By a vote of 27 to 22, the Southwest Pennsylvania Commission (SPC) has again chosen to toss its integrity out the window and approve moving more money to the dysfunctional money pit known as the Port Authority (PAT). And in doing so it has confirmed for the transit unions that money will always be found to bailout the preposterous operating costs, inefficiencies and enormous legacy costs of PAT thereby removing the necessity of the unions being asked to make concessions.
If the past is any guide, the unions have no intention of ever making concessions. Still, the prospect of losing another 500 jobs before March and even more after June might have convinced them to begin talking about givebacks. Now, that will not happen and probably never will as this was the best chance of extracting concessions PAT has ever had-too bad management never even brought the idea up in hopes of winning some public support. The SPC’s latest cave-in will be viewed by the unions as proof positive that bailouts will always be there. Future prospects of concessions have become nil.
It will be interesting see the report on who voted for and who voted against the SPC approving the money pass through. If most of the members who represent surrounding counties were "no" votes, and most of the "yes" votes were from Allegheny County or state appointees, the SPC’s action could be very bad for regional cooperation. How ironic. Allegheny County civic and government leaders constantly and loudly tout regional cooperation as the key to economic success. But when the rubber meets the road, they become County partisans-and worse union partisans. After all the money the SPC has provided for PAT over strenuous objections of board members from other counties, this latest vote can only be interpreted as in your face power politics. Why should they be surprised?
The only hope for bringing sanity to the disaster masquerading as a public transit system is for the state government to take a series of steps we have outlined in our latest report-now available online.
Pennsylvania’s Governor is in Pittsburgh today announcing that, surprise, surprise, he has found $45 million in unspent economic development funds that could be used to avert the planned service cuts at the Port Authority and grant the next legislature and the incoming Governor time to come up with a permanent fix.
Stop us if you have heard that one before.
It happened in 2005 when the Governor found close to $700 million to give to PAT, SEPTA, and other transit agencies in order to give his task force time to come up with a transportation fix. We wrote in a 2005 Policy Brief that the temporary fix "would make it very tempting to forget the real problem" plaguing PAT and its sister agencies. What followed was Act 44 and the ill-fated I-80 tolling plan.
The Southwest PA Commission had acquiesced to previous requests to flex highway money to PAT and, after doing it several times, said enough was enough. The Governor’s action-if carried out-gives SPC an out since what is being flexed is economic development money, not highway money.
That raises this question: why would the Governor, who is such a strong proponent of all the positives public sector economic development can deliver, leave some $45 million unspent? How many jobs could have been created with that expenditure in these tough economic times?
As we have written time and again, so long as the state continues to ride to the rescue with temporary fixes there is no impetus to address the right to strike, the monopoly status of PAT, or how to begin outsourcing of service. Will the next Governor and General Assembly let today’s action serve as a free pass?
A previous blog entry pointed out the eerie similarities between the cities of Pittsburgh and Harrisburg and their recent struggles with looming legacy cost bills and how the parking authorities in each city were key components in working toward solutions on those costs.
Under the state’s Parking Authority law, board members are appointed by the chief executive and serve at the pleasure of the chief executive. They can be removed by the chief executive at any time.
So when Pittsburgh’s Parking Authority voted 3-2 to oppose a study of an alternative to the recently defeated long-term lease of parking assets, the Mayor appeared at that hearing and stated "I thought it was important for me to let you know personally my position" in opposing the alternative. A Council member who was in support of the alternative stated "the mayor showed up at a public meeting, and he told board members to their faces, ‘I do not support this.’"
In the state’s capital city the Mayor there forced three members off of the Authority board and replaced them with three others when the details of an alternative plan to help the City through a financial tough spot garnered attention before being vetted by the Mayor. The Mayor’s spokesman noted "The mayor feels that its board has an obligation to communicate with the administration about these important matters and wanted to ensure a board that understood the importance of that communication". The City’s financial condition is currently being heard by DCED, who will make a determination as to whether Act 47 distressed status will be granted to Harrisburg.
Stop us if you have heard this one. A private interest make a cash offer for a parking system, and the Council turns it down. Then there is a new plan hatched whereby the assets of the Parking Authority, the assets that were not sold, are pledged as collateral in order to help the host city through difficult financial times.
It is happening in Pittsburgh, as we have documented in our last three Policy Briefs, but it is also occurring in the capital city of Pennsylvania, Harrisburg. We have written previously about the debt issues plaguing the City of Harrisburg and how bankruptcy and Act 47 have been mentioned as real possibilities.
Now there is a plan for the Harrisburg Parking Authority to issue new bonds and refinance existing debt (there is an uncanny, almost eerie similarity between that Authority and Pittsburgh’s where existing debt is just over $100 million and plans on the table call for issuing $200 million in new debt) to help the City. According to one news report "…up to $60 million in new money to be used for ‘certain qualified purposes.’ The authority could make a payment to the city to help it pay down some $288 million in incinerator debt."
The solicitor from the Harrisburg Parking Authority also said that any parking rate increases would be smaller than those imposed by a private owner and would keep a public asset public, much like the sentiments expressed by Pittsburgh City Council and the Controller with their alternative plan.
Are these two cities and their parking authorities flattering each other through imitation?
History is repeating itself in the City of Harrisburg, and at an alarming rate: we wrote recently that the Commonwealth had agreed to expedite payments so that the capital city would not miss a bond payment. Just last week the City got additional help from the Harrisburg School District, the Harrisburg Authority, and the Parking Authority in order to meet payroll this week.
"It ameliorates the immediate crisis" was what the Mayor’s press secretary said. Note that he said immediate, which implies there are still long term problems. The City still is trying to secure a line of credit to pay its bills through the end of 2010. This follows on the heels of the Mayor’s official application to DCED to place the City in Act 47 distressed status. If approved Harrisburg will be the state’s 20th municipality in Act 47, and the first new entrant into distressed status in almost a year (Reading went into Act 47 status in November of 2009).
If placed in Act 47, Harrisburg would be given priority for aid and could even get emergency financial aid from the state, much like the quick cash that has been extended in the recent weeks.
In a February article in the Harrisburg Patriot Times the Governor had this to say about the financial woes facing the state’s capital city, woes that raised the possibility of Act 47 and possibly Chapter 9 bankruptcy: "there’s no easy, pain free way out…there is no Santa Claus riding into the aid of the city".
Perhaps it was the fact that back in February the Governor, like most people, was not in the spending mood due to the post-Christmas spending hangover. Because just this week the state announced it is riding in to rescue Harrisburg with a $4.4 million package that will help the city to avoid missing a payment on its bond debt and hire a consultant to help steer the City to financially calm waters.
But don’t call it a bailout because according to the Governor the package includes money Harrisburg was due anyway like its municipal pension aid ($2.6 million) and money the City gets for protecting the State Capitol complex against fire ($1 million). There is also money from a loan fund that must be paid back ($500k). "We’re just front loading it and expediting it" not bailing the City out, said the Governor, who felt that it would be disastrous for Harrisburg to miss the debt payment. How the City is able to use what appears to be restricted money to pay a debt is not clear.
And rest assured that the money is just there as a temporary step so the City and its consultant can come up with a long-term solution. Just like flexing highway money did for the Port Authority.
Some of the early Christmas cheer must also be extended to the City from banks or foundations because even with the cash infusion the Mayor noted that they are still $500k short of making payroll.
In Policy Brief Volume 10, Number 39 we discussed the Governor’s mention of the possibility of “flexing” highway money to help the Port Authority (PAT) with its impending deficit thereby repeating actions from earlier years when he was able to convince the Southwest Pennsylvania Commission (SPC) to approve a funds shift. In that Policy Brief we asked “will the SPC acquiesce” to the Governor’s request?
What do PAT and the Buccos have in common? No matter how much taxpayer money they have been given, they simply are not able to keep from falling into deeper and deeper holes.
The Pirates’ long, painful slide into being a major league laughingstock is well known. PAT’s long decline into financial ill-repute takes a little more digging to understand. For the Pirates years of mismanagement and poor judgment have produced the fiasco that portrays itself as a major league franchise. Port Authority’s troubles arise out of too much spending on projects that can never pay a return to taxpayers and collective bargaining agreements that have saddled the agency with employment costs and legacy cost that no private entity could hope to survive.
The Pirates promised that a new ballpark would end their financial and performance woes. The Port Authority thinks cutting service and laying off overpaid drivers will solve their problem. All they are doing is running a smaller, still very expensive system.
The question is; why do fans and taxpayers put up with the endless displays of incompetence?
Is history repeating itself? Later this week the state will convene a meeting in the eastern suburbs of Allegheny County to come up with a fix for roads, bridges, and mass transit in the wake of the none-too-surprising rejection of placing tolls on Interstate 80.
Piggybacking on a theme at the end of today’s Brief an article in today’s Financial Times examines recent research done on the condition of statewide pension systems done in part by a professor at Northwestern University that asserts more than half of the states might find themselves with insolvent pension systems in two decades.
The professor notes that the fiscal strain could put "pressure on the Federal government for a bail out that could potentially cost more than $1,000 billion".
In 1994 the university’s home state of Illinois had a $17 billion gap for its statewide pension fund that it planned to retire by 2011. Today its unfunded liabilities stand at $78 billion.
As we pointed out today with the expected rate spikes for PSERS, as well as SERS and the weight of unfunded liabilities in Philadelphia and Pittsburgh, pressure is building toward finding a long-term solution. A Federal bailout would be far from it.