Tag Archives: merger

Any Closer on Parks Cooperation?

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Whenever the topic of merging or consolidating City and County services comes up, there is a regular recitation of what has been done (think 911 and purchasing) and what could be relatively easy to do in the future (think parks). Since both the County and the City have park land this has always been mentioned as a slam dunk.

Earlier reports that have extolled the elimination of duplicative services (the 1996 Competitive Pittsburgh report, and the 2008 merger report come to mind). The 2009 Act 47 plan instructed the City to "explore the creation of a non-profit park commission to oversee all City and County RAD-supported parks". There has been some talk that the current County Executive and one candidate for the Mayor’s office would like to see cooperation on parks.

Since the 2009 directive the County has created its own non-profit to help the County parks separate from the non-profit that assists with fundraising for City parks and the City is working on its OpenSpace plan under its 25 year planning document. The document has a section under "Policy Framework" and the "need for partnerships" but there is no mention of partnering with the County. It is possible that should an accord between the City and the County come to fruition that there might be changes to the planning document, the relationship between the separate non-profits, the respective departments that provide services to the parks, etc. but that seems a long way off.

What exactly would be up for grabs? The nine County regional parks have a combined 12,014 acres. The City’s four regional parks have 1,972 acres: adding in the acreage of community, neighborhood, riverfront, and special use parks the total acreage is 2,887. Only the County parks and the four regional parks receive RAD funding and it is those parks that are usually included in discussions.

The Trust for Public Land measured the City’s parkland, added in Point State Park, and calculated that Pittsburgh had 10.1 acres of parkland for every 1,000 residents, which was third highest according to the Trust’s segmentation of cities based on population density. Producing a similar measurement for the remainder of the County (895,000 people) and not including the acreage that exists in municipal parks in the County and outside the City the acreage per 1,000 non-City residents in Allegheny County would be 13.4.

USAirways Merger with American Hits Turbulence

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The Federal Department of Justice has been joined by the attorneys general from six states (including Pennsylvania) and Washington DC to stop the proposed merger between USAirways and American Airlines.  They have filed suit in Federal court claiming that the merger would create the world’s largest airline resulting in higher fares and less service and competition.  This is an unexpected turn of events.  Since the two companies had announced their merger plans earlier this year, things had been moving along without turbulence as the plan was approved by each company’s shareholders along with American’s creditors as that airline departs bankruptcy. 

 

 

So what does this mean for Pittsburgh?

 

As we had written in a Policy Brief earlier this spring (Volume 13, Number 17), the burning question for local officials is the fate of USAirways’ flight operations center which was partially funded by taxpayers.  If the merger goes through it will certainly mean that facility would be closed in favor of American’s center in Dallas.  Shuttering the facility will mean the loss of 600 Pittsburgh jobs. And those would be in addition to the thousands of employees at the airport who have lost jobs since the USAirways bankruptcies and tremendous downsizing and the de-hubbing of Pittsburgh International (PIT).  Clearly, there are many workers who will be hoping for the merger to be blocked by the courts.

 

The suit to stop the merger has come at nearly the last minute as the bankruptcy court was set to hear final arguments for the plan to exit bankruptcy, a plan supported by the unions and creditors. 

 

The Justice Department, in moving to block the merger, asserts the merger would be strongly anti-competitive.  And there is some reason to agree with that.   Although it is interesting to note that the Justice Department in recent years approved the mergers of Delta/Northwest, United/Continental and Southwest with Airtran.  If this merger is allowed, it would leave the country with four airlines controlling 80 percent of the market. On the one hand, American argues that United and Delta are already hogging the markets in several cities. But would any of the smaller point-to-point discount carriers, such as JetBlue Airways step up and enter more markets if the merger is not allowed and American is forced to shed routes?  Profits are a strong motive for new entrants in any industry.  As USAirways’ CEO once said, the airline industry is “far too hard to predict”. 

 

But there is a broader question. If the merger is denied what happens to American’s effort to get out of bankruptcy?  Will its creditors and employees be at substantial risk of loss? Will American have to cut service?  Lots of questions for the bankruptcy court to ponder.   If the merger is denied by the courts through the lawsuit and American fails to come out of bankruptcy, then there would still be less competition. 

 

If the Justice Department prevails, the traffic control center in Moon will almost certainly get a reprieve and many workers can breathe a sigh of relief.  And a diminished American presence at the airport could provide an opening for USAirways to offer more flights to take up the slack.  Of course other carriers might go after good routes.

 

But as we have written before, PIT is now an origination and destination (O/D) airport that needs to concentrate on lowering fees to entice more airlines, be they the major players or smaller flyers, to start offering more flights thus drawing more O/D passengers.  With the advent of drilling money from future Marcellus Shale wells entering the picture and gaming money being used to lower terminal related debt, PIT has already taken a step in that direction.  A growing economy that generates both increased business and pleasure travelers will be key to helping O/D demand to rise and possibly induce more carriers offering more seats to more destinations.

 

Nonetheless for the time being the holdup in the merger has added to the uncertainty about will happen at the Pittsburgh airport.

High Taxed Cities Shows One Surprise

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The website 24/7 Wall Street took a report done by Washington, DC’s Office of Revenue Analysis that examined the property, sales, and automobile taxes paid by a hypothetical family of three earning one of two levels of income ($25,000 or $150,000) to see which city had the highest tax burden. To be clear, the data does not look at all cities, only the largest city in each state. So for Pennsylvania only the City of Philadelphia is examined (it ranked second highest for both hypothetical earning levels, taking 13.3% of income for the higher earning family, 18% for the lower earning family).

The highest taxes city was Bridgeport, CT. Its high property taxes add to that distinction, and New York, Los Angeles, Detroit, and Baltimore fill out the top ten. One surprise would be the city that came in fourth, taking $18k from a family earing $150k and $3.5k for the $25k earning family, was Louisville. Readers of our work will recall that Louisville was the last major city to merge city and county functions (in January of 2003), and was the shining star of merger advocates in the southwestern Pennsylvania region (they ignored the example of Philly, which has been a merged government for a very long time) and many officials from Louisville took junkets here to trumpet their successes. A September 2003 article noted "Of particular interest to Pittsburgh, the Louisville merger allows the metro city to be more efficient…Instead of two information-technology departments, there is one. Instead of two human resources offices, there’s one. By eliminating redundant offices, the city will eventually save money not only on personnel, but also on rent, once leases on county office buildings expire." Though not sold as a money saver and rather as an image booster, one would expect that there would be some tax savings through consolidation.

Looking at the statistical section of two of Louisville’s financial audits-the 2003 one and the 2012 one-gives a perspective on the ten years leading up to the merger and the ten years since shows the rates levied on real and personal property by the City of Louisville (now known as the "urban services district") and Jefferson County (now known as the "metro government") shows that from 1993 to 2002 combined real and personal property tax rates fell 7% from 1.325 to 1.236. From 2003 through 2012, the combined rates on those taxes still fell, but by 0.8%, a rate much lower than pre-merger. But who’s in the position to complain about a tax cut of any shape or form these days? Especially when one notes that the combined real, inventory, and personal rates of the long consolidated school district (not part of the 2003 merger) went up 18% since the merger?

On the Whole, Would We Rather Be Philadelphia?

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School closings, teacher contract concessions, and "difficult choices", many of them related to the loss of students to charter schools and a failure to rightsize operations. Oh, and a $300 million borrowing just to keep the schools operating. And that is with a School Reform Commission running the show for the Philadelphia School District. This year the District will spend $2.5 billion on educating 146,000 K-12 students, and just under half of that budget comes from the state.

The fiscal situation in Philly is pointed out, not only for the implications it has on statewide taxpayers, but because one member of the state’s second largest district, Pittsburgh, recently opined that "bigger must be better" and suggested that there be a merger of the 43 districts in Allegheny County since "We’re working on an agrarian model that’s so out of date it’s not funny." A consolidated Allegheny County district would have roughly the same enrollment as Philadelphia’s school district, based on calculations of PA Department of Education data.

Unless the state were to just consolidate the districts in Allegheny County, which is doubtful since school districts are not governed according to county borders, or the board member goes back to the Nordenberg report that suggested consolidating only the County and the City and leaving the other municipalities and the school districts in the County alone and amends it to gain some interest nearly five years later, the cast a wider net approach so we can spread financial problems over a larger area is a non-starter.

There has been one merged district, Central Valley, in the last five years and that came as a voluntary arrangement. It was upheld as a model when the previous gubernatorial administration pushed the idea of cutting the number of districts from 500 to 100 in order to reduce "back office" costs and improve educational offerings. But our work found that the largest district in Allegheny County, Pittsburgh, had more "non-teachers" per 1000 students than a sample of other districts in the County, the exact opposite situation one would expect to see.

Pennsylvania has largely trended the way the U.S. has with the number of school districts: much of the consolidation came in the 1950s and 1960s; by 1972, according to the Census of Local Governments, the significant drops in numbers of districts had stopped and this year the totals in PA and the country are slightly smaller than where they were nearly four decades ago.

How’s the 911 System Doing?

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In April of 2004 the City of Pittsburgh and Allegheny County announced the merger of 911 emergency operations, with co-location coming first and then a complete merger in 2005. As of the 2010 sunset review report, the merged 911 center provided full dispatch of police, fire, and EMS for 103 municipalities, partial dispatch of those services for 16 municipalities, and "ringdown service" with no dispatch for 11 municipalities.

In May the state’s Legislative and Budget Finance Committee reviewed 911 operations in Pennsylvania, and some of the data points in the report are quite enlightening. In 2010 Allegheny County received 1.024 million 911 calls, about 1.5 calls per worker per hour at a cost of $22 per call (based on total expenditures/calls). There were 13 providers of 911 service that took more than 128,000 calls in 2010 and the cost per call for that group averaged $24, placing Allegheny just under.

Other data points:

  • In 2010, surcharge revenue covered 74% of total expenditures in Allegheny County. This was slightly higher than the average for the state (72%) and higher than the only other county that generated more calls (Philadelphia at 61%).
  • Allegheny’s cost per staff member (personnel expenditures/call taking dispatch staff) was $62,208; fairly close to Philadelphia ($61,398) but higher than the state average ($55,359).
  • As a percentage of total expenditures, Allegheny’s personnel costs represented 71.7%. This placed the County 13th from the top (Bucks County was the highest at 82.4%).
  • Allegheny had 9.5 dispatchers for every 1 supervisor; Philadelphia had a ratio of 9.1 to 1;

Effects of Merger up in the Air

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No, we’re not talking about a City-County merger: that idea has not surfaced since the 2008 Nordenberg report was unveiled and got a lukewarm response. Nor are we referring to the proposed idea of the County Executive to create a SEPTA 2.0 in southwestern Pennsylvania out of PAT and other regional carriers: when the Exec traveled to Harrisburg this week to talk mass transit, he just pleaded for more money for the Port Authority.

Instead the subject is a possible merger between US Airways and American Airlines, and what, if anything, it would mean for Pittsburgh International Airport. One analyst stated there could be a "moderate increase" in Pittsburgh’s business but conditioned that upon whether "landing fees can come down". Duplication of flight destinations or maintenance could mean less potential for positive effects. Another analyst bluntly stated "don’t believe for a second that it’s going to do anything to increase any kind of traffic out of Pittsburgh."

In 2001 US Airways had 12,000 employees in Allegheny County, representing about 2% of total employment and making it the fourth largest employer in the County. Ten years later it does not even appear in the County’s financials on its list of top ten principal employers. Passenger volume fell 33% through the decade while operating expenses rose 22%. On a per passenger basis, operating expenditures have climbed from $3.42 to $6.23. Fees dropped in the 2012 fiscal year but the airport’s "cost per enplanement" was still characterized as high when the fee reduction was announced.

A Regional Transit Authority: Will Consolidation Be Better?

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Alluding to the dire financial forecast that threatens the Port Authority (PAT) in FY2013 a candidate for Allegheny County Chief Executive recently offered the idea that it would perhaps be better to have a regional transit agency, much like the Southeastern Pennsylvania Transit Agency (SEPTA) that serves the opposite corner of the Commonwealth, handle transit operations here.

 

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Merger Math

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Take two Allegheny County school districts, each comprising three separate municipalities within them, one that voted to consolidate elementary schools and one that discussed the idea but tabled it, add in a combined decrease of close to $1.5 million in decreased state subsidies, the suggestion of a pay freeze for employees, and the statement from the Governor on his tour of Allegheny County that "…I think school districts around the state are going to have to start looking at can they continue to exist, that there should be a consolidation or a merger somewhere" and you have the present case of Carlynton and Keystone Oaks.

The former district opened the idea of approaching three nearby districts with the idea of consolidating; one said no, one is largely leaning toward no, and KOSD’s superintendent stated "I’ve not been given specific directions, but I think the board is willing to have informal conversations."

Both districts have about the same enrollments (Carlynton with 1,460, KO with 2,050) and if a merger would be successful it would be the first one since the creation of Central Valley a few years ago. Apparently all talk of school consolidation within each district will be delayed while there is a discussion of the merger idea.

Is it Time for a New Merger Typology?

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It has been nearly five years since the Mayor of Pittsburgh stated "a year from now, when you ask the question ‘should the City merge with the County?’ we will have the answer". It has been four years since the County Executive said of a prospective merger "hey state [of Pennsylvania], you have to help fix the unfunded pension and the outstanding debt". And it has been three years since the report of the Citizens Advisory Committee on the Efficiency and Effectiveness of City-County Government, or the "Nordenberg report" after the chair of the committee, released its recommendations. That report was to provide the answer to the question posed by the Mayor in 2006.

So what has happened since? We have heard of the 911 consolidation, the City and the County making agreements to purchase services together, the City providing services to other municipalities, municipalities and/or their authorities joining together with others to provide services. Just in the past week there was a failed multi-municipal merger of police departments, a successful merger of water systems, and a merger of fire departments. Unlike the "one size fits all" approach that a City-County merger would have produced (though municipalities other than the City of Pittsburgh, school districts, and authorities would have been untouched) there are a variety of methods by which mergers and consolidations have come about.

They can be cooperative, directed, or voter-driven, and either between various governments (County-City, City-municipal, County-municipal, authority-authority) or wholly within government (a department-department consolidation). Note that the Nordenberg report pointed out that their inquiry was "…limited to improving the efficiency and effectiveness of the two important units of government…[it] does not extend to other municipalities or to school districts".

The recent union of the City and the County into a financial management system came at the behest and insistence of the Act 47 team and the oversight board. That would be considered "directed, County-City". The agreement announced between the City of Pittsburgh and the Borough of Wilkinsburg for the City to provide fire protection would be considered "cooperative, City-municipal". That’s similar to the garbage collection pact negotiated between the two governments several years ago.

The pact between two water authorities in the North Hills reported in the newspapers would be "cooperative, authority-authority" and the consolidation of row offices into County departments would be "intra-County, voter driven" since a voter referendum approved that change.

What this suggests is that there is more than one method by which to evaluate the conditions under which a merger or consolidation is undertaken. The typology might help to determine which kind works better than others.

Newspaper Revisits Nordenberg Report

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The Post-Gazette in an opinion piece this morning laments that politicians and local leaders have failed to get a referendum question on the ballot asking voters to approve a merger of the Pittsburgh and Allegheny County. In decrying the lack of progress they remind us of the infamous Nordenberg Report from 2008, which recommended the merger vote. According to the op-ed writer the Nordenberg study group did a very thorough job of making the case that with all the municipalities there is excessive duplication and called boldly for a City and County merger to address the issue.

Too bad the op-ed writer has never bothered to read any of the criticisms of the shortcomings of the Nordenberg Report. Analytical ineptitude hardly begins to describe the hastily written report. Misleading use of Louisville’s job growth following merger with Jefferson County and failure to point out the huge differences between the situations in Kentucky and in Allegheny County and Pittsburgh are just a sample of the fallacies contained in the study.

But what really sank the Report almost as soon it was released was the absurd plan for merger. Pittsburgh would merge with the County, but all other 129 municipalities would remain intact. Pittsburgh as a government would cease to exist and be replaced by an "urban services" district. The district would run city services and collect taxes to support the expenses. Unfortunately for the plan, the Pennsylvania Constitution does not allow different tax rates for people and businesses in the same government jurisdiction. With Pittsburgh no longer in existence as a municipality its residents would be citizens of the County and could not be taxed higher than County residents. Moreover, Pittsburgh’s debt and other obligations would be shared by all residents of the County.

What a pathetic effort for seventeen months of study. Little wonder the public, in the City and across the County, have no interest in pursuing the merger.

Perhaps if the writers of opinion pieces would actually read the report and look at some of the criticisms leveled against it, they might climb down off their lofty high horse and deign to consult with a few folks who know something about the issues and problems in the Nordenberg Report. But don’t count on it. Strongly held convictions based on pie in the sky notions are often impervious to facts and reasoned argument.