Pennsylvania in California?

There has been a California in Pennsylvania for a long time, as confusing as that is for many who learn of it for the first time. Now we learn that one of Pennsylvania’s worst flaws is having a painful impact in San Francisco. To wit, the Bay area transit workers have gone out on strike, something that Pittsburghers and Philadelphians have seen and are threatened with every contract negotiation.

One is tempted to say, well, Californians, you voted for the people who gave transit unions the right to strike and you keep returning rabid union supporters to office. So when you are stuck in a massive traffic jam trying to get to work or when the old and sick cannot get to their doctor’s appointment or the poor cannot get to the grocery store, just remember who is responsible for this situation. Look in the mirror.

Perhaps a lesson will be learned but past electoral experience in California and Pennsylvania does not offer much hope that any lesson will be taken away from the strike caused hardships. Indeed, the transit strikers are supported by many of the most harshly affected on the grounds that the strikers are part of the downtrodden who are fighting for justice. And that is tied to their inability or unwillingness to see that well paid unionized public employees are a major cause of high taxes and inefficient service delivery.

It is a story being played out all over the country in non-right to work states.

Proposed House Transportation Amendment Serious About Costs

According to newspaper accounts, the proposed House amendment to the transportation funding legislation takes a very sensible and long overdue approach to difficult issues that have been time and time again kicked down the road. As presented earlier this week, the proposal takes on special interests and offers money saving solutions.



First, and of paramount importance, the proposed legislation would eliminate the prevailing wage requirement on some road projects. The monetary savings from elimination of the wage requirement would be substantial and, depending on the type of project, could amount to as much 20 percent of the current cost of the work.  Moreover, it frees up work to bidding by non-union contractors, a freedom enhancing move.


Second, the amendment would drop the $100 add on charge for traffic violations that would be used primarily for mass transit. This provision in the Senate bill has been roundly criticized as an inappropriate and problematic method to generate funding for transit. 


Third, the House proposal offers local communities tax options to increase the local share of transit funding.  Fare revenue, which provides about 25 percent of total funding, combined with the 15 percent local match requirement to receive state aid means the transit service area is providing far less than 50 percent of the funds needed to operate the mass transportation system. Raising an additional five percent locally seems more than fair. By putting any transit funding levy option on a referendum ballot, local voters will have a say in how much the local transit agency has to spend.


Fourth, the amendment calls for privatizing ten percent of bus service at the Port Authority of Allegheny County (PAT) and SEPTA. Privatization is a step that was recommended years ago by the Rendell Transportation Task Force. Privatization does not mean shutting down routes and letting private firms come in. The transit agency would put routes up for bids.  Authority funds, including state and Federal subsidies, would be used to pay a company that enters into a contract to provide service.  The idea is to get the service delivered at a lower cost than the authority can provide it. There are successful examples in Southwest Pennsylvania and Denver, Colorado.


To be precise and more effective, this provision should be retitled as “outsourcing” or “competitive contracting” as opposed to simply privatizing. Indeed, regional transit agencies in the PAT area should be able to bid on routes that make sense for them to incorporate into their service capabilities.  It is well known that the employee compensation costs at these agencies are well below those at PAT.


Finally, the House amendment greatly reduces the three year increase in funding for transit agencies, in large part due to the elimination of the $100 add on traffic violation charge. 


The advocates of mass transit are all up in arms over these provisions with the usual claims that the state underfunds mass transit already. Too bad the critics never bother to look at the outlandish cost structure the authorities, especially the Port Authority, face because of a long history of excessively generous labor contracts and a massive buildup of legacy costs.  Why is it so hard to understand that most taxpayers have no interest in paying more for retiree benefits at PAT that most of them can only dream about?  There are many studies that illustrate the high and unsustainable cost structure at PAT. They should be examined.


The objection to eliminating prevailing wage is nothing more than special pleading for union construction workers.  It is simply a mechanism to transfer wealth from taxpayers to union workers beyond what the marketplace would do through market determined wages.  The right to strike by teachers and transit workers accomplishes the same result.


The objection to privatizing a share of bus service at PAT and SEPTA is predictable with claims that before PAT the private bus service was a disaster.  But PAT’s outsourcing of service is not a return to the pre-public transit days. The authority would enter into contracts with providers to obtain service delivery at a lower cost than it can accomplish. It would, in effect, pass along a large share of the subsidy it receives in its payments to the private provider. There is no way a purely private bus operation can compete with a heavily subsidized public transit agency such as PAT.


Then too, opponents claim the House Republican transportation proposal is too ideological-which really means that it threatens to reduce union clout.  Who are the ideologues in this?  Efforts aimed at limiting the increase in taxes that would otherwise be necessary to continue on the path of funding the status quo are deemed to be ideological. Would raising taxes and rewarding past irresponsible behavior be considered non-ideological? 


The opposition to the proposed House transportation legislation is of a piece with resistance to meaningful state employee and teacher pension reform that is so desperately needed and the full court efforts to prevent liquor store privatization. Talk about ideological. It is all about government kowtowing to the demands of its public sector employees. This unfortunate situation is demonstrably at the heart of severe government financial problems from sea to sea shining sea.

Port Authority Board Appointment Bill Moves Forward

By a 16 to 10 vote in the Senate Appropriations Committee on June 10th, Senate Bill 700 took another step toward becoming law. Of course, the full Senate has to consider it and, likewise, the House must approve and it is not clear what the reception will be in that body.



The bill, sponsored and heavily supported by the president pro tem of the Senate, has two key provisions. First, the naming of board members of the Port Authority of Allegheny County (PAT) is changed dramatically. Eleven members will be appointed. One by the Governor, one each by officers of the four legislative caucuses, one by the County Executive, one by the Mayor of Pittsburgh, and four by the at-large members of County Council. The at-large member appointees will be named from a list of nominations by four designated organizations (Allegheny Council of Governments, ACHIEVA, the Southwest Regional Commission and the Allegheny Conference on Community Development). Existing members’ terms would end in 60 days. Existing members would also be eligible to serve in the new regime.


The effect of this new appointment scheme will be enormous. By removing all but one of the member appointments from the County Executive and placing five with state government officials, the state assumes more of an oversight role for the Authority. By having four board members appointed by at-large council members from various entities presumably there will be some vetting and possibly a variety of viewpoints represented by the members.


Appointments-Current Law and Proposed Law


Current Law

Proposed Law

# of Board Members



Appointment Power

County Executive

Governor (1), County Executive (1), Mayor of Pittsburgh (1), State Legislative Leaders (4), At-Large County Council Members (4)

Residency Requirements

U.S. Citizen, resident of County

Resident of Commonwealth


None Specified

Experience in Budgeting, Finance, Economic Development, Transportation, Mass Transit

Term Limits

None Specified

Three Consecutive Terms


It is worth noting the changes in qualifications.  Under the proposed law, members will have to have expertise or experience in areas important to the management of a large organization and specifically some will have to have experience related to transportation issues.


The second key provision is a mandate to PENNDOT to (1) study the possibility of consolidation with other local transportation organizations to determine if revenues could be enhanced or expense reduced and (2) to study the opportunities for privatization that will enhance revenues or lower expenses. A report with findings and recommendations for each study is to be ready within 180 days of the enactment of the bill and provided to the Governor, the General Assembly and PAT. 


These study requirements are useful but could be worded better to include such things as improved operational efficiency, lower cost per rider, and better service.  Moreover, it is not enough to recommend consolidation or privatization, there needs to language to require the adoption of recommendations when the analysis strongly supports them. A mandate to privatize some percentage of bus service within three years is a reasonable requirement.


Obviously, the County Executive and many loyal supporters of the status quo at PAT will be extremely opposed to these steps. But given the state’s financial support and the chronic financial crisis PAT finds itself in and is unable to resolve on its own, there simply must be some major reform.


The steps contained in the legislation are a start but they alone do not adequately address the primary source of the Authority’s long term problems-the right of the transit workers to strike. As long as that situation exists, it is only a matter of time until the threat of a strike will force the board, no matter how the appointments are allocated, to choose to approve a contract it cannot afford or a shutdown of the system and all the attendant difficulties and hardship that entails.


Still, there is no gainsaying the fact that this proposal is a game changer. It represents a very strong signal regarding the state government’s exasperation with PAT and its constant demands for more funding while operating one of the most expensive per rider systems in the nation.


The only question is whether the House members have the same level of exasperation. Will it concur that substantial change needs to occur at the Port Authority?

Is PAT a Burden on Taxpayers?

In a remarkably inept attempt to invalidate the State Senate Pro Tempore’s assertion that the Port Authority of Allegheny County (PAT) has been a long-time burden on taxpayers, an editorial writer says the Senator’s claim is a flawed premise and misses the significant role mass transit plays in a region like Pittsburgh.



Clearly, anyone who takes the time to think about the editorial writer’s comment can see the faulty logic of the attempted refutation.  The Senator’s comment neither explicitly nor implicitly claims that mass transit has played no role, important or otherwise, in the region. If he believed that he would more likely be pushing to eliminate state subsidies altogether as opposed to wanting to reform PAT to make it more cost effective and efficient.  Note that state operating assistance and grants provided a combined $205 million (55%) of PAT’s total revenue in FY13, while farebox revenues accounted for $84 million, or 23 percent, of total revenue. 


But the larger issue is whether the Senator was right about PAT being a burden on taxpayers. There are a number of ways to look at the burden issue.  For example, are PAT’s costs in line with benefits it produces for the county, region and state? Or, are PAT’s costs in line with other comparable transit agencies around the country? 


Well, let’s go back a ways to assess the Senator’s claim that PAT has been long-time burden on taxpayers. In November 2006, Governor Rendell’s Commission on Transportation Funding and Reform issued a report containing the following findings (among others) regarding PAT.


  • Needs to focus on financial performance indicators to better align service needs and effectiveness. The Commission wanted PAT to meet industry best practices.
  • Has the highest wage rates in the country adjusted for cost of living.  At the time of the report PAT wage rates averaged $20.50, 40 percent higher than the average of 60 transit agencies studied by the Commission. 
  • Is challenged by high labor, health care and pension costs for current and retired employees. From 1999 through 2005 these line items grew at an annual rate of close to 14 percent.
  • Focused effort on fixed guideway development and service expansion rather than basic asset replacement maintenance. The Commission said that PAT was going after new starts and expansions instead of focusing on existing needs.


So where is the agency now?  The National Transit Database’s profile of the largest 50 public transit agencies in the U.S. showed that in 2011 PAT provided 54 million annual unlinked bus trips over a service area of 775 square miles with a per passenger expense of $5.31.  If one looks at agencies in the top 50 that ran the same range of bus trips (44 million to 64 million) which covered areas such as Atlanta, Milwaukee, San Antonio, and Houston only Houston came within $1 of the expense by PAT ($4.95 per bus trip).  If one looks at agencies covering a similar service area (570 square miles to 868 square miles) which included Portland, Philadelphia, Minneapolis, San Diego, and Dallas, all with the exception of Dallas ($6.40 per bus passenger trip) had costs below PAT. 


For 2009 (the latest data available) the American Public Transportation Association examined transit wages and average bus operator wages.  In FTA region 3 (PA, WV, DE, DC, MD, and VA) the average agency wage was $17.12: the average PAT wage was $24.25, which was the highest of all transit agencies in region 3.  Adjusted for cost of living, the 2009 average PAT bus operator wage was higher than those of Atlanta, Chicago, Cleveland, and Milwaukee. Bear in mind that drivers at other regional transit agencies in southwestern Pennsylvania earn $8 less per hour and have nowhere near the benefit package PAT drivers have.


PAT’s net expenditures for pension, active healthcare, and retiree healthcare stands at $103.3 million in FY2013, 6 percent above the audited 2010 amount of $97 million.  Contract after contract has made changes to fringe benefits as new hires (depending on bargaining unit) come under defined contribution pensions or have age and service requirements to make them eligible for retiree health care.  With a long-term liability of $890 million on retiree health care those are changes that have to be made. As a percentage of PAT’s covered payroll, the unfunded liability stood at 559 percent as of 2012.  By way of comparison, the larger SEPTA system’s unfunded liability to payroll percentage was 299 percent in 2009. 


Bear in mind too that the concerns about excessive spending on guideways expressed in the Governor’s report predated the $520 million North Shore Connector project. This project required tens of millions of state and local tax dollars as well as the diversion of millions of Federal dollars that could have been used for other traffic improvement projects in the region.


Over and above the state’s generous annual allocations to PAT for operations and capital expenditures, enormous sums of highway money have been “flexed” by Governors and the SPC to fill budget holes at PAT. In 2005 alone, PAT received over $140 million to plug budget holes. Another $47 million was flexed in 2011-12 to avoid shortfalls.


Much of this comes down to the issue of contract bargaining that was tilted heavily in the unions favor by their right to strike. “Transit strike” are the two most frightening words transit managers and riders can hear. Because of the threat of strikes, PAT boards have not been able or willing to stand up to union demands, no matter how outrageous or threatening to the Authority’s long term financial viability.


The right to strike is granted by the state, which therefore bears some responsibility for the excessive cost structure at PAT and the resulting need for the state to heavily subsidize its operations. But that does not obviate the Senator’s point.  Because PAT’s cost are so high compared to similar sized agencies and because the state’s subsidy keeps expanding in the face of relatively stagnant paying riders, there can be little doubt that PAT is a burden on taxpayers.  That situation must be corrected. And substantial corrective reforms ought to and must receive broad support from taxpayers and businesses if the burden is ever going to be reduced.

Advocates Miss the Bus

Proponents of funding public transit rallied at the City-County building this week calling for dedicated funding from the state for the Port Authority, one speaker noting that there is still a "transit crisis" that they hope will be ended when the Governor unveils his transportation plan for roads, bridges, and transit (that is now supposed to come at the budget address next month rather than today). The speaker used the opportunity to state opposition to "privatizing" transit since that "spells disaster … With privatized transit, fares go up while quality, safety and wages go down". Why even mention it? Because the speaker had heard the Governor make mention of it at a speech at the University of Pittsburgh.

Does the speaker realize that several small transit companies in western Pennsylvania, even some that drive buses into Allegheny County on a daily basis, contract with outside companies to run their bus service? Based on our 2011 survey, some even paid higher wages than those that kept their operations "in house". Of course, none could touch the wage of an average PAT driver ($25.48 to $15.23). Or that the Port Authority contracts with a company to provide ACCESS service? The previous Governor’s transportation commission in 2006 gave that portion of PAT’s operations very high marks. Know what else that Governor’s commission did? It directed PAT and other transit agencies around the state to evaluate competitive contracting opportunities, adjust service to meet market demand, reduce labor and management costs, and tie bus fares to inflation. Sounds quite business-like.

The speaker’s worst nightmare might be riding a bus in Denver, Colorado. A 1988 state law directed Denver’s Regional Transportation District to contract out a portion of service, which now stands at 50% of "rubber tire" service. As of 2011 the RTD had 1,093 contracted fixed route drivers working alongside 1,826 represented employees; 537 buses were RTD owned and operated, 457 RTD owned and leased to private carriers. A customer can’t pick and choose whether an RTD driver or a contractor is going to pick them up on a bus trip. And who knows if the quality of the buses under the direction of lessees is compared to the in-house driven ones. Has that uncertainty scared off bus riders? According to statistics from the National Transit Database since 1996 (the farthest back the data goes) unlinked bus trips are up 16%; PAT’s are down that rate over the same time frame.

PAT Could Be an Asset

After reviewing a host of sources-statutes, judicial decisions, internal documents of the organization-an attorney retained by the Regional Asset District (RAD) board has determined "there is no legal impediment to the District providing funding to the Port Authority (PAT). That answers the "is it" or "isn’t it" part of the question of the plan to devote $3 million in asset funding to PAT as a local subsidy.

The opinion does not address the "should it" question (the attorney notes "…we are not opining that the District is compelled or that it is advisable to fund [PAT]) but says that the law does spell out what RAD can’t give money to and if transportation was not the Legislature’s intent it would have put it on the list of prohibited beneficiaries. It also noted that the RAD request will not be a one time deal ("it is further anticipated that this will not be a one time request but will be continuing for at least the next several years").

The Institute raised these questions in a recent Brief and the attorney’s opinion will provide the input the RAD board needs on the decision.

All Hail the Port Authority’s Alleged Cost Savings

For sure, the heading is a bit tongue in cheek. In the latest press announcement, the Port Authority says through management efficiencies it has cut another $10 million from the cost of the North Shore Connector, bringing the total cost reductions since last May to $24 million. The estimate of the final cost of the project is now placed at $528. Of course, that assumes no unexpected cost overruns on the remaining 30 percent of the project-a big assumption.

What the Port Authority assiduously avoids telling us is that the final cost is still nearly double the estimated cost. In February 2004, the price was said to be $363 million. But then they cut the convention center leg and other elements of the project. These cuts were said to save $80 million. Thus, the project cost should have been lowered to $280 million and that means the $528 million new final estimate is 89 percent above the original estimate of the project’s cost.

Moreover, by dropping the convention center leg of the Connector a large and disproportionate fraction of the putative benefits of the project were lost. The per rider cost for a round trip on the North Shore Connector over its first 20 years will be $45, assuming the ridership forecast is accurate. It would be cheaper to provide limo service from the North Side to Downtown.

And so it goes with this ill-conceived money wasting boondoggle.

Federal Stimulus Spending on Transit Running on Empty

Federal stimulus money for transportation seemed like manna from heaven for cash-strapped states needing to repair roads and bridges as well as fund public transit. Now these same states that have enjoyed the gift are starting to wonder what will happen when the funds dry up. They worry that there will not be enough to satisfy all of their projects or, in the case of public transit, where replacement funds for the stimulus programs will come from. Many of them are pushing for a higher Federal gasoline tax. However, the Obama administration is correct in noting that raising the gasoline tax is the wrong thing to do in a recession.

There is plenty of irony in the plea to raise the gasoline tax, not just at the federal level, but the state level as well. The push to get people into cars that get higher miles per gallon driven, as evidenced in the cash for clunkers program, has reduced the demand for gasoline and thus reduced the tax revenue collected. Now they want to raise the tax rates which will further force people into more fuel efficient cars.

Thus the cry for a more reliable funding source for transportation.

But these advocates are missing one important point-the cost of these projects have been inflated by as much as 30 percent due to prevailing wage laws. If they want the money to go farther, this onerous law should be repealed. It’s nothing but a sop to the politically powerful unions. Thus repeal is unlikely to happen. Instead the tax and spenders at the state and federal level will find ways to bleed taxpayers for the benefit of these unions.