Tag Archives: concessions

Inevitable Chain of Events Leading to RAD Funds for PAT

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Back in the early 1990s the state Legislature granted Allegheny County authority to establish a Regional Asset District (RAD) and to impose a one percent County add-on sales tax to fund the district. The County Commissioners quickly voted to do so. There was no referendum asking the voters to approve the tax. This outrage was not repeated when it came to the plans to impose a sales tax for stadiums in 1997. That tax was roundly defeated by the voters and in all likelihood so would the RAD tax have been if it had been put to the voters.

But it is the law and the RAD tax has been collected for 18 years funding all sorts of things including new stadiums and propping up the Civic Arena. It was used to fund the Pittsburgh Development Fund that helped underwrite such memorable debacles as the Lazarus Department store. The Pittsburgh Schools also received a dollop of the tax revenue but that is now being sent to the City.

Now we have the spectacle of the RAD board approving $3 million for the Port Authority (PAT) to help fund the County’s matching contribution in order to receive additional state funds to fill a $64 million dollar deficit at PAT. Note that reserves had to be tapped to get the $3 million. Of course that means some other applicants or potential applicants could have gotten more money if the dollars were not going to PAT.

And why does PAT need the RAD money in the first place? In brief, because the state Legislature and the Governors over the years have done a remarkably inept job at controlling PAT by giving it a monopoly in the County and then giving the union employees the right to strike-something only three states permit. The right to strike a mass transit system is the most powerful bargaining chip any union can hold. Just the threat of a strike sends management into flights of terror and riders into paroxysms of anxiety about they will get to work. Businesses then join the chorus of pleading to give the union what it wants. Anything but a strike. So using the kryptonite equivalent of a bargaining advantage the unions have been able to extract one of the best, if not the best, compensation package and union favoring work rules in the nation.

Thus it was that PAT became an extraordinarily expensive transit operation, inefficient and destined to go bankrupt. If only state law would permit bankruptcy of PAT-which unfortunately it does not. So for a decade or more PAT kept sliding deeper into the ravine of financial chaos only to be temporarily bailed out again and again by the Governor riding to the rescue with highway money to fill the budget holes. Only this time, the hole was too big for the state to fill by itself. After all, the state is not flush with cash lying around to be redirected to PAT. Moreover, there are many in the Legislature from other parts of the state who are repulsed by the idea of tossing more of their constituents’ tax dollars at the outrageously expensive and inefficient PAT.

In this latest iteration of asking for state money, the Governor was far less generous than previous Governors and forced the County, the unions and the management to come up with a big chunk of the $64 million projected deficit. Of course the union share was a pittance relative to their share of the cost structure. The County, to raise its share, went immediately to the pot of money at RAD, asking for $3 million a year for ten years. The argument being that transit is too important to allow the major cuts that could be required if the state money is not forthcoming.

Dutifully, the RAD board agreed to hand over $3 million, no doubt under enormous pressure from the County Exec, PAT board members and the business community.

There it is. In short, the Legislature allows the County to create a revenue stream with one hand and then gives a "take all you want card" to the transit workers union with the other hand. Guess what was inevitable as the robins in spring? Eventually, the RAD money bags would be tapped for PAT. And so it goes.

At the very least the Legislature should have prohibited RAD money from being used to fund entities other than educational, recreational or cultural. There are some who will say this grab of RAD dollars for PAT could not have been foreseen. But they would be wrong.

Council Lady Displays Woeful Ignorance about PAT

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The following paragraph is taken verbatim from a sitting member of Pittsburgh’s City Council and illustrates perfectly how the City got into financially distressed status and why it is likely to remain there if her views continue to guide policy decisions. Writing in the Post Gazette editorial pages Councilwoman Rudiak says, "We live in an extraordinarily wealthy country that can afford the vital, world-class public services that have provided the foundation for our economic prosperity. Unfortunately, our priorities have shifted. Many of our elected officials have decided that maintaining public services is not important and that our nation’s wealth is best kept in a few hands."

This paragraph is part of an editorial in which the Councilwoman bemoans the fact that the state is not rushing to pour more money into Allegheny County’s outrageously expensive and effectively bankrupt public transit system. According to the Councilwoman it is mere selfishness on the part of Harrisburg officials by which she undoubtedly means the Governor without saying as much.

Ms. Rudiak either has no conception of the extraordinary burden imposed by legacy costs at the Port Authority or the extremely high wage rates and benefits paid by the Authority or chooses to ignore them while slamming elected officials who have the responsibility of seeing that public dollars are used wisely.

But most ridiculous of all is the argument that world class public services are the foundation of our prosperity. The foundation of prosperity is a free enterprise system that allows free people to start businesses and use their talents, hard work and creativity to generate income and wealth. The rule of law and protection of individual and property rights are the foundation of prosperity; infrastructure and adequate public services are facilitators. As we have plainly witnessed in the Soviet Union, a good mass transit system and huge expenditures on "public services" did not create prosperity.

And to argue that the wealthy are being allowed to keep too much of their income and wealth is simply devoid of any factual basis. It is a known fact that the top 10 percent of income earners pay the lion’s share of all Federal income taxes. Ms.Rudiak quotes a study claiming that high income earners in Pennsylvania pay a much lower share of their income in state and local taxes than do middle income earners, 4 percent for over $428,000 as compared to 9 percent for $35,000 to $56,000. But the proviso is that the 4 percent is after Federal offsets, whatever that means.

It would not be surprising to learn that very high income earners pay a lower share of income in sales taxes or property taxes but not low enough to make their state and local share only 4 percent. In absolute terms those taxpayers are paying a large amount of state and local taxes. The state income tax is a flat 3 percent and there is no way their combined property and sales taxes account for only one percent of their income. For that to happen they would have to spend most of consumption dollars out of state and own very little taxable real estate.

One of the crises facing Pittsburgh, Pennsylvania as well as many states and cities across the nation is the financial burden of pension costs of public employees whose benefits are far greater than most private sector workers. With a greater and greater share of tax dollars going to pay for legacy costs, there will be fewer dollars to pay workers to perform for public services. Unless, of course, taxes are raised which will in turn stifle the income producing private sector that is needed to support all the public spending.

Ms Rudiak-and the other elected officials who believe that higher taxes are the answer to the economy’s problems-is a main reason the country and many states are in the shape they are in financially. How easy it is to believe that taxes can be raised willy-nilly to fund ever less efficient government and its rising costs without serious consequences to the city, state and nation. For these folks, there is never enough government or publicly provided services.

County Exec Asking Legislature for Increased PAT Funding

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The newly installed County Exec, after declaring he would be leading the charge in PAT labor negotiations, has made his way to Harrisburg to lobby for more funds for all but bankrupt Port Authority. He will argue that the looming $64 million deficit and the cuts in service it will require could have serious negative effects on the region’s economy.

What he will not tell the legislators about is the lack of progress by PAT in getting any meaningful concessions from the transit unions or retirees. Therein lies the principal root of PAT’s financial problems but nothing significant ever gets done to lower immediate cost other than lay off employees and cut bus service. The Exec has not once indicated he will press for major concessions by the retirees or union members. Hence the legislators should politely indicate the way out of their offices to the Exec.

More money for PAT now will only beget the cries for more money next year.

Really hard to enact bills need to be passed by the state government to address PAT’s fiscal situation. We have outlined those on many occasions. Eliminate transit workers’ right to strike, eliminate PAT’s monopoly in Allegheny County, and amend state law to allow PAT to declare bankruptcy. There is no other way to reduce the enormous burden of legacy costs that are driving the Authority into the ground.

The question is, do the Governor and the General Assembly have the intestinal fortitude to face down the Exec and the unions and do what needs to be done?

Another 11th Hour Plan

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Roughly three months after citizens were treated to Pittsburgh City Council embarking on a series of pension solutions that stretched until New Years’ Eve (hours before a state-imposed deadline) we now have the events that transpired at today’s Port Authority board meeting.

In sum, service cuts amounting to 15% of service were to go into effect Sunday the 27th; the board was set to discuss an offer by a private operator to take over two routes that the Authority was vacating as part of those service cuts.

Then came a late-minute plan by the transit union: they would forego next year’s 3% wage increase, take a 10% pay cut now, and in exchange avert the service cuts (and by extension, the opportunity for PAT to contract with the outside vendor). The union’s proposal amounts to $18 million, some $12 million short of what the County Executive insisted was necessary to bridge the gap. As of this writing the PAT board is considering the offer and is supposed to determine this evening if the offer is palatable. If it is, the union will vote on the concessions tomorrow.

This messy episode (it is not the first last minute plan hatched to avert cuts or financial problems at PAT) could have been handled differently. The board could have not entertained any concessions of less than $30 million; they could have told the union to feel free to make concessions but they were going to go forward with their cuts and, if concessions proved solid, would consider restoring service and employees. Instead, they, like City Council and City staff in December, are under a ticking clock trying to rush and determine if the plan is viable.

SPC Caves Again: Lesson Appears Unlearnable

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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.