Sugary Nonsense

Now comes Pittsburgh Mayor Ravenstahl with plans to "consider" imposing a two cents per ounce tax on sugar sweetened soft drinks. What a non-starter. Two cents will boost the retail cost of a two liter bottle by about $2.00. Such an increase in price will drive sales down precipitously making the hoped for $26 million in new revenue a pipe dream.

The only real issue here is this: Who is advising the Mayor?

This certainly does not pass the smell test or the taste test. Now we can see where some of the stalwart supporters of the Mayor and Pittsburgh policies come down on this outlandish idea.

Hard to Feel Sympathy for PAT

light rail

Another year, another budget crisis.  The Port Authority’s (PAT) budget projection for 2010-2011 calls for yet another funding shortfall; this time about $25 million.  PAT’s planning and development committee chair is saying that it will be the most challenging budget his board has faced.  If PAT is looking for sympathy, they shouldn’t look to the Allegheny Institute. 

 

 

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Parking, Pensions and Prices in Pittsburgh

Will parking rates skyrocket if the City successfully leases its publicly owned garages and lots over to a private operator? Several members of the Pittsburgh intelligentsia seem to be convinced this is the case. Officials of the Downtown Partnership feel that there will be an "impact on the affordability of parking Downtown" and this will make "the City even less attractive to developers, shoppers, businesses, etc." The Mayor even played prognosticator back last January when he first announced his idea to lease the garages in order to fund pensions: he noted that "I’ve got to protect pensioners. I’ve got to protect City taxpayers. And of course I’d like to protect parkers too, but not at the expense of City taxpayers and pensioners". And therein lies a clear indicator of the City’s real problem, i.e., shift blame and cost to someone who cannot vote you out of office.

The implication seems to be that putting parking in private hands with the market determining rates that operators are simply going to gouge people who park.

But the big problem in Pittsburgh is that there is a mismatch between the supply of parking and the demand for it. This mismatch existed as far back as 2002 when we studied Downtown parking. And what has been happening to parking demand and supply in recent years? The building of three new sports venues, convention center, residential, retail, cultural and new office buildings over the last decade or so has increased parking demand in Downtown and near-Downtown with relatively few new parking spaces being provided. This desire to have people come into the City has forced existing firms to ration the spaces to an increasing number of users by employing the basic market tool-pricing.

The other big problem is the parking tax, a tax that further jacks up the price of parking in the City. The true irony here is that the civic leaders who are now expressing concern about the price of parking in Downtown Pittsburgh did nothing to push City officials to lower the tax dramatically over the last few years, especially since the state legislation in 2004 that mandated a lowering of the parking tax from 50% to 37.5% merely spelled out the maximum rate the tax could be set.

The same City officials who realized the inelastic nature of parking demand and boosted the tax to 50 % in order to increase City revenues substantially now rail against operators who dare to be motivated by profits and a reasonable return on investment. How hypocritical. How typically Pittsburgh.

Some Ideas for Taxable Privileges in the ‘ BURGH

With the proposed tax on the privilege of attending college within the City limits on hold, Pittsburgh City Council is exploring other ways to increase tax revenues. They are currently floating a proposal to seek part of Allegheny County’s seven percent drink tax because most of it is collected in the City. Despite an earlier court ruling stating that the revenues from the County’s drink tax can only be used for mass transit (Port Authority), City Councilwoman Harris said that since most of the revenue is generated in the City "a portion of that money should come back to the city." Obviously the Councilwoman has no knowledge of Court rulings and has forgotten the fact that a large fraction of the beneficiaries of the Port Authority’s services are City residents. She might even consider that many Allegheny County residents who pay the tax live in areas not served by PAT.

Since desperate times call for desperate measures, we will assist Council and the Mayor and suggest other privileges they can tax. After all, if getting an education is a privilege surely there must be many other privileges that are taxable.

Take for instance consuming alcohol in the City. If the City cannot share in the drink tax money from the County, they could enact their own alcohol consumption privilege tax. This tax could not only cover those bar tabs, but also anyone who drinks alcohol in the City’s jurisdiction. This would effectively cover tailgaters who have been known to have the occasional beer before a game. City tax collectors could walk through the parking lots before games and collect money. Incidentally, this tax may also catch a large number of the college students who escaped the tuition tax.

Since the Mayor wants those who consume City services to pay their fair share, we suggest a fireworks privilege tax. The City has a handful of fireworks displays per year (mostly courtesy of the Pirates) that draw thousands of viewers each time that are consuming City services they should be paying for. This new tax could be collected by having tax agents roaming along Mt. Washington and Point State Park and in boats along the rivers collecting fees for this privilege. The same could be done for Light up Night and any number of parades.

This of course is only the beginning. There could be many other privileges that can be taxed. The City could easily exit its financially distressed status with some imaginative privilege taxation. Of course this will discourage folks from venturing into the City. But isn’t that the notion behind the City’s drive for new revenues-figuring out how to stop those Treasury draining outsiders from bankrupting the City?

Carving Out a Realistic Budget

Mayor Ravenstahl is quickly coming up against the end of the fiscal year and needs to solidify Pittsburgh’s budget for next year. The Intergovernmental Cooperation Authority (ICA) rejected the first budget draft because it relied on revenues from a tuition tax for which legislation had not yet been approved. The second draft reduces his revenue projections from $453.8 million to $446.5 million. And by some accounts this is carving out an aggressive budget. If he were truly being aggressive in putting together his budget, he would work on reducing expenditures rather than using stop-gap measures to shore up revenues.

Without the projected $16.2 million from students attending colleges and universities in the City, he has had to rely on a time-worn tradition of Pittsburgh mayors-one-time revenue sources to balance his spending. For example, the new budget relies on the sale of City owned buildings which are expected to bring in $500,000 as well as a transfer from the City’s debt escrow account of $4.1 million. The new budget also anticipates increases to other revenue streams such as the earned income tax, the deed transfer tax, and the payroll preparation tax. Considering that the recession has shown no signs of abating anytime soon in the Pittsburgh area, these estimated increases may be a bit of wishful thinking. Furthermore, these one-time revenue generators will not solve the City’s spending problems-especially the crippling legacy and debt costs.

If the Mayor truly wants to be aggressive in setting the budget, he needs to address the expenditure side. He can start with mandating that each department shave five percent from its budget. This across the board cut could save the City a substantial amount-$22 million on a $450 million budget. At a time when most companies and individuals have seen freezes or cuts to income, the City should do the same. The Mayor needs to tackle the high legacy costs by lobbying for defined contribution plans to replace the defined benefits plans currently in place. Any City property that is sold should have those proceeds used for debt reduction and should not be put into the general fund.

Throughout the years we have made many suggestions on how the City can improve its finances. If the Mayor wants to be aggressive he should start implementing some of these long-term solutions to finally get the City back on track.

Summing Up the G-20 Summit

Shortly after the conclusion of the September G-20 Summit, the head of VisitPittsburgh claimed the event’s economic benefits to the City and region reached $35 million.  As we pointed out in an earlier Policy Brief, that was a very dubious claim. Two months later data are available that call into serious question the notion the region enjoyed a $35 million boost in economic benefits.  We now have a reading on the RAD (regional asset district) tax revenue for September, which is a gauge of retail sales in Allegheny County, as well as figures for hotel occupancy tax revenue for September, which allow us to calculate the dollars spent on hotel rooms during the month.  By comparing the September 2009 data to September 2008 numbers and examining the pattern of year over year changes for 2009, it is possible to come to a reasonable conclusion about the G-20 meeting’s direct impact on spending. 

 

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College Students, Welcome to Taxburgh

Fresh off his election victory, the Mayor of Pittsburgh has decided to take charge in dealing with the fiscal mess that is the City. No he hasn’t decided to cut spending. Instead he has found a new segment of the population to tax–college students. His plan is to tax college and university tuition at one percent in an effort to shore up the City’s runaway legacy costs. This of course sits well with one local newspaper that has yet to meet a tax it didn’t like, who editorialized that this is only fair since these students have the audacity to come into the City and use services.

The Mayor’s plan draws from Act 511, the state law granting permission to municipalities the right to tax certain privileges. For years the City has been able to tax the privilege of doing business as well as the privilege of working and earning a paycheck within its borders. The Mayor is now suggesting that going to school in the City is a privilege and should be taxed. The difference is that the business privilege and occupation privilege taxes are based on financial earnings and not on one’s sheer presence. What’s next, taxing the privilege of being buried in one of the City’s cemeteries? After all they already tax the living, why not go after the dead next?

And does anyone really think that this new tax would be the end of it? Recall that just a few years ago the City was granted the right to tax payrolls of for-profit firms and organizations and increase the occupational privilege tax (now called the local services tax) from $10 to $52 annually. This and the admittance of the City into Act 47 financial distress program was to help right the City’s finances. Apparently it has not happened and the City needs more help.

And why has it not worked? The City has not gotten to the root of the problem-it’s spending. It would have been nice if the Mayor would have used this creativity to cut expenditures. Without reducing spending and legacy costs there will never be enough tax revenue. But that is too politically unpopular and difficult to do. It’s easier to go after college kids who don’t vote.

The argument that these students use services such as building inspection without paying for them is preposterous. If the students live in off-campus housing, that housing and the landlords who earn rental income from these properties are paying taxes to the City and have every right to use building inspection services to keep them safe. If that is a major concern, increase the fees charged for these inspections. And many of these universities have their own police departments that handle the vast majority of crimes these students commit.

The notion that the City has already tightened its belt is patently absurd. What concessions have theyextracted from the public sector unions? What services have been privatized or contracted out with the County? Neither the Act 47 team nor the oversight board has held the City’s feet to the fire.

City officials are afraid to raise taxes on residents because they vote. But these residents are the primary beneficiaries of services, and comprise the vast majority of the City’s workforce and as such are the ones reaping the rewards of these legacy costs. Why should they not pay for such largess? Instead they will look to tax the non-voting segment of the population and make them the scapegoats for the City’s problems. And they wonder why few of these graduates remain in the City after their studies conclude. It’s probably because they don’t want to live in Taxburgh.