The Authority That Wouldn’t Die!!!

The Mayor just appointed City Council’s most junior member to the board of the Stadium Authority, an Authority that was created in 1965 to "provide increased commerce and prosperity, and to promote cultural, physical, civic, social, and moral welfare to the general public". No doubt its role as the owner of Three Rivers Stadium did most of the above-the jury on how "moral welfare" was promoted is still out.

Consider that the new appointee had just become eligible to drive in the Commonwealth when the stadium was demolished, eleven years ago this month. Since then, the Stadium Authority no longer owns any stadiums, that role taken over by the Sports and Exhibition Authority (the SEA performs administrative duties and gets reimbursed by the Stadium Authority) so the Stadium Authority is now relegated to playing land developer and constructed a parking garage in the land between the new stadiums.

The Authority’s financial statements make it clear that "the garage has not and will not generate revenues fully sufficient to cover expenses and debt service". It took on a $20 million loan to construct the garage, and the financial statement states that the last payment will be December 1, 2028, somewhere around Super Bowl LXII. Long-term leases involving the Authority and parking spaces last until 2050, just around the time the current Steelers’ quarterback can begin collecting Social Security.

A 2005 report to the ICA said that "operationally, the Stadium Authority could be operated by another City authority such as the URA". That same report showed that as of 2004 the Authority had total assets of $9.4 million and liabilities of $9.4 million. In 2011 total assets were $35 million and total liabilities of $44 million.

Sure makes that admonition on the Stadium Authority’s website in 2001 that its "existence and function will conclude with the planned demolition of Three Rivers Stadium" look funny after all these years.

Turnpike Drowning in Debt?

highway

Recently Pennsylvania’s Auditor General stated that the Pennsylvania Turnpike is “drowning in debt”.  This characterization was disputed by the Turnpike’s CEO as “simply not true” and that the Turnpike “has developed a sound, fiscally responsible approach to meet all of its financial obligations…”  So which is it?  Is the Turnpike’s financial condition sound or is the Auditor General correct in raising a red flag?  To get an unbiased picture of the situation it is important to examine the large rise in debt over the last few years and the major causes of the borrowing. A principal reason for the debt increase is a provision of Act 44 of 2007. 

 

Continue reading

So, What Does the ICA Want the City to Do?

Two days before this past Christmas a letter was hand-delivered to the Mayor noting that the 2012 budget "fail[ed] to reflect the conditions for approval that the ICA has required". Those conditions were threefold: first, to adopt a strategic capital plan, which would be important given the fact that the City has not issued debt for infrastructure projects but soon anticipates doing so, second, to create a dedicated fund for other post-employment benefits, something first required in the amended Act 47 plan from 2009, and the City’s share of the pension fund payment ($60 million) for 2012.

In addition the letter states that the City amended the budget by increasing Council staff salaries and creating a dedicated fund for Council mailings by "apparently…diminishing a workers compensation fund".

Could it be more ironic that-following the City’s 2007 request to get out of oversight and an amended recovery plan that stated "get focused on legacy costs like debt, pensions, and workers comp-the City comes late with plans and funds related to these items and siphons money off of one of them to bolster Council operations?

The Drip, Drip, Drip of Water Rates

City taxpayers will be paying a higher City property tax rate (as a result of the library referendum), a higher County property tax rate (as a result of County Council’s 1 mill increase) and now higher water rates based on the vote of the board of the Water and Sewer Authority. Based on a typical residential customer (use of 4,500 gallons per month) the increase will tack on $2.57 per month to the typical $47.12 bill, which itself was boosted to that amount by a 7.7% increase in 2010.

According to the City CAFR (the page titled "Revenue Bond Coverage") the PWSA’s gross revenues increased 231% from 2001 to 2010 ($60.4 million to $139.7 million) while operating expenses grew 242% over that same time frame ($38 million to $93.1 million). In 2010 the net revenue (gross revenue – operating expense) was $46.5 million, while debt service was $55.6 million. That means net revenue cover 84% of the annual debt service. The debt-which in total is $662 .7 million-is not a direct obligation of the City of Pittsburgh government.

After envisioning the PWSA as an agency that would be interested in purchasing other small municipal systems after it did so in 2009 when it bought Millvale’s system (the authority’s head at the time said the "city authority is considering buying other water systems in surrounding communities") the discussion recently turned to privatization as a possibility. The Mayor mentioned that "We remain open-minded to doing what’s best for the city of Pittsburgh."

Most City Debt Still Pension Related

Feeling that the City’s finances are in good enough shape, the Mayor has proposed a bond issue of $80 million to pay for capital needs in the City. Some members of Council say the time is not right, the amount is not right, etc. so it seems certain that the relative ease with which the operating budget passed might be absent from discussions over the capital budget.

As of year end 2010, the City had $633 million outstanding on its general obligation bonds. Nearly 40% of this is related to bonds 1998 A, B, and C which were "issued to fund the City’s pension fund" as noted by the Controller’s audit. There is $140 million outstanding on 2006 B which, with others the same year, was used to refund previous bonds. After those outstanding amounts are counted, what remains is $259 million (about 40% of the total) in various bond issues that date back to 1993.

In 1996 (the earliest historical number available on the Controller’s website) per capita debt was $1,507 and the ratio of debt to general governmental expenditures was a very low 9.33%. Last year the per resident amount was $2,058 and the debt to spending ratio was 14.80%, the lowest since the early to mid 2000s. Most of the past fifteen years per capita debt has hovered around $2,400 and the ratio of debt to spending around 18%. That’s why much of the future fiscal optimism of the City is predicated on the "debt cliff" when payments fall significantly, supposed to arrive somewhere around 2018.

Dissolving an Authority

Earlier this summer we wrote a Policy Brief describing the state of affairs between Pittsburgh City Council and the Parking Authority. At the time there were some that were calling to get rid of the Authority altogether, bringing the function "in house", thus eliminating one of the tentacles of City government. That talk has largely died down, but in a nearby large suburb the process of shutting down a Parking Authority has commenced.

Mt. Lebanon has had its Parking Authority since the 1950s, established initially for the purpose of financing and constructing two garages in its uptown business district. According to the municipal manager, the sentiment among a majority of municipal commission members was that "the Authority served to ‘fragment’ local government, reducing the ability of elected officials to control operations in a manner that is most responsive to citizen concerns" and thus the decision to dissolve the Authority was made.

So what happens to the parking facilities, debt, operations, and employees under the arrangement? The municipality will own the parking assets and two other buildings owned by the Authority will be sold after the dissolution. As we pointed out in the Brief, the debt question has to be settled whenever there is a move to end the existence of an Authority, and, according to the manager that debt (around $3.8 million) has been refinanced in the name of the municipality.

The parking function will be dispersed between public works, police, and finance and six of the Authority’s nine employees will become municipal employees when the dissolution is finalized.

Obviously Pittsburgh is much larger in scale and its Parking Authority has more employees, more facilities, and more debt. But if Council members are looking for a small scale case study, they have it.

Is Council Serious About Shutting Down the Parking Authority?

Members of Pittsburgh City Council have expressed frustration with the operations of the Public Parking Authority.  Some have mentioned the possibility of dissolving the Authority. Perhaps that’s because Council members have spent the better part of the past two and a half years debating, deliberating, and discussing how to solve the City’s massive pension problems with the  Parking Authority and its assets a major element in those discussions.

 

Continue reading

Mayor Fails $52 Question

The Mayor of Pittsburgh was on a radio station today bemoaning the condition of the City’s roads and advocating for more money to pave nearly 900 miles of asphalt roads. The Mayor stated that commuters drive on the City’s roads and only pay $52 a year to work in the City through the Local Services Tax and that the tax should be increased and the resulting revenue would be dedicated to roads.

A few facts for the Mayor are in order. First, as we have pointed out time and again, non-residents pay more than the $52 LST; a good portion of the RAD sales tax goes to the City, and, if the drivers busting up the City’s roads are parking at a garage, lot, or meter they are paying the nation’s highest parking tax.

Second, a boost in the $52 tax would be a tax increase on City residents as well. The last time the state raised the tax from $10 to $52 they permitted every municipality in the state (except Philadelphia, which does not levy the tax) to raise it and would likely do the same if the idea were to get more than a moment’s notice in Harrisburg. And if for some strange reason the state permitted only Pittsburgh to raise the tax it would fall on City residents who work in the City (some of them might drive to work as well) since the tax is paid where the taxpayer works.

Lastly, on the idea that the proceeds would be put into a "lock box" for roads the state law already mandates that funds from the LST be used for police/fire/EMS, road construction/maintenance, and/or reduction of property taxes. The law does not allow it to be used for other purposes, so it is disingenuous for the Mayor to imply otherwise. Council attempted to dedicate LST money to pensions late last year before opting for the parking tax due to these statutory restrictions. Perhaps a detailed accounting of how the City has allocated the cumulative $100 million in LST money (from its increase in 2005 through 2011’s budget) would be helpful.

The City has decided to fund its capital needs on a pay-as-you-go basis without issuing new debt. That was seen as a necessary remedy for Pittsburgh, which has above-average debt on a per-capita basis. That means infrastructure improvement decisions are made with the same pot of money as pension benefits, money for workers’ compensation, the clerk’s office, etc.

Sustainability in Pittsburgh

Could the irony be any richer? Upon the departure of Pittsburgh’s greencoordinator, we learn there is actually a full time permanent position bearing that title. According to one Council member the position is necessary to enhance Pittsburgh’s greenness. A City with spending that is unsustainable, with legacy costs that are unsustainable, with huge debt burdens, a school system that is little more than a high cost money pit, a declining population and a decade long flat private sector employment base is consumed by worry about Pittsburgh’s impact on the global climate.

We might never know if the two year tenure of the now resigned coordinator did much to save the planet, but we can say with some assurance that having a government dedicated to economic principles known to be inimical to growth and private sector employment expansion has done a great job of holding Pittsburgh’s economy in check. Whether the resultant slow or no pickup in CO2 emissions and actual pollutants has made any difference to the global climate is at best a guess.

It is too bad the same degree of Council zealotry, clarity of purpose and devotion to the world’s wellbeing is not in evidence when it comes to dealing with the problems the Council is elected to deal with.

Council’s Last Minute Pension Funding Plan Raises Many Questions

As the proverbial clock moved close to midnight on December 31st Pittsburgh City Council finalized a plan it believed would be sufficient to avoid a state takeover of the City’s underfunded pensions. Instead of a long term lease of assets that would have produced a lump sum of upfront cash for the pensions, the Council’s plan promises to dedicate thirty years of parking tax revenues along with what the City already pays in as its minimum obligation to the pension system.

Continue reading