Uncertainty and Confusion Abound at PAT
What seemed to be a clear and straightforward agenda at the Port Authority (PAT) board’s March 25th meeting turned into a much longer and drawn-out affair after the transit union made a last-ditch concession proposal in order to avert the 15 percent service cut necessitated by a revenue shortfall.
In fact, the critical agenda item the board was to take up that morning-whether to allow a competitive service provider to handle two routes that PAT scheduled to vacate -was not decided until Saturday afternoon as the board’s deliberations pre-empted the regular agenda to deal with the labor union’s 11th hour offer of concessions.
Early reports on the first morning of the newly reduced service pointed to confusion and frustration for many riders. The head of the transit union was quoted as saying “there will be massive confusion on Monday morning and all next week”. Confusion and frustration are also evident in the events leading up to the service cuts. In that regard, this Policy Brief raises several important questions:
- Why did the union wait so long to offer concessions and then refuse to consider the counter offer? On the Friday before service cuts were to go into effect (on Sunday the 27th), the transit union came with a last minute proposal to forego the last installment of its contracted wage step (3%) and take a 10 percent wage cut (published reports indicate this would have been diverted to the pension fund) that would have amounted to $18 million by the union’s estimation. The County Executive and the PAT board and management said that the proposal “was well short of the necessary savings of $30 million.” Counter proposals made by the County Executive were viewed as too harsh by union leadership to be considered and dismissed out of hand.
But does that mean all deal-making is officially over? PAT and the union could still talk concessions before another round of cuts is made and, if enough progress in cost cutting can be made, perhaps some folks could be rehired. Legacy costs and work rule changes would have to be included. Now that the union has signaled a willingness to make concessions PAT should pursue it with counter offers. Or was the union’s last minute offer of concessions mere window dressing to convince the workers about to lose their jobs that the union really cares about them? The unwillingness to negotiate work rule changes or address legacy cost issues as asked for by the County Executive suggests continuing union intractability on those major points of contention.
- With PAT reducing service and ridership, will the state argue PAT should get less money next year? If one looks at subsidy per rider as the criterion for state aid, then such an argument might make sense in light of the service cuts now in place. Recall that County Council recently tried to reopen the 2011 budget and rescind $5 million of its local match as a result of lower state funding, a measure that failed because the County Executive indicated he would veto the amendment.
- Where was the County Executive going to get another $9 million to sweeten the pot? Published reports indicate the initial parameters of the concession agreement proposed by the County Executive was “…if the union agreed to about $20 million in concessions, the remaining $10 million would come from a 25-cent fare increase and a $9.2 million annual increase in the county’s subsidy payment to the authority”. The important part of the equation here is the increase in subsidy: right now the County is providing $27.3 million as a local match for state money through the drink and car rental taxes that comprise the transit support fund. Another $9.2 million would have taken the contribution to $36 million. Remember that back in 2007 the County pointed out repeatedly it no longer wanted to use property tax revenue for its local match and pushed Harrisburg to create the drink and car rental taxes. If the $9 million was to have come from property tax revenue, even temporarily, the County would have been going back on its own word. If there is $9 million “lying around” then officials have a lot of explaining to do in light of recent arguments that County is facing serious revenue shortfalls and needs money from non-profits, drilling rights, etc.
- If the PAT board had caved on the concession offer would it have hurt or helped its standing in Harrisburg? Past years have seen flexing of federal funds to stave off financial problems and the previous Governor was even involved in labor negotiations. A realization of the real problems at PAT (described in the previous Governor’s transportation task force report) has broadened the debate over what needs to happen at PAT. A rejection of the outsourcing service proposal from Lenzner Tours and acceptance of very limited and last minute union concessions might not have received a positive review in the state capital. In fact, legislators might very well take up the issue of Chapter 9 bankruptcy, an idea first proposed by the Allegheny Institute and the subject of a County Council hearing last week. While legal counsel for PAT “could find no instance of a Pennsylvania transit authority filing for bankruptcy” the reason is simple: existing state law does not allow for filing by entities other than municipalities. If the General Assembly viewed a last-minute agreement as “crisis averted” then they would have been supportive of the board. If the board had taken the deal and the state Legislature chose to interpret that as another temporary and incomplete fix, then quick action to pass serious reforms aimed at solving PAT’s never ending crisis might ensue.
So what happens next? By stretching out the flex dollars and assuming no changes to state or local funding and costs rising at projected levels, PAT officials say “current service and fare levels may be sustained through June 30, 2012”. That buys time, not simply to wait for state revenue, but for exploring other service options. PAT needs to pursue aggressively more outsourcing options as moving quickly as possible to replace discontinued service. The contractor handling two North Hills routes said “other private bus companies are looking at suburban routes in other parts of the county”. PAT management needs to find them and arrange suitable agreements. That holds true with the neighboring authorities that offer service and could be called upon to offer service in Allegheny County. Legacy costs are eating up revenues at an alarming rate, as we have pointed out, and “benefits” will soon equal and then overtake “wages” as an expenditure category and simply must be dealt with.
Every route PAT can outsource over coming months will further enhance its bargaining leverage with the union. Longer term the retiree costs, employee compensation and work rules must be the subject of more concessions. Otherwise, bankruptcy will be the only viable alternative if PAT is to survive as a transit agency.