PAT Claims to Be an Investment Train Engine

PAT Claims to Be an Investment Train Engine

Are businesses flocking to Pittsburgh because they are looking for a viable public transit system? That is the claim being made by the Port Authority (PAT) in an advertisement in the July 25th edition of the Pittsburgh City Paper. The ad goes on to say that every dollar of investment made by PAT in public transit returns as much as six dollars in economic returns. Their only specific example: they maintain that the East Busway spurred $800 million in development in the areas around the bus stations.

Let’s take a hard look at PAT’s assertions regarding the economic effects of its investments in transit.

First, if employers and developers are evaluating where to locate based on a viable public transit system, they must surely be skeptical about Pittsburgh transit’s viability. PAT is bankrupt in any meaningful financial sense of the word and can only sustain its egregiously expensive operations with ever increasing taxpayers’ subsidies. It currently faces a 35 percent reduction in service in September coming hard on the heels of substantial cuts in the past few years unless the State comes up with significant additional funding-which it appears reluctant to do.

Moreover, PAT operates in Allegheny County, Pennsylvania where the public transit unions are empowered by state law to strike and shut down service completely. That means every three years or so when contract time comes around the threat of a walkout is always on the table. This power to strike is a principal reason PAT’s finances are in such dreadful shape. Strikes could also occur if there is sufficient grievance over management’s implementation of an in-place contract to justify a walkout.

Further, a recently enacted state law strips PAT of its long standing monopoly status. Over time that will mean increased competition from private carriers as well as incursions into PAT’s once protected territory by regional transit agencies from neighboring counties. PAT’s financial situation and the union’s power derived from the right to shut down the system and throw transit riders and their employers under the proverbial bus cannot bode well for PAT’s future as a viable entity.

Second, does PAT’s contention that every dollar it has invested led to six dollars in economic returns have any validity? In terms of any new investment near the busways or the light rail corridor, the claim of "induced" new investment must be able to determine whether some or all of that spending would have occurred in others areas of the City or County if PAT had not made the transit investment. Bear in mind that the City’s population has been declining for 60 years and the County’s has dropped by hundreds of thousand since 1960. So, if busways or light rail has merely altered residential distribution patterns and shifted investment in housing and retail closer to those systems, that must not be confused with net new investment in the City or County over and above what would have happened anyway.

If PAT is including investment dollars in new stadiums or the convention center in their calculations that is a gross error. Indeed, any taxpayer funded projects should be stricken from the spin off effect calculations. PAT owes it to its ad readers to spell out its methodology for calculations of its economic impact.

Then too, the return on PAT’s spending assessment should also take into account the fact that PAT’s transit projects are heavily subsidized by County, State and Federal tax dollars. The recently completed North Shore Connector at a cost to taxpayers of over $500 million will have to generate $3 billion in returns to conform to PAT’s claim of six dollars in economic returns for each dollar of transit investment. Is there even a remote chance that will happen?

Half or more of the cost of operating and maintaining the buses and trains falls on taxpayers. Are those dollars included in the total project cost to get a more accurate evaluation of the "induced" gains from the project? And if so, over what time frame are the calculations being run? A safe bet is that PAT does not take the annual stream of tax of dollars needed to support the project into account.

Finally, does PAT (or the government agencies doling out its funding) ever look at the opportunity cost of a project? Every dollar spent on a transit project is money that could have been used for another purpose or left in taxpayer pockets. Was the PAT project the best use-better than eliminating traffic bottlenecks for example?

In sum, PAT’s ad in the City Paper should be taken with a grain of salt and as little more than self-promoting ink spilling.