Benchmarking Pittsburgh

City of Pittsburgh, know thyself. So goes the Socratic admonition.  Here’s some information to help in the self-knowledge. 

 

 

In order to see how the City performs on various measures of local government functions; how much it spends, taxes, how many people it employs, its legacy costs, and its authorities and schools, the Allegheny Institute in 2004 created the concept of the Benchmark City. The Benchmark City allows for an approximation of national norms of city governing by taking four regional hub cities from across the U.S. (Salt Lake, Omaha, Columbus, and Charlotte) and amalgamating them together to form a construct with which to gauge Pittsburgh’s performance.  After undertaking the initial analysis in 2004, we have updated the data in three year intervals and just recently released our 2013 report.

 

What did the 2013 analysis find?  An in-depth analysis can be found in the report, but here is a summary: on a per capita basis Pittsburgh spends more overall, collects more taxes and more non-tax revenue, and spends more on police and fire than the Benchmark City.  On the key measure of general fund spending, the gap between Pittsburgh and the Benchmark City was 46 percent ($1,539 to $1,051). When staffing levels are examined (on a per 1000 person basis), Pittsburgh is higher on total employees, total police, and total fire.  It has higher per capita debt obligations, a lower pension funded ratio, and pays out more in workers’ compensation.  City authorities employ many more people and have much more assets. Meanwhile, school spending and school taxes per person are considerably higher.  Overall, 2013 comparative results were not all that different from those found in the three previous Benchmark City reports as they took snapshots of budget and audited data at specific periods of time.

 

It is fair to say that positive change has occurred since 2004 when we first created the Benchmark City comparing Pittsburgh with cities of similar population size. Remember, that the City had just entered Act 47 recovery status and an oversight board like the one in Philadelphia was being discussed.  Gone are the business privilege and mercantile taxes, the $10 occupational privilege tax, and in their place are the payroll preparation tax and a $52 local services tax.  Act 47 status could be revoked based on the recommendations made by the recovery team in November of last year. 

 

With nearly ten years of benchmarking data on hand it is also possible to look back at 2004 and compare the relative standing of Pittsburgh to the Benchmark City now to see where the gap on certain variables has improved, stayed the same, or gotten worse.  There is good news. Pittsburgh has significantly improved its standing relative to the Benchmark City on pensions and debt.  In 2004, the funded ratio of Pittsburgh’s pensions was 43 percent lower than the Benchmark City.  By 2013, the gap had shrunk to 13 percent. Obviously the 2010 revenue plan crafted locally in response to the mandate by the state under Act 44 had a major impact. In 2004 the funded ratio in Pittsburgh was 51 percent and the Benchmark City 89 percent.  As Pittsburgh’s ratio climbed to 62 percent, the Benchmark City ratio fell to 72 percent, thus the combination of Pittsburgh’s improvement and the Benchmark’s poorer showing worked to close the gap. 

 

Then too, per capita debt, which was 233 percent higher than the Benchmark nearly ten years ago now stands at 64 percent higher.  Pittsburgh’s per capita debt fell by more than $800 while the Benchmark City debt rose by over $300 per person. If there is a strict adherence to reaching the debt to spending goal laid out by City Council (12% of spending taken up by debt by 2020) then improvement will continue in the future. 

 

Total staffing and fire staffing (per 1000 people) have also seen movement in a positive direction. Per capita school spending and per capita school taxes (which are not under the control of City officials in Pittsburgh or any of the cities that comprise the Benchmark, but are critically important) are still higher in Pittsburgh as of 2013, but again the relative standing between Pittsburgh and the Benchmark shrank since 2004.

 

That being said, the City’s per capita spending still remains close to 50 percent higher than the Benchmark,  now as it was did in 2004 and the gap between it and the Benchmark City on taxes is likewise the same (62% higher in 2004, 57% higher in 2013).  There is no noticeable difference in the staffing levels or asset holdings of related authorities which, again, are not directly part of any city’s government but perform services critical to taxpayers and have directors exclusively or partially appointed by city officials.

 

Did anything get worse since 2004?  The student population to city population (students per 1000 people) was 29 percent lower in 2013 compared to 20 percent lower in 2004.  Police staffing was 13 percent higher in Pittsburgh in 2004 and is now 24 percent higher. 

 

In sum, we conclude the Pittsburgh has made progress, but there is still much more work to do.  Whether there is one oversight group or two going forward, they will have to continue pressing the City for more restraint and downsizing of government.

Police Pleas for More Staff

Within five years, more than half of the Pittsburgh police department’s 886 sworn officers are eligible to retire. Getting new blood into the City forces is tough, say FOP officials, because of the pay of suburban departments and the fact that some police officers with children don’t want to send them to the Pittsburgh Public Schools (thus the recurring efforts to amend the law to allow City officers to live where they want).

The FOP says it almost never has reached the budgeted amount of 917 officers because of normal turnover and that, in fact, Pittsburgh could be best served with a department of close to 950 officers. Based on Pittsburgh’s population (310k) that higher number would put the employee per 1000 people ratio at 3; add in other police staff and Pittsburgh would far exceed other U.S. cities on staffing.

The City’s CAFR shows that from 2000-2009 total City full time equivalents fell 24%; police fell 23%. The 2009 Act 47 plan shows that on "headcount by bargaining unit" the FOP count fell 1.9% from 2004-2009 while all personnel in all bargaining units fell 9.9% over the same time period.

Facing retirements and budget constraints-along with the realization that Pittsburgh is already high on overall police staffing-there has to be a better way. The Act 47 team made a point of turning non-safety services to civilian employees so that the sworn resources can be better deployed on the streets.

City Staffing Numbers: A Recent History

The Mayor took to the local airwaves this morning to explain the fallback provisions of the garage lease deal: a property tax increase, a wage tax increase, or a reduction of 400 police officers (as of 2009 audited numbers there are 1,116 people in the police department and the Act 47 plan counts 850 as sworn officers).

The Mayor went on to say, in effect, that cuts won’t work because the City is down 1,000 employees from where it was in 2002. That, on paper as audited, is accurate: in 2002 there were 4,352 City employees and in 2009 the count was 3,310. In that time frame the City has had only two periods where its employee count fell in the hundreds: 2003-04 (down 637) and 2005-06 (down 321). The biggest drop in the police department came in 2003-04 when the headcount fell 237.

But here’s the key: even with the decline since 2002 the City is still staffed, on a per 1,000 person basis, at a rate higher than other U.S. cities. This was true overall (40% higher) as well as for police (24% higher), which, incidentally, was supposed to be the department where emphasis was placed on moving more civilians into roles in order to allow for more officers on the street.

Population Change: How Does Pittsburgh Stack Up?

In anticipation of the formal count of population under the decennial Census comes the 2009 estimate of "incorporated places and minor civil divisions". Looking at the list of the 276 places that fit the criteria of being over 100k people-all the way from New York City at close to 8.4 million to Boulder, CO at a scant 160 people over 100k-shows a population count of 311,647 for Pittsburgh, ranking it 61st. Year over year decline has slowed since the earlier part of the decade, and overall Pittsburgh has lost 6.6% of its 2000 estimated population of 333k (the official Census count was 334.5k).

How does Pittsburgh’s estimated change over the decade stack up? Revisiting our research back to 2004 when we started looking at cities in a comparative perspective provides an idea.

Our peer group report looked at ten other cities of similar population size (we used a range of 305k-380k from 2000 estimates). All of the cities increased in population-from a 0.6% bump in Cincinnati to 39% in Raleigh. That latter city, along with Colorado Springs and Minneapolis, no longer fit the population range we defined six years ago having reached more than 380k in 2009.

We then looked at Rust Belt cities-here Pittsburgh finds more company with Detroit (-3.7%), Buffalo (-7.5%) and Cleveland (-9.5%) posting decreases. Philly (2%) and Milwaukee (1.2%) netted positive numbers.

Lastly, our Benchmark City-a concept much broader and one we have revisited twice-shows all four regional hub cities growing over the decade. Salt Lake City is up 1.1%, Columbus 4.9%, Omaha 8.1%, and Charlotte is up 21%.

One City in the Institute’s Benchmark Takes a Big Action

Last week we released our most recent Benchmark City report updating data to reflect 2010 budgets. But the school district in one city in the Benchmark-Charlotte, NC-is showing signs that it is preparing for the economic hardships that are surely ahead in the coming years.

Just this week the district announced that it plans to layoff 600 teachers for the fall term and is cutting pay for 224 assistant principals. According to the Superintendent "performance" will be the guiding factor in determining who gets laid off.

Let’s put the 600 layoffs into perspective: Charlotte-Mecklenberg School District has 10,497 teachers and support staff employees listed in their most recent annual report. Letting 600 teachers go amounts to a 5% downsizing. If Pittsburgh Public Schools were to layoff 5% of the workforce classified as teachers/support staff, it would amount to 115 people (based on 2,303 teachers and academic coaches listed in the most recent school CAFR).

Consider too that enrollment in Pittsburgh is falling while enrollment in Charlotte-Mecklenberg has been on the upswing (since 2004, Pittsburgh is down 26%, Charlotte is up 15%) yet, on a per 1000 student basis, Charlotte has 79 teachers/support staff and Pittsburgh has 88 teachers/coaches, 14% higher in the Steel City (total overall staffing is even more disproportionate with Pittsburgh having 39% more employees per 1000 students).

Imagine what rancor 100 layoffs in the Pittsburgh Public Schools would cause. And if those layoffs were based on performance without regard to seniority the ire among teachers would be off of the charts. Ironically the teachers’ union in Pittsburgh would want to set aside performance for layoff decisions while it tries to define what constitutes good performance to satisfy the requirements of the Gates Foundation grant. Moreover, under the union contract and state law it is unlikely that either spending or layoffs will occur in Pittsburgh no matter how tough the economic environment. Indeed, raises for teachers will have to be paid according to contract terms no matter the hardship for taxpayers in Pittsburgh and across the state. Somehow the state and Federal government will be counted on to fill any gaps.

What a difference in approach in NC, a state that has no recognized public sector unions and where teacher and other public employee strikes are not allowed and would result in serious penalties if they occur.

Pittsburgh’s school board just voted to close two schools because of falling enrollment. Is there a chance a single teacher will be let go as a result of declining numbers of students? Not in Pittsburgh where public sector unions are in firm control.

And Pittsburgh taxpayers have not seen the worst yet. The school board requirement to boost funding sharply for teacher pensions in a couple of years will cause school tax rates to jump. Then too, the 2012 county wide reassessment will undoubtedly cause enormous heartburn for people whose properties are seriously undervalued currently. One must wonder how charitable toward teachers’ unions taxpayers will feel by then. But unless they are willing to vote differently they will just have to grin and bear the higher tax burdens.

Measuring Pittsburgh’s Financial Performance

Compared to our Benchmark City-an amalgamation of financial data from four U.S. regional hub cities that differ in geographic location, population, square mileage, and political environment-Pittsburgh spends more per resident, taxes more per resident, has more employees per 1000 people, and is far out of line on legacy costs related to pension health, debt load, and workers’ compensation expense.

 

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Facts from the Act 47 Plan

Pittsburgh’s debt is high, but how does it compare to other cities?

The Recovery Plan includes data from Moody’s Investor Services on FY2008. Using direct debt (not counting overlapping debt from other governmental agencies or debt that is paid by recurring revenues like user fees) and population, Moody’s put Pittsburgh up against seven other cities (Newark, Buffalo, Rochester, Cincinnati, Cleveland, Toledo, and St. Louis) on outstanding debt, per capita debt, and debt service as a percentage of operating expenditures.

Pittsburgh’s total debt ($791m in Moody’s data, closer to $737m now) was 51% higher than the group average and almost $100m more than the next closest city (Cleveland). On a per person basis (Moody’s used 2000 Census numbers, which is higher than current population), Pittsburgh carried $2,667 in debt. The group average was $1,702 (a 57% difference) and the closest cities trailing that number were just over $2,000 per capita.

Finally, Pittsburgh spends about 21% of its operating expenditures on debt service, $1 for every $5 in spending. The group average was 7.6%, and only Cleveland and Cincinnati reached double digit percentage levels (11 and 16.3 percent, respectively).

And this is against rust belt cities-our own analysis of the Benchmark City in 2007 showed that Pittsburgh’s net bonded per capita debt was three times that of cities like Salt Lake, Charlotte, Columbus, and Omaha, a good geographic mix.

To get out of this predicament the Act 47 team recommends that the City refinance debt in 2012, plow more money to paying off debt, and try to avoid borrowing and instead continue to use "pay as you go" financing.