s an even larger issue here: Huffaker comes to the Port Authority after 14 years at Sound Transit in Seattle. He started his career there in finance and most recently served as that agency’s deputy director for operations support services. And Sound Transit is a mass-transit agency that has been an absolute mess.

As one critic put it in 2015, commenting on that agency’s light-rail efforts:

“So, how can a transportation project taxpayers have spent so much money on offer so few actual benefits? To put it simply, bad planning based on a false assumption of the benefits of light-rail.”

A year later, the Washington Policy Center hit Sound Transit (which operates light-rail and bus service in three central-Puget Sound counties) for bogus planning, primarily for inflating ridership projections on rail projects whose estimated costs were wildly lowballed.

No, this is not to ascribe blame to Huffaker personally for all the foibles and failures of Sound Transit (a misnomer if ever there was one). But he has come to Pittsburgh after a long tenure in a climate that hardly was the epitome of sound planning and prudent development and squandered millions upon millions of taxpayer dollars.

Port Authority CEO Katharine Eagan Kelleman, in announcing Huffaker’s hiring, said the position “is critical for the region’s success as David and his team will be responsible for determining where our routes – and our agency – will go in the future.

“This position directly supports the foundation of our mission: to deliver outstanding transportation services that connect people to life.”

One can only hope that the unsound practices of Sound Transit haven’t followed Huffaker to Pittsburgh and that he can slay eerily similar unsound practices that have dogged public transit in Greater Pittsburgh for more than half a century.

Again, one can hope. But it’s difficult to be hopeful.

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

Light-rail shibboleths

It was in August that Pittsburgh Mayor Bill Peduto told WTAE-TV news that should Amazon not pick the erstwhile Steel City for its second headquarters outside Seattle, mass transit could be the reason.

From the TV report:

“Limited light-rail access outside the city is poor and the Pittsburgh region is ‘woefully’ behind other cities in that regard, Peduto said.”

“If you were to look and ask if we have an antiquated transit system, sure we do, with buses,” the mayor said. “But when it comes to light-rail, we’re woefully behind other regions.”

A lack of a more expansive light-rail system “certainly” could be a detriment in landing what Amazon has called “HQ2,” Peduto said.

But for a city leader who fancies himself as the epitome of a 21st-century “progressive,” Peduto’s take on light rail is out of step with reality. More than 20 years out of step with reality, essentially.

It was in 1997 that scholar James V. DeLong, writing for the Reason Public Policy Institute (RPPI), identified eight myths associated with light-rail transit – myths that too many elected and appointed public policy makers continue to insist are bogus.

First, there’s the myth that rail transit is rapid transit. But, in general, DeLong found those buses that Peduto considers to be so “antiquated” are quicker.

Then, there’s the capacity myth. Found DeLong’s RPPI study: “Bus corridors … have vastly more capacity than any single rail line. Only the most heavily used rail trunk lines have greater capacity than busways, and these have significantly higher costs.”

But surely light-rail is a champion of easing commuter congestion, right? Sorry, but no. As DeLong notes:

“Rail is not a decongestant. Support for rail voiced by drivers is based on a hope that others will use rail transit and open up the road.”

Fact of the matter is, the researcher found, “rail riders are taken out of buses, not cars.” Those supposedly “antiquated” buses.

But, of course, light-rail transit is “cost-effective.” No, it is not. Rail is “economically inferior to conventional bus service,” DeLong found.

Then there is the myth that rail best promotes the central planners’ vision of urban “superior form” (high density areas for living and work) whose advantages supposedly are manifest.

But, simply put, DeLong finds centralization runs counter to natural forces pushing decentralization.

But, but, but, surely light-rail benefits low-income people! Again, no.  Given that light-rail tends to cater to more affluent neighborhoods, such routes “are poorly adapted to the needs of the low-income users,” DeLong says.

And light-rail also strips resources from bus systems that actually serve the needs of low-income riders – that is, go where those riders need to go – “because available funds must be funneled into fulfilling the extravagant promises made to satisfy the middle- and upper-class constituency that advocated the rail systems,” DeLong adds.

Then there’s the myth that light-rail creates jobs. But DeLong’s research shows not only that bus systems provide more jobs per public dollar, they lead to more local employment.

So, how about that “free money,” those federal dollars that typically cover such a huge portion of light-rail projects?

In a nutshell, DeLong notes that “the rail option is 20 times as costly as bus service in terms of demand on local capital funds.”

DeLong’s exhaustive look at light-rail more than suggests that it’s not Pittsburgh’s bus transit system that’s antiquated — though, as this institute has repeatedly found, even its costs are far and away above the national norm – but Mayor Peduto’s thinking.

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

Of locks, lagoons & innuendo

At long last, Congress has appropriated the millions of dollars desperately required to fix the crumbling system of locks and dams on the Monongahela River. It now will be up to the U.S. Army Corps of Engineers to allocate the money.

While this is great news, it is long overdue. And it points to a broken bureaucratic process that endangered the free flow of vital commerce on our inland waterways. Witness that the work on the lower Mon was authorized by Congress in 1992 – 26 years ago.

Sound public policy indeed demands due diligence. But that diligence certainly must be performed in a timely manner. Twenty-six years hardly is “timely.”

Word from Pittsburgh’s North Shore is that a tropical lagoon will be incorporated into a 15-acre mixed-used development along the Ohio River off Beaver Avenue, just west of the West End Bridge in the Chateau neighborhood.

The lagoon, sized at 2 acres, is designed for use by swimmers, kayakers and paddleboarders in the summer. It will be converted into an ice-skating rink during the winter. The lagoon/rink will be open to the public for a fee.

But while various media reports tout the developer’s effusive accolades for the coming project, there’s no indication what, if any, taxpayer dollars are expected or have been offered. Past being prologue, one can only imagine there is an extended or expected public financing component.

That said, other than public infrastructure, taxpayers have no business being turned into venture capitalists to underwrite capital costs that the developer alone should bear.

And that said, once upon a time developers were expected to cover the cost of the increased demand their developments placed on the public infrastructure.

Gee, remember the good ol’ days of “impact fees”?

A correspondent chides this scrivener for an op-ed detailing the Allegheny Institute’s argument against instituting a severance tax (on top of the existing impact fee) for the extraction of shale natural gas.

“The gas industry once again wants us to think they (sic) pay us so much just for the privilege of being here in Pennsylvania that we should give them our gas for free,” the writer states in a letter to the Tribune-Review.

“Among their latest efforts to get their raw product for nothing, did they recruit Colin McNickle to write a favorable piece in the Trib?”

There, of course, are two issues here that must be addressed:

First, companies drilling in Pennsylvania certainly don’t “get their raw product for nothing.”

On top of that impact fee, they also must buy the mineral rights from property owners or those who otherwise own those rights. Those owners typically are paid a signing bonus and royalties.

And then there are the hardly incidental costs to comply with myriad government regulations.

There’s nothing “free” about any of that.

Second, this writer was not “recruited” by anyone “to write a favorable opinion piece.” It was based on the scholarly research of this public policy institute, always grounded in sound and fundamental economics.

In other words, the facts — and not the misinformation and innuendo of the letter writer to the Trib.

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