Pittsburgh: A Competitive City?

"The residents and taxpayers in the City deserve excellence in City government. The City must be able to provide quality services at the lowest practical cost. City resources must be used to meet the needs of the residents, visitors, and businesses in the City".

Fifteen years ago this month the Competitive Pittsburgh Task Force released "Establishing a Culture of Excellence", a report that was prompted by a structural deficit in the City’s budget. Years before Act 47, the ICA, new business taxes, and long-term leases for parking spaces were in the public consciousness of the region, the Task Force attempted to "identify opportunities for cost-saving through the introduction of market discipline, and develop strategies for increased competitiveness and cost savings". No doubt spurred on by cities like Indianapolis, which used the "yellow pages test" to determine what municipal services the private sector could provide by contract, the report focused heavily on benchmarking and the private sector to identify $44 million in annual and one-time savings for the City.

At 37 pages, the Task Force report covered public works, public safety, and general services and also pointed out the "ticking time bomb" posed by the pension plans. On that last point, the report recommended selling pension bonds-an action taken soon after which did not prove fortuitous-but also advocated using any immediate savings from the bonds to reduce future pension obligations. The City is still wrestling with pension issues in spite of the actions taken this past December.

How much was implemented? The Task Force did recommend bidding out many non-safety functions like garbage collection, animal control, street sweeping, basin cleaning, cable, and fleet management. The message across departments and functions was clear: get non-safety costs to private sector levels or get out of the business. Today, the City still collects its own garbage and that of neighboring Wilkinsburg: there was a "managed competition" bid in 2007 which the City won, but our work showed that some of the costs may have been understated. Animal Control has its own bureau. Fleet management is privately contracted.

On safety services like police, fire, and EMS some initiatives discussed by the Task Force are still being discussed today: introducing civilians into police administration, getting the hospitals to partner/absorb EMS functions, reducing police overtime, etc. Privatization of the tow pound-recommended by the Task Force-was accomplished in 2009. The headcount and number of fire stations, which the report pointed out was far out of line with comparable cities, have come down largely over the years of Act 47 and changes to post-retirement health care in collective bargaining agreements.

The Task Force also recommended the City and Allegheny County "eliminate all duplicate services", a recommendation repeated in the 2008 proposal to merge the two governments and has not acted upon to any great degree as of today.

"Big picture" wise, the City had 370,000 people in 1996; it spent $442 million across all funds that year (audited amount from general, special revenue, debt service, and capital) for a per capita amount of $1,197. Per capita net bonded debt was $1,507. With a January 1996 payroll of 4,217 employees, the City had 11.4 employees per 1,000 people.

In 2010, population had fallen 17% to 306,000; audited total City spending was $589 million, resulting in a per capita amount of $1,924. Per capita net bonded debt rose 30% to $2,058. Employee headcount per 1,000 fell slightly to 10.3.

Spending is up, the per resident share of debt is up, and headcount is down slightly: what would the Task Force have to say for the success of their recommendations?

Exploring Privatization or Just Talk?

It was heartening to learn Pittsburgh officials are opening up to the idea of looking at outsourcing and other private sector involvement to solve the City’s perennial fiscal problems. The Allegheny Institute has been arguing for such an approach for 15 years only to have our research and recommendations rebuffed by elected officials. Now, according to recent news accounts, the finance director has been telling New York financial players that Pittsburgh is actively exploring public-private partnerships as a way of generating revenue and/or lowering costs.

The time has come-the Mayor now says-to be open to a concept that is widely used already by other state and city governments but one that has been stymied in Pittsburgh. Political and union led opposition toward anything hinting of privatization has been fierce. Therefore, it must be asked; Is this a real epiphany on the part of the Mayor and his staff, or is it just an effort to convince financial markets that Pittsburgh is moving toward a sensible approach to solving deep and longstanding fiscal problems?

Certainly, it is to be hoped that the more open stance is real and sincere. If it is, the Mayor deserves congratulations. If previous mayors and councils had adopted a friendlier position on privatization, outsourcing and public-private partnerships 15 years ago instead of wasting enormous amounts of money pursuing a publicly funded, wrongheaded growth strategy, Pittsburgh would undoubtedly been in better shape than it finds itself today. Unfortunately, delaying the shift toward market based, private sector involvement for so long has almost certainly lowered the potential gains to be had from the new approach.

Still, it is never too late to begin using the private sector to improve the City’s financial situation-the sooner and more extensively the better. Let’s hope for the sake of City’s long term well being the Mayor is serious and the inevitable union and Council opposition can be overcome.