Pittsburgh’s Weak Nod toward Entrepreneurism

Summary: The Standing Committee of Pittsburgh City Council has passed a resolution calling for the creation of a fund of $75,000 to $100,000 to assist small startup businesses.  Sponsors say more new businesses would be a good thing for the city. The same sponsors have forced existing businesses to go to court to fight heavy-handed regulation.


In an ironic twist, a City Council member has apparently recognized the need for businesses to succeed in Pittsburgh as well as the need for new business startups to grow the city’s tax base and provide employment opportunities. Why is this ironic? The same council member has previously pushed a council effort to require businesses to offer sick leave and supported higher minimum wages for small businesses. The city has passed an ordinance that mandates that employees who work in the city for companies with a city contract must be paid a minimum wage of $15 per hour—if they work 30 or more hours per week.

Meantime, the city is pursuing the so-called P4 initiative that puts all its policy desiderata (people, planet, place, performance) ahead of market-driven business growth and entrepreneurship.  Indeed, the plan says consideration of a project’s job-creation potential or profitability will not be a priority. According to newspaper reports on Oct. 12, 2016, the mayor was quoted as saying “We are not simply looking for projects to make money and jobs.” Further, he wants to be sure that projects are “environmentally sustainable and inclusive and accessible to a wide population.”

The sick leave effort was killed by the courts to go along with other court rejections of city ordinances aimed at interfering with business decision-making. The city also lost its court battle over its ordinance requiring security guards in privately owned buildings to undergo CPR and other training.  Both cases are currently in front of the state Supreme Court.

Bear in mind, too, that the city levies a payroll-preparation tax that ignores profitability and ability to pay the tax. And it has one of the highest parking tax rates in the country.

Now comes a resolution that aims to create a fund to underwrite business startups.  On February 14th the resolution was passed (affirmatively recommended) by the Standing Committee after referral from the council a week earlier.

The resolution wording: “Resolution directing the Urban Redevelopment Authority (“URA”) to create, fund and maintain an Entrepreneur Support Fund for the purposes of supplying select new businesses with early-stage seed funding where applicable.”

According to newspaper accounts on the announcement of the plan, “Encouraged by the city’s Advisory Board on Entrepreneurship and Start-ups, the support could go toward permits, licenses, software and other non-payroll costs of launching a business.” The sponsoring councilman is quoted as saying, “The goal here is to start as many businesses as we can so that they thrive and hire more and more people, and obviously you get more and more people employed in Pittsburgh.”

Beyond the irony of council members who have heretofore shown little respect for the free market suddenly realizing the private sector and business activity are important to the tax base for the city and are creators of jobs, there are obvious very questionable aspects of the Entrepreneurial Support Fund.

First, why would the city set up a fund to make grants to businesses so they can pay the city for permits or licenses? If a start-up cannot afford a couple hundred dollars to pay for a license, how can it afford to buy equipment and supplies, or even contemplate hiring employees?  Then, too, if the city is eager to help start-ups, why not waive the cost of permits and licenses for them and after a year, if they are successful, then ask them to make the payment?

Second, the resolution specifies the support will be for select new businesses. That can only mean one thing. There will be a number of social welfare and environmentally correct qualifying criteria for the applying firms. These will likely be based on past efforts by the city to regulate businesses and to force certain outcomes as propounded by the P4 program and the new zoning guidelines which are not compatible with a free market, competitive economy.

Thus, it can be reasonably expected the qualifying criteria will require the business to pay, or pledge to pay, the city’s desired minimum wage. How would it look if the businesses were granted exemptions from this longstanding social welfare goal of the city? The applying business will likely need to pledge that its employees will have a sick leave benefit. It will have to promise to provide medical insurance. And it will need to verify that to the greatest extent possible it will be environmentally friendly including minimizing the use of fossil fuels by using eco-friendly generated electricity. Businesses that exhibit a hint of not being politically correct will not qualify. And it will be interesting to see what repercussions the city will attempt to impose on businesses that make pledges but fail to honor them.

In short, efforts by the city to require businesses to adhere to its longstanding political  ideology regarding free enterprise will not attract the true entrepreneurs who are the most likely to be successful.

Here is a better idea for the city:  Make an effort to appreciate the benefits of free markets and real entrepreneurism and the dynamism they create. After all, they once made Pittsburgh an economic colossus. Lip service and grants to cover license costs are not the answer that is needed.

Cut business taxes and abandon the government’s anti-business mindset that tries to impose social goals on businesses. Good jobs with good pay are a far superior socially desirable outcome. And stop treating industry as if it is not welcome. Manufacturing is enjoying a resurgence nationally. Those jobs, with their accompanying multiplier effects and high wages, would be good for the city to have.

Pittsburgh’s Second Bill of Rights Proclamation

Never has so much inanity, ignorance and denial of reality been on display as the Pittsburgh City Council’s proclamation calling for the Federal government to enact a second Bill of Rights to protect the middle class. The proclamation would have the new Bill of Rights include a living wage, education rights and full participation in the electoral process.

How fascinating that Pittsburgh’s City Council would be the promoters of a Bill of Rights which have in effect already been implemented in the City. Are they not happy with Pittsburgh’s results? Has the City’s living wage bill not worked to grow the middle class’ income? Apparently not. Has spending over $20,000 per pupil, having a Promise scholarship program that guarantees money for Pittsburgh school graduates and adopting every politically correct education strategy and gimmick coming down the pike improved education in City schools? Absolutely not. What new educational rights could possibly do more than is already being done? And how likely are they to achieve better results than are already occurring? History says they will be a counterproductive waste of time.

The nation has long since had a minimum wage and a labor policy that gives great power to unions. Look at the industries the unions have decimated through their demands. The nation and the state have had prevailing wage laws for decades. Pennsylvania has labor laws that give public sector unions enormous bargaining advantages over the elected officials representing the taxpayers. And given the incestuous, mutual back scratching relationship between elected officials and public sector unions taxpayers end up getting short shrift. Those laws enrich the government employees but have pushed 26 municipalities in the state into distressed status, including Pittsburgh.

Which of these policies, along with business strangling environmental policies, have been helpful in promoting private sector activity and creating sustainable high paying jobs? Look at the deep blue cities all around the country such as Philadelphia, Detroit, Buffalo, Cleveland, San Bernardino, Scranton, and Harrisburg. Where is the evidence that all the "progressive" programs in those cities have protected the middle class?

The unwillingness to recognize the damage being done to our economy and financial system by progressive programs is to be in complete denial. Model cities ring a bell? How did the Civic Arena work out for the Hill District? Have progressive education policies improved education? Look at academic achievement in Chicago, Atlanta and many other cities across the country where the lack of discipline and kowtowing to teacher unions have held sway for years.

Finally, how can a City that has been totally under the control of one party for 80 years in a country that has been under the control of the same party for much of the same time and is in a country which has a voting rights act have concerns about electoral participation? Where has their party been? The same party that has a very checkered history when it comes to electoral malfeasance. Philly Black Panthers ring a bell anyone? ACORN shenanigans? Then there is the candidate for Congress in Maryland who has had to drop out for voting in both Florida and Maryland in the same election season. Does full participation in the electoral process include being able to cheat?

Rights cannot specify outcomes as the Council apparently believe they can. Rights should ensure freedom to work, start a business or any other pursuit of happiness an individual chooses with minimum of interference and then only to protect the same rights of other people. Rights should ensure the sanctity of life, the ability to own and dispose of private property and the right of free speech, the freedom of the press and religion. In fact, the founding documents including the Bill of Rights and other amendments already do these things as long as politicians and judges do not subvert them. And therein lies the rub for the Council’s proclamation. They are unhappy with the tried and true way the country has guaranteed our rights and produced the greatest prosperity the world has ever seen.

But progressives are never happy. And they have enacted idiotic laws such as those that led to the subprime mortgage debacle that nearly destroyed our financial system. They have worked to choke off the country’s ability to exploit its own resources and to hamstring the ability of entrepreneurs to build and grow businesses. The drafting of the proclamation demonstrates the inability of progressives to be open minded enough to question whether or not all they have done before is doing what they promised? Or will they ever they recognize the unintended consequences of their policies and beliefs? They would choke the goose that lays the golden eggs and expect the goose to keep producing the eggs.

Sizing up City Council

The Pew Charitable Trusts just released a comparative study of city councils in 15 U.S. cities, the focus being Philadelphia where the Trusts’ Philadelphia Research Initiative is based. The study covers a wide range of cities: from New York, with a population of 8.3 million and 51 council members to our own Pittsburgh with 311 thousand and nine council members.

There are multiple opportunities for classification and grouping of the data. There are five cities with no at-large council seats (Los Angeles, New York, San Diego, Chicago, and Pittsburgh) and one with no district seats (Detroit); four cities have a professional manager as their chief executive/administrative officer (Phoenix, San Jose, Dallas, and San Antonio) while the remainder are mayor-council cities; only four have fewer than ten total seats (Pittsburgh, San Diego, Detroit, and Phoenix); likewise only four cities have population-per-seat of less than 50k people (Boston, DC, Baltimore, and Pittsburgh); seven cities have no term limits (Pittsburgh, Baltimore, Boston, Chicago, Detroit, Philadelphia, and DC); and all councils represented 1 percent or less of all general fund expenditures.

The study found that Pittsburgh is quite frugal on spending attributable to council functions: $225k per council seat, $6.52 per resident. Los Angeles, DC, and Detroit exceeded or approached $1.5 million on the first measure, and DC tallied a staggering $32.41 on the per resident measure, more than twice that of the next closest city (Detroit at $14.53).

An interesting measure to examine with the Pew data is the ratio of employees on each city council to elected council member. Pittsburgh is shown to have 33 "council employees" including the 9 elected members. That means there are 24 non-elected staff members, or 2.6 staffers per 1 council member. This was second lowest in the 15 city sample with Dallas at 1.4/1.

The average for the group is 6.7/1. Here’s where the shocking numbers come in: San Diego at 10.6/1, New York at 11.2/1, and DC again topping the list at 14.2/1. The nation’s capital city has 13 elected council members and 185 staffers. Keep in mind that U.S. House members, with districts that approach 700k people, are allowed to hire 18 staff members and up to 4 part-timers. How has the situation in DC’s city council been able to exist?

Hoping for a Miracle

Pittsburgh’s City Council and Mayor must be hoping for a miracle. They have rejected each other’s plan to avoid a state takeover of the City’s pension funds. As a result they are looking down the barrel of a financial howitzer in January if they cannot cobble together a plan to raise $220 million over the next few weeks. And even if the $220 million can be raised, the pension problem will still require bigger City contributions going forward.

Yesterday’s briefing by the Pennsylvania Municipal Retirement System officials pointed out just how massive the unfunded pension problem is and the staggering amount of money the City will have to come up with over the next 30 years-as high as $3.6 billion in one scenario.

And Council’s response? One idea is to renegotiate the terms of the rejected lease agreement offered by the LAZ-JP Morgan group: unlikely to happen because reopening the terms would require another bidding process. Otherwise lawsuits would be flying. Another idea is to sell parking meters to the Parking Authority, a plan strongly rejected by the Mayor. Yet a third idea is to have non-profits pay more in payments in lieu of taxes. Good luck with that one.

Indeed, the Council seems to be praying for a miracle. Having rejected privatization with such gusto and self-righteousness a month ago, they have boxed themselves in. There are no other good choices and the bullet will have to be bitten. There will be no bailout coming from the state; it has its own problems. And as we noted in a Policy Brief yesterday, the Pittsburgh school district will need more revenue soon as well. Pittsburgh taxpayers cannot be happy at the prospect of a double hit in their tax bills.

This is what happens when tough problems are kicked down the road year after year. Where has the Act 47 management team been for six years that it has allowed the City to get to this point?

Return of the Living Wage

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Pittsburgh City Council’s attempt to install a prevailing wage for employees at City-subsidized development projects has emboldened one Council member to take it a step further and revisit the idea of the living wage.  At a time when the nation is in recession,  the City and area are losing jobs, and governments at all levels are struggling to balance their budgets, resurrecting the living wage could not be more ill-conceived. Although hearings on the bill have been postponed for the moment, it will almost certainly be on Council’s agenda soon.



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Ready to Judge?

Section 709 of the City of Pittsburgh Home Rule Charter outlines the oath of office for every elected official and appointee as the following: "I do solemnly swear or affirm that I will support the Constitution of the United States and of this state and the charter of this city and that I will faithfully discharge the duties of office to the best of my ability".

So how do we reconcile the obligations of that oath with the statements of one of the most senior members of Council, soon to be a magisterial judge of the Commonwealth, who said this of a senior citizen tax relief program debated yesterday in Council: "So it’s not in compliance with state law. Big deal…I don’t give a damn if [the tax break] is illegal or unconstitutional if it supports the poor people of the city of Pittsburgh."

Stunning: not only in light of the fact that the member is in direct violation of the oath he vowed to uphold, but for the fact that soon the member will be hearing cases involving "most summary offenses, most preliminary hearings, certain DUI cases, certain third-degree misdemeanors and some ordinance violations, landlord/tenant cases and some general civil claims subject to financial limits" according to one description of the responsibility of a magisterial judge. Imagine if a landlord in the City fails to meet state safety requirements or doesn’t have sprinklers and claims it is because they are too expensive; would that pass muster? Or what if a person down on his luck decided to steal to support his family?

What will be the deciding factor in his rulings: the law and the Constitution, or the financial needs of the parties in front of the bench?