Tag Archives: Sports and Exhibition authority

SEA attendance and finances during the pandemic

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Summary: The Sports & Exhibition Authority (SEA), a joint authority of the City of Pittsburgh and Allegheny County that owns Heinz Field, PNC Park, PPG Paints Arena and the David L. Lawrence Convention Center, saw attendance and finances significantly affected as a result of the coronavirus pandemic. 

Based on SEA audits and reports, COVID had a significant impact on attendance at the four venues due to games and events being canceled, postponed or having limited attendance due to government restrictions on capacity.

From 2019 to 2020, convention center attendance fell from 576,315 to 215,134 (63 percent), Heinz Field from 863,760 to 24,769 (97 percent), PPG Paints Arena from 1,608,104 to 408,554 (75 percent) and PNC Park from 1,276,950 to 0 (100 percent).  When considered in total, attendance fell from 4.3 million to 0.6 million, a decrease of 3.7 million attendees (85 percent).

Reports note that the number of convention center events, concerts and post-season games fluctuate year-to-year; typically, there are 10 pre- and regular-season Steelers games, six to eight Pitt Panthers games, 81 Pirates games and 43 Penguins pre- and regular-season games. 

As an example of the impact COVID had on scheduling and attendance, the Steelers’ 2020 season at Heinz Field (Aug. 2020 to Jan. 2021) had two pre-season games canceled; fans were permitted at five of the eight regular-season games, two of which were rescheduled to different days; no fans were permitted to attend the lone post-season game.  The game with the highest attendance was in November with 5,909 fans, roughly 10 percent of 2019’s lowest-attended game. There was a decrease in the number of home regular-season games played by the Pirates (81 in 2019 to 32 in 2020) and Penguins (41 in 2018-19 to 35 in 2019-20).  Events at the convention center totaled 198 in 2019 and 56 in 2020.

Through the end of 2021, total attendance rose to nearly 2.5 million, which was a three-fold increase over 2020 but 42 percent lower than 2019.  Another 9,000 people attended events virtually. Attendance at the convention center was lower in 2021 while the other venues improved from the decrease they experienced in 2020. In 2021, the National Football League enacted a 17-game regular-season, giving the Steelers an additional home game.

SEA Venue Attendance, 2019-2021

The SEA’s operating revenues—a mixture of surcharges; parking revenue; fees and event revenue that are generated from games and events—were negatively affected.  Revenues totaled $29.4 million in 2019 and fell to $14.3 million in 2020 ($15.1 million or 51 percent).  The 2021 figure of $15.8 million was slightly above the previous year. 

Specific payments from the sports facilities to the SEA declined from 2019 to 2020.  Total payments were $11.8 million and dropped to $9.5 million ($2.3 million or 19 percent). Heinz Field from $5 million to $3.5 million, PPG Paints Arena declined from $6.1 million to $5.9 million and PNC Park dropped from $0.7 million to $0.1 million.  In 2021, with activity returning, total payments were $10.6 million, or 10 percent below 2019. 

Operating expenses—operations and maintenance, administration and depreciation and amortization—were $65.3 million in 2019 and fell to $59.3 million the year after ($6 million or 9 percent).  Expenses then climbed slightly through 2021 to $60.9 million.  Depreciation and amortization represent the bulk of the SEA’s operating expenses, averaging 79 percent over the three years.

The difference between operating revenues and operating expenses is the operating loss.  This figure rose from $35.9 million to $45 million ($9.1 million or 25 percent) from 2019 to 2020.  The loss in 2021 was essentially identical to 2020’s.   

The SEA’s finances include non-operating revenues that reduce the operating loss.  This money comes from various entities, mostly to pay for the debt service obligations. The Regional Asset District (RAD); Allegheny County; the commonwealth; the federal government and the Rivers Casino are among these.  Total non-operating revenues, on net, after accounting for interest and development expenses, rose from $7.8 million in 2019 to $28.2 million in 2020 ($20.4 million or 261 percent).

Much of this growth was attributed to money received from the state and federal government for the I-579 “cap” project.  Last year, the SEA also received a $10 million grant from the Stadium Authority—the entity that was supposed to dissolve when Three Rivers Stadium was demolished (see Policy Brief Vol. 17, No. 33)—to help with operations.  Allegheny County gave the SEA $1 million from its CARES Act allocation and granted $20 million from its American Rescue Plan allocation. 

The SEA’s net position at the beginning of 2019 was $360.9 million and at the end of 2021 was $301.7 million ($59.2 million less or 16 percent lower).

Before COVID, the SEA sought to secure recurring sources of tax revenue to pay for its responsibilities at the sports facilities under current lease agreements and at the convention center, which it owns and oversees management (see Policy Brief Vol. 18, No. 34).  The SEA received a RAD grant of $800,000 in 2019, 2020 and 2022 and $760,000 in 2021.  Of the $2.3 million spent from 2019 through 2021, $1.8 million (78 percent) has been spent at the convention center and $0.5 million (22 percent) at Heinz Field.

The General Assembly repurposed a $1.7 million annual allocation the SEA was receiving for the convention center’s operating deficit to the creation of the SEA Sports Commission (see Policy Brief Vol. 18, No.16).  This past November when the SEA board set-up its procedures for distributing financial awards, a restricted account to hold 25 percent of the revenue for capital repairs at the four venues was approved. 

If a proposed special assessment on hotel stays becomes law (see Policy Brief Vol. 22, No. 7), there is language in the bill that would set aside an unspecified percentage of revenue to be directed to the SEA for facility maintenance.

Rather than cobbling together more sources of taxpayer dollars, the professional sports teams should be responsible for more expenses related to the structures they benefit greatly from and the promises of the convention center being an economic engine need to be realized. 

In a news article, the chair of the SEA board stated in regards to the Pirates’ and Steelers’ leases that “I think the lease as a whole, you almost have to blow it up and start over again to make it as fair as possible to each [side].” 

That’s something for present and future SEA board appointees, who are appointed by elected officials of the City of Pittsburgh and Allegheny County, to consider as the end date for leases of two of the facilities are less than a decade away.

Pirates Threaten Legal Action

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Summary:  The Pittsburgh Pirates baseball club is threatening legal action over the Sports and Exhibition Authority’s reluctance to grant the team’s request for ballpark repairs and upgrades.  The dispute centers around a video scoreboard which the Authority claims is an improvement and falls outside the stipulations of the lease.  Given that the taxpayers have largely paid for the stadium from which the team earns millions, the team should fund desired “improvements”.

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While spring training is a ways off yet, the Pittsburgh Pirates baseball club is playing hardball with the City-County Sports and Exhibition Authority (SEA) over repairs at PNC Park.  The Pirates are asking the SEA to pay for capital upgrades to the ballpark which opened in 2001.  The requested upgrades include repairs to seats, new carpeting for suites, painting, and new field lighting.  In response, the SEA says it needs to explore whether or not it’s obligated to do so under its lease.  Legal action is being threatened by the team.

Presumably the lease details will determine what happens. PNC Park was built for $216 million and funded mostly with taxpayer money.  Required annual base rent paid by the Pirates for leasing the Park is set at $100,000 per year until 2030.  The team is also required to pay “excess gate” rent as well as “excess concession revenue”, each based on a percentage of benchmarks achieved by the team or its concessionaires.

The lease also stipulates that the team consents to adding a ticket surcharge to the price of admission.  Revenue from the ticket surcharge is divided such that the Pirates retain the first $1.5 million in each year with the next $375,000 going to the SEA (adjusted for cost of living).  This amount is to be deposited into a “capital reserve fund”.  The next $250,000 of the ticket surcharge revenue is to be paid to the SEA as additional rent and “… may be used by the Authority in such manner as it deems appropriate (page 15).”  Any remaining ticket surcharge revenue is retained by the team.

According to the SEA’s most recent audited financial statement (note 17); “In fiscal year 2015, the Authority recognized $100,000 in Base Rent, $750,969 in ticket surcharges, and $0 for Excess Gate and/or Concession Revenues.”  So for a rental payment of just over $850,000 per year, the team plays in a $200 million, mostly taxpayer financed stadium—an extraordinarily sweet deal.  But the deal is made even more generous by the fact that at least $375,000 of this money is placed into the capital reserve fund which is to be spent on the ballpark.  Thus the SEA actually only realizes about $450,000 in rent—certainly nowhere near the rent a $200 million facility would bring in a market transaction.

The capital reserve fund is the source of contention between the SEA and the team.

According to the lease (section 10.3.1) the SEA established a capital reserve fund and had to place an initial $3 million into the fund and then is responsible for placing $650,000 into the fund each year for the duration of the lease.  As of December 31, 2015, the fund held $5.8 million down from $9.1 million at end of December 2014. SEA claims there is currently only $3.3 million in the fund (end of December 2016).  The lease further specifies that if not enough money is in the fund for use, the SEA is required to find the funds for any work that must be done.

These funds are not to be used for ordinary repairs and maintenance, only for capital improvements and repairs.  Capital repairs are defined as extraordinary repairs and replacements that typically have an economic life of greater than seven years or that are needed to maintain the structural integrity of the park.  The lease lists quite a few repairs that are covered by the fund.

For example, the lease does allow for replacement of ballpark seats and “major repairs, replacement, or upgrades of components to the field lighting.”  It also stipulates that painting and carpeting of non-public areas is covered as long as it is done at a minimum every five and seven years respectively.

According to the news reports, the Pirates are seeking repairs to seats, new carpeting for suites, including their exclusive club area, painting, and new field lighting.  Furthermore they are asking to upgrade a secondary scoreboard (to show out-of-town scores) and other video boards.

The biggest disagreement seems to stem from the request over the scoreboard and video boards.  The lease notes that “upgrades to components of the scoreboard more frequently than seven years” does not constitute a capital repair. News reports state the SEA views the Pirates’ request to upgrade the scoreboard as an “improvement” and not a “repair” since it would involve using new technology and not a simple replacement of parts.  An improvement would not be covered by the lease.  The team disagrees.

The SEA claims that there is currently not enough money in the capital reserve fund to pay for the scoreboard improvements, but plenty to cover the Authority’s responsibilities. There are references in news reports to a letter sent from the team president to the head of the SEA in which the team offers to put money into the capital reserve fund as long as the SEA matches those funds with money from a new revenue source.  The head of the SEA is quoted as saying “…our position has always been that the revenue should be generated by operation of the facility and not by the taxpayers generally.”

This is the fundamental point in the argument.  The SEA, as owner, has no source of funds to pay for “improvements” beyond what it can collect from the ballpark. And, the money they currently receive from the team is barely adequate to cover the normal owner expenses of repairs and maintenance, insurance, administration, etc. Where does the team president think the SEA will find more funding?  If they borrow the funds, where will the money come from to repay the loan?  They cannot levy taxes.  The ballpark itself would have to provide the dollars.

Or the SEA could ask the City, the County, or the Commonwealth for the funds.  How will that request be received?  Not very well in the current fiscal environment. That would mean still more tax dollars for the Pirates. There is a political limit, even in Pittsburgh, to the welfare that will be made available for rich owners and players. Finally, the SEA could turn to foundations and ask for grants.  But that seems less viable as a source of funding than the governments.

In short, what is wrong with the team asking luxury suite lessees, game attendees and concessionaires to put in a small percentage more than they are currently paying to fund “improvements” that will be enjoyed by the people at the game? What a novel concept. Tickets and suite leases are already heavily subsidized by taxpayers through the underwriting of the ballpark construction and the fact that there are no property taxes being paid by the facility. Those two factors produce many millions of dollars per year in direct subsidy to the team.

It is bad enough that taxpayers are on the hook for the construction of the ballpark. They should not be fleeced to provide the team with extras like secondary scoreboards.  If rents were close to a more normal market rate for a property of the ballpark’s value, the owner would be able to fund the repair budget and needed improvements easily.

The team makes many tens of millions from PNC Park through ticket sales, concessions, parking, naming rights, advertising,  radio and TV, etc.  If the team wants extras, they should pay for them and stop asking taxpayers for even more assistance.

Report on Tax Revenue from SEA and Stadium Authority Venues Needs Clarification

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In mid-December of last year, the City Controller released results of a study showing that over a five-year period, 2009 through 2013 inclusive, properties (and entities using those properties) owned by the Sports and Exhibition Authority and the Stadium Authority had paid $107 million in taxes and fees to the City of Pittsburgh.  The study was done at the behest of a 2014 City Council resolution. The revenue figure is based on the Controller’s access to the individual tax reports of the various entities. Data was assembled for the amusement tax, earned income tax, business payroll expense tax, facility usage fee, local services tax, and parking tax on “…entities occupying the facilities and land owned by the Sports and Exhibition Authority and the Stadium Authority of the City of Pittsburgh” as specified in the resolution.

 

The study simply totaled up all the revenue in each category paid by all the entities involved for each of the five years and then added the five yearly six revenue sources to come up with the $107 million figure. The report also includes the statement that very few Pittsburgh tax dollars were used in the construction of the new sports venues, the convention center and the parking and other infrastructure associated with these facilities. And with that, the answer to Council’s request was complete. Or was it?

 

For several reasons these findings are misleading.  In the first place it is dismissive to brag that few local resources were needed for these projects. And it is somewhat insulting to say what a wonderful payoff these facilities have produced for Pittsburgh and have no concern about whether the folks who put up most of the money (PA and U.S. taxpayers) are receiving any benefits. After all, over a billion dollars were spent on Heinz Field, PNC Park, the new convention center and related infrastructure. Another $375 million was spent on the new Penguins arena.

 

Of that $1.45 billion, little was provided explicitly by the City, although local authorities did put up about $50 million while local foundations contributed $16 million.  Other private sources, mostly team contributions, added $330 million. All told, taxpayer backed bonds and grants from the Federal and state governments covered a billion dollars of the total outlays. One could also reasonably argue that the $517 million spent on the North Shore Connector would never have happened if the new stadiums had not been built.  Of that number 40 percent was state and local dollars and redirected Federal money away from needed highway projects.

 

That taxpayers, most of whom do not live in the City, have paid for the facilities is an important point of criticism but there is a deeper problem with the study. It should be obvious that the revenue produced by each of the taxes examined in the report must be placed in context if one wants to get an idea of how much the new facilities have actually enhanced revenue.  Bear in mind that amusement taxes, earned income taxes, parking taxes, and an earlier version of the local services tax were being collected at the sports venues, parking lots and previous convention center before the current facilities were built. There was no business payroll tax but there were mercantile and business privilege taxes that the payroll tax replaced. There was no facility usage fee until 2005, well after the new venues were built.

 

A better, more appropriate question than the one the Controller was asked by Council to investigate is; “how much did the new facilities add to the revenues of the various taxes compared to what was being collected before? And more pointedly, “what kind of return on all that investment are taxpayers getting?”

 

So, what happens if we look at estimates of taxes that were being paid prior to the new stadiums and compare them to the recent figures?   We will use the 2013 figures since they give the new facilities the highest numbers and the 2000 figures as the last year before the opening of the new stadiums, and well before the new convention center and the new hockey arena. The new sports complexes, the convention center and SEA and Stadium Authority parking facilities produced total revenue from the taxes listed above in the amount of $24,740,000 in 2013.

 

The largest component of the $24.7 million was amusement tax receipts at $10,967,000, 80 percent of the entire amusement tax collected by the City that year.  Amusement tax revenue is almost half the total tax revenue coming from the SEA and Stadium Authority venues. Meanwhile, in 2000, the amusement tax generated $8,256,000 (the tax rate of 5 percent of admission price has not changed over the period). If we assume 80 percent of that came from SEA and the Stadium Authority owned entities that would put amusement tax revenue in 2000 at $6,604,000 from those facilities. Now we know there was inflation over the period, so adjusting for the 30 percent increase in the CPI between 2000 and 2013 makes the 2000 revenue worth $8,585,000 in 2013 dollars. Thus for 2013 compared to 2000, the real net effect of the new facilities on amusement taxes stands at $2,382,000, a far cry from the nearly $11,000,000 touted in the study.

 

The next highest tax revenue in 2013 comes from the parking tax with $7,117,000 attributed to the SEA and Stadium Authority owned parking facilities, 14 percent of the City’s $52,000,000 total parking tax revenue.  The study says this is the revenue collected from the 23 garages and lots owned by the two authorities. There is no indication in the report that the revenue is solely collected during sporting events, i.e., it includes all parking taxes collected at those facilities.

 

In 2000, the total parking tax collected was $30,960,000. Since the parking tax rate was 37.5 percent in 2013 and only 31 percent in 2000, the 2000 revenue when adjusted to reflect the higher tax rate would have been $37,452,000. Assuming 12 percent of this was from SEA and Stadium lots, their 2000 share of total would have been $4,484,000, and then adjusted for a conservatively estimated parking price rise of 20 percent between 2000 and 2013, the 2000 collection would be $5,392,000 in 2013 dollars. Thus, the real net increase in parking tax collections from these facilities over what they would have been in the pre-new stadium construction period is actually only $1,725,000.

 

Granted the assumptions of 12 percent for the share of total parking taxes paid by SEA and Stadium Authority facilities and 20 percent increase to the pretax parking price might be off a little from the actuals, either high or low, but the point is made. The net impact of the Regional Renaissance plan construction on parking taxes, just as it was on amusement taxes, is much smaller than the numbers included in the study.

 

Because the amounts received from the earned income tax and the local service tax are so small, $509,000 and $171,000 respectively, the differences with the adjusted 2000 numbers reduce their net impact compared to the pre-construction numbers to less than $120,000 each.

 

The business payroll expense tax presents a problem for comparison purposes because it did not exist in 2000. The tax was phased in after 2004 to replace the mercantile tax and business privilege tax.  In 2013, the tax brought in $54,511,000 of which only $1,844,000 is attributable to the sports facilities, convention center and SEA and Stadium Authority parking. This implies taxable payroll expense of $354 million, and for the City, total payrolls of about $10.5 billion.

 

In 2000, total mercantile and business privilege taxes stood at $51,053,000. When the two taxes were completely phased out in 2011, the business payroll tax had reached $50,641,000. There were a few years between 2006 and 2010 when the combined payroll tax and privilege tax produced about $55,000,000. However, there is no way to estimate what the properties owned by the SEA and Stadium Authority were paying in the two nuisance taxes without a large number of assumptions that would make a specific result questionable. Nevertheless, it is undoubtedly the case that if the payroll tax had been in place in the pre-construction era, the net impact of the $1.4 billion building spree on payroll tax revenue would be less than the $1,844,000 figure in the Controller’s report.

 

Likewise, the facility usage fee came into existence well after the new construction and in 2013 produced $4.2 million.  Thus, there can be no direct or indirect comparisons with the preconstruction period. So, we have to give the report the $4 million since it would be unfeasible to estimate what the usage fee revenue would have been if it had been in place in 2000.

 

All told then rather than the $24.7 million impact on revenues in 2013, the net impact compared to the 2000 tax revenues is more on the order of $10 million and almost half of that is attributable to a fee that did not exist prior to 2005.

 

And then there are the costs not accounted for by the study. For one, $55 million worth of property was taken off the tax rolls in the late 1990s to build the North Shore projects. Assuming the value of that real estate would have increased along with the average value of commercial property in the City, these properties would now be assessed at $123 million. That means the City and school district are giving up over $2 million combined in real estate taxes annually.  The lost real estate tax effect for the properties acquired for the Penguins arena was not calculated but it is likely to be significant as well.

 

All this is by way of pointing out that it is not sound policy to focus exclusively on revenue being received from these facilities without taking into account the revenue that existed before and any additional costs incurred in the form of foregone tax revenue.  That is if one wants to know what the actual tax revenue impact of the construction has been.

Time to Shine a Legislative Light on the Sports and Exhibition Authority

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On November 5th the Court of Common Pleas of Allegheny County ruled that the Allegheny County Controller does not have the power to audit four Authorities related to Allegheny County:  the Allegheny County Airport Authority, the Allegheny County Sanitary Authority (ALCOSAN), The Sports and Exhibition Authority (SEA), and the Port Authority of Allegheny County (PAT).  The Court’s opinion is that these Authorities were created by state law and are therefore not subject to review by the Controller.

 

As we wrote earlier this year (Policy Brief Volume 15, Number 4), regarding the Controller’s request to audit the Sports and Exhibition Authority (SEA), “the law seems clear.  As long as the SEA annually delivers to the City and County an independent audit…then the Controller does not have standing to conduct an audit.”  The Court in its ruling also extended this assessment to the Allegheny County Airport Authority, ALCOSAN, and PAT.

 

The crux of the Controller’s argument was that the office has the right to perform an audit on any entity receiving public money (from the County) as granted to the Controller under the Second Class County Code.  The Court’s opinion noted that the Code grants the Controller “the general supervision and control of the fiscal affairs of the county and of the accounts of all officers or other persons, who shall collect, receive or distribute the public moneys of the county, or who shall be charged with the management or custody thereof. 16 P.S. § 4901.”  Of course the Controller wanted not only to perform a financial audit, but a performance audit as well and believed the Code also allows that.  As was outlined in the opinion, the Controller argued that the office “may at any time require from any of them, in writing, an account of all moneys or property which may have come under their control.”  She was particularly interested in how the SEA distributes tickets to events at its facilities.

 

Of course counsel for the Authorities disagreed, claiming that the Authorities were granted operating power through state legislation wherein no specific provision was made for permitting the County Controller to perform audits. The Airport Authority and ALCOSAN were created through the Municipal Authorities Act (1945) which gave governmental auditing power to the Attorney General.  The Attorney General was also granted auditing authority for the SEA which was created under Act 85 of 2000, “Second Class County Code—Omnibus Amendments”.  PAT was created under the Second Class Port Authority Act which provided the Auditor General auditing powers.  Of course, all Authorities must by law have financial audits carried out by the qualified firm of their choosing.

 

As we wrote in the aforementioned Brief, “the office of the Attorney General is the state’s top law enforcement officer, not an auditor. On its webpage the Attorney General’s office lists as its responsibilities and duties items such as defending the Commonwealth and its agencies in a court of law but, to no one’s surprise, auditing authorities is not one of them.”  Was the provision in the laws authorizing these three Authorities (excluding PAT which is periodically audited by the Auditor General) granting auditing power to the Attorney General rather than the Auditor General—which presumably should be able to audit any agency receiving state funds— done deliberately to limit governmental scrutiny or was it merely a typographical error?  Since it happened in two different Acts, the latter possibility seems very unlikely. Indeed, it would be interesting to learn whether the Attorney General’s office ever performed an audit of an authority.

 

The Court’s opinion is that the Legislature specified the Attorney General to have the primary auditing power and the best the Controller can do is review any fiscal audits that are performed for the Authorities.  Quoting the court ruling:  “That the legislature gave the controller only a back-up or provisional right to audit and gave the Attorney General the principal right to audit leads this court to the conclusion that the Controller cannot conduct an audit outside of the Municipalities Authority Act…”   That quote was in reference to the Airport Authority, but similar conclusions were made regarding ALCOSAN, PAT, and the SEA.  The ruling notes that “the general powers granted to the controller by the Second Class County Code cannot override the specific auditing structure the Legislature has created. 1Pa C.S.A.§ 1933.”

 

Of course that is the strict legal interpretation, which is of course correct. The Legislature created these Authorities and gave the oversight power to state level officials, the Attorney and Auditor Generals.  They did not include local oversight.  However there is an easy fix:  the Legislature can amend these Acts to give auditing power to the Auditor General, the county controller, or both, especially in the cases where the power is currently limited to the Attorney General, who would probably never become involved unless possible criminal activity was taking place. Indeed, involvement of the Attorney General would almost certainly be perceived to be an investigation.

 

First and foremost, transparency would be the main reason for allowing this move.  The crux of this lawsuit was the Controller’s desire to examine the awarding of tickets by the SEA.  Were the recipients politically connected and were they given as favors or rewarding past support? Was there any quid pro quo, whether explicit or not? The public has a right to know.

 

In the opinion, one judge stated in regard to the Acts, “the Legislature has created several layers of safeguards to assure the public that government funds and assets are being used wisely.”  But the ultimate “safeguard” was placed in the hands of the Attorney General, not exactly the greatest accounting and auditing expert. And as noted above, any audit by an Attorney General would likely be viewed as a signal that there were suspicions of questionable behavior.

 

In short, the current law regarding the creation of the SEA and the other Authorities needs to be amended to include granting auditing powers to the Auditor General and the local Controller.  Simple modifications in one sentence would be all that is required.  Why should there be any hesitation to offer the requisite amendment language and bring it to a vote?

Time to Rewrite Law Governing SEA Auditing

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Recently the Allegheny County Controller revealed that she wishes to perform an audit on the City/County owned Sports and Exhibition Authority (SEA).  As the County’s official fiscal watchdog she wants to review its practice of distributing tickets to sporting and entertainment events held at the Authority’s venues—shining a light on a practice that otherwise remains in the shadows.  However, the SEA rebuffed her attempt, noting that they are a state created agency falling outside the County and City Controllers’ purview.  If neither the County nor City Controller cannot perform the audit then who can?

 

The law creating the SEA is Act 85 of 2000, “Second Class County Code—Omnibus Amendments”, Article XXV-A “Sports and Exhibition Authority”.  Under section 2509-A, titled Moneys of the Authority, the process of overseeing the finances is spelled out:  Every Authority shall have at least an annual examination of its books, accounts and records by a certified public accountant. A copy of such audit shall be delivered to the county or city creating the Authority. A concise financial statement shall be published annually at least once in a newspaper of general circulation in the county or city where the principal office of the Authority is located. If such publication is not made by the Authority, the county or city shall publish such statement at the expense of the Authority. If the Authority fails to make such an audit, then the controller, auditors or accountant designated by the county or city is hereby authorized and empowered from time to time to examine, at the expense of the Authority, the accounts and books of the Authority, including its receipts, disbursements, contracts, leases, sinking funds, investments and any other matters relating to its finances, operation and affairs. The Attorney General shall have the right to examine the books, accounts and records of any Authority.

 

The law seems clear.  As long as the SEA annually delivers to the City and County an independent audit from a qualified certified public accountant, then the Controller does not have standing to conduct an audit.  Currently on its website the SEA has available audited financial statements from 2007 to 2013.  It is not quite apparent that the SEA is adhering to the law above by publishing these reports “annually at least once in a newspaper of general circulation”.  The website doesn’t even list press releases that would announce when an audit has been completed.  Moreover these statements cover just the finances (“the books, accounts, and records” mentioned above) of the SEA.  As noted in the Auditor’s report in the most recent statement, “Our responsibility is to express an opinion on these financial statements based on our audits…standards require that we plan and perform audits to obtain reasonable assurance about whether the financial statements are free from material misstatement.”  They do not cover “operation and affairs” as perhaps desired by the Controller in her effort to look into the disbursements of tickets to events.

 

The SEA is a state authorized and created entity formed on behalf of the City and County and the   state has dictated who will perform audits and under what circumstances. But as mentioned above, the law gives the responsibility to the Authority first, and to the City and County Controllers if the Authority does not have an annual audit done by a certified accountant. The law permits the Attorney General to audit presumably any time he/she feels it is warranted. Interestingly, the Auditor General is not given legal power to conduct audits of the SEA as one would expect, that office being equipped and having the trained personnel to do the job properly.  The office of the Attorney General is the state’s top law enforcement officer, not an auditor. On its webpage the Attorney General’s office lists as its responsibilities and duties items such as defending the Commonwealth and its agencies in a court of law but, to no one’s surprise, auditing authorities is not one of them.  So was the provision in Act 85 that the Attorney General would have the power to audit the SEA rather than the Auditor General—which presumably should be able to audit any agency receiving state funds— done deliberately to limit governmental scrutiny of the SEA or was it merely a typographical error?

 

The only people who know for sure are the Legislators who wrote and/or sponsored the language and they have not stepped forward to offer an explanation.  But there is a simple fix.  All it would take is for someone on the appropriate committee to offer an amendment to change the Act 85 wording to read “Auditor General” instead of “Attorney General”.  To really repair the language the amendment should go further and give the County Controller and/or the City Controller, since this is a joint authority, the power to audit the SEA every three years or on an as needed basis. Surely this is not the type of change that would counter much resistance if the SEA has nothing to hide.  At least one attempt to expand the powers of the City Controller had been attempted in the 2003-04 session of the Legislature when a bill was introduced (HB2007) to give the City Controller the ability to audit the SEA.  The Governor at the time vetoed the bill.

 

In the event this proves to be too difficult, perhaps the Attorney General ought to designate someone with auditing experience, such as the Auditor General’s office or even the County Controller, to perform the audit on behalf of the Attorney General’s office.  Not the best solution, but a possibility.

 

This is a matter that clearly cries out for remedial action. The SEA, as a public authority, ought to be subjected occasionally to the bright light of the Controller’s office. The awarding of tickets to sporting and entertainment events to those who are politically connected can be seen as buying favors or rewarding past support.  The public has a right to know whether this entity is operating completely above board.  It will be interesting to see who opposes amending the Act 85 language as recommended above.

Steelers’ Ludicrous Rationale for Heinz Field Subsidy

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A clearer example of hubris and sense of entitlement could not be found than the Steelers’ justification for having the public underwrite the cost of expansion and upgrades at Heinz Field.

"This state- of- the- art expansion assures that Heinz Field would remain the first-class facility our fans expect and deserve." Is this what we have come to? Fans deserve to have the public subsidize a stadium that is already a tax exempt structure and is occupied by a team that has been massively enriched by the public’s underwriting most of the cost of construction?

For goodness sake, why should fans expect or deserve a first class facility at the expense of the public? When is enough enough? And how is adding seating capacity creating a first class facility for fans? Will they be really good seats for viewing games? Or will they simply add to Steelers’ revenue?

This is a prime example of what is wrong with today’s culture and perforce our economy. The notion that fans of professional sports teams deserve a "first class" facility in which to watch games and the public should subsidize that facility is simply outrageous. One can only marvel that the world has come to this.

The Steelers’ have been enriched enormously by the taxpayer investment in Heinz Field and the rights they received regarding development on the North Shore. The stadium pays no property tax and the Steelers’ rent payment is de minimus considering the value of the stadium.

Why is there so little gratitude on the part of the Steelers’? Is there no limit to their willingness to keep asking taxpayers for more money? If the Steelers’ want to expand the stadium, let the expansion pay for itself.

Or how about this. The Sports and Exhibition Authority will agree to pay for the expansion if the Steelers’ sign an ironclad agreement to pay sufficient additional rent necessary to cover the borrowing costs needed to build it. What could be more fair? But in the world of Steelerdom fair is apparently what they say it is-no more, no less.

Convention Center and Prevailing Wage

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One of the oft repeated assertions of unions in their advocacy of perpetuating the market defying law known as the Prevailing Wage act has been that paying union wages means much higher quality workmanship. That argument has been debunked by a thorough study from the Ohio legislature that examined prevailing wage projects and market wage projects. Overwhelmingly, respondents indicated they detected no quality differences in workmanship.

The new Convention Center in Pittsburgh, a prevailing wage project, has had a number of incidents related to work quality, specifically roof leaks. So bad were the leaks that the Sports and Exhibition Authority has had to sue installers to recover extensive repair costs.

The point is that to get the Center built, workers earned wages and benefits that were as much 30 to 40 percent above market wages. Those costs added tens of millions of dollars to the cost of the overall project. Costs Pennsylvania and local taxpayers were forced to pay.

This madness needs to be stopped. It will require legislative courage, but it must be done. Pennsylvania taxpayers and non-union construction workers deserve better.

Pittsburgh Casino’s Rough Beginning Continues

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In its sixth full week (Sept 14 to Sept 20) of operations, the Rivers Casino in Pittsburgh turned in its worst week to date with gross terminal revenue (casino’s take from wagers) falling to $3.584 million. This continues a pattern of decline since the grand opening week when the casino had $5.3 million in terminal revenue.

Bear in mind that the owners’ projection for their first year of operation showed gross terminal revenue of $420 million. The latest week’s take, if continued for the next twelve months, would bring in only $186 million. Undoubtedly, at this level, the casino would have a lot of trouble paying all its bills, starting with the $108 million in gaming taxes it is required to pay before any other expenses are met.

The bad news for the casino is that the fall season is the weakest part of the year for wagering. So the next few months hold little promise of a substantial turnaround in the casino’s revenues.

If it is any solace for the Pittsburgh casino, the other casinos across the state face the same slowdown in gambling activity. However, the owners cannot be very happy about the fact that their latest weekly decline at 14.4 percent was nearly double the drop in play at the nine casinos currently operating in Pennsylvania.

And the Rivers Casino still owes $7.5 million to the Sports and Exhibition Authority for Penguins Arena bonds and at some point will be hit with a big property tax bill when the County gets around to assessing the property. All told, this cannot be what the owners and managers had envisioned or hoped to see.