Whose Bluff is Council Calling?

At last night’s County Council meeting a resolution to amend the 2011 County budget was proposed and sent to committee for further discussion. There is nothing too unique about the fact that Council wants to make an budget amendment, as the Home Rule Charter sets out the requirements for doing so (a 2/3rd vote and the approval of the Executive, and the amendment cannot unbalance the budget) but the subject and the timing of the proposal are quite peculiar.

The County’s 2011 budget (its fiscal year is the calendar year) approved $27.6 million for the Port Authority: that amount shows up under "miscellaneous agencies" in the operating budget. It constituted the County’s local match under Act 44, a 15% requirement that was based on what PAT was to receive from the state for its 2010-11 budget (PAT’s fiscal year is July-June).

Because the state money was predicated upon the ill-fated I-80 tolling plan, PAT’s state allocation for this coming fiscal year was reduced. According to the resolution, Council was told "in November 2010 the Authority’s state funding derived from Act 44 was reduced by an additional $6.8 million for FY2011-12", bringing PAT’s state allocation to $150.3 million. On December 6th Council approved their 2011 budget with the $27.6 million for PAT intact. Based on the state funding the County match would be 18%.

Now, three months after passing its budget, Council proposes reopening the issue and revising its match to $22.5 million, making it 15% of the amount they knew about before they adopted the budget. What’s changed? For one thing, there is a pitched battle over the bailout money funneled through SPC: the transit union is advocating for all the money to be spent now to avoid any of the planned service cuts and layoffs at the end of March, while the PAT management wants to spread the money over 18 months as per the sentiment expressed by the SPC. In addition, the PAT board is set to decide in about a week on allowing a private company to operate service PAT wants to abandon in the North Hills. This measure is too opposed by the transit union and its allies.

So who is Council trying to bluff in this latest standoff? Do they want PAT to capitulate on the bailout money and the competitive service offer in order to keep the $5 million? Do they want the state to intervene and come through with more money for PAT? In either case, Council is playing a losing game as they are trying to bluff with a weak hand, not realizing that the other players likely know it is a bluff. And what does Council plan on doing with the rescinded $5 million if the amendment is successful? Hold it in escrow until PAT and/or the state meets their demands? Maybe the state will react by lowering the top rates at which the drink and car rental taxes are levied. That will create a standoff no one wants to see.

What Doomed Council’s Second 11th Hour Plan

OK readers, grab your scorecards.

After a three hour session, City Council passed a plan to boost the pension fund to 50% by using the future revenue stream of the Local Services Tax (LST) the $52 tax that falls on every person who works within the City’s limits. This replaced the plan (let’s call it Council plan A of December)that would have used parking meter revenues as the pledged source to get the funded ratio of pensions up to the legislatively acceptable level under Act 44. The Mayor did not like that one, so soon after, the LST plan (that would be Council plan B of December) was put together and then that was scrapped in favor of dedicating a portion of parking tax revenue to the pensions (yep, Council plan C of December).

What happened to the LST plan (B), you ask? Here’s likely the answer. Act 222, the law that originally raised the tax from $10 to $52 and renamed it the Emergency and Municipal Services Tax from the Occupational Privilege Tax and Act 7, which subsequently renamed the tax the Local Services Tax, contain language that restrict the use of the tax.

Section 22.6 of Act 7 states "any municipality deriving funds from the local services tax may only use the funds for (1) emergency services (2) road construction and/or maintenance (3) reduction of property taxes (4) property tax relief through a homestead or farmstead exclusion". The act further states that 25% of the money must be used for emergency services such as police, fire, and medical services.

Using the LST revenue stream as a pledge to fund pensions was not going to fly. So the next act was to identify another revenue source, and that’s where the parking tax revenues come in. Right now that tax generates about $44 million for the City’s general operations, and dedicating $13 million as is the plan would require cuts or another revenue source to fill the hole.

What Will a State Pension Takeover Mean for Pittsburgh?

“A City of the Second Class that is determined to be in Level III distress based upon the required actuarial valuation reports for a plan year beginning on January 1, 2011, shall transfer all existing benefit plans established by the City to the Pennsylvania Municipal Retirement Board solely for administration…Pension benefits and eligibility requirements shall continue to be subject to collective bargaining”-Act 44 of 2009, Section 902C

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Labor Union Ad to Denounce Pennsylvania Roads

How deliciously ironic. The Laborers Union International announces it will run ads warning motorists about Pennsylvania’s structurally deficient bridges. And why are the bridges deficient?-according to the union not enough money is being spent on the bridges.

Perhaps if the bridges did not cost 30 percent more to repair than bridges in a right to work state with no prevailing wage requirement, they would be in much better shape. The union should be asked this question: In order to have safe bridges in an environment with very limited funds available to do the work, would you be willing to abandon the prevailing wage requirement and allow less expensive non-union labor do the work?

The answer would be no. So, here is what the union is really is saying. We prefer unsafe bridges to giving up any of our stranglehold over the policies of Pennsylvania. Indeed, they are really about soaking taxpayers regardless of the consequences. Looks like France from here.

Not the Mayor’s Choice?

Today the Mayor’s spokesperson was quoted as saying that the parking lease for pension relief deal is something the Mayor is being forced into. "Let’s be clear: The mayor doesn’t want to do this" was the exact statement.

Consider for a moment that the state is not (and never was) going to swoop in and rescue troubled pension systems like Pittsburgh; there is no magic wand to wipe away the $650 million in unfunded liabilities; there are few options to generate a lump sum of cash to put into the pension fund; there is no free lunch.

But to imply that the Mayor does not want to do the lease is disingenuous. Recall that the state passed Act 44 last fall as a way to deal with municipal pensions. It even had the makings of moving to a defined contribution system and away from defined benefit plans. But the Mayor wanted no part of it and said, nearly a year ago, "just give us a chance to solve this locally. We can do it. … Give us a two-year window to explore leasing [public] garages".

Out of that came the amendments to Act 44 and the granting of the Mayor’s preferred alternative, the same one we are now told he is lukewarm on.

Governor Displays Hypocrisy over Failing Bridges

In what can only be described as arriving incredibly late to a crucial government problem, Pennsylvania’s Governor is now bemoaning the condition of the state’s bridges. Yesterday (Aug 5), the Governor was quoted as saying, " If we don’t do something about finding the money to do repairs of our roads, our bridges, our highways, our mass transit systems, they’re either going to become more and more dangerous or we’re going to have stop traffic from going over these bridges."

"These bridges" is a reference to the 5,646 bridges in the state that have been deemed structurally deficient. The deplorable condition of roads and bridges in Pennsylvania is a long standing problem that has existed throughout the eight years of the governor’s tenure.

So now that the Governor is in the last six months of his second term and is quickly attaining lame duck status, he is suddenly concerned about roads and bridges.

This is the same Governor who led the effort to divert scarce Federal highway funds to mass transit. It is the same Governor who has propelled state overall spending upward at a very fast rate during his time in office with hefty emphasis on education and economic development. Rather than focusing on making sure the critical highway system received top priority, the Governor used highway money to shore up Pittsburgh’s outrageously expensive transit system, pushed an ill-conceived and eventually failed plan to toll I-80, and spent several billion dollars underwriting subsidies to businesses with precious little to show for all the money. And little wonder: given the state’s poor business climate and the rapidly deteriorating condition of the roads and bridges what could we expect?

Ultimately, no amount of spending on education or handouts to business will offset the negative impact horrible highways have on the economy. Call it what it is. On the one hand endless generosity to the state’s teacher unions and on the other dogged determination to make a failed economic development strategy work while being derelict in carrying out one of government’s basic functions-transportation infrastructure.

What Will Council’s $250,000 Parking Study Accomplish?

City Council wants to leave no stone unturned and wants to make sure that when it decides to approve or disapprove of any agreement the Mayor reaches with a potential lessee of parking facilities that will provide funds to bolster the City’s ailing pension funds it will base its decision on a thorough examination of facts and options. That’s why, with the blessing of the City’s oversight board, Council will spend $250,000 to engage a consulting group to study the lease-for-pensions deal. 


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Step Right Up and Play the Pension Shell Game!

Here is a story that could only come out of New York: there is a plan afoot to allow the state and its municipalities to borrow money from the pension fund in order to make pension payments into the pension fund and then repay the money back, at higher interest, beginning in 2013. In all the state would borrow somewhere in the range of up to $2 billion and local governments could take on $4 billion or so. According to the most recent Census of governments New York has 57 counties and over 1,500 municipalities.

The symptoms sound eerily familiar to what is going on in Pennsylvania: enhanced benefit packages and a declining stock market have caught up with each other to weaken the underpinnings of the pension system. Rate spikes are projected for the Commonwealth’s two plans for state workers and school teachers in the next few years as a result of deals brokered in the early part of the decade, and municipalities have been granted tax increases (Philly and Pittsburgh) and some time to get a breather from retirement contributions.

But no one has yet suggested dipping into the pension trough to take care of the obligations.

Are “Draconian” Cuts Ahead for Port Authority?

The CEO of the Port Authority will go before the board of directors to inform them that the transportation agency is facing a $50.6 million budget deficit for 2010-2011. He claims that unless more revenue comes from the state level, the agency faces "draconian" and "damaging" changes. He claims "the Port Authority that serves us today will not be the Port Authority that exists afterward." Will his fears be realized or is this yet another empty threat at the heads of taxpayers?

Recall that when the state passed Act 44 in 2007, the Port Authority was afforded two new streams of revenues-a poured alcoholic drink tax in Allegheny County and funds from the tolling of Interstate 80. Since then the Federal government denied the application to toll I-80 and the money available for mass transit across the state has been cut in half.

The Port Authority CEO claims that unless more state money is found, weekend and evening services would be cut, routes would be eliminated, and maintenance and service garages would be shuttered.

But this scenario may not have happened had they listened to the Governor’s task force on transportation (2006) and implemented some of their recommendations such as engaging in competitive contracting and moving at least 20 percent of operations to the private sector. Furthermore the task force recognized the high cost of the Port Authority’s labor when compared to other transit agencies around the country and noted that in future contracts concessions would be required from the agency’s labor force. However when time came for a new contract (2008), immediate short-term concessions were not part of the deal and any long-term concessions were minimal at best.

And what does the union have to say on this matter? The transit union chief notes that he agrees the situation is dire and something needs to be done. However don’t count on the union to offer up concessions. Instead he recommends waiting until the state comes up with a fix rather than making cuts.

How nice. Instead of offering to help the bloated agency, he suggests finding new ways to bleed the taxpayers.