Tag Archives: Allegheny County

Strongest and weakest high schools in Allegheny County

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Introduction: The picture of the strongest and weakest high schools in Allegheny County is a one of two vastly different situations.

The 634 Pennsylvania high schools ranked academically by Schooldigger © by average standard test scores as reported by the Pennsylvania Department of Education, shows nine Allegheny County schools ranked in the top 30 or top 5 percent.  Meanwhile, 11 county high schools ranked in the lowest 20 percent with four in the bottom 10 percent. Scores are based on combined results of three Keystone exams (math, literature and biology) taken by 11th-graders in school year 2021-2022.

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 Top ranked

By way of background, the highest ranked school in the state was Seneca High in Erie with a score of 97.2; the lowest ranked was The Workshop School in Philadelphia with a score of 1.2, a range spread of 96 points.  Using district averages for the schools, Seneca High’s current expenditures per student were $17,373 while The Workshop School spending was $17,158 per student.  Interestingly, the very best and the very worst performers had nearly the same spending levels. All spending data is from the Pennsylvania Department of Education.

 Allegheny County’s best performing high schools

 

School State Rank Average Score Per-pupil Expenditures
Mt. Lebanon 6 94.1 $17,524
Upper St. Clair 14 91.4 $19,381
Thomas Jefferson 16 90.8 $15,297
South Fayette 19 90.3 $15,306
Pine Richland 23 90.2 $17,122
Fox Chapel 24 90.0 $21,973
North Allegheny 25 89.9 $18,298
CAPA-Pittsburgh 26 89.7 $26,402
Bethel Park 27 89.5 $20,264
Average 20 90.6 $16,956

As the sixth-ranked high school, Mt. Lebanon’s score was only 3 points below the highest-ranked in the state. All of Allegheny County’s top-ranked schools had scores at or close to 90. One Pittsburgh Public Schools high school made the list—CAPA—a magnet school that is by far the best high school in the city. Unfortunately, CAPA’s per-pupil spending at $26,402 brings the average for the top schools ($16,956) well above what it would be ($15,775) if CAPA’s spending was more in line with the other schools

 Allegheny County’s lowest ranked high schools

 

School State Rank Average Score Per-pupil Expenditures
Carrick 509 25.8 $26,402
West Mifflin 511 25.5 $20,879
Penn Hills 520 21.8 $17,738
Cornell 527 20.6 $24,930
McKeesport 530 19.8 $16,091
Woodland Hills 531 18.1 $20,623
East Allegheny 550 14.2 $19,025
Brashear 581 7.3 $26,402
Perry 601 4.6 $26,402
Sto-Rox 613 3.4 NA
Academy at Westinghouse 619 3.1 $26,402
Average 554 14.9 $22,489

Note that several schools that have traditionally been poorly ranked are not included in the list. For example, Wilkinsburg, Duquesne and Clairton are not shown because of insufficient data reporting to qualify for ranking. Note that Wilkinsburg high schoolers attend Westinghouse and Duquesne students are at West Mifflin and East Allegheny.

Four of the lowest 11 are Pittsburgh Public Schools with three in the bottom four.  In any case, all the poorly ranked schools have completely inadequate scores for the amounts of money being expended on education.

Indeed, many of these schools are perennially among the lowest achieving schools in the county. This represents a massive failure of the state as well as local school officials.  The presence of so many strong performers in the county should be a strong impetus to do better.  Long running, seemingly intractable failures to improve these schools should have long since led to personnel and policy changes led by the state’s governors and Legislatures.

Very few graduates of these horrendously performing schools are likely to go to college and, if they do, they will need massive remedial education. Even technical schools require basic reading and math skills. What kind of job can one expect to get with so little math or language skills?  Indeed, years ago the state instituted the passing of the Keystone tests as a requirement for graduation but, year after year, awful scores on the exams have essentially permanently forestalled the imposition of passing the Keystone exams as a graduation requirement.

These failing high schools are exhausting enormous amounts of resources to no avail. It is so bad that the question must be asked by school officials: Why are we asking taxpayers to waste such enormous sums of money and effectively mislead young people that they are being educated?

The truly sad part is that just over 200 hundred of the 634 high schools (including special schools such as charters) in Pennsylvania posted average scores of 50 or less.  It is not because children cannot learn; there are good schools in less well-off neighborhoods.

Windber High (Somerset County) students scored 75.9 percent advanced or proficient, despite spending only $13,476 per student in school year 2020-21. That amount is about half of the amount spent per student in Pittsburgh and $8,000 less than the average spent by the 11 very poorly performing Allegheny County schools and $4,000 under the state average.  Windber’s test score puts it in the top 30 percent of the 634 schools.

Even more impressive is the Loyalsock High School in Lycoming County.  With expenditures per student of just $13,593, half of the Pittsburgh Public Schools spending and $4,000 (21 percent) below the state average of $17,358, the high school posted an average score of 89.3, which ranked 31st highest of 634 schools. It is an amazing payoff per dollar spent compared to the 11 poorly performing Allegheny County schools.

Indeed, Loyalsock and Windber, to a lesser degree, put the lie to the argument that more resources—i.e. more money—are needed to achieve good academic results.

No. What is needed is commitment to achieving high-quality results—from school boards that put superintendents, principals and teachers in place to do what is necessary.  And that’s achieved through discipline in the classroom, attendance requirements and enforcement and teacher quality measured by results, not degrees and years of teaching.

All this will require legislation in Harrisburg that puts punitive measures in place for districts or schools that do not meet minimum standards of accomplishment.  Indeed, the state should have the power to place superintendents in failing districts that show no progress. School boards in failing districts have already shown they cannot fix the problems.

It will require pulling some of the power back from the unions. There can be no more strikes on penalty of huge fines. Superintendents have to be given authority to dismiss poor teachers and administrators. And it’s past time to quit kowtowing to disruptive students.

The need is now. The years of talk and promises and enormous waste of money must end.

None of this will happen, of course.  Governors and Legislatures have seen and watched the failure of many districts to educate the majority of their students for decades and have done little but throw money at the problems.  The entrenched power of forces opposed to real reform is simply too strong for significant progress to happen.

 Conclusion

The state has many examples of very good schools operating at reasonable costs. Learn from them. Make real and effective changes.  The taxpayers deserve better, the students in these miserably failing schools deserve better.

PRT should right-size weak performing routes; governing bodies should insist on it  

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Summary: Bus and light-rail ridership on Pittsburgh Regional Transit (PRT) vehicles remains far below pre-pandemic levels.  This Brief examines route data for August 2022 compared to the pre-pandemic month of August 2019 and recommends corrective actions.

Policy Brief Vol. 22, No.33, utilized PRT’s performance metrics and system data tool which shows average monthly ridership for buses and light-rail on weekdays and weekends.

Ridership and costs

Compared with pre-pandemic August 2019, average August 2022 bus ridership was 37 percent lower and average light-rail ridership 52 percent lower. Low ridership exacerbates PRT’s already high operating costs.  Using the same methodology described in the Brief noted earlier to determine cost per passenger, bus trips in August cost $9.87 per rider and light-rail trips were $25.92.  PRT’s current fiscal year (FY) budget is higher than last year’s budget and there were no employee layoffs.  And the bus rider cost is an average over all routes.  Owing to the large variation in usage levels across the routes, there is a similar variation in costs per rider among the routes.  

The PRT data tool shows ridership by route.  In August 2022, PRT operated 95 bus routes and three light-rail routes.  Routes operated on one of three schedules: seven days a week, weekdays only or on weekdays and one weekend day. PRT’s annual service reports classify operations as “rapid,” (fixed guideway for at least 75 percent of the route); “commuter,” (connect major job centers); “local,” (no fixed guideway and average weekday ridership of 1,000 or more), or “coverage,” (same as “local” but average weekday ridership of less than 1,000).

Of the 95 bus routes, 64 operated seven days a week (62 of those were “local” or “coverage”); 29 operated on weekdays only (25 of those were “commuter” or “rapid”); two operated on weekdays and one weekend day (one was “local” and one was “commuter”).  The three light-rail routes operated seven days a week and were classified as “rapid.”

In terms of the percentage difference in average daily ridership in August 2019 compared to August 2022 (Saturday and/or Sunday service was added on 11 bus routes in this time frame, but comparisons were made only on common days of operation), the routes ranged from 11.4 to 86.9 percent below the three-year-earlier level.  Four routes having the smallest three-year shortfalls—less than 20 percent below August 2019—ranged from 11.4 to 14.3 percent lower.  All four were “local” or “coverage” routes.  There were two routes for which August 2022 ridership exceeded August 2019; both occurred on a weekend day of operation.  

Three years ago, nine routes had average daily ridership of 10,000 or more.  In August 2022 there were only four such routes.  The bus route with the highest average ridership this August was the 51 route, which had average ridership of 11,493. There were 34 routes with ridership 50 percent or more below ridership three years ago.  Meanwhile the light-rail Red Line had average ridership of 10,601, a drop of almost half from August 2019.

The table below shows the 10 routes with the largest percentage declines in ridership from 2019 levels.   All 10 routes terminate in downtown Pittsburgh.  All were bus mode, all operated weekdays only and all but one was “rapid” or “commuter.”  This is likely due, in large measure, to the continuing shift to remote work occurring in office settings in the City of Pittsburgh and other commercial centers in the county.  Bear in mind, too, that 24 additional routes not shown had ridership declines of 50 percent or more.  On bus routes, the average $9.87 cost per bus trip could double for routes with ridership 80 percent or more below the August 2019 level and depending on the length of the average passenger trip.

PRT August Route Performance, 2019 to 2022

Remedial and cost-cutting recommendations

As was argued in the previous PRT Brief, if ridership does not increase dramatically by year’s end, PRT needs to look at bus routes with extremely low levels of ridership and either cut trips or begin shifting service to much smaller vehicles that consume much less fuel and have, overall, drastically lower operation costs. Note that currently, of the 725 buses PRT operates, 30 are 35 feet in length, which is the smallest size bus PRT operates. On light-rail the options to lower operating costs are limited to fewer trips and running single-unit trains.

Although PRT adjusts service on a quarterly basis, with the next adjustment scheduled to go into effect in November, the very low-performing routes should be candidates for changes along the lines suggested above. 

PRT is utilizing federal COVID aid to fill shortfalls and how long that money will last depends on how ridership recovers.  The entities that provide recurring taxpayer subsidies to PRT—Pennsylvania, Allegheny County and the Regional Asset District (RAD)—should re-evaluate support if significant service changes don’t happen.  To date, there has been no indication of a change in their funding levels.

The state’s FY2022-23 budget shifted sales and use-tax money to replace Turnpike dollars (as was directed by Act 89 of 2013) in the public transportation trust fund that subsidize PRT and other transit agencies in Pennsylvania. PRT has received $68.3 million in state operating assistance through September, the first three months of the current fiscal year.  Legislators need to look at ridership at all systems across the state and consider cutting funding if ridership remains dramatically below pre-pandemic levels.

Allegheny County’s alcoholic beverage and vehicle-rental taxes and a RAD grant match the state dollars that come to PRT.  Both the county’s and RAD’s budgets have to be approved by the end of the year. The county is budgeting $49.5 million and RAD’s preliminary budget includes $3 million.  That latter amount has been requested and approved each year since 2013 even though RAD board members urged state and local leaders to find other sources of money when the initial grant was made. RAD now has even stronger grounds for refusing to contribute.

It is past time for these governing bodies to be much better stewards of the tax dollars sent to PRT and to go further and demand remedial steps to reduce PRT operational costs that were far out of line with other transit agencies before the pandemic.

Schools receive a third (and perhaps final) round of stimulus dollars

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Summary: Two previous Policy Briefs (Vol. 20, No. 39 and Vol. 21, No. 23) discussed Elementary and Secondary School Emergency Relief Funds (ESSER I and ESSER II) to help schools deal with the effects of the coronavirus pandemic.  Now comes the American Rescue Plan (ARP-ESSER).  How much money is to be awarded and how will school districts and charter schools in Allegheny County use the funds?

Compared to ESSER I and II, ARP-ESSER is a higher dollar amount and has a spending period ending in September 2024. It encapsulates many of the previous allowable spending categories of ESSER I and II but requires 20 percent of the allocation to be directed toward “learning loss” which is defined as “any specific or general loss of skills or to reversals in academic progress” and can be the result of summer break, interrupted education, school absence or teaching. With this being COVID-related federal legislation, the emphasis is on learning affected with schools being shuttered.

According to the Pennsylvania Department of Education, the state received close to $5 billion in ARP-ESSER funds. The bulk of the money for the 500 school districts and 167 charter schools—$4.5 billion—is distributed under an existing federal formula. The ARP statute has what is referred to as “state-level reservations” where specific percentages must be directed toward learning loss, after-school and summer school programs by school districts and charter schools. This totals $350 million. The remainder is for intermediate units, career technical centers and other educational entities.

Comparison of ESSER Allocations

In Allegheny County, the 43 school districts are to receive $283.6 million and the 25 charter schools—both brick and mortar and cyber schools located in the county—are to receive $46.7 million. The range of allocations for school districts is $108.7 million for Pittsburgh Public Schools (PPS) to $503,000 for Avonworth School District.  McKeesport Area, Woodland Hills and Penn Hills will each receive more than $12 million.  Three districts besides Avonworth—Hampton, South Fayette and Upper St. Clair—will receive under $1 million.

For charter schools the range of allocations is a high of $8.2 million for PA Leadership Charter School to $367,205 for Young Scholars Charter School.

Eligible recipients have to apply for the money. A response to an open records request for the contracts between school districts and charters in the county and the Pennsylvania Department of Education accounted for $324.9 million (98 percent) in completed contracts.  ESSER funds have to be tracked separately by recipients for reporting purposes.

School district agreements

Of the $278.3 million in planned expenditures, all 43 school districts will spend $97.3 million (34.9 percent) on salaries; 35 will spend $29.4 million (10.6 percent) on benefits; 42 will spend $51.1 million (18.4 percent) on supplies; 18 will spend $23.9 million (8.6 percent) on property.  The remaining expenditures are for purchased/other services and indirect costs.

A sample of districts that are spending on both salaries and benefits include Bethel Park (summer school and class reduction personnel); Chartiers Valley (long-term substitutes and curriculum writing personnel); Clairton (teachers and an administrator), and Deer Lakes (counselors and a teacher). Some school districts are more specific, describing how much staff they are hiring and for how long, while others are more ambiguous.

A sample of districts that are spending on supplies include Brentwood (educational materials and COVID supplies); Duquesne (technology and eSports lab supplies); Elizabeth-Forward (technology and gaming supplies); Fox Chapel (curriculum and medical supplies); Montour (hybrid learning supplies and pickleball courts); North Allegheny (remote learning and personal protective equipment), and Woodland Hills (cleaning supplies and laptops/Chromebooks). Baldwin-Whitehall, Gateway and North Hills are among districts spending for improvements or overhauls to building ventilation.

PPS is spending $47.6 million on salaries and benefits, $17.1 million on supplies and $40.7 million on purchased/other services. The remaining expenditures are for property and indirect costs.  The $108.7 million allocation equates to 60 percent of 2022’s budgeted property tax receipts.  PPS’ spending plan includes $27.4 million allocated to learning loss and an additional $14.3 million toward social and emotional learning. PPS is spending $33.7 million on “continuity of services,” which includes maintaining the employment of counselors, administrators, teachers, etc. for the purpose of “support[ing] the ongoing academic needs of students.”

Additional expenditures include spending on after/summer school programming; COVID mitigation supplies; IT security; laptops; professional development; transportation; technical education programs and ventilation upgrades.

Charter school agreements

Of the $46.6 million in planned expenditures, all 25 charter schools will spend $26.6 million (57.1 percent) on salaries; 21 will spend $6.8 million (14.6 percent) on benefits; 23 will spend $2.9 million (6.3 percent) on supplies; seven will spend $2.6 million (5.6 percent) on property.  The remaining expenditures are for purchased/other services.

A sample of charters that are spending on salary and benefits include Manchester Academic (teaching assistants and administrators); Passport Academy (teachers and a guidance counselor); PA Distance Learning (teachers and counselors); Urban Pathways 6-12 (teachers and counselors), and all of the Propel Charter Schools (specialists and summer school staff).

A sample of charters spending on supplies include Penn Hills Charter School for Entrepreneurship (staff computers and custodial supplies); Urban Academy of Greater Pittsburgh (curriculum and technology); and Westinghouse Arts Academy (textbooks, curriculum and resource materials).  Charters making upgrades to HVAC include the Propel Schools in Homestead; McKeesport; Montour; Northside, and Pitcairn. 

Possible effects of ESSER funds

Federal money might have the effect of delaying hard decisions and cost-cutting measures until it is spent in its entirety.  Or it might act as a substitute for state and/or local dollars that would have been otherwise expended. 

It is worth thinking about electronic devices, unused supplies and additional staff. What happens to the materials purchased with remote or hybrid learning in mind? Or to staff devoted to social distancing or technology modifications?

As was pointed out in the previous Policy Briefs, there were few, if any, layoffs or furloughs of school personnel by school districts.  The Public School Code allows school boards to suspend professional employees (teachers, principals, counselors and 12 other classifications) when there is a decline in enrollment, an alteration of the educational program, consolidation or creation of schools or for economic reasons.

Based on the state Department of Education’s school staff summary for full- and part-time employees, statewide there were 151,294 professional employees in school districts, charter schools, career technical centers and other educational entities on Oct. 1, 2019.  One year later the total stood at 151,858, an increase of 564 (0.4 percent).  Support staff, which includes aides and support employees, saw total headcount fall from 101,445 to 98,104, or 3,341 employees (3 percent) from 2019-20 to 2020-21.

If expenses funded by all ESSER dollars are maintained, it might fall to property taxes levied by school districts to provide the revenue.  Of the 42 school districts in Allegheny County that began their budget year on July 1, 2021, property tax rates increased in 21 districts.  No increases were greater than each district’s Act 1 index. PPS raised its millage rate by 0.25 mill in December 2021 for the 2022 budget year. 

In the pandemic time frame, with budgets approved in June 2020 and June 2021, 12 school districts raised property taxes in both of those budget years while 16 did not raise taxes in either year.

With ARP-ESSER being the third in a series of spending packages passed for the purpose of educational stimulus, the important question of whether this will be the final stimulus package is in the air. If the problems caused by the school closures continue to proliferate, will Congress consider further aid?

Will all the extra federal money be enough to repair the educational deficits created by the pandemic? If not, what will it take and how long?

Allegheny County’s 2022 assessed values rose

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Summary: Allegheny County’s assessed property values in 2022 stand at $106.5 billion, with $84.4 billion taxable and $22.1 billion exempt from taxation.  These figures are taken from the County Assessment Roll certified on Jan. 14.

Taxable value stands at $84.4 billion, with residential value totaling $58.2 billion and commercial $26.2 billion. Of the 581,667 parcels in the county 550,860 (94.7 percent) are taxable. 

The assessment roll displays value by municipality.  There are 128 municipalities with residential land and building value and all but one of those (Pennsbury Village) have commercial land and building value. The City of Pittsburgh accounts for $20.3 billion (24 percent) of taxable value ($10.4 billion residential and $9.9 billion commercial).  Eight other municipalities have over $2 billion in assessed value each, totaling $19.3 billion (23 percent of the county’s total).  The other 119 municipalities account for the remaining $44.8 billion (53 percent). 

From 2021 to 2022, the county’s taxable value increased by $1.7 billion from $82.6 billion (2.1 percent).  Residential value rose a bit slower than commercial value.  The aforementioned $58.2 billion in assessed residential value was up from $57 billion (2.1 percent) and commercial value posted a gain from $25.6 billion to $26.2 billion (2.2 percent).

Of the 128 municipalities, 115 saw assessed value move higher from 2021 to 2022 while 13 saw assessed value decrease. Of the gains, 35 municipalities had a percentage increase greater than the county average. The biggest percentage moves were in Pine Township ($2.1 billion to $2.4 billion, or 12.3 percent), Indiana Township ($617.7 million to $685.5 million, or 11 percent) and Aleppo Township ($135.2 million to $149.7 million, or 10.7 percent).

At the other end of the spectrum there were three municipalities that experienced taxable value declines in 2022 of more than 1 percent.  This group includes Glassport Borough ($96.8 million to $95.5 million, or -1.4 percent), Wall Borough ($11.1 million to $10.8 million, or -2.2 percent) and Millvale Borough ($93.8 million to $90.1 million, or 4 percent).

Unless there is a countywide reassessment, changes to property values year-to-year take into account new construction, improvements, demolition, corrections to records and appeals by property owners and taxing bodies. 

Commercial building value has garnered plenty of attention in recent years due to COVID and the effect it has had, or will have, on office work, shopping, dining out, etc. and owners seeking assessed value reductions through appeals.  In the municipalities with the biggest increases or biggest decreases on total value, it was commercial building value change that drove overall change.  The highest assessed property in the county, Rivers Casino, filed an appeal that went to the Board of Viewers, and the decision was a reduction in assessed value from $245.9 million to $221.4 million, resulting in a tax bill reduction of $584,934.

Change in Taxable Value Categories, 2019 through 2022 ($000s)

The assessed value of taxable commercial buildings countywide in 2022 is $20.4 billion. That was up $566.1 million (2.9 percent) over 2021.  Looking to the municipal level shows varying results.  There were 84 municipalities where assessed value was unchanged or up year-over-year and 43 municipalities where the value decreased.

Ten municipalities posted a gain in commercial building value saw a percentage jump of 10 percent or greater.  There were four municipalities that had a year-over-year decrease in commercial building value of 10 percent or greater. 

How has taxable commercial building value changed where it is highly concentrated?  In 2019, the assessed value of commercial buildings countywide was $19.2 billion.  A third of this total–$6.4 billion (33.4 percent) was located in three wards of the City of Pittsburgh (Ward 1, Downtown/Bluff; Ward 2, Downtown/Part of Lower Hill District/Strip District; and Ward 22, Stadium/Allegheny Center/North Side Proper) and four municipalities (Municipality of Monroeville and the townships of Moon, Robinson and Ross). Ward 2 had $2.4 billion in assessed value, the other wards and municipalities were all above $500 million but less than $1 billion.  Ward 22 has $1.4 billion in exempt building value, most of which is accounted for by the building values of Heinz Field ($600.7 million) and PNC Park ($445.5 million).

Through COVID and to the beginning of 2022, the year-over-year changes (2019 to 2020, 2020 to 2021 and 2021 to 2022) in taxable commercial building value, three—Pittsburgh Ward 1, Monroeville and Ross—had increases in each year-over-year period.  Pittsburgh Ward 2 declined in each period. The remaining three had mixed results.  Overall, by the 2022 certified taxable value of the group was $57 million higher than it was in 2019, growing 0.9 percent.  However, taxable commercial building value grew 6.2 percent countywide, and, as a result, the percentage share of value concentrated in these wards and municipalities shrank to 31.8 percent.

The lingering effects of COVID on sales of existing homes, improvements, demolitions, new construction and the value of commercial property based on use and income could affect local governments that levy property taxes on assessed value to generate revenue to carry out their functions. 

Pennsylvania is out of step compared to other states in which reassessments are carried out with regularity.  Since Pennsylvania allows counties to use a base year, decades can pass before new values are established and it is either a decision of the county government or a court decision that brings about a reassessment. 

Allegheny County’s values and adjusted millage rates went into effect in 2013 and the county’s millage rate has remained unchanged.  The average municipal millage rate rose 15.7 percent from 2013 to 2021 and the average school district millage rate rose 13.2 percent from 2013-14 to 2021-22.

Since then nine counties have completed assessments: six by county government action (Erie, Lehigh, Indiana, Blair, Lancaster and Monroe), three by court decision (Lebanon, Washington and Delaware).  Four other counties are moving toward new assessments.  The state should act to bring a regular cycle to reassessing.

Allegheny County’s hotel tax revenue increased in 2021

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Summary: Allegheny County levies a 7 percent hotel room rental tax that is used primarily for debt on the David L. Lawrence Convention Center and tourism promotion. Data from the County Controller’s Office show 2021 tax revenue was $9.7 million above 2020’s collections but remain 34 percent below the pre-pandemic collections of 2019.  A proposal to add a special fee on hotel stays in Allegheny County has been introduced in the General Assembly.

In a recent presentation to the local tourism community, a consultant forecasted that hotel stays, room rates and spending will “bounce back close to 2019 pre-pandemic levels” in Allegheny County.

That has to be good news for hotel owners and employees that rely on tourists as 2020 was a very bad year for the industry.  A return to 2019 levels has implications for Allegheny County’s hotel tax and the entities funded from the revenue.

Operators of hotels, motels and, in recent years, AirBNB-type rentals, are required to collect a 7 percent hotel room rental tax for Allegheny County (this is in addition to the 7 percent state and county sales, use and hotel occupancy tax).  The hotel room tax revenue is deposited in a special fund. 

Sports & Exhibition Authority website data show that, as of December 2020 there were 208 hotels and an estimated 18,661 rooms and suites in Allegheny County.  While there were new hotels constructed each year from 2015 through 2019, no new ones opened in 2020 due to the pandemic.

Hotel tax revenue is reported by the county on a one-month lag; thus, the December 2021 collections reflect November activity. Each reference to a month in this Brief will be to the month revenue was reported.  

Total hotel tax revenue in 2021 was $24.8 million, a $9.7 million (64.8 percent) increase from 2020.  From April forward monthly collections exceeded the same month in 2020, which is not at all surprising given the effects of the pandemic-caused travel collapse. 

By September 2021, monthly collections totaled $15.5 million, which surpassed 2020 total revenue.  On a percentage basis, May revenue was 540.5 percent above the previous May.  However, collections in January, February and March were lower than the same months in 2020, just prior to the COVID shutdown.

But 2021 collections are still 34 percent below the $37.8 million collected in 2019.  There were two months in 2021 (September and November) in which collections topped $3 million.  In 2019 there were eight months above that amount.

Hotel Tax Revenue, 2020 and 2021 ($000s)

While the tax rate is 7 percent, that total is, in reality, the result of two state statutes that permit the county to levy a 5 percent tax and a 2 percent tax.  The distribution formula and recipients of revenue are different for the two taxes. 

Statutory disbursements from the 5 percent tax include allocations to (1) the Municipality of Monroeville for tourism promotion (the municipality receives a percentage of hotel tax revenue generated within Monroeville); (2) debt service on the David L. Lawrence Convention Center; (3) Allegheny County for collecting the tax and (4) VisitPittsburgh for tourism promotion.  Any remaining money is used for discretionary disbursements for operations and maintenance at the Convention Center and for tourism events or organizations.

The 2 percent tax was added by the 1997 state law that authorized the Regional Renaissance Initiative ballot question.  After paying Monroeville’s distribution under the same formula used as the 5 percent tax, the remainder goes to debt service on the convention center. 

Total statutory and discretionary disbursements from the hotel tax in 2021 were $21.5 million, including debt service on the convention center ($14.2 million) and to VisitPittsburgh ($5.6 million). Part of the payments to those two entities were made from the fund balance, which ended 2021 at $13.7 million, up from $10.4 million at the end of 2020. 

Given that it would be reasonable to take a “slow and steady” approach to the coming year, why would there be an effort to pursue an increase in what travelers would pay to stay in Allegheny County?

Rather that increase the hotel tax itself, a proposal in the General Assembly would permit counties of the second class to create neighborhood improvement districts under Act 130 of 2000 (counties are not currently empowered to do so under the Act).  An improvement district would be able to levy a special assessment fee, which could then be passed onto travelers if hotels or motels were involved. 

This idea has precedent: Philadelphia, which can create improvement districts under Act 174 of 1998, created one in 2017 (the Philadelphia Hospitality Improvement District) which allows hotels with 50 or more rooms to levy a special assessment, currently 0.75 percent.  The purpose of the assessment, as described by the improvement district website, is to “fill hotel rooms by incentivizing conventions and large events to come to Philadelphia.”

At a hearing on the proposed change to Act 130 this past fall, the justification by local tourism officials was to “expand promotional activities and help local hotels” due to the pandemic.  Wasn’t that why a new convention center, stadiums and other cultural attractions were built?

One beneficiary of the proposed assessment would be the Sports & Exhibition Authority, which would get a percentage of the collections to maintain the venues it owns.  The authority receives a distribution from the Regional Asset District for that purpose.  Why not ask the professional sports teams to do more? 

A better approach is to shelve the improvement district and the fee and let the 2 percent tax added in 1997 expire as it is supposed to.  That would leave a hotel tax of 5 percent.  The entities that want a piece of the revenue generated can come up with a plan on how best to set a statutory formula for distribution.  

In last year’s Brief it was asked “What do the coming months portend …will hotel business bounce back quickly?  Or will it take several months or even years for travel-related activity to get back to pre-pandemic levels?”  One forecast seems optimistic.  But going down the road of charging tourists more would surely dampen that.   

Allegheny County’s household employment lagging

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Summary: As 2020 began, Allegheny County Executive Rich Fitzgerald touted the economic performance of the county since 2000.  As noted in late 2019, an Institute Policy Brief (Vol. 19, No. 44) reported that the seven-county Pittsburgh Metropolitan Statistical Area’s employment growth has fared quite poorly recently compared to similar-sized metros. Allegheny County makes up about half the population of the seven-county region.

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The Policy Brief findings were based on surveys of employer payrolls. These surveys cover only metro areas and do not report data by county. However, U.S. Bureau of Labor Statistics does collect household employment and labor force data at the county level through phone surveys.   

In the earlier Brief, the Pittsburgh metro area was compared with the Charlotte, Cincinnati, Cleveland, Indianapolis and San Antonio metro areas. This Brief looks at household employment data for the counties that host the cities for which the metro areas are named. They are Mecklenburg, N.C. (Charlotte), Hamilton and Cuyahoga, Ohio (Cincinnati and Cleveland), Marion, Ind. (Indianapolis) and Bexar, Texas (San Antonio).  Additionally, this study will include the performance of the nation and state. 

Household employment for Allegheny County in 2000 stood at 612,461 people (all figures are the 12-month average for the year cited).  In 2019 employment had increased to 625,287—a rise of 2.1 percent. In the sample of counties, it ranks as fourth best ahead of Cuyahoga (-11.4 percent) and Hamilton (-1.4 percent), but well behind Mecklenburg (57.5 percent), Bexar (45.7 percent) and Marion (7.8 percent).  Nationally household employment rose 15 percent and Pennsylvania’s count moved up 6.5 percent. 

The first decade of the new millennium ended just as the deep recession was drawing to a close with four counties having lower household employment in 2010 than 10 years earlier (Allegheny, Cuyahoga, Hamilton and Marion).  Pennsylvania also saw a drop while nationally household employment posted a very small 1.6 percent gain.  Meanwhile, Mecklenburg and Bexar (16.4 and 18.4 percent, respectively) recorded solid growth. 

With a rebound from recession levels and ongoing strong gains in recent years, the national household employment count climbed 13.2 percent between 2010 and 2019 while Pennsylvania posted a 6.5 percent rise. Unfortunately, Allegheny County, at 6.4 percent, trailed well behind the national gain and managed to surpass only Cuyahoga’s 1.8 percent. Allegheny’s growth fell far behind Mecklenburg (35.3 percent), Bexar (23 percent), and Marion (17.7 percent). Hamilton County, at 8.9 percent growth, was marginally better than Allegheny County’s gain. 

Another measure of the economic vitality of an area is labor force growth. The labor force consists of those who are employed and those who are actively seeking employment.  It does not count members of the population under age 16, retired or in an institution such as a school or hospital. 

From 2000-19, labor force in Allegheny County ticked up from 638,137 to 650,557 or barely 2 percent.  Over the same period the national labor force rose 14.7 percent, while the commonwealth rose by 6.5 percent.  Among the counties reviewed, Mecklenburg County’s labor force jumped by 58.9 percent followed by Bexar County at 44.3 percent and Marion County at 8.4 percent.  Both Ohio counties, Hamilton and Cuyahoga, had losses of 1.5 and 10 percent, respectively. 

While better than two Ohio counties, Allegheny County’s very slow 19-year labor force gain does not signal strong economic vitality in comparison to the nation and many counties across the country.  

As mentioned above, labor force is dependent upon the population at large—generally speaking, a growing population allows for a growing labor force.  While the next decennial Census will be taken in 2020, recent county population comparisons can be made using annual population estimates, with the 2018 estimate being the most recently available from the U.S. Census Bureau.

In the 2000 Census Allegheny County’s population was recorded as 1,281,666. By 2010 the count had fallen by 4.6 percent to 1,223,348.  The losses slowed to just 0.4 percent between 2010 and the 2018 population estimate of 1,218,452.  Over the time frame 2000 to 2018, Allegheny County’s population fell by 4.9 percent. 

By contrast, Pennsylvania’s population count over the two decades increased by 4.3 percent.  The bulk of that increase happened in the first decade (3.4 percent) before cooling off to less than one percent between 2010 and 2018. 

From 2000 to 2018, Mecklenburg led the six-county sample with a jump of 57.3 percent to the population (695,454 to 1.1 million) and will likely surpass Allegheny County in the next Census count.  Bexar County’s population climbed 42.3 percent to 1.99 million people, up from 1.4 million in 2000.  Marion County grew 11 percent over the period. However, Hamilton County and Cuyahoga County each saw population losses. Hamilton’s drop of 3.4 percent was smaller than Allegheny County’s.  But Cuyahoga was very hard hit with a population loss of 10.8 percent. 

In short, Allegheny County’s economic performance, as measured by household employment and labor force gains in comparison with the nation and state and several counties, has not fared well over the last two decades.  Of course, part of that story is tied with the loss of population.  But it all comes down to the availability of jobs and the business climate.  Job availability draws people to a county and boosts labor force and employment levels.

As many earlier Policy Briefs have noted, the business climate in Allegheny County has been less than ideal for job growth.  It is not free market-oriented or business friendly. A large part of that is the stifling regulatory climate coming not only from the state level but also from the county’s core, the City of Pittsburgh.   

It also has a lot to do with burdensome taxes, such as the additional one percent Regional Asset District sales tax, the drink and rental car tax and the very high level of school real estate taxes within the county.  Until the county reverses course and becomes more welcoming to businesses—without using public subsidies to draw them here—the slow growth that characterized the first two decades of this millennium will continue.

Details on the Port Authority’s Extremely Costly Bus Service

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Summary: A recent Policy Brief (Vol. 18, No. 13) demonstrated the Port Authority of Allegheny County’s (PAAC) very high bus operating expense compared to five comparably sized transit agencies. This Brief expands the number of agencies compared and looks at additional measures of efficiency and pay levels to develop a thorough understanding of the key differences that lead to PAAC’s extremely expensive bus operations. The news is not good. PAAC’s bus service is inexcusably costly and imposes far too heavily on taxpayers and Turnpike users.

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As noted in the March Policy Brief, the most comprehensive measure of operating cost effectiveness for comparison purposes is operating expense per revenue hour. That is, the non-capital outlays required to deliver services divided by the hours buses are actually on routes picking up and discharging paying passengers.

Total operating expenses per revenue hour data for 2016 were gathered from the National Transit Database for 28 transit agencies across the country. Of the 28 only one, New York City at $226, had higher operating cost per revenue hour than PAAC’s $189.69.  Boston ($185.14) and San Francisco ($186.54) were close to PAAC. The next most expensive were Newark, N.J. at $167.47, Seattle at $159.41 and Southeastern Pennsylvania Transportation Authority (SEPTA) in Philadelphia at $158.40. D.C. Metro was $152.30 and Los Angeles was $153.73.

No other agency in the group of 28 had total cost per revenue hour over $150. Several were in the $140s including Cleveland, Minneapolis, Miami, Syracuse and New Orleans. Chicago was $139.14. The remaining 14 bus systems had costs per revenue hour ranging from $101 to $130, including Phoenix; Buffalo; Jacksonville; Dallas; Charlotte; Milwaukee; Columbus; Salt Lake; Denver; Indianapolis; Cincinnati; St. Louis; San Antonio and Atlanta.

For detailed comparison with PAAC, a group of 10 systems were selected:  Charlotte; Cincinnati; Columbus; Cleveland; Milwaukee; Minneapolis; St. Louis; Atlanta; San Antonio and Salt Lake.

Operating expense per revenue hour is made up of several expenditures and factors, including operator wage expenses; wages of other employees necessary to produce bus services; fringe benefits of all employees involved in bus service delivery and nonemployee expenses (fuel, etc.), the percentage of vehicle hours that are actually on revenue-producing routes and any time for which drivers are paid while not actually operating a vehicle.

For purposes of this analysis the ratio of operator wages paid, other employee wages and fringe benefits for all bus-related employees to revenue hours and to vehicle hours were calculated for each of the comparison agencies. Recent estimates of average hourly wages for drivers for each agency were collected.

PAAC had a total operating expense per revenue hour of $189.69 while the 10 agency comparison group averaged $117.42, making PAAC 62 percent more expensive than the 10 system average.  Of the 10 agencies, Cleveland had the highest cost per revenue hour at $148.86 followed by Minneapolis at $145.57. The lowest operating cost agencies were Charlotte ($101.31), Milwaukee ($101.28) and San Antonio ($103.28).

Calculated on the basis of cost per vehicle hour, PAAC stood at $161.58 and the average for the 10 was $107.44 making PAAC 50 percent more expensive than the group average. Note that PAAC’s 62 percent greater operating expense per revenue hour compared to the 10 systems is significantly higher than the 50 percent difference in the cost per vehicle hour. This results in part because only 85 percent of PAAC’s vehicle hours are actually revenue hours while the average of the 10 comparison agencies was 91.5 percent.

A look at the components of operating expenses reveals the underlying problem with PAAC’s extremely high relative operating expense per revenue hour.

The most obvious comparative cost measure is driver wage rate.  PAAC’s average of over $25 per hour is 32 percent above the 10 system average of $18.98. The highest wage rate agencies are in Milwaukee, Minneapolis and Cleveland with average hourly wages of between $24 and $25.  The lowest hourly wage agencies were in Atlanta, San Antonio, St. Louis, Cincinnati and Salt Lake with wages between $15 and $17 per hour.  Among the very large transit systems reviewed, Chicago’s driver wage was just under PAAC’s while Boston’s was slightly higher. New York and San Francisco at $31 plus per hour were much higher.

Total operator wages expended per revenue hour to deliver bus service were $37.48 at PAAC and averaged $28.77 for the 10 agencies, a difference of 30 percent. The highest wages per revenue hour for the 10 systems were in Minneapolis at $36.19, followed by Cleveland $32.12 and Cincinnati at $32. The lowest operator wage expense per revenue hour was in Columbus ($23), followed by Atlanta ($25.45); San Antonio ($25.88) and Salt Lake ($25). The remaining three systems had expenses ranging from $28 to $30 per revenue hour.

Note that PAAC’s total operator wage payments per vehicle hour were $31.92, reflecting the fact that only 85 percent of vehicle hours are actually revenue producing hours. Still, the operator cost per vehicle hour is about $6 higher than average driver wages per hour.  This occurs because of overtime pay and pay for time the operators are not driving but are still on the clock.

For the remaining analysis only per revenue hour figures will be discussed since the relation of those costs to cost per vehicle hour has been established.

The second cost component examined is wage expense for bus service employees other than operators. For PAAC the wage expense per revenue for non-operator employees is $39.85 while the average for the 10 comparison agencies is $24.73 making PAAC 61 percent more costly than the group for this cost component. The highest expense among the 10 agencies was in Cleveland at $36.80. The lowest non-driver wage expense agencies were Charlotte ($17.20); Columbus ($22.88); St. Louis ($19.99); San Antonio ($20.54) and Milwaukee ($12.31).

The final component of employee cost is the fringe benefits for all bus service employees. At PAAC fringe expense per revenue hour in 2016 was $72.76 and the average for the 10 systems was $36.27 making PAAC’s costs per hour 100 percent greater than the group. Cleveland had the highest fringe expense per hour at $47.57, followed by Minneapolis at $46.58. Charlotte was lowest at $22.47. The rest ranged between $31.50 and $39.

Total employee cost per revenue hour at PAAC was $150.08 compared to an average of $89.77 for the 10 systems making PAAC employee costs per hour 67 percent higher than the group average.  The highest employee cost system in the group was Cleveland at $116.50 and Minneapolis at $116.07. Lowest employee cost was posted by Charlotte at $68.59. The other systems’ employee costs ranged from $78 to $91 with most in the $80s. In short, PAAC’s employment expenses are enormous compared to these similar sized agencies.

Finally, the cost comparison analysis looks at non-employee costs. PAAC’s non-employee expenses per revenue hour were $39.61. The 10 system average was $27.65, making PAAC’s non-employee costs per hour 43 percent more expensive than the average.

All told, the operating expense per revenue hour was $189.69 at PAAC.  None of the 10 similar size systems came anywhere near that close to that figure with Cleveland the closest at $148.90.

PAAC’s costs are not just a problem for Allegheny County for matching funds and fares, the agency also receives substantial state funding.  For many years, the management and boards at the authority succumbed to union pressures in order to avoid strikes.

Consider that if PAAC had the same cost per revenue hour as the 10 similar size agencies, it would have cost $114.8 million less than the $301 million PAAC actually spent for the 2016 level of service. Just lowering PAAC to SEPTA bus costs per revenue hour would save $48 million per year at current operation levels. Then, too, finding ways to raise the ratio of revenue hours to vehicle hours to the level in the 10 system average would save a lot of money.

Public transit system funds have to come from the fare box or taxpayers, and in PAAC’s case, from tolls paid by Pennsylvania Turnpike users, thanks to Act 89 of 2013. The decision made by the Legislature to allow unionized transit workers to strike and the unwillingness of management to face down unions threatening to strike has resulted in a cost structure that is far outside the norm. Then too, PAAC’s non- employee costs are much higher than those expenses at comparison transit systems.

The PAAC situation demands action to correct the egregious costs PAAC is incurring. Why does the Legislature countenance this glaringly overly expensive transit system and make no effort to rein in the spending and at the very least remove the right of transit workers to strike?

Municipalities’ Share of RAD Tax Revenue

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In 1994 Allegheny County imposed a one percent local sales tax allowed under 1993’s Act 77, the legislation creating the Allegheny Regional Asset District.  Act 77 mandates that 25 percent of the revenue collected be distributed to the County and 25 percent to its municipalities with the requirement that it be used primarily to reduce other taxes, with a few other permissible uses.

 

For most of the 1994-2015 period, 128 of the 130 County’s municipalities have received a share of the funds. Two municipalities, Trafford and McDonald, do not participate. Over the period, a total of $801 million was shared by the municipalities. All sales tax and municipal distribution data are taken from the RAD board web site.

 

The share of the revenue a municipality receives is calculated by multiplying the total amount available for distribution by a factor designated as the ratio of its weighted tax revenue and the sum of the weighted tax revenues of all municipalities.  Weighted tax revenue is specified as the municipality’s total tax revenue from all sources divided by the ratio of the per capita market value of real property in the municipality and the per capita market value of all County property. All population figures are taken from the latest Census figures available, currently the 2010 numbers.

 

In simplest terms the formula means that a municipality’s share factor will, all other things equal, be larger the greater its tax revenue and will be larger the smaller its per capita market value of real property.   Thus, municipalities with large tax revenues will tend to receive more than municipalities with small revenues.  However, the weighting formula will boost the share of municipalities that are poorer in terms of market value of real estate per resident above what it would be if its tax revenue alone were the factor and conversely the formula will act to reduce the share for municipalities that are wealthier in terms of market value of property per capita.

 

To investigate how accurately the formula is being applied this report examined the details of the sales tax revenue distribution. The first step was to calculate each municipality’s share of the sales tax revenue distributed over the last five years as well as the for the cumulative shares for periods 1994-2010 and 1994-2015. One interesting fact emerges quickly. The City of Pittsburgh received 52 percent of all the dollars distributed during the first 17 (1994-2010) years of the program and 50 percent of all the money distributed over the 1994-2015 period. However, the City’s share has been falling in recent years and by 2015 stood at 42 percent.

 

For the entire period 1994-2015, the municipalities with the seven highest per capita sales tax allocations include Braddock Borough, Clairton, Duquesne, McKeesport, Mt. Oliver, Pittsburgh, and Rankin.  All had per capita cumulative distributions over the 22 years of over $1,000 with Braddock, Rankin, and Duquesne above $1,400, Pittsburgh at $1,321, Clairton $1,200, McKeesport $1,121, and Mt. Oliver at $1,003. At the low end, the seven lowest per capita cumulative distributions went to Ohio Township, Pine Township, Sewickley Hills, Frazer, Franklin Park, Marshall and Robinson.  All received totals of under $200 over the 22 years except Robinson which received $209.  Of the remaining municipalities, 40 received between $500 and $1,000 while 74 received between $209 and $500 per capita.

 

 

Note that the per capita taxable property averaged $25,000 for the seven highest per capita RAD tax recipients (only $18,000 if Pittsburgh is excluded) while the seven lowest per capita recipients had average per capita taxable property of $155,000.  Thus, the impact of the distribution formula’s weighting scheme is readily apparent.

 

The simple average per capita cumulative for all 128 municipalities was $483. The weighted average (actual total dollars distributed divided by all 128 municipality residents) per capita was $655. This gap is due largely to the fact Pittsburgh received over half of all the sales tax revenue distributed during the period since the beginning of the program and its tax revenue and population count are so large relative to the other municipalities—larger than the ten next largest municipalities combined.

 

The next task was to evaluate whether the per capita distributions were close to what the legislated procedure should produce.

 

By using the formula in a reverse fashion, that it is to say, using it to solve for the effective sum of weighted tax revenues as opposed to calculating the amount to be distributed, it is possible to evaluate whether a municipality is receiving more or less than it should be—or the right amount.  The four other   components of the distribution formula are easily obtained for the seven municipalities that rank at the top of per capita distributions and the seven with the lowest.

 

Using this procedure reveals that for the 2015 allocations, results for two of the 14 municipalities examined suggest they received more than the legislatively mandated formula entitled them to. But they were fairly small boroughs and the amounts of money were small compared to the total amount distributed. The one municipality getting significantly fewer dollars than the formula says it should was tiny Frazer Township. Interestingly, the Frazer distributions since 2010 have been roughly a third of the average distribution from 1994 through 2010.

 

The remaining municipalities in the 14 selected for study had 2015 allocations that were within ten percent or so of the amount an accurate application of the mandated formula would be expected to produce. Bear in mind that deviations from ideal results are inevitable due to inaccuracies in estimates of market value of real estate caused by the County’s frozen assessments, self-reported municipal tax revenues, and the use of five year old population counts. Ironically, the RAD distributions are included in the tax revenue used to calculate the share factor. Inevitably, this will create serious distortions over time, especially in the cases of poor, small municipalities whose RAD tax distribution is a large fraction of their total tax revenue.

 

Finally, it is important to note the changes in municipal shares that have occurred starting in 2011 through 2015. Overall, dollars available to distribute rose 11 percent from $41.9 million to $46.6 million.  There were some big winners in dollar amounts and some big winners in the percentage increase in dollars received.

 

The most dramatic change was in the distributions going to Pittsburgh. Although the dollar amount for the City rose $98,000 (0.5%) from 2011 to 2015, the share of total funds distributed fell by ten percent.  If the City share had remained at the level of the first 22 years, Pittsburgh would have received $23.5 million in 2015, instead of the $19.98 million it actually received. This would have left only $23.1 million for other municipalities instead of the $26.6 million that actually occurred, a difference of $3.5 million.

 

The diminution of the Pittsburgh share over the last several years has been accompanied by significant gains in shares for some municipalities and large dollar increases for some. Clearly, the weighted tax revenue of the City has fallen relative to the sum of weighted tax revenue for all municipalities. This cannot be blamed on the County reassessment because the Pittsburgh share was declining before the reassessment.  And since population numbers are set to the 2010 Census they cannot be the explanation.  It is possible however that the significant declines in City population from the Census of 1990 to 2000 and then from 2000 to 2010 could have lowered the City’s weighted tax revenue from the 1994 to 2000  period to 2000 to 2010 and then again in the years since 2010.

 

Penn Hills, with an increase of $408,425 or 30 percent over the 2011 to 2015 period, was the biggest gainer in dollar terms. Clairton was second with a gain of $201,752 or 50 percent during the period.  Bethel Park posted the third largest dollar rise at $ 180,000 or 40 percent.  Six other municipalities enjoyed distribution gains of over $100,000 including; Moon (up 41%), Mt. Lebanon (up 20%), Munhall (up 32%), Rankin (up 66%), Upper St. Clair (up 34%), South Fayette (up 59%) and Ross (up 41%). Thus, each of these experienced gains well in excess of the overall 11 percent growth in total tax revenue distributed.

 

106 municipalities had increases in distributed funds from 2011 to 2015 of over ten percent. Of these thirteen municipalities received increases of over 50 percent, but none reached the $100,000 dollar mark in actual dollar increases. Ninety three of the municipalities had gains in the range of ten through 49 percent.  Eleven saw their allocations rise from one percent through nine percent while three had no change in share. Meanwhile, five municipalities saw their distribution amounts fall led by Braddock at 28 percent and Duquesne at 17 percent.

 

A table with all the dollar values and share changes has been posted on the Institute web site.

 

In summation, while the formula for distributing the sales tax revenue is apparently working reasonably well, it has a major drawback. To wit, much of the data used is outdated or subject to errors.  Failure to keep market values of property up to date and using Census data that can be as much as ten years out of date are real problems for accurate calculations. A new, simpler formula that uses more up to date data is needed to rectify these problems.  That will be the subject of a future Policy Brief.

A Lesson that Never Gets Learned

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As of August 30th, the USAirways’ (now American) flight operations center, subsidized by taxpayers, will close.  Around 650 jobs will either move to Fort Worth or disappear altogether—the result of the airline’s merger with American Airlines.  Such is the nature of business.  Firms are constantly being created, closing their doors, and /or moving.  Government placing expensive bets on the success or retention of specific businesses is problematic on several levels.

 

The first and foremost is that taxpayers should not be bankrolling private investment and second is that there are issues of favorable treatment for some companies and third there is the moral hazard issue. Yet politicians seem to be unable to stop doing it. So many examples of recent memory come to mind; Solyndra and other solar energy companies, Kvaerner Shipyards in Philadelphia, and locally Sony, Lazarus, Lord and Taylor’s to mention a few prominent ones.

 

Recall that USAirways in 2007 asked three cities to put together a financial package to bid on getting a new flight operations center.  USAirways had just merged with America West Airlines, who had such a center in Phoenix but deemed it too small (150 people) to accommodate the new combined airline’s needs.  Pittsburgh, which at the time had the USAirways’ flight operations center, was asked to compete against Phoenix and Charlotte to host the new center.

 

Naturally the news reports of Pittsburgh’s victory were glowing. The center was to cost $25 million and employ 600 people—with 450 coming from USAirways’ current center with 150 new jobs although as reported in the news “the 150 employees in Phoenix will have the option of moving to Pittsburgh once the consolidation is complete.”  The financial aid package put together by the state and County totaled more than $16 million which consisted of $3 million in grants, $12.5 million in loans and $750,000 in state tax credits tied to the number of jobs created by the project.

 

We asked at the time (Policy Brief, Volume 7, Number 54) “will government officials ever learn that lavishing tax dollars on firms is not an antidote for market trends?  It seems a simple lesson, but one that currently escapes them.  The Pittsburgh region suffers dreadfully from this affliction…”  We noted the inexplicable loyalty to USAirways from elected officials.  “Still the most galling case is the region’s support for USAirways over the years.  Allegheny County built the airport facility, designed to accommodate 50 million passengers per year at a cost of half a billion dollars largely to house the USAirways hub and the anticipated surge in traffic through the airport.”

 

Unfortunately, the highest passenger count since completion of the new airport occurred in 1997 (20.7 million).  All Pittsburgh travelers received from this new hub was a strong USAirways’ monopoly, and, for years, the highest airfares in the country.  For a long time, the Allegheny County Airport Authority was stuck trying to make huge debt service payments until money from new external sources (gaming and Marcellus Shale production) came along.

 

In 2007, the time of the bidding process, O&D traffic came in at just over 9.8 million but was slipping and recently has settled in at about eight million origination and destination passengers.

 

We also noted in 2007 regarding the airline’s financial difficulties:  “Almost continuous financial problems arising out of extraordinarily high costs at the airline finally led to bankruptcy in 2002 and again in 2004.  Those bankruptcies eventually resulted in a merger and a dramatic drop in the airline’s presence at Pittsburgh International Airport with flights falling precipitously from well over 500 per day to just over a hundred currently.  USAirways’ employment in the region fell in concert with the decline in flights from 12,000 in 2001 to below 3,000.”

 

Another red flag was raised not long after the announcement Pittsburgh had won the rights and the expense to host the new center.  Flights were again cut from 108 daily to 68 beginning in January 2008.  These flight reductions came with 450 local jobs being lost and the relocation of 500 pilots and flight attendants.  Employment at USAirways in Pittsburgh fell to 1,800.  As we commented, “so the more than $16 million in subsidies used to guarantee 450 flight operations jobs, for which ground was also broken in September, will not offset the loss of 450 jobs and the relocation of 500 others.”  The CEO of USAirways at the time commented that the cuts may continue while the then Allegheny County Chief Executive responded, “the flying public makes that decision. I wouldn’t hold my breath until they figure out how to be competitive in Pittsburgh.”

 

And of course he was correct.  Upon the announcement of the merger with American Airlines in March 2013, the CEO told the media that the flight operations center would close “a couple years from now.”  News reports place the final cost of the 72,000 square foot flight operations center at $32 million and employed 650 people.  It opened in 2008 and lasted seven years.  It is not clear if USAirways repaid the $12.5 million in loans used to build the center, but state and county money ($3.75 million) and the gamble using taxpayer money did not reap the rewards for which elected officials had hoped.

 

As we concluded in that Brief from 2007: “The ongoing USAirways saga should be an object lesson for government officials.  Stop using taxpayer money to support private firms in decisions that are not financially viable absent the subsidies. It is far better to keep taxes low and create a favorable labor climate. But of course if those were present, all this doling out of subsidies would not be necessary to persuade companies to invest in the region and state.”

 

And we might add in this case that given the awful experience with USAirways in the first few years of the new century, the decision to reward them again for a chance at some jobs that were likely to be gone in a few years anyway—not to mention the other significant cuts that were already scheduled—was ill advised at the time and the repercussions are now in full view.

Updating Municipal Spending in Allegheny County

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Recently the Allegheny Institute released its annual report on municipal spending in Allegheny County (Report 15-03).  This year, the data has been updated by looking at 2013 spending reports submitted to the Pennsylvania Department of Community and Economic Development.  All data are available on the Institute’s website.

 

We examined the annual financial reports of 125 municipalities in Allegheny County.  The City of Pittsburgh is excluded, as it is frequently analyzed in other Briefs and Reports; neither Springdale Township nor Wall Borough submitted an annual report for 2013; McDonald and Trafford Townships straddle two counties and cannot be considered solely in Allegheny County.  We analyzed only general fund accounts and present a weighted average for each category for comparison purposes.  Since we focus on per capita amounts, we used data from the U.S. Census Bureau for the most recent population counts.

 

For these municipalities, the weighted average expense per capita for the year 2013 was $696 with the weighted average revenue per capita of $712.  The range for total expenditures went from a low of $221 per capita in South Versailles to nearly $2,500 in Sewickley Heights.  The range for total revenues was a low of $216 per capita in South Versailles to $2,489 in Sewickley Heights.  From 2008-2012 municipal expenditures increased each year—rising from $629 in 2008 to $699 in 2012.  Thus the current level represents a slight drop of less than one half of one percent.  The weighted average per capita total revenue figure had also experienced an upward trend over this time frame rising from $621 in 2008 to $720 in 2012—an increase of 16 percent.  However, this trend was also broken in 2013, with a decrease of one percent.  It is worth keeping in mind that this time frame covers the national recession and subsequent sluggish recovery which undoubtedly played a role in a municipality’s ability to raise revenue.

 

Among the expenditures categories, public safety represents the largest outlay.  The weighted average per capita spent on public safety for 2013 by the municipalities was $245, an increase from $242 and $239 in 2012 and 2011.  This category covers specific areas like police, fire, ambulances, and zoning.  Twelve municipalities spent more than $400 in these areas and four municipalities spent less than $100.  Public safety also had the strongest correlation to total expenditures of any of the individual categories in the 2013 study.  Spending in this category exceeded spending in other notable categories including: sanitation, recreation, administration costs, and public works.

 

Public works are also a major expense item in municipal budgets. This category references all expenses put towards cleaning of streets, winter maintenance, bridge/road repair, street lighting, and virtually anything else that has to do with highway and road maintenance.  The weighted average per capita spent by municipalities in Allegheny County on public works in 2013 was $126.  Nine municipalities spent over $300 per capita in this category, with two spending over $700.  On the reverse side of the spectrum, six municipalities spent under the $50 mark, and forty-seven were under $100.

 

On the revenue side, property tax was the largest source of income for Allegheny County’s municipalities.  The average amount collected per person from the property tax in 2013 was $238, an increase from $229 and $228 in 2012 and 2011.  In addition, eleven municipalities brought in over $500 per person in revenue by using this tax.  Unlike public safety, property tax did not have the highest correlation to total revenue. The earned income tax has the highest correlation with total revenue.

 

The earned income tax brought in a weighted average of $183 per person across this sample for 2013.  The municipalities collected $167 million in revenue through this tax and twenty-eight municipalities collected over $200 per person. On the reverse side of the spectrum thirty-three municipalities collected less than $100 per person showing a large range throughout Allegheny County.

 

Our report also found a continued increase in the average debt per person in these municipalities.  Weighted average per capita debt is up to $716 per person in Allegheny County.  This is an eight percent increase from 2012 ($663) and a 39 percent increase since 2009 ($514).  It is important to note that debt per person has increased each of the past five years, and unlike the average revenue and average expenditure trends, this one has continued unbroken.

 

In total, the municipalities in our study raised more money than they spent.  However, of the 125 municipalities, forty-seven did not have a balanced budget for 2013, spending more than they received in revenue.

 

The key findings mentioned above provide a brief snapshot of the municipal finance situation in Allegheny County. Local government is often overlooked by many citizens, yet it is the closest to them.  It is responsible for providing many of the basic services, such as public safety and public works, which enable residents to function on a day-to-day basis.  It requires revenues to carry out these functions through sources such as property and earned income taxes.  Our report and the data, available on our website, chronicle the spending and revenue for 125 municipalities within Allegheny County. It is hoped this will help residents better understand the financial performance of their local government.