County Gambles on Show

An article over the weekend (in which the Institute was quoted) revealed that the County, through its Redevelopment Authority, awarded $225,000 to a non-profit spearheading the filming of a reality show. It is not the first time the County put some money into the filmmaking business: most recently it did so in 2006, and that foray was described in a newspaper account at the time as such: "The movies would provide up to 120 local jobs, pump money into the economy, return the county’s investment (to seed future projects) and build on the city’s reputation as film-friendly". Much of the same offshoots were touted in the 2013 article by those in favor of the venture.

Rather than having a seed fund at the County level for movie making, the $225,000 grant came from the Community Infrastructure and Tourism Fund, a fund that holds money from legalized gaming and was not available at the time of the first grant. The state statute that authorized the disbursement noted the money was "to fund construction, development, improvement, and maintenance of infrastructure projects". The "tourism" in the County fund name somehow materialized after the fact.

Even so, a quick read of the program’s guidelines leaves one befuddled as to how a film project could get approved by the Authority board for CITF money. The stated purpose of the Fund, noted under the bolded "purpose" states it "is intended to provide financial assistance to entities to facilitate economic development through infrastructure assistance, stabilize or correct existing infrastructure problems, or plan and prepare sites and buildings for future use". The "eligible activities" section of the guidelines mentions only infrastructure, site planning and preparation.

That the Authority chairman, while defending the grant, noted that the money is "…used to promote businesses that serve the purpose of promoting the region, creating jobs, promoting tourism – which this clearly does – or enhancing the lives of the residents of Allegheny County" ought to invite scrutiny. Perhaps it is acceptable if nine out of ten grants from the fund go for infrastructure: time will tell on that one since the money is not going to be disbursed indefinitely unless the General Assembly extends the agreement. Money spent on promoting the region means scarce dollars don’t go to projects seeking money under the clear guidelines of the program.

Water Under the Bridge

The Pittsburgh Water and Sewer Authority (PWSA) is staring at some sunk costs. According to an article today the PWSA spent $2.7 million on a financial management system that is essentially a closed loop and cannot communicate with the integrated City-County financial management system that took quite a long time to implement. A former City employee was quoted as saying that the PWSA should have jumped in on the integrated platform and one board member is not happy with the system they have.

But is that characterization of getting in on the City-County platform accurate? A March 2011 article seems to indicate that it was the City that was proposing to go with the PWSA’s platform as an alternative to joining the County’s system (the Act 47 rejected this option). That means the City-County integration was not even done at that point-that was not formally announced until January 2012, possibly two years after PWSA purchased its financial management system.

And how about the board member’s position-that "PWSA upper management recommended the system, and it made sense to approve it"? The PSWA board includes four Mayoral appointees: surely they had to have known in 2010 that there was a push to get a large integrated system. It was mentioned in the amended Act 47 plan that was written in 2009, a year before the PWSA purchase was made. Add on top of that the fact that the Mayor was bullish on cooperation and completed a purchase of the Borough of Millvale’s water system under the admirable goal of efficiency. Didn’t those appointees get direction from somewhere other than PWSA management? The other three members of the board are heavily involved in City finances-the Controller, the Finance Director, and the Treasurer. Did they offer opinions on where to steer the Authority’s financial platform?

City-County Cooperation Stalls

In a new audit the City Controller takes the City’s rental car policy to task, noting that Pittsburgh is paying much more for renting similar type vehicles than Allegheny County does, even though there have been opportunities for the City to join the County in a combined bid.

Perhaps there are good reasons why the City stayed put with its current vendor, the same one it has had since 2006, rather than going with the County. There’s no response contained in the audit from the people in charge of the City’s rentals (most of them are for police and parks) so it is hard to speculate. But one has to wonder what it could be when for the price of a four month minivan rental for the City equates to over eleven months for the County under their contract. The Controller also stated that "oversight by City personnel of these invoices appears minimal".

It basically boils down to (1) looking for savings and (2) watching the bottom line. Ironically, the audit points out that the City in 2008 "had an opportunity to join the County in its request for bid (RFB) issuance, but declined". That is the same year when the Task Force on how to merge the City and the County released their report in favor of the concept. That report wanted a clear commitment from the Mayor and the Executive to further efforts at cooperation.

The Allegheny Institute commented on the rental car issue over the summer in a media interview.

What to Make of 2013 County Budget?

Tomorrow evening the County Chief Executive is expected to present the budget for 2013. This will be the first budget for the current Executive as this year’s budget was enacted in December of 2011 after he was elected but before he took office. The budget was unsigned by the previous Executive and contained a 21% property tax hike.

This year’s plan is expected to finish out at $784 million: the bulk of it, $676 million, is in the general fund, $76 million in debt service, $4 million in liquid fuels fund, and $27 million in the transit support fund.

2011’s budget dipped slightly from 2010: $767 million from $773 million. The coming year is going to be based upon new property values and the readjustment of the millage rate. Will the Executive propose a tax increase following the reassessment and the revenue neutral rate? It is possible for the County to take 5% more than it would collect in property tax revenue this year, but that has to happen in a separate vote. Going higher requires the permission of the courts.

Beyond that, the 2013 budget will be the first to receive money from the impact fee on horizontal drilling for natural gas. According to our estimates and those from the state the County is expected to receive $79,000 from drilling, and about $1 million set aside from the "legacy fund". The use of those revenue is spelled out in Act 13, with legacy fund dollars specifically tied to environmental purposes.

Yes, Let’s See Where ALL RAD Money Goes

An opinion piece celebrates the start of RADical days, when the assets funded by the 1 percent sales tax created under the Regional Asset District offers free admission as a "thank you" to taxpayers to show them what the money has paid for. The op-ed closes by noting "RADical Days are the most entertaining way to watch your tax dollars at work."

Much more entertaining that going down to see what happens at the County Courthouse or the City-County building, that is for sure. If the Port Authority gets deemed a regional asset as is envisioned by the recent bailout plan perhaps there will be a day in the future when "free" bus or trolley rides will get patrons to RADical days.

The piece correctly points out that one half of the proceeds from the sales tax goes to fund the assets. The other half is split into two pieces, 25 percent to Allegheny County, the other 25 percent to the municipalities in the County. The legislation creating RAD mandated that upon accepting the money the County and the City had to eliminate their personal property taxes, and the City had to reduce its amusement tax from 10 percent to 5 percent. The City and the County had to create senior citizen tax relief programs and municipalities other than the City and the County were to use the money to reduce local taxes and dedicate a portion to inter-municipal organizations like councils of government.

Do taxpayers know what their local governments are doing with the money? For the County’s 2012 budget the revenue side shows $41.5 million from the sales tax, which amounts to its 25 percent share under the formula. Then, under "other and miscellaneous" there is $17.8 million reported from the Regional Asset District. The latter allocation in its entirety goes to Parks, which has a $22 million budget this year. The $41.5 million goes entirely to non-departmental revenues, a $408 million pot of money. The City budgeted $12.2 million this year as its share and notes that the money "replaces funds lost with the elimination of the personal property tax, the reduction of the amusement tax…and the expansion of the City’s real estate senior relief program".

The RAD website notes that "as a result of new sales tax revenue, 115 municipal governments reduced local millage, 10 eliminated the per capita tax, and three reduced/eliminated the wage tax." It is a strong bet that many of those millage rates have crept back up, and we know that the County and the City have been granted and are often asking for new sources of tax revenue.

County Property Taxes: Up, Down, or Same?

As we have pointed out in Briefs this year, a property owner’s first bill under the new assessment will not necessarily be higher than the bill for this year and years past just because the assessment is higher. That’s despite the claims by several elected officials that make the statement that reassessments lead to tax increases. And despite the County’s own property assessment webpage that points out a taxpayer’s obligations depend on how their assessment changed relative to the taxing body overall.

With one county, 128 municipalities, and 43 school districts all levying property taxes it would be quite an undertaking to describe the present and future tax burden for all properties in the County. A new website, Property Tax Estimator, allows taxpayers to examine their property and see what to expect based on new assessed values and anticipated millage rates. Recall that the County and municipalities have to establish revenue neutral rates after values are certified. Tax hikes can happen after that.

Revisiting our sample of 100 sales that we utilized in two Briefs in 2012 (here and here) we examined the resulting impact of the assessments on County property taxes. We used the following assumptions:

  • The home would take the County’s homestead exemption that lowers the taxable assessment by $15,000 for both 2012 and 2013
  • The millage rate for the County currently (5.69 mills) would fall to 4.11 mills based on the Estimator’s calculation

So what happened? Of those 100 sales, 38 would end up paying more in County property taxes in 2013 than they did this year. This ranged from one home paying close to $800 more to one paying $1 more. The remaining 62 would all see a drop in their County property taxes. The range goes from a $3 cut to a $500 cut for the group.

A higher tax rate-whether a revenue neutral rate settles in at higher than what the Estimator predicts or the County increases the rate as permitted under the law-would obviously change what the final tax bill looks like. Assume that the County Council increased the tax rate by 5% in a separate vote (it would take a 2/3rds affirmative vote) and then successfully petitioned the courts to utilize the same 5.69 millage rate that is in place this year, only with the new assessments taking hold. Of those 100 properties in our sample, 9 would pay less in 2013 than they did in 2012. Their assessed values have fallen far enough for that scenario to happen.

County Wants to be Right on Rights

Though there has been a lot of talk about how Marcellus Shale drilling could be a boon for the County, specifically for the County’s coffers if drilling rights were leased on airport land, County officials likely have little firsthand knowledge on what the County owns, if anything, in the way of mineral rights-gas, oil, coal, etc.

That could change if action is taken on a motion that would instruct the County manager’s office to "…determine what mineral rights Allegheny County owns on any parcels within the County and the feasibility and economic value of conveying those mineral rights to other parties for development".

A similar motion was introduced into Council last June but no action was taken on it after it was referred to the Committee on Economic Development and Housing.

It could turn out that the County owns mineral rights under some valuable property in the area. It is doubtful that even if the County owned mineral rights in the middle of, say, a County park, that there would be extraction due to strenuous objections. Recall the 2008 proposal to extract coal in a section of South Park.

Conversely, it could be possible that someone other than the County owns the mineral rights under government structures, that of related County agencies, or perhaps under some of the shiniest new economic development projects carried out in recent years. Could there be drilling next to the County Courthouse in the near future? Or how about digging near the Convention Center?

The proponent of the study wants to use proceeds to reduce the increased property tax burden, which the proponent incorrectly assigns to the new assessments. How about the 21% millage hike passed by Council at the end of 2011? Besides, the County is limited to a 5% windfall that requires a vote of Council. Otherwise, there is no net increase in revenue from the assessment.

The proponent’s comment points out once again how ignorant even County officials are about the assessment process.

Obscure Authority in Thick of Debate, Again

The ongoing conflict between UPMC and Highmark has set up shop, briefly, at the County courthouse. Not because the Council or the Executive is bringing those parties to the table, but because there is a request to use the County’s Hospital Development Authority as a conduit through which one of the parties would like to borrow more than $330 million.

The County has had a hospital development authority since 1971. What amounts to a mission statement comes from the County’s page on boards, authorities, and commissions: "The ACHDA was created and is authorized by law to acquire, hold, construct, finance, improve, maintain, operate, own and lease, as lessee or lessor, health centers (including but not limited to, personal care facilities and nursing homes), hospitals and facilities devoted to hospital purposes. Financing is provided by the Authority through the issuance of tax-exempt bonds. The rate and term of financing are negotiated. The interest income on the bonds may be exempt from federal and Commonwealth income taxes which results in a reduced rate to the borrower (emphasis added)."

Could the County and its authority deny the borrowing as a way to force a negotiation between the providers? It is doubtful. For one, a committee approved moving the issue along and the chair of that committee was quoted as saying the County has "no effective financial leverage". And two, a denial would simply mean a borrower would go to another issuing authority to get what they want. What was surprising on this second point is that it was supposedly something committee members had not known about as implied in a newspaper article (the language said "members learned").

If that means members were surprised or caught off guard that’s interesting because the County just went through a similar episode in 2009-10 when one of the providers came asking for a refinancing as it was planning to close a facility in the Mon Valley. Membership on the committee has not changed much since then. The authority, Council, and the state Higher Educational Facilities Authority all voted to approve the $1 billion bond issue. After the state authority vote an article pointed out that "The hospital system decided to seek state approval as a contingency plan in case its efforts to issue bonds through the county authority hit a snag."

Will County’s Counsel on Transit Be Heard?

Since announcing the formation of a Special Committee on Public Transportation in mid-April, two meetings have been held. The first, in April, lasted 48 minutes. The most recent, on May 10th, lasted 30 minutes. A total of seven County Council members have attended, with four having come to both.

The Committee’s goal stated at the outset was to "…develop a unified public transportation plan that county officials can present to Governor Corbett and legislators". Soon after the County created the Special Committee the Governor announced his own transportation task force, a task force which has been written on in the blog and in Briefs, and it will be deliberating through the summer and is expected to issue recommendations by August 1st. Now the County wants to have its deliberations and feedback forwarded to the task force by the beginning of July.

Will the County have a unified transit plan? Usually the chorus of voices that is the loudest chants about dedicated revenues, which the Governor’s task force is going to look at, but in a broader scope for roads, bridges, transit, airports, etc. What are the ingredients of the unified plan? It is very unclear, but the May 10th hearing produced a few interesting tidbits from the PAT CEO. First, answering a question from a Council member he noted there have been "…increases in utilization of the Authority’s park and ride lots near the routes turned over to Lenzner in the North Hills". Recall that the board voted to allow the private provider take over two routes that the Authority was no longer going to operate. Thus far there has been little evidence about how Lenzner is doing on those routes and while the CEO’s comments don’t provide any detailed numbers and could be anecdotal.

Second, the CEO stated "…escalating legacy costs will likely hamstring the Authority in the event that the performance based funding model is perpetuated from Act 44 to the new legislative solution". The 2010 single audit for PAT shows an unfunded retiree health care liability of $812 million and an unfunded pension liability of $198 million. PAT put in over $60 million for both benefits in 2010. What is the "performance based funding model" you ask? According to PENNDOT factors like passengers per hour, cost per hour, revenue per hour, and cost per passenger trip would factor into allocating scarce dollars. No wonder officials at PAT are scared: our Brief last week showed that PAT has very high passenger costs on buses and those costs increased over the decade at a very high rate.

City and County Share a Ride on Vehicle Maintenance

According to the 2009 Act 47 report for Pittsburgh, the City has a fleet of 940 vehicles and related pieces of equipment. A quick look at data in the most recent County CAFR shows a similar count (934) for Allegheny County. Both currently contract vehicle maintenance to a private contractor under separate contracts and could be under one contract in the coming months, possibly by August 1st according to a County spokesperson.

By doing so the hope is that the savings for taxpayers will be even greater in scale, and it would maintain a non-core service of both the City and the County with a private operator.

The City’s Act 47 report points out that, even with the contractor agreeing to abide by the collective bargaining agreement that the City had with in-house employees, "vehicle maintenance costs were approximately $400k lower in FY2007 than in FY2003".

With the possibility of such savings and improved performance by the respective vehicle fleet of each governing body, this is a joint effort that should be pursued with vigor.