Major Changes in the Makeup of the Port Authority Board

The Governor has signed legislation that will dramatically alter the board of directors of the Port Authority (PAT).  What was a nine member body with members serving staggered five year terms and appointed solely by the Allegheny County Chief Executive will become an eleven member body with members eventually serving staggered four year terms with appointment power shared by six individuals.

 

 

The idea behind what is now Act 73 of 2013 began germinating a few years ago with recurring financial problems at PAT.  The argument was made that since the state put in a significant portion of PAT’s budget there ought to be state level appointees on the board.  The Auditor General’s 2007 performance audit of PAT called attention to our work (see Policy Brief Volume 7, Number 9) and that of the 2006 Governor’s Transportation Commission’s thoughts on the matter, and pointed out that “taxpayers from across the state have been providing most of the funds to operate [PAT] for many years…the governing structure of [PAT] must be changed to include permanent representation by the state on the behalf of state taxpayers”.  The Authority did not challenge the Auditor General’s argument in its response to the audit, noting that state law determines who serves on the board. 

 

Fast forward six years to this year’s legislative session.  A bill changing the PAT board was introduced in the Senate in early June.  Though the Act went through many changes, these items remained the same from the first proposal:

 

  • A new board would have eleven members.
  • The Governor and the legislative leaders of both chambers would make appointments.
  • Board members would be term limited and would have to possess a background in finance, transportation, or economic development.
  • PENNDOT would be charged with undertaking a study on what benefits consolidation and privatization can have on revenues and expenses.

 

Most of the changes dealt with how to apportion local appointments.  In earlier versions of the bill the County Executive would have had either one or four appointments to the new board.  The Mayor of Pittsburgh, County Council at Large members, and County Council members of the opposite political affiliation of the Executive would have had appointments but those were eliminated as amendments were adopted.  The final version of the Act gives the Executive six appointments in total. Here’s how those appointments will be made: four will be chosen freely by the Executive, and two will be drawn from a list compiled by four community-based organizations and confirmed by County Council.  There is no requirement that a member of County Council serve on the board as the law currently requires, but a member could certainly be appointed. 

 

The terms of current board members end in 60 days, and the law permits any of those members to be reappointed.  Once the new board is seated, the terms will be staggered so that expirations occur at various times.  Board members cannot serve more than three consecutive terms, including the initial appointment.  The table below shows when appointments would be made over the next decade.

 

Appointing Official

Years Making Appointments

Governor

2013, 2017, 2021

Senate Pro Tem and Senate Minority Leader

2013, 2017, 2021

House Speaker and House Minority Leader

2013, 2016, 2020

County Executive-2 free nominations

2013, 2015, 2019

County Executive-2 free nominations

2013, 2016, 2020

County Executive-2 nominations drawn from list and confirmed

by County Council

2013, 2015, 2019

 

Assuming all of the initial 2013 appointments serve for the maximum three terms, the appointees of the Governor and the Senate leaders will have served twelve years, House leadership appointees and two Executive appointees would have served eleven years, and four Executive appointees would have served ten years.

 

A quorum for meetings is six members, but it will require seven members to “take action on behalf of the Authority”.  That means it could require one state level appointee to join with the six County appointees on a decision, or, conversely, two County appointees to join with the state appointees to get business moving forward.   Obviously the point of this requirement is to ensure that the County-level appointees can’t do anything unilaterally without at least one state appointee consenting.

 

The state will exercise significant power on the board in two other ways. First, for adopting by-laws, appointing a CEO, authorizing bonds, borrowing, leases, and contracts in excess of $5 million the two board members appointed by the General Assembly who are not of the same political affiliation of the County Executive can move to table this business to stop it and/or second it to move it forward.  Under current partisan arrangements, that would mean the appointees of the Senate Pro Tem and the House Speaker would get important veto power over these areas. 

 

Second, the Governor’s appointment is the only one that does not have to be a resident of Allegheny County, only a resident of the Commonwealth.  This appointee might come from another part of the region or another part of the state and would provide a broader perspective should indeed the Governor not select someone residing in Allegheny County.

 

A statewide say on PAT business, board members with qualifications, and a study to determine what exactly privatization and consolidation can bring: is a new day dawning for PAT? While not as draconian as it might have been, the just enacted law will certainly offer opportunities to bring professionalism and business acumen to oversight of the Authority.

The Senator and the County Executive

In a dramatic announcement on March 8th, the President Pro Tem of the Senate revealed his intention to introduce legislation that will restructure the Port Authority of Allegheny County (PAT).  It is important to bear in mind that PAT was created decades ago by state legislation, and as such is a creature of the state and therefore can be restructured by legislation. 

 

 

 

The Senator’s announcement contained a harsh condemnation of PAT as having been a significant strain on state and local taxpayers for “far too long and it is time the legislature address the issue.”  He further singled out the “fiasco surrounding the dismissal of the CEO” as making it clear the County Executive is not moving PAT in the right direction.

 

 

The Senator proposes to change completely the way PAT’s governing board is appointed. Instead of all nine members being appointed by the County Executive, the Governor, Legislative Leaders, Allegheny County Council and the Mayor of Pittsburgh would have appointments. The County Executive would have only one appointee to the restructured board.  The Senator stressed that with the increasing funding coming from the state, it is important for state officials to have a voice on the board.  The Allegheny Institute wrote of the relationship of state funding and state appointees to transit agencies in light of efforts to reform the PAT board in 2007 (see Policy Brief Volume 7, Number 9). 

 

 

Further, the Senator stated that, “Moving forward all options need to be on the table when discussing options to streamline operations and cut costs…”  To that end, the Senator proposes creating a commission to examine remedies including regionalization, consolidation and privatization of services.

 

The Senator’s proposed legislation, if enacted, would certainly bring a new approach and possibly major improvements in PAT management and operations. However, major and probably uncorrectable problems will remain if the Senator’s reform legislation stops with the proposals contained in the March 8 announcement.  PAT’s tremendous legacy costs remain and will continue.  And the principal underlying cause of the Authority’s financial woes is not addressed by the reform proposal-namely, the right of the transit workers to strike. Unless and until that right is eliminated, there can be no permanent fix of PAT’s problems.  Every step forward can be reversed in contract negotiations under the threat of a strike.

 

 

To be sure, a substantial outsourcing program that reduces the share of transit service under the control of the large transit union will go a long way toward curbing the impact of strike threats but will not eliminate it.

 

 

This is not to gainsay the importance of a change in board appointment powers.  With the obvious arbitrary power that can be wielded by on official as demonstrated recently, a state created organization receiving massive amounts of state taxpayer funding to maintain operations simply must be more answerable to state taxpayers.    

 

 

There will be push back by the County Executive and his friends in the Legislature.  This will be the time for the business community that has so often sided with PAT in pushing the Legislature and Governor for more state money to support the reforms being recommended by the Senator. If these reforms and the others that are needed are not enacted, the day will surely come when legislators from other parts of Pennsylvania will simply refuse to approve the money requested by PAT and its friends.  Indeed, we might be there already. 

 

 

Important changes aimed at restructuring PAT in a manner that will improve efficiencies and lower costs will not come quickly or easily but they should be pursued vigorously.  For one thing movement toward regionalization cannot proceed in a meaningful way until legacy costs, compensation costs and work rules are lowered dramatically at PAT. Nor can outsourcing occur as long as the union retains the ability to block such efforts. 

 

 

While optimism must be tempered with realism, it is nonetheless a hopeful sign that the President Pro Tem of the Senate has taken such a keen interest in correcting some of the ills that plague the Port Authority.

Bluhm on the Hook but Squirming: Taxpayers May Get Tab

With less than a month until the Rivers Casino opens in Pittsburgh the slots parlor is facing a $7.5 million payment due this October for its share of the hockey arena debt service. Predictably, casino owner Neil Bluhm is balking at making his first payment so quickly. Instead he insists that his first installment is not due until 2010 at the earliest and possibly not until 2012. Will this be settled amicably or through the courts?

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