Tag Archives: Infrastructure

Are new mass transit and infrastructure taxes on the horizon?

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Summary: Proposed legislation would enable certain counties in Pennsylvania to enact new taxes, surtaxes and fees to subsidize mass transit and fund transportation infrastructure.  This is the wrong approach given the need to align mass transit operations and costs with post-pandemic ridership.

 

 

In 2019 two reports, one issued by the Pennsylvania Turnpike Commission (PTC), the Pennsylvania Department of Transportation (PennDOT) and the Southeastern Pennsylvania Transportation Authority (SEPTA) and the other by PTC, PennDOT and the Port Authority of Allegheny County (now Pittsburgh Regional Transit, PRT) advocated for expanded tax and fee options for local governments to support mass transit agencies.

 

The issue at the time was the change in 2022 when the payment from the PTC to the Public Transportation Trust Fund was to drop.  That funding change has occurred; from fiscal year (FY) 2021-22 to 2022-23, the transfer of sales and use tax revenue rose from $649.2 million to $1.1 billion while the PTC’s deposit fell from $420 million to $50 million.

 

With the coming expiration of federal COVID dollars for mass transit agencies, there should be no surprise that agencies are starting to look for new money.  A Center Square news article from Apr. 18 notes that leadership at SEPTA is raising the possibility of fare hikes and service cuts once the federal money is gone.

 

Legislative proposal

 

The article describes a legislative proposal introduced in the House of Representatives that would expand county options for subsidizing mass transit and funding transportation infrastructure.  Many of the options were included in the 2019 reports. The legislation intends to “enable new county-level investment options to advance transportation projects that drive local priorities” according to its findings. It would apply to counties of the first class (Philadelphia), second class (Allegheny), second class A (Bucks, Delaware, Lancaster and Montgomery) and third class in a specific population range (Chester).

 

If approved by the General Assembly, taxes, surtaxes and fees on deed transfers, motor vehicles, personal income, sales and use, local services and rides originating in a county from transportation network companies (arranged through an app) could become real if a county chose to enact any.

 

Some of these items are already taxed by the state, municipalities and/or school districts and would be collected under the same arrangements. The $5 fee on motor vehicle registrations that counties were permitted to levy by Act 89 of 2013 (25 counties have the fee, including six of the seven mentioned in the proposal) could double to $10. Counties could make annual grants to mass transit agencies for operations, maintenance and debt service or for a specific project or for purposes including roads, bridges, traffic signals and traffic signs.

 

Effects on Allegheny County

 

How would Allegheny County be affected by the legislation? It would be the only county able to continue to levy taxes on alcoholic beverages and car rentals as permitted by Act 44 of 2007.  Those taxes are budgeted at a combined $49.5 million for this year. The county levies a sales and use tax of 1 percent, and a portion of the revenue received by the Regional Asset District is made as an annual grant to PRT, budgeted at $3 million this year. County revenue from the registration fee is budgeted at $5.5 million this year.

 

The bulk of the collections are for the tax on alcoholic beverages; collections have fluctuated through the pandemic and after.  Inflation has also had an impact.  The change in the Northeast Consumer Price Index from 2021 to 2022 was 6.9 percent, well above the previous three years.  If county drink tax collections came in at the 2022 budget level ($42.2 million), the 14 percent growth from 2021 likely would have been impacted by inflation’s effect on the price of alcoholic beverages.

Transportation Revenue Collections in Allegheny County, 2017-2021 ($, millions)

There likely would be a negative impact if Allegheny County were to adopt any of these revenue options on individuals, businesses and on its position relative to border counties.

 

As mentioned, the proposed legislation would allow revenue to be utilized for “transportation infrastructure.”  In 2009, Allegheny County attempted to use drink and car rental tax revenues for debt service on roads and bridges, noting that the buses used this infrastructure.  The county lost a lawsuit and abandoned the idea.  Now, many years later, using drink and car rental taxes for infrastructure could happen.

 

To be sure, ridership has yet to return to pre-pandemic levels for many agencies.  This includes PRT, where, as of February 2023, average bus and light-rail ridership are 31 percent and 63 percent, respectively, below where they stood in February 2020.

 

PRT has done very little in the way of layoffs (this year’s budget added 49 employees), service reductions or utilizing smaller vehicles as a way to adjust to low ridership. PRT’s FY 2021-22 Annual Service Report shows the cost per rider on bus was $11.94 and $33.64 for light-rail; both topped PRT’s peer group of transit agencies in FY 2020-21.  The same report notes “significant legacy costs, significant congestion, long-standing collective bargaining agreements that are difficult to change, and the region’s unique topography” as prime factors of PRT’s high costs.

 

Conclusion

 

So where is the insistence on cost reductions? How about eliminating the right of transit workers to strike and eliminating prevailing wage? Hopefully the General Assembly takes these into consideration before providing counties with a menu of new levies which would exacerbate issues with mass transit spending.

County Gambles on Show

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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.

Olympics in Pittsburgh?

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Will gold roll into the Pittsburgh area with the blazing Olympic torch? Preposterous idea? Not according to the Mayor and the County Exec who suggest that the Olympic Committee’s request for bids be considered.

Let’s think about what this means. The Committee says the City (region) will have to come up with $3 billion and have 45,000 hotel rooms. That is now. What will be the price five years from now? Moreover, according to an official who keeps track of such things, the area will need 60,000 hotel rooms and there are currently only 24,000. How far out one has to cast the net to reach 24,000 rooms is not clear and, with no idea what many of the 24,000 look like, the notion that 60,000 will be ready by 2024 seems highly unlikely.

And three billion dollars? Where does that come from, Marcellus gas? For a City in financial distress, the notion seems incredible.

But one thing is for sure. Unless many more international flights and as well as more domestic destinations and flight origins are available in 2024 than there are currently at Pittsburgh International, the possibility for hosting an Olympiad is too remote to contemplate.

Then too, for the Olympic Games to be held in the Pittsburgh area, virtually every neighboring county would have to be involved offering sites for events. Soccer stadia, velodromes, tennis arenas, sailing venues, equestrian sites, kayaking sites, gymnastic arenas, etc. Massive amounts of land acquisition, infrastructure development and disruptions in many communities would be necessary.

There is a reason the summer Olympics games are held in large cities. There is more money, more people to be spectators, lots of hotel rooms, and bigger international airports with dozens of international routes.

Perhaps the Mayor and the Chief Exec are planning to grow Pittsburgh back to where it was 60 years ago. Then too, Philadelphia got the same Olympic Committee letter and that area is many times larger than the Pittsburgh area in terms of population and money and has a much busier international airport. It will be interesting to see how eager they are to bid and if they do how will Pittsburgh compete with them.

No TIF, No Development?

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There has been much debate about the proposed riverfront development in the Strip District. A URA request for proposals says the development will be part residential, part hotel, part office and commercial, and have a parking garage.

The company announced today that it won’t pursue a TIF anymore, noting the company "does not wish to participate in a financing program the community views negatively" and that it will self-finance the infrastructure improvements that would have been funded with the TIF.

Why the change of heart? Was the company worn down by trying to get financing? Pittsburgh City Council agenda notes show that motions to adopt a Lower Strip District Tax Increment Financing (TIF) plan and to set forth cooperation agreements with the URA, the County, and the Pittsburgh Schools were presented and withdrawn on nearly a weekly basis going back to late May of 2012.

Such a large development going forward without expecting some sort of subsidy is rare-the predictable by-product of handing out money to certain developments only to see others parroting the request. If a TIF were granted, the taxing bodies that opt to participate agree to redirect all or some of the incremental property taxes from their coffers to pay off debt issued to get the project off of the ground. Once the arrangement expires, usually it is a twenty year deal, they recapture all of the money from the property.

If the company holds true to its word, and it is not in line for nor seeking any other source of state or local subsidy, then there might be a lesson to be learned for those quick to hand out public dollars when asked and the strength of the "but for" criterion attached to TIF subsidies.

Business Owner for Higher Taxes? Had to be One Somewhere

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In a recent op-ed piece a business owner made an incredible statement. "My business would be hurt far more by allowing the tax cut for America’s most fortunate to continue and instead slashing budgets for things like public education, research and infrastructure to pay for them."

Nice rhetoric but completely wrong on every point. Federal income taxes are not even close to the most important component of education spending. Public education is funded primarily by state and local taxes. Infrastructure, especially roads and bridges, are funded mostly by special taxes designed to collect money from people and businesses that use them. And the notion that Federal budgets have been slashed totally ignores the fact that Federal spending is up a trillion dollars since 2007. Which budgets have been slashed? Federal spending as a percent of GDP is at its highest level in history save for WWII. The claim that programs are being starved is nothing if not hilarious.

The writer is obviously concerned about Federal tax revenue not keeping up with the nation’s spending binge. But the primary reason for depressed tax revenue is the weak economy that has not responded to the bulge in Federal spending as we were promised it would by the President and his people. Moreover, the policies of regulation and the threats of higher taxes coming out of DC are depressing private sector investment and growth. It is important to remember that the USA has one of, if not the, highest corporate tax rates on the planet. And the magnitude of the final real costs of Obamacare is still unknown both in terms of direct expense for employees for health care costs and for compliance.

The notion held in some quarters that allowing the tax cuts to be eliminated for those making over $250,000 is going to solve the nation’s fiscal crisis is irrational. That will not raise nearly enough money in a depressed economy and will have a chilling effect on business growth. The tax raisers are forever and always disappointed when higher rates fail to produce more revenue. But they never learn.

Getting more people on private sector payrolls is the only sensible answer to our fiscal woes, Federal or local. Current and prospective policies in DC are pushing in exactly the opposite direction. It is too bad and very sad that some folks can be successful in the private free enterprise system and still have so little understanding of what makes the system great or have so little respect for keeping free enterprise free and as unfettered as possible. A look at France, Greece or Spain might help them but the writer of the op-ed in question is too busy linking things together fallaciously to take a look elsewhere to see what happens in the world he thinks would be better than ours.

Finally, the typical ignorant comment about the need to spend ever more money on public education in the country fails abominably to see what is happening in public education in Chicago, Philadelphia and Pittsburgh and other cities. Seven percent of Westinghouse 11th graders are proficient in math. The majority of Chicago students are unable to function at grade level. Lack of spending? Over $20,000 per pupil in Pittsburgh and the nation’s second highest paid teachers in Chicago. How many more tax dollars must be thrown at these failed school systems to satisfy the business man who thinks we are under taxed?

Acquiring some actual knowledge about the world and how it works could go a long way to correcting the thinking of the business owner.

Some PA Senators Want Obama Lite Plan to Stimulate Job Growth

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Following the precepts of the Obama "jobs" bill, several state senators are proposing to boost employment by stepping up the pace of water and sewer projects, supporting green jobs industries, job training and promoting home ownership. The $1.2 billion plan would use existing funds and a fee on Marcellus drilling.

Let’s take one flaw at a time. First, we do not need special subsidies for green industries. As Obama is proving, such a use of taxpayer money is a gigantic waste. Solar energy is growing on its own. Windmills have been used for almost 40 years now. There is no need to subsidize these efforts. Shovel ready sewer jobs? Not likely. It takes a long time to plan new projects or rehab on major installations. Besides, all such jobs created would be at best short-lived and little more than a payoff to unions who would get all the work because of the prevailing wage law.

More money for job training? What, we do not spend enough on education and training already? And the proposal to promote homeownership is outright ridiculous. Have we learned nothing about the negative consequences of putting people in homes they cannot afford? Interest rates are at the lowest levels ever. If that is not stimulating home buying there is little left for government to do but wait on the market to right itself.

If the senators want to see faster job growth in Pennsylvania, they might want to look at what Wisconsin is doing to rein government unions and they might want to think about repealing prevailing wage rates. Getting government out of the way is a far better jobs program than wasting $1.2 billion trying to boost employment through a sham development scheme. We have seen this movie. Governor Rendell spent a half billion a year attempting to boost the economy. And we got precious little to show for it.

Job Creation Silliness

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It must be the time of year for some to engage in the kind of intellectual vacuity that represents total abandonment of reason. The Keystone Research Center just released a study purportedly showing Pennsylvania’s employment situation to be worse than the 7.4 percent current unemployment rate depicts. Fair enough. Everyone who follows the labor market knows there are lots of folks who are underemployed or have dropped out of the work force because they have become discouraged. That is not news.

But come on. Pennsylvania’s unemployment rate is well below the national average-for several reasons. First, because the state has been such a slow performer for many years prior to the recession and did not have a housing boom as did many states, the housing induced downturn was not as dramatic in Pennsylvania. Second, the industry mix of jobs in Pennsylvania has changed substantially over the decades away from goods producing jobs that are subject to recessions toward industries that are more recession resistant. Third, the state is in the midst of a booming growth in the natural gas business thanks to Marcellus Shale that is greatly improving the labor situation.

There is no mention in the report of the reasons Pennsylvania has been a perennial slow growth state. That list would include punitive anti-business labor laws, lawsuit abuse, environmental regulations, business taxes, prevailing wage requirements and a generally unfriendly business climate.

But the report does have recommendations on how to grow jobs. More government spending, especially on infrastructure, extending jobless benefits and job training.

How predictable. Government spending of money the state does not have to create prevailing wage jobs to support union workers. Job training to do what? To learn how to work on roads that are in endless need of repair?

Not a word about addressing the obstacles to growth in the state. There is no talk of Right to Work, ending teacher strikes, eliminating prevailing wage and getting environmental regulations under control. In short, this is nothing more than the failed policies that have crippled Pennsylvania’s economy for decades. It is stunning to see how resistant to facts and reason some people can be.

Buses, and Trains, and Trucks, Oh My!

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The Governor’s transportation panel met in Harrisburg on Monday to hear presentations on mass transit, rail, and truck modes and discuss funding options for what is pegged at $10.7 billion of "unmet needs" in the state’s infrastructure. With three separate modes to receive testimony upon, there is a lot of information for the panel to digest as it works toward issuing recommendations by August.

Here are some of the interesting factoids taken from the presentations:

Transit-When considering the funding for the state’s transit agencies, Federal and state subsidies provide 50% of SEPTA’s budget with local funding and fare revenue providing the remaining 50%. All other systems derive much more funding from Federal/state sources with PAT at 65%, other urban systems (in total) at 70%, and rural carriers at 80%. PAT accounted for 15% of the 432 million boardings in FY 09-10. The highest base fare for transit-levied by five systems-is $2.

Trucking-Roughly 1.2 million tons of freight are moved each day in PA. The industry in PA pays $1.39 billion in state and Federal taxes and fees annually. Truck-related fatalities per 100 miles driven fell in recent years.

Rail-Some $40 million from the capital budget and the rail funding assistance program is dispensed in Pennsylvania.

How to fund the state’s transportation needs? That question was given a 16 page treatment looking at existing sources, new sources, short-term, long-term, etc. Everything from increasing registration fees, tire fees, rental and lease fees and taxes were mentioned, along with dedicating certain sources of revenue to specific uses (like driver license fees to the state police or small games of chance for transportation) along with new forms of local taxation for transportation needs (sales tax, income tax, etc.). Many of the funding options were raised by the previous Governor’s transportation panel in 2006.

What is Pittsburgh’s Debt Load?

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A quick perusal of the City Controller’s Popular Annual Financial Report shows that long term debt has fallen from $787 million in 2005 to $680 million today-more than $100 million in five years. The City has issued debt just once in the amount of $47 million in recent years.

It is doing so in order to get the debt level down to more manageable levels. Per capita debt-depending on which population figure one uses, the 334k count from the 2000 Census or the 311k count from the most recent Census estimate-stands at over $2,000. Higher than Newark, higher than Rochester, higher than St. Louis.

Note too that the Controller points out "challenges ahead" as declining population, pension funding, and aging infrastructure. That means smaller tax base, more dollars dedicated to funding current pension participants and paying for retirees, and at the same time trying to avoid borrowing to pay for streets, bridges, and sewers.

Are Pittsburgh’s Shovels Ready?

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Following the directive of CB01 of the 2009 recovery plan and section 508 of the City’s Home Rule Charter, a City Councilman today introduced legislation that would create a six year capital improvement program for the City. The program would create a committee to select and oversee capital projects, the sources and uses of capital revenues and expenditures, and generally how to manage the infrastructure needs that include 2.3 million square feet of facility space and 900 miles of roadway.

The critical question becomes how to pay for those needs. In order to avoid taking on additional long-term debt (the Act 47 plan notes that "Pittsburgh continues to face a debt crisis" and per person it amounts to more than $2,200 but current debt is to be retired in 2024) much of the City’s capital needs have been met on a pay as you go basis out of current revenues, other state and Federal funds (including stimulus money) for an annual capital expenditure of $59.6 million in FY09. Actual City contributions (not counting state and Federal) were low in comparison with other cities like Cincinnati and Toledo.

At the time the Act 47 team recommended that money from freezing the parking tax at 37.5% be set aside for capital, but that has been dedicated to pensions via Act 44. The time frame for the City to identify a method of funding capital needs is coming in the 2013 fiscal year when the plan expires.