If you had a relatively new and shiny airport and there was no interest-none whatsoever-from people in the hotel industry to build a hotel to capitalize on travelers, perhaps that would be telling you something about the demand for rooms. But not the leaders of Allegheny County government circa the turn of the century: by hook or by crook they wanted to have a hotel there, and, with no private interest and local government authorities that were "maxed out" according to one of the former County commissioners, they turned to an authority from Dauphin County to get the job done.
This tale comes back to the surface due to an article that shows neither the County, nor the municipality or the school district where the hotel is located, have received a payment in lieu of taxes. Smacks of a "sweetheart deal" when it is discovered that all other expenses took precedent over tax payments and, because of all the other dealings the Authority was involved in, there is no money for tax payments. Ironically, one former County commissioner said that the hotel was needed to "attract more flights": one would think that the airport would have spun off development, not the other way around. Sounds eerily like the situation with the convention center and its quest for a headquarters hotel. If the hotels were so integral to the success of these facilities, why were they not included in the initial plans?
If an out of county property owner failed to make tax payments on a property he would be put on the delinquent rolls and be labeled a tax cheat or an absentee property owner. And when there is a discussion about tax-exempt properties very rarely does the property owned by public sector entities get mentioned. Why does a public authority not get the same treatment? This is an episode County taxpayers, and those writing checks for property taxes in the airport area, should not soon forget.
Not long ago Allegheny County was discussing dissolution of some of its related authorities, like the Airport Authority and the Port Authority, in order to exert greater control over their operations by bringing them into the County’s organizational chart. Now a member of City Council, noting how the City’s authorities straddle two worlds in which they are supposed to be independent but also seem to be subject to the demands of the City, wants to explore dissolution.
Authorities are quasi-governmental agencies: they can’t tax, but they can issue debt and assess user fees and set rates for the services they provide; their board members are appointed, not elected, and the appointments are made by elected officials; they are supposed to be independent and free from political interference, but that is not often what happens.
As we wrote in a Brief earlier this year the municipality that created the authority can dissolve it as long as there is a clear assignment of any outstanding debt. That’s why the City Councilman wants to start with the Parking Authority: it carries around $100 million in debt, an amount that would have been erased under a long-term lease as proposed by the Mayor.
But there would be a better place to start: the City’s Stadium Authority. It was created to own and operate Three Rivers Stadium. The Authority even admitted years ago that its place in the governing landscape would cease once Three Rivers was demolished. Would anyone be surprised that the Authority is still around, conducting business as a land development agent for the City, almost ten years after the stadium was demolished?
Under a proposed resolution (5836-10) before County Council, several of the County’s larger special purpose authorities would be studied by an independent panel that could then recommend remedial options including dramatic steps such as privatizing the authorities or bringing their functions “in house” into the unified organizational chart. Considering the services provided by authorities-everything from running buses to providing low income housing and owning airports and stadiums-the financial, governance and operational impacts of such changes would be quite large.
Realizing that the County’s departmental sunset review is well overdue (the Charter requires one every four years, yet the Manager’s office has not completed one since July 2003) three of the Republican members of Council (the Council is responsible for taking action on the Manager’s recommendations in the review) have put forth an ordinance that would get the ball rolling on this fundamental duty.
Under their proposal the Manager must have the review that was due in July of 2007 done in six months from the effective date of the ordinance. The Manager would then have to submit a departmental evaluation schedule by October 1 of this year. Each department would have to be reviewed at least once every four years (it could be reviewed more than once in that time period) and the schedule would have to be communicated in writing to the Executive and the Council. The due date for the sunset review would be July 1 of 2011 and every four years thereafter. If a review cannot be done, a six-month extension would be granted.
Currently the Charter and the Code prescribe no sanctions for failing to have a sunset review on time. The proposed ordinance would tie Council’s role in confirming or denying appointments to the completion of the review, disapproving of all new and pending appointments to County authorities (PAT, Airport, Housing, etc.) until the review is received.
County Council has a motion before it that, if approved, would allow for a feasibility study of privatizing, absorbing into County government, or leaving untouched its largest related authorities (PAT, SEA, Airport, and ALCOSAN). Presumably the intent of the legislation is to determine the best way to carry out the functions performed by these special purpose authorities. Sort of like the way the County is to examine its own internal operation every four years through a sunset review report, a report that has not been undertaken since 2003.
If the motion is to pass, one would think there would have to be a pretty quick undertaking of the study: later this week there is another resolution pending that would allow ALCOSAN to extend its corporate life (as of now under its articles of incorporation it is scheduled to expire in 2039 at the ripe old age of 93) and it is a safe bet that the other three authorities-as well as some inside County government-will make arguments as to why those entities should stay outside of the County organizational chart.
Proponents of the study should know how stubbornly hard it will be to change the status quo of the authority structure, considering that the County’s largest municipality still has a Stadium Authority that owns no stadium and possibly soon a Parking Authority that owns no parking assets.
A city with budget woes, many of them related to long-term debt, comes up with a plan: why not lease or sell the parking structures owned by the city (or a related city authority) and use the proceeds to pay off the debt?
This sure sounds a lot like Pittsburgh, but as we’ve chronicled in earlier blogs and a Policy Brief it is Harrisburg that is looking around for dollars. After this past week in which the Mayor vetoed a revised budget and still has to contend with a $4 million shortfall but did nothing to address the debt related to an incinerator owned by the Harrisburg Authority but guaranteed by the City of Harrisburg the possibility of asset sales became more real.
According to published reports the Mayor of Harrisburg "has supported looking into the sale or lease of certain city assets – including parking garages, City Island and McCormicks Island – to help retire the debt." Now the City seems prepared to hire outside experts to see how much money the assets could bring in.
There will likely be more cities and local government that might be hoping that their parking structures can deliver quick fix savings for debt and legacy cost problems that are staring them in the face. Unfortunately, this will be happening in retrospect (looking for money to close budget gaps) instead of prospectively (making a judgment as to whether parking or other municipal functions are a core function that ought to be moved to the private sector).
Last week we analyzed the financial problems related to the debt owed on an incinerator in the City of Harrisburg. The incinerator is owned by an independent authority, but the City apparently is on the hook for a good portion of the debt.
One of the possible solutions floated to get money to the City is to raise water rates to customers served by the water system (according to the 2008 CAFR for Harrisburg, the same authority runs the incinerator and the water system) which includes both city and suburban users.
Imagine that-using rates for water in order to pay down the debt of another project of the authority. While an official of the Authorities Association of PA was quoted in the Harrisburg Patriot News that such actions are above the board and legal and likely not the first of its kind (Pittsburgh sold its water system to an authority to raise cash, and municipalities likely borrow from similar funds to meet general needs), it would be hard for customers to swallow the fact that they would be paying higher water rates-based on the amount of water they consume-to not fix the water infrastructure but to pay off a bad debt.
Municipal authorities were purportedly created in part to do things regular governments cannot do and to assume certain financial and operational functions. In Pittsburgh, we have the water and sewer authority, the parking authority, the housing authority, the redevelopment authority, etc. These authorities are governed by a board that is appointed by the Mayor and approved by the City Council. Within the state’s statutes governing the authority and the authority’s own charter and by-laws, the board presumably has the responsibility and freedom to make the big decisions for the authority.
Generally speaking the board is supposedly independent of political pressures. Of course, board members who continually run afoul of the Mayor’s wishes could be asked to resign or not be re-appointed. Certainly, the City Council should not be stepping into manage the affairs of any authority. That is a prescription for turmoil.
Now comes Councilman Shields saying, "The [Urban Redevelopment Authority] can’t even breathe a breath without the consent and authorization of this body"-referring to Council. He went on to say that he would do unimaginable things to the URA if it did not comply with the prevailing wage bill Council is getting ready to pass.
So, in Pittsburgh, what is it? Are authorities independent or are they lackeys of City Council? Apparently, a new era of Council hegemony just dawned in Pittsburgh.
Earlier this year the Mayor of Pittsburgh announced his plan to sell or lease garages and lots, possibly meters as well, in order to get an up front lump sum amount that could both retire the Parking Authority’s debt and make a healthy down payment towards the City’s unfunded pension liability. Soon after, the County Executive likewise floated the possibility of leasing or selling the parking garage at Pittsburgh International Airport as a method to bring down airport debt.
What has happened since then? It is almost November and the gears are grinding slowly. The City’s Parking Authority has heard from a consultant that told them, yes, there would be a lot of interest in a lease or sale of the assets. But there are additional steps to be carried out: an even if an interest is expressed, there is a lot of negotiation to follow. Keep in mind that the City has until 2011 to show a 50% minimum funding ratio for its pensions to avoid a state takeover. One would think there would be more urgency.
The County’s Airport Authority-the entity that would have to sign off on a deal for the County-has yet to publicly discuss the issue at any of its board meetings, according to the Authority’s public records officer. There is no timeline other than a self-imposed one by the County Executive (a May newspaper article said the Executive "…will ask the county airport authority to put Pittsburgh International’s parking garage and surface lots, about 13,200 spaces in all, up for sale this year"); by that measure there is no way a deal gets done this year.