Archive for the ‘Uncategorized’ Category
Thursday, August 25th, 2011
Everyone reading this knows that Pittsburgh is a city with financial problems. Pittsburgh has been in Act 47 distressed status and under the watch of two oversight boards for over six years now. While it’s easy to cast blame, what we often don’t think about is how our city compares to cities in the rest of Pennsylvania. When you take a real look, you not only find that we are far from alone, but that the pattern of financial woes is not only all to familiar, but how much these difficulties are structural in nature.
The Pennsylvania League of Cities and Municipalities (PLCM) was set up with a mission to “serve local governments by providing programs, cost-effective services, and legislation which strengthen the autonomy of Pennsylvania municipalities.” A year ago the League created the “Core Communities in Crisis” task force to develop a strategic proposal for the new Governor and administration in 2011 regarding growing municipal fiscal challenges. The committee consists of 28 elected officials from every region of our state, including Pittsburgh City Councilman Bill Peduto. You can read their findings here.
In June of this year, Lancaster Mayor J. Richard Gray (who is also a member of the task force) released a report by Lancaster’s Municipal Finance Task Force titled “Prosper or Perish: Financing Local Government Services in Pennsylvania.” While the report uses Lancaster as its case study, the problems it identifies are the same in city after city statewide. An editorial in the Erie Times-News noted as much and the problems listed are ones with which Pittsburgh is well acquainted:
“It’s striking how closely the circumstances outlined mirror those in Erie. What’s wrong is no secret, here or there.
The report acknowledges the case it’s making isn’t new and applies to communities throughout the state. What’s different now is that the cumulative damage threatens to send Erie, Lancaster and other cities into a disastrous, accelerating downward spiral of increasing taxes, declining services, urban blight and suburban flight.
Preventing that requires a wider understanding that in general the decline of Erie and other cities hasn’t resulted from mismanagement, and that their elected officials can’t cut their way out of it. The game is rigged against cities, and only changing the rules will help.
The targets for change identified in “Prosper Or Perish” will be familiar to anyone who’s been paying attention:
- Excessive reliance on the property tax, an issue aggravated in cities by the prevalence of tax-exempt property.
- A system of binding arbitration for police officers and firefighters that doesn’t account for a city’s ability to sustain the costs imposed and that routinely awards pay increases and benefits wildly out of sync with the rest of the economy.
- Fragmented, duplicative local governments that combine with a regressive tax system to leave suburban residents, who are more affluent on balance, shouldering less than their fair share of a metropolitan area’s costs and challenges.”
Sadly as another editorial, titled “SOS,” on LancasterOnline observes:
“Unfortunately for Lancaster, virtually all of the reforms are beyond the city’s control.
The task force, composed of business leaders, says small cities need a menu of tax options to reduce overreliance on property tax revenue. Only the state Legislature can do that.
And, the report says, the contract arbitration system for police and fire unions has to be rewritten. Again, a job for the Legislature.
The report calls for revenue sharing with federal, state, county and tax-exempt property owners, meaning, among other things, that other government offices would contribute a fair share toward the cost of services provided by the city. Lancaster can’t force any level of government — or any nonprofit agency — to cough up the cash.”
“Prosper or Perish” recognizes this and issues a call to action:
“The time has come for Pennsylvania’s legislature to change the rules by which communities finance their local services. Local governments are forced to operate with a fiscal system that is, at best, irrational and, at worst, dysfunctional; a system that effectively deprives locally elected officials and the people they serve of the ability to be the architects of their own communities and their own futures.”
You can read the full report online here.
Tuesday, July 5th, 2011
The Clean Air Act has been created to ensure that we don’t use public dollars to pollute our air. Human exposure to diesel particulate emissions and other diesel pollutants increases health care costs, missed school days, lost worker productivity and premature mortality — cancer risk from diesel pollution alone in Pittsburgh is hundreds of times greater than the EPA’s acceptable cancer level of one in a million. Moreover, the American Lung Association’s “State of the Air 2011″ report rated Pittsburgh’s air quality as “the nation’s third most polluted area for short-term particle pollution for the second year in a row.” As you can imagine, this is not a selling point for our city. In fact, it’s a real factor in keeping companies from moving here and in slowing our economic progress.
The act requires construction vehicles for city-subsidized projects to have the “Best Available Retrofit Technology” in order to reduce these emissions. The benefits will spread even wider when these same contractors end up using the retrofitted vehicles on privately run construction sites. While we were one of the first cities to enact clean air legislation under David L. Lawrence, we’ve sadly fallen behind. The Clean Air Act is the first legislation to clean our air in decades and has been over a year in the making.
Now, as the prime sponsor of the legislation, I’m asking for your help in getting the Clean Air Act passed. This legislation has been co-sponsored in Pittsburgh City Council by Doug Shields, Bruce Kraus and Natalia Rudiak — and they deserve thanks for that. But, last week — when it came up for a vote — a majority of Council decided to put it on hold. The Clean Air Act is ready to go and the preliminary vote is scheduled for Wednesday, July 6 at 10:00 AM.
For the sake of Pittsburgh’s air, please contact City Hall now (click here) and let them know that the time has come to pass this much needed legislation. Let them know you want and need a cleaner, greener Pittsburgh.
Monday, June 13th, 2011
I would like to thank you for taking the time to contact me regarding the recent changes in the metered parking rates in the City. I appreciate your frustration and agree with you about the negative impact of higher parking rates and increased enforcement hours. To be certain, a bad situation rarely results in a good outcome. That is what we were faced by a state mandate to come up with $250 million in new revenue in one year in order to fix a broken pension system, that has needed help for over 40 years. Failure to come up with the needed cash would have resulted in a state takeover, which would have cost the city twice as much as the new payments.
We were given a puzzle where all of the pieces do not fit, however City Council did their best to come up with a plan that would have the least negative impact on our City. Like you, I am concerned with the harm this may do. To help you understand the dire situation, here are some answers to the most commonly asked questions I have received these past two weeks.
What initiated this rate increase?
In 2009, the state legislature passed Act 44, which required the City’s pension system to be funded at a 50% level by December 31, 2010 or be taken over by the state. As a result of this law, Mayor Ravenstahl proposed privatizing the City’s meters, lots, and garages under a 50-year lease with private financial interests. City Council, which was opposed to the Mayor’s proposal, developed an alternative. The City Council plan used guaranteed future revenue (parking tax) to get the plan up to the 50% threshold. This averted both privatization and state takeover. In order to fill the gap in the annual budget created by promising parking tax revenue be dedicated to pension, the parking rates at meters were increased. Council hired the consulting firm Financial Scholars Group that was headed by the former Chief Economist of the Security Exchange Commission and present CMU Tepper Business School professor to analyze all plans before making any decisions. We also conducted public meetings in all Council districts and a series of special meetings downtown over a nine-month period.
Prior to 2010, the City’s annual pension payment obligation was approximately $45 million. If the state took over the pension system, they would raise the obligation to $100 million per year – an increase of over $50 million annually. The Council alternative that raised rates required an additional $9.3 million in annual revenue (achieved through the rate increase) and met the required state threshold. This is due to two specific criteria. First, the State would require that the pension fund be 100% funded, under Act 44, the city is only required to fund the plan to 50%. Secondly, the state would use more conservative estimates in determining the rate of investment over the long-term of the plan. Although this would be a better way for the city to operate, it was not something that we could afford without doubling the present increases or raising property or wage taxes.
Why not privatize the system?
The Mayor’s proposal to privatize the system would have resulted in the loss of this public asset for fifty years. It included raising parking rates at meters, garages, and lots 300%-400%. Parking meter rates would have been as much as double the increases that went into effect – for example, in Shadyside, the Mayor’s privatization proposal would have increased rates to $3.50 per hour instead of $1.00 per hour. In other neighborhoods like East Liberty and Garfield, privatizing the system would have resulted in meters costing $2.00 per hour. The affects to our neighborhoods would have been devastating.
It also would have added enforcement until 10:00 PM and added Sunday enforcement. This City would have lost billions of dollars in revenue of the 50-year period. This plan would have raised rates to a level that would have devastated our city’s business districts. Furthermore, it would have driven drivers to park on residential streets, lowering property value and decreasing quality of life for city residents. Additionally, any closing of a street or removal of a meter would have required taxpayers to pay the bank for any lost revenue. This plan would have resulted in a loss of over $2 billion in revenue over the life of the lease.
Why not change the pension systems?
While the state legislature passed Act 44 mandating we bring our pension funding up to 50%, they gave us no authority to change the pension system. All pension requirements and laws are controlled by the state legislature. City Council has no authority to change local pension requirements. State laws obligate municipal governments to provide a defined benefit program. In terms of the age of retirees or any other significant cost to our pension plan, the rules are also governed by the state, not local government.
The State controls the rates of most revenue sources for the City. The City only has the right to increases property tax, wage tax, deed transfer tax, and parking rates. Property taxes, when combined with the school district, are one of the highest in the County. Additionally, we must prepare for the upcoming reassessment that may raise property taxes as soon as next year.
The deed transfer taxes are one of the highest in the State and the highest in the County. It is a deterrent to homebuyers to move into the City and is full of loopholes that allow the purchasers of large properties to remain exempt.
Combined with the School District, the wage tax is the highest in the County and second highest in the State. State law mandates that it can only be applied to City residents – we do not have the right to tax people that work in the City, but live outside of it (like almost all other cities in the country). State law also prohibits us from having the right to tax non-profits or create a new source of revenue. We were under a state mandate to come up with additional revenue, but only had the options to increase wage tax, property tax, deed transfer tax, or parking rates.
Parking rates at City meters had not been increased for most neighborhoods for over twenty years. Since the mid-1980s, they have remained at fifty cents per hour for most neighborhoods, far below the national averages. It is difficult to find anything, including parking rates, which cost the same today as they did in the 1980s. Again, we were required to find $250 million in new revenue and of the four choices that we had only one – parking rates – that were below the average rates and had not been changed in over twenty years.
How were these rates determined?
The rates were chosen through analysis by multiple outside consultants. The initial report was conducted by a national parking consultant in conjunction with the Mayor’s plan to privatize parking assets. Further analysis was provided by Financial Scholars Group and compared with national parking averages through 20 comparable cities by City Council. In general, rates were increased by half of what the Mayor proposed through his plan. Rates remain on average or below with most other cities.
The rate increase as a percentage is even across the City (other than Downtown and the North Shore) to what the Mayor proposed and what had been debated last year. The original proposal was to also have Shadyside and Squirrel Hill increase at a larger percentage, but I amended the legislation to protect neighborhoods where the majority of businesses are local, even if shoppers are city residents or from elsewhere. Parking rates are one of the only fees that are paid equally between city residents and commuters. The goal was not only to lower the rates proposed by the Mayor, but also to make them more equitable by neighborhood.
Instead of increasing rates, why not reduce the cost of government?
First of all, the City was required to have cash to fund the pension system; a reduction of services would not have met the requirements of Act 44. Second, since 2004, the City has been under Act 47 status with the State. This requires that both the Act 47 Coordinators and the Intergovernmental Cooperation Authority (ICA) approve all financial decisions. This includes having an approved five-year financial plan. As result of Act 47 and state oversight, the City has already reduced the workforce by 25% (1,000 employees). There have also been cuts in almost all city services, including fire stations, police, pools, recreation centers, senior centers, and street cleaning. While there is always room for improvement, the City is operating in a much more lean and efficient position than we did in 2004. Even if we were permitted to fund our pension system with reductions in city services, eliminating $250 million of services would decimate operations to a point that would be unacceptable to city residents.
What can we do now?
The rates are dedicated to the pension. Removing them would trigger state takeover of the pension fund and as described above, we would need as much as an additional $50 million annually. This is something we cannot afford. Under the plan approved by City Council the increased rates will be met by 2018 with additional funding from a reduction in our debt payments. It may not be apparent, but the plan that was approved was by far the lowest cost to the taxpayers of Pittsburgh. But, that is not enough.
It is obvious, the entire parking system needs to be overhauled. We are operating a 1970s system, while other cities have transformed into a 21st century transportation plan. While this new approach would need to guarantee the $9.3 million annually for the pension, it would also include reforms and improvements that would benefit residents and businesses. Cities like San Francisco are moving toward a market-driven rate system for meters, Washington DC has utilized smart phone systems for payments and cities throughout the world have realized of the importance of parking as a key ingredient in a successful urban development planning strategy. In the next few years, we must do the same – or better.
Once again, I appreciate you taking the time to contact me about the parking changes. I sincerely appreciate your concern and share that concern with you. I hope the information provided at least helps you to understand the difficult position that state mandated and the decision process we struggled with for over a year. I remain committed to protecting our City and the businesses and residents that choose to locate here. If you have any other questions or concerns, please do not hesitate to contact me.
Saturday, May 14th, 2011
As the Pittsburgh Post-Gazette has reported, on Tuesday, Pittsburgh City Councilman Ricky Burgess introduced legislation to repeal the city’s campaign finance law. Following is a press statement and memo from Councilman Bill Peduto on Burgess’ efforts to renew the old ”pay to play” system. Peduto calls Burgess’ attacks against the law “hollow and wrong” and a “bow to the pressure of big money interests.” He also details exactly what the law is in order to combat dishonest statements made to the media.
Burgess Campaign Finance Reform Statement
May 10, 2011
“In 2009, City Council passed campaign finance reform legislation – a reform that was long overdue for the City of Pittsburgh. It is disappointing to learn that Councilman Burgess would bow to the pressure of big money interests and reverse the reforms that Pittsburgh fought so hard to enact. Councilman Burgess’ attacks against the law are hollow and wrong. He is simply giving in to special interests and working to hide who is funding his campaign. The voters deserve to know who is pay-rolling this effort before they vote – and state law requires he tell them.
The City’s laws on acceptance and disclosure of contributions follow the federal rules and this was clearly discussed during Council’s debate in 2009. These efforts to rewrite history and create turmoil for political gain right before an election are being done at the expense of good government and transparency.
I look forward to the debate on this issue. It is further regrettable that Councilman Burgess would try to waive the rules of Council to vote on this bill tomorrow even further taking away the public’s ability to voice their position on this matter. I am dismayed that Council Members Lavelle, Dowd and Smith would support the waiver of rules to bring this up for a vote before the public has an opportunity to comment.
The people of Pittsburgh should be vigilant. Those who favor a “pay to play” government have given their orders and Councilman Burgess is working to deliver a gift for them – at the public’s expense.”
To: Pittsburgh City Council
From: William Peduto, Author/Sponsor of Campaign Finance Reform Act
Date: May 13, 2011
Re: Dishonest Statements Regarding Campaign Finance Reform Act
During the past few weeks, the public has been barraged with unethical and illegitimate statements regarding the Campaign Finance Reform Act of 2009. I spent five years working to pass legislation that would limit the undue influence of those who believe that our local government should operate under a “pay to play” system. During those years at least four versions of campaign limits were debated. Finally, on May 5, 2009, Pittsburgh joined the ranks of most other cities and established rules on campaign contributions. Now with the 2011 primary just days away, a Mayor-backed faction supported by Pittsburgh’s version of the classic political machine has launched a campaign to twist the language and intent of this bill in order to damage their opponents. It is critical that the attempt by Councilman Ricky Burgess to rescind the Campaign Finance Reform Act under these reprehensible tactics be dismissed immediately and that the public be given a full understanding of the legislation and the process.
As you all know, in 2009 we debated two proposals regarding campaign finance limits. After vetoing the original bill, Mayor Ravenstahl and County Executive Onorato offered a modest proposal to set limits–these limits would have been some of the highest in the country and did not address the important issues included in earlier versions. The Mayor’s bill would have set limits for contributions to Council candidates at $4,600 per individual per election cycle and $10,000 per Political Action Committee per election cycle. Under the bill finally approved and passed by City Council and signed by the Mayor, these monetary limits and campaign periods were changed.
The Campaign Finance Reform Act set limits at $1,000 per individual per covered election and $2,000 per PAC per covered election. As was discussed during the debate and contained within the legislation, a covered election is any primary, general, or special election. Therefore a contribution of $1,000 could be made by an individual, or $2,000 could be made by a PAC to a candidate in both the primary and the general election.
“COVERED ELECTION – Every primary, general or special election for City Elected Office” – 2009-1039, §198.01 Definitions
Read the rest of the memo here.
Thursday, May 5th, 2011
It’s been four years since Lamar Advertising and the Pittsburgh Parking Authority reached an agreement on the construction of a giant 1,900-square-foot LED billboard and ticker on the Grant Street Transportation Center. It’s been three years since Pittsburgh City Councilors Bill Peduto, Patrick Dowd, Ricky Burgess, Bruce Kraus, and Doug Shields raised objections to the billboard as the City granted a permit without requiring Lamar or the Parking Authority to obtain needed variances, public hearings, etc. and the City revoked the permit for the partially erected billboard. In that three years, there’s been numerous lawsuits, allegations of corruption, dismissals, court decisions against Lamar, a moratorium and editorials for its removal, yet, the sign still stands.
In March, Scenic Pittsburgh, a civic group dedicated to banning billboard blight, went to court to demand that the illegal sign finally be removed. Yesterday, Scenic Pittsburgh announced that an agreement has been reached and that Lamar will pay to have the sign removed and that removal will occur by September 1st. Here’s a letter by Mike Dawida, Executive Director of Scenic Pittsburgh and former Allegheny County Commissioner, announcing their victory:
Dear Friends of Scenic Pittsburgh,
I am pleased to announce Scenic Pittsburgh has negotiated an agreement the Parking Authority, the City and sign owner to remove a billboard erected in violation of the City of Pittsburgh Zoning Code. We expect the 19′ x 58′ electronic billboard that hangs on the Grant Street Transportation Center in Downtown Pittsburgh will be removed on or before September 1, 2011. We are pleased about the agreement as this partially completed sign hanging at a prominent downtown intersection has remained an eyesore for more than three years.
Although this long-running legal fight has ended, the controversy continues. It is unfortunate that this billboard should have been handled as a simple zoning variance issue. Instead, an unconventional permitting process eventually led to the dismissal of two zoning commissioners and the URA Director. The removal of this sign validates the position taken by Councilmen Shields, Peduto, Burgess, Kraus and Dowd, who were sued for their opposition to this billboard. These councilmen should be commended for defending the people’s right to due process in the well established zoning process.
The story of this billboard is a lesson as to why it is important to carefully consider the consequences of allowing electronic billboards in our neighborhoods. Once you allow billboards to be built, they are nearly impossible to get rid off. Scenic Pittsburgh is moving forward to remove other illegal billboards, but because of state law, most billboards in Pittsburgh enjoy grandfathered legal status. Hundreds of non-conforming billboards would be illegal otherwise.
Rand McNally, Forbes, and The Economist recognize Pittsburgh as among the best. It is time to take a close look at what makes Pittsburgh exceptional. For many years our riverbanks and skylines where dominated by commercial interests but the “smoky city” eventually reclaimed its riverbanks and skylines. Today we bring our
visitors to the overlooks to gaze down on our proud city. This happened because of an advanced understanding of the value of these resources and the vision of a better Pittsburgh.
In the vision of a better Pittsburgh, where do billboards fit? How much of our reclaimed city should we surrender to corporate interests? What do electronic billboards contribute to riverbanks and skylines of our scenic city? Do you want an electronic billboard in your neighborhood? These questions are not rhetorical, and will soon be up for debate in City Council where their decision will affect Pittsburgh’s image for another century.
Congratulations to the citizens of the City of Pittsburgh who will finally soon be able to enjoy their Downtown without this eyesore.
Tags: Bill Peduto, billboard, City, Grant Street Transportation Center, Lamar Advertising, Pittsburgh, Pittsburgh City Council, Pittsburgh Parking Authority, Scenic Pittsburgh
Posted in Uncategorized | 1 Comment »
Wednesday, April 20th, 2011
On April 19th, Pittsburgh City Council held the third — and final — Post Agenda on the future of the city’s budget. This meeting concentrated on long-term financial planning (2018-2025). It coincides with the city’s “debt-cliff” — when expected debt payments lower significantly. It builds off of the findings of the first two meetings which addressed the 2011 operating and capital budgets and examined the needed actions of the city to assure a sustainable financial plan for 2012-2017 (including a funded 6-year capital plan). This final meeting has provided the groundwork for City Council to continue to take financially responsible actions that protect the taxpayers of Pittsburgh now and far into the future.
A PowerPoint presentation from this meeting can be see here.
Tuesday, April 12th, 2011
On April 12, 2011, Councilman Peduto hosted the second post-agenda on the future of the city’s finances. This meeting focused on the next six years, 2012-2017. Many governments work to create 6-year capital plans in order to plan for major needs. Councilman Peduto is interested in creating a 6-year “Capital-Plus” plan that incorporates the city’s Operating Budget along with future pension payments, needed capital improvements and coordinate these costs with the city’s present debt structure.
A PowerPoint presentation of this meeting can be found here.
Wednesday, April 6th, 2011
Yesterday, Pittsburgh City Council hosted the first of three public meetings chaired by Councilman Bill Peduto to look at the present financial situation of Pittsburgh and the future of our City. The first meeting focused on the 2011 Budget. It provided an analysis of both the operating and capital budgets and addressed any confusion from recent reports. In addition, it contained a series of recommendations for good government reforms to provide a more transparent and responsible budget process this year and in the future.
You can view a slide show presentation from that meeting titled “City Finance Update” here.
Friday, April 1st, 2011
The following letter from Pittsburgh City Councilman Bill Peduto was delivered to Mayor Ravenstahl yesterday and was also presented to the ICA at yesterday’s meeting. it was written in response to the Mayor’s letter last week.
March 31, 2011
Mayor Luke Ravenstahl
5th Floor, City-County Building
414 Grant Street
Pittsburgh, PA 15219
Dear Mayor Ravenstahl:
Thank you for your interest in Council’s parking plan. Please see below for the answers to your specific questions.
Will there be any modernization of the meter system when the rates are raised and the hours of enforcement extended?
The Pittsburgh Parking Authority is already modernizing their meter system. We applaud them in their effort. Existing machines should be recalibrated by current Parking Authority staff. The analysis of Pittsburgh’s parking assets by the Finance Scholars Group took into account that meters would need to be modernized (exhibit IV-B.8) All calculations include sufficient funds to do needed modernization, including immediate modernization of Downtown and Oakland (exhibit IV-B.10). The need for meter modernization is immediate in areas where the rates are significantly increased, and “pay stations” are literally needed in order to pay the rate (because the meters cannot accept the increased coinage.)
Is it City Council’s intent that meter installation be added to the City’s capital plan or to the PPA’s capital plan?
The Parking Authority already has meter line items in their budget that can cover the necessary pay station installation for on-street parking. The Finance Scholars Group study estimates that necessary meter upgrades will cost approximately $747,000 in 2011, and decreasing to $300,000 or less the next ten years (FSG exhibit IV-B.10).
In addition to the FSG findings, the Controller was able to identify additional sources of funds for the PPA’s capital plan. The Parking Authority currently has $3,209,587 of expendable capital funds, and another $17,576,044 of unrestricted net assets.
What is the expected cost of the additional 922 meters?
These are 922 additional spaces, not 922 additional meters. With multi-meter space technology, the Parking Authority can install less than 922 meters. Operating expenses of the new spaces can be found in the FSG report in exhibit IV-B.9. It is estimated that the additional operating expenses for those new spaces will be $158,750 annually – while revenue from those new spaces will total $907,943 next year, increasing to over one million dollars by 2015.
The Parking Authority is aware of the costs of installation of meters, but unfortunately, due to the lack of information provided to the Finance Scholars Group (FSG) consultants during the course of the study, the numbers provided by the consultants are estimates, and not actual costs. According to FSG’s research, the physical multi-space meters (also known as “pay and display stations” or “pay stations”) can cost $5,000 each. Other cities have installed these pay stations for under $8,000, labor included. Our consultants estimated that complete purchase and installation of each machine would cost approximately $15,000. These machines can also be outfitted with advertising, further defraying costs of the machine.
What is the expected date by which these meters will be installed?
As soon as possible. Council sees no reason to wait to install these meters. The approved budget only relies on a $1.3 million dollars increase in the Pittsburgh Parking Authority PILOT. This means we will only be receiving an increased PILOT payment in the fourth quarter of 2011, giving the Parking Authority ample time to install the new meters and make the necessary adjustments to existing meters.
However, the Parking Authority can realize much more than an additional $1.3 million dollars by implementing the recommended changes.
Where will these meters be installed?
Please see the studies and reports by the Desman group (page 42), the concession agreements (schedule 10, pages 1 through 7), JP Morgan, Morgan Stanley, Scott Balice, LAZ Parking, and any other information your office prepared on this matter.
What is Council’s proposal for the new terms of the Cooperation Agreement? What is the proposed revenue share? Is it still 6.5% for the City and 93.5% for the PPA, or something different? Please provide a clear financial analysis proving the amount of revenue that the meter rates increases can generate and be transferred to the City. This analysis should include any operating, maintenance, and labor costs resulting from the rate increases.
This action is no longer necessary for the implementation of Council’s budget. If your office can increase the amount of funds the City receives through the co-operating agreement that would be acceptable.
The Cooperation Agreement has to do with the amount of meter revenue coming to the City. Council attempted to change this in order to dedicate meter revenue directly to the pension fund. However, for a number of reasons this was not feasible. As such, the attempt was abandoned and the co-op agreement no longer needs to be amended.
What does need to be amended is the Payment in Lieu of Taxes (PILOT) agreement with the PPA. This currently gives the City $1.3 million dollars, which is loosely based on the real estate tax we would be paid if they paid real estate taxes. This needs to increase to $2.6 million this year, and $9.3 million dollars in 2012 and beyond in order to cover the hole in the City’s budget from diverting parking tax revenue to the pension.
Has City Council considered the need for significant capital repair in their revenue calculations?
The Parking Authority currently has a capital improvement needs plan that was relayed to, and included in the FSG study (exhibit IV-A.10). This means that Council’s study is based on the needs of the Pittsburgh Parking Authority, and not the Parking Authority’s actual budget, which was much lower. In other words, Finance Scholars Group used the Parking Authority’s “wish list” rather than their budget. This also exemplifies the ongoing need for the Parking Authority to increase revenue. Opportunities for increasing revenue goes beyond raising rates and should include market based revenue opportunities, including advertising, etc. By not increasing rates in the past, the Authority allowed many of its facilities to fall into disrepair.
What is Council’s proposed schedule for garage replacement or rehabilitation? What is Council’s proposed source of funds for the garage replacement or rehabilitation?
Prior to the privatization proposal, the Parking Authority did not have any plans for any garage replacement. However, the proposed 2010 concession agreement proposed garage replacement in 2017. In 2017, there will be less than 10 years left on current PPA bond payments. At that time, debt service can be restructured, and any needed replacements can be financed with tax exempt bonds.
The exact costs of garage replacement are detailed in the Tim Haas engineering study on page 65. City Council was not provided a copy of this study. They estimate that the Smithfield/Liberty garage will cost $17,577,226 to replace, the 3rd Avenue garage will cost $30,049,222 to replace, and the 9th and Penn garage will cost $15,485,988 to replace.
FSG instead used numbers provided from the Parking Authority (exhibit IV-A.9). They estimated that the 9th and Penn garage would cost $15,854,674 to replace, the Ft Duquesne garage would cost $29,164,121 to replace, and the Smithfield Liberty garage would cost $18,893,279 to replace. Opportunities may also be available to sell one or more of these properties, as long as long term revenue projections are met.
What are the new garage rates?
The Board of Directors of the Parking Authority must set the rates for the garages. Attached are rates from the Council-Controller plan which may be used as a starting point for the purpose of the discussion, and for the purpose of the Parking Authority working as a partner with the City of Pittsburgh to protect the financial health of our city, workforce, and residents. Less than a third of the garage spaces downtown are owned by the Parking Authority. The proposed rates suggest the Parking Authority adjust its pricing closer to downtown garages, i.e. “market rate.”
As you can see in the attached document, the rates at both parking meters and garages that were proposed in the City Council plan are lower than the rates you proposed in your privatization effort. In fact, in no locations does City Council propose rate increases greater than you proposed and in some areas the Council proposal is 67% less than the rate increases you proposed.
When will the new garage rates go into effect?
Council has no control of when the new rates go into effect. The new rates will go into effect as soon as the Board of Directors of the Pittsburgh Parking Authority votes to put them into effect. Of course, the sooner you implement the increased rates, the more money the Authority will realize. City Council passed a parking plan at the end of the year. It is now a quarter of the way through they year and no action has been taken by your administration. The sooner the Board of Directors of the Pittsburgh Parking Authority meets and begins to address these issues, the better off the taxpayers of our City will be.
Provide a clear financial analysis proving the amount of revenue that the garage rates increases can generate and be transferred to the City. This analysis should include any operating, maintenance, and labor costs resulting from the rate increases.
The suggested garage rate increases would yield free cash flow in the amount of approximately $2,120,000 in 2011 increasing to approximately $8 Million annually by 2015. The detail can be found in the Finance Scholars Group study as amended to accommodate the lower rates suggested by the Controller-Council plan (EXHIBIT IV-A.1). Other supporting documentation can be found in the Desman meter study, the Desman garage study, the Scott Balice study, the LAZ study, the Morgan Stanley study, the JP Morgan study, the concession agreements, the Tim Haas engineering study, the P4 Partners study, the Parking Authority budget, and any other studies that your office did on the matter.
All members of City Council worked tirelessly during the past year to avert a state takeover of our pension system, a goal you publicly stated that you supported. This was done by dedicating a funding stream from the parking tax to the pension fund.
In order to reach the 50% funded level, City Council transferred $45 million dollars from the debt-pension trust fund to the pension fund. The City also irrevocably dedicated $13,376,000 from the Parking Tax to the pension fund every year. This increases to $26,752,000 a year in 2018, when the City’s debt payment drops by $18.6 million. In order cover this year’s budget gap, City Council transferred $12,076,000 from the fund balance to the 2011 budget and increased the Parking Authority PILOT payment by $1.3 to $2.6 million in 2011. The Parking Authority PILOT increases to $9.3 million in 2012 and beyond. The rates for garages and meters outlined in the City Council plan will result in an additional $9.8 million in additional annual revenue for the Parking Authority by next year, which more than covers the increased PILOT payment. By 2015, the Parking Authority will be receiving an additional $18 million in new revenue, which is much more than the additional $8 million in PILOT payments. This will also result in an additional $900,000 in parking tax revenue for the City.
As you can see from the brief overview, the City’s budget is sound and all the money that was approved by City Council, the Oversight Board, and Act 47 Coordinator for the 2011 Capital Budget is there. Council’s plan was endorsed by the City Controller, approved by the Intergovernmental Cooperation Authority, and supported by the Act 47 team. As this letter clearly outlines, there are actions that now must be taken by your administration and the Parking Authority in order to continue to avert state takeover and also avoid unnecessary tax increases or reductions in services. However, if your administration continues to delay the implementation of this plan, Council cannot be held responsible for the reduction in City services and the increases in taxes that you would need to implement.
Cc: President and All Members, Pittsburgh City Council
Chair and All Members, Intergovernmental Cooperation Authority
Act 47 Coordinators
City Controller Michael Lamb
Finance Director Scott Kunka
Thursday, March 17th, 2011
Posted by Bill Peduto
You may have been reading articles about the city’s budget missing $25 million (see here and here). You may have also read about short term problems in getting the Administration to implement last years Pension Plan (click here). If you are aware of these issues, then you are probably also aware of the breakdown with the Administration over the joint purchase of a Financial Management System with the County (here and here). So, what does all of this mean and how is it all connected?
As you know, City Council, the Controller, Act 47 and the Oversight Board worked together last year in order to meet state requirements for the funding of our troubled pension plan. Although there was a strong effort to get the Mayor to join us, the Administration held fast that the ONLY solution was through the leasing of our parking assets for fifty years to a Wall Street consortium. Independent economic analysis proved this would be one of the most costly options the city could choose. The plan approved by Council and others would raise parking rates a portion of that proposed by the Mayor and use those funds to get the pension plan to over 50% funded. Unfortunately, the Mayor-appointed Parking Authority has taken no action and now the required funding of the pension plan is in jeopardy.
During the budget debate, the Mayor proposed spending $25 million from the capital budget in 2011 (see here). This coincided with the Controller’s Comprehensive Annual Financial Report (click here) from earlier in the year and with the Act 47 approved Five Year Plan (here) from 2009. However, with funds needed to purchase Police vehicles last month and needed infrastructure projects ready to begin, the Mayor’s Office stated that the capital budget funds had been allocated. In any other city, this would be easily determined by utilizing an ERP system (explanation here). A modern, transparent financial management system is standard in all major cities and corporations. But, not in Pittsburgh government – yet.
Late last month, the Oversight Board took action against the city for failing to implement an ERP system (click here for more). Despite work on the project since 2007 and the implementation with the County being the first priority of the 2009 Act 47 Five-Year Plan, nothing had been completed. The Oversight Board held $13 million in city gaming revenue and required that the city sign an agreement with the county – so Pittsburgh could have transparency in budgeting. The Mayor’s Office never sent an agreement, so the Controller and Council sponsored the agreement. We are ready to approve it today. Without a Financial Management System it is impossible to adequately track transfers from accounts, reimbursements from other government agencies, or potential shortfalls or surpluses. An EPR system is absolutely critical in order to maintain the separation of powers and assure proper checks and balances of city government.
Without the approval of the Parking Authority to enter into a new Intergovernmental Cooperation Agreement with the city, the city’s pension fund will not meet the requirements agreed to by Council, Controller, Act 47 and the Oversight Board. Without the funds from the Parking Authority, the city will need to come up with nearly $15 million in new money. By not spending funds allocated to the Capital Budget for needed long-term needs and by transferring the funds from accounts with surpluses to other accounts, a short-term fix could be made to come up with those missing funds. In other words – robbing Peter to pay Paul. Finally, without a modern, transparent Financial Management System, these types of actions can occur without oversight – even with TWO Oversight Boards. The perfect storm of financial mismanagement – the type of games that caused this city to become financially distressed to begin with. A failed system that has to end today.
Today, City Council has the opportunity – the responsibility – to end politics as usual in Pittsburgh. We can approve an agreement with Allegheny County to create a joint City-County Financial Management System. Implementing an ERP will provide the city with an open, real-time system for all financial matters. We can work with our Oversight Boards to audit all past transfers and assure that they meet government standards and our five-year plan. We can begin to compel the Ravenstahl Administration to implement the Pension Plan that was approved by Council, the Controller, Act 47 and the Oversight Board. We can begin to create a six-year plan for our Capital, Debt and Pension costs – one that will assure we meet our needs and our budget. And, we can look beyond six years into the future – when our debt payments become much lower and the opportunity for long-term financial stability becomes a reality. We can do all of this today – more importantly – we must.