Sunday, August 31, 2008

Oil Drum

For those who have not see it, probably the best site to discuss energy and energy policy to include the impact of the hurricane on US oil production... see The Oil Drum.

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Saturday, August 30, 2008

Beyond cable news: Hurricane watch

The wonkish way to keep track of hurricanes is from the folks at Colorado State University. Their current compilation of model predictions for Hurricane Gustav has in one picture more information that you will get from any cable channel.

Scary.

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Friday, August 29, 2008

for labor day

Lot's of misconceptions about the scale of unionization in the Pittsburgh labor force. With the decline of steel and heavy industry, the rate of unionization in the labor force has dropped as well. Most still don't believe this when I point it out, but unionization among local workers is under 14% which places it about average among large metro areas.



Union membership as a percentage of total employment for the top 25 metropolitan statistical areas in 2007

Compiled from latest data in the Unionstats.com.

And that is unionization among all workers. Private sector unionization is even lower for the region, around 10%.

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Thursday, August 28, 2008

Foreclosure-less Burgh again

Remember, foreclosures in Pittsburgh are already a fraction of the rate just up the 'Pike in Ohio. Yet the story today is that Pittsburgh area foreclosures dropped 29%. The funny thing is that if the story was that foreclosures jumped by 29% people would think it was a huge story. That we are so far below the national trend and dropping is actually a much bigger story. Ironically, what was a PG headline today?: ".... millions facing foreclosure.....".

I have in the past highlighted the difference not just between Pittsburgh and Cleveland, but between all of Western Pennsylvania and the nearby parts of Ohio. The foreclosure wave goes right up to the PA-OH border. Then it's like night and day and clearly represents some very different financial environments in the two states. Some say it's because we didn't have the speculative bubble in real estate here. That may be true true, but that is just another effect not an explanation of the cause. Why was there not a speculative bubble here? The two regions are just not disimilar enough to account for such a difference in how the two regional economies are doing.

Pennsylvania has clearly done a better job at inhibiting the predatory type of sub-prime lending that caused so many problems elsewhere. There is a big story in how consumer protection may have been the tool that could have prevented the crisis in the real estate market.. a crisis that has been the catalyst for the now-global financial industry miasma. It really is a topic right under our noses that nobody has looked into in depth. I have wondered why there isn't anyone in Pennsylvania highlighting how low the foreclosure rates are in parts of the the state.... but there is a problem with the politics of that. There still are foreclosures out there and a politician highlighting the low rate of foreclosures here would be at risk of looking callous toward the many who are experiencing foreclosures. So a good risk averse pol will stay away from what is a topic that has more downside than up. It's understandable, but it means that as they try to figure out how to prevent such massive market failures in the future there will not be any lessons learned from the natural experiment staring us in the face.

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labor news roundup

With the factfinders report about to come back, news coverage of the Port Authority contract negotiations might heat up a bit. I thought it would be interesting to look at what is going on in the world of labor management relations elsewhere:

  • The United Steelworkers of America recently agreed on a new contract that will be the model across the industry. The details are not fully disclosed, but both sides seem to agree that it provides "very significant wage, substantial bonus and pension increases and improves benefit programs for active employees and retirees." Pension increases? The ATU needs to hire those USW negotiators.
  • Looking at public sector unions, in New York City Mayor Bloomberg has achieved what the NYT considers an historic level of labor management amity by concluding a contract with police unions without resorting to arbitration that has multi-year 4% annual pay increases and some unspecified increases in benefits.
  • or looking more specifically at transit. Down in Miami there is a funny story about what their local transit union is doing in response to a cut of 16 little used bus routes there. 16 routes? How many routes were cut here in Allegheny County.
  • Pay raises in Minneapolis averted a potential transit strike during the upcoming Republican convention.

  • Not all is well however near Akron where 55 drivers are set to strike.

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Wednesday, August 27, 2008

manning the barricades at 200 Ross

Like many others I can't really make sense of the news out today that Pat Ford released a resignation letter of sorts to the media. Neither the purpose of the letter nor its particular content make much sense on the surface. I really just want to ignore this because it's all just so odd.... but there is one thing.

What really irks me is that the letter talks about how "people perish" at one point and about "loyal soldiers". Perish? Soldiers? Who in their right mind drafted that language?

Seriously, someone needs to lay off the martial language. I know some consider public policy a contact sport, but that letter is more than a tad bit over the line. If Pat Ford or his attorney really wants to act tough I think I can find a Marine recruiter in town who might be willing to talk to them.

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Tuesday, August 26, 2008

Transit Tuesday - otherwise known as 'fact of the day'

I didn't really want to argue one on one with KZ and his new blog on transit issues, but he parrots the oft-repeated statement that Port Authority workers are the highest paid in the nation. I't just too superficial a comparison to leave on its face. To be fair, he is not alone. You wouldnt have to look far to find a few quotes from folks claiming that the Port Authority has the highest paid drivers in the nation. Even the Post Gazette had this quote in an editorial saying that the Port Authority workers....:
"the highest top hourly wage of any metro area when adjusted for cost of living"
Top hourly wage? of ANY metro area. Really? I'd challenge to PG folks to find the reference that has adjusted wage levels for transit drivers for each and every metro area in the nation as they claim. Sure makes it sound like the local operator wages are off the chart when compared to everywhere else.

Here is the ranking of bus operator wages per hour for the major transit systems in the nation. I have put the Port Authority's ranking in red. The Source is something called the "National Transit Database" and if you want a full PDF version of the illustration you can click here. The full file has the individual trans agencies listed.


So is the Port Authority average wage on the high side, yup, but certainly not the highest by any means. Cut a few percentage points and the wage would drop a lot further in that ranking.

Here is the thing that goes unmentioned. Of all the transit agencies in the nation I bet the Pittsburgh area has had the lowest population growth in recent decades. Thus the Port Authority sufferes from an afflication of most industries in the region that are population dependent and thus have not had much growth in decades. I bet that if you compared the Port Authority to all other transit agencies, a smaller proportion of their current workers have been hired in the last 10 years than elsewhere. Why does that matter? I bet a lot of the transit agencies that have lower average wages are really places where they have a lot of junior workers whose wages are on the lowest part of their salary scale. Thus its not a fair comparison at all to say that one transit agency's entire compensation system is . Like a lot of things affected by our extreme demographic, this is one of them I would put good money on. If true, this type of ranking is saying nothing more than the Port Authority's workers are older and more senior than their colleagues working for other transit system. I am sure the Port Authority would love to get rid of its oldest and highest paid workers, but there are these little laws against age discrimination that would get in the way even if their labor contract didn't prohibit that selective type of layoffs.

This is a big issue for a lot of private sector industries as well, but is very much at issue in a lot of public sector workforces that derive their 'demand' from the population size. Lots of local school districts have some fairly senior workers as well, expecially compared to places in the South and West which have seen the fastest growth in recent decades. If you look at the full file, you will see a lot of those lowest paying agencies are in Florida or other places which have seen the highest population growth in the last decade.

So why do they keep getting away with the metric that the Port Authority's wages are 'highest'. First they don't compare themselves to the all transit agencies in the nation, only a subset of transit agencies around the country. Then they 'adjust' the salaries for regional cost of living differences using something I use often which is the ACCRA (now called COLI) cost of living index. That is fine for many things, but that index explicity states it is for higher income professional households who are likely to be choosing between different regions to live in. I think that disclaimer pretty much disqualifies it from applying it for blue collar bus operator wages whom I doubt are being recruited by transit agencies in other regions very often... It's just not the right metric to use in this case. Ironically it would be the right metric to compare Steve Bland's salary to other transit leaders and anyone truly considered professional 'management' at the Port Authority. Funny how this adjustment is not applied to the analysis of management salaries.

Even so, why not use that same 'adjustment' when looking at everyone else's wages and salaries. I bet you yourself would be shocked at how your wage comparesif adjusted by a similar means and compared to the same regions used to compare Port Authority operator wages. Most everyone in the region would be considered overpaid if we applied the same methodology for other occupations, something I doubt we agree with without deeper inspection.

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Monday, August 25, 2008

PAT doth protest too much

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Sunday, August 24, 2008

Wettick Waiting (not much longer?)

Many people have forgotten the legal case in which Judge Wettick ruled against the constitutionality of the base year assessment system presently in use for property assessments in Allegheny County. It also happens to be the system in use throughout most of the rest of the state.

Per the State Supreme Court docket for the case, it looks to me like oral arguments in the base year assessment appeal were finally slated for scheduling last month. Maybe I missed something in the local news, but I see no mention of the case's status anywhere. This is big big big news! Consider that if Judge Wettick’s ruling is affirmed then it could throw asunder the basis of local public finance in just about every county, municipality and in particular every school district across the state. I really am befuddled why it has not received more coverage than it has. not just here, but elsewhere in the state.

I have discussed some of the oddities of local property assessment history in the past here, here, and here among other places. So I'll skip the history lesson which really is important though in understanding how we got to this point.

I will leave the legal merits for other to argue over for the moment, but I myself would be incredulous that the supreme court would rule in a way that would upset decades (arguably centuries since the basis of property tax collection in Pennsylvania goes back to the 17th century I do believe) of public finance status quo. At the same time I am told that Judge Wettick has never been overruled on appeal. I can't confirm that myself. How those things balance out, or whether they matter at all I dunno.

Property assessment a single policy issue that affects nearly everyone in Pennsylvania. Every homeowner in the state could see vastly different tax (some higher but some lower) than they have received for decades in some cases. Even if you are not a property owner, nearly every school district and municipality in the state relies on property taxes and could see a vastly different tax base if statewide mass reassessments were mandated. And while this would all be seminal for Pennsylvania, it really is the standard elsewhere. What is ironic is that for how lax Ohio has been at regulating subprime loans and predatory lending to the degree that global financial markets have been impacted, they have been great at implementing property assessment standards. Ohio properties must be assessed every 6 years I do believe, thus inhibiting the type of asymmetries that define property assessment across Pennsylvania.

and I won't even begin to address the political implications of all of this.. There is going to be a governor's race not too long in the future. Could this be issue number one in that race? Depends on what the Supreme court eventually decides. Given the glacial pace of the entire assessment case, even with an expedited appeal to the supreme court, I can't begin to predict when that final ruling will come.

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Small-car Burgh

News last week about the GM Cruze, the new small car that GM intends it make at it's (Greater Greater) Pittsburgh area Lordstown plant... just over the border in Ohio. Lordstown may not technically be in the Pittsburgh MSA, but it isn't far and is a big enough plant to have an impact on the local economy. So file this under 'Cleveburgh' posts.

I hate to sound a pessimist, but it's hard to shake the decision Volkswagen made to build the Rabbit in Westmoreland County following the gas crises in the 70's. That and I just saw a $3.20/gallon gas at the pump. It wasn't in Pittsburgh (I am away) but I really have to wonder how long before the energy mania is forgotten by many. That and it really puts in perspective the energy prognostications of even, or especially, the experts out there. I swear I heard someone last month say that even with some drop in oil prices the US consumer will never see $3/gallon again. There may be places in the US next week with market prices pretty close to $3/gallon.

There was grumbling when gas was $3/gal, but it was not really the news story that it was until gas prices peaked at over $4/gallon and looked to be accelerating upwards. If parts of the country are already back to $3.20 and possibly dropping... you just have to wonder.

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Saturday, August 23, 2008

The view from Milwaukee

Just for fun: A Tale of Two Cities: Milwaukee vs. Pittsburgh from OnMilwaukee.com.

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Thursday, August 21, 2008

Gaming research online

So who knows when we will ever need this here at the rate we are going, but a great resource on gaming research from the University of Alberta's Gaming Research institute is online here. The section listed as 'reference sources' is particularly useful, but there is a lot of other stuff as well. I may try to use the online chat interface they have set up to query their librarian someday. If he could only answer "When will a casino open in Pittsburgh?"

That and more learned from the latest issue of the Journal of Gambling Issues.

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Wednesday, August 20, 2008

Here comes the media...

Many have seen this, but the fall election must again be approaching. The New York Times looks at voter attitudes in Beaver County. I don't think the one story says much in itself, but the more people think Pennsylvania is in play in the fall, the greater the national media coverage will be.

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AHERF again and again

The CP's politics blog comments on the recent news of trouble at AHERF and its outstanding debt. Some may not even know what AHERF was and think UPMC was the only elephant in the room in the local health care system. There was a time when Allegheny General Hospital had grandiose visions of being and had expanded via acquisitions and merger to be a player in health care on both ends of Pennsylvania. Such a big vision needed a bigger name and AHERF, or the Allegheny Health, Education and Research Foundation, was that brand. It was a plan that pretty quickly collapsed under its own weight. Out in Philadelphia, people are still mad at the destruction it wrought on the health system out there when the system plunged into bankruptcy. In typing this I wonder, AHERF in some form must have been bigger than UPMC for some brief period of time? I'd have to check that, but it seems like it must have been true.

AHERF is worth thinking about again. Lots of talk of public sector bankruptcy around the country as I have been pointing out. Some may not realize that AHERF's bankruptcy was filed under chapter 9 of the bankruptcy code. Thus in the eyes of the law, it was a public entity like a government in some ways. I simplify of course, but it's worth remembering. That and for everyone who tells me chapter 9 bankruptcy can't happen around here... there was a time when the concept of AHERF going bankrupt was pretty inconceivable.

What is also worth thinking about, because it shows. The financial calamity of AHERF is not ancient history in that it was only last year that the final financial issues from the bankruptcy were unwound. You would think they would have learned from all that, but some cycles are forced to repeat themselves, thus the references in the first paragraph.

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Tuesday, August 19, 2008

Bankruptcy all around

Here is the first question of a referendum that residents of Jefferson County Alabama might be asked to answer in the fall.



"Jefferson County confronts a crisis involving a sewer debt of $3.25 billion that was incurred under court order pursuant to the federal Clean Water Act. Which of the following courses of action should be taken by the county? Select One:


  1. Attempt to implement a plan under Chapter 9 of the federal bankruptcy law that would repudiate all or a significant part of the sewer debt.

  2. Default on the payment of the sewer debt and accept the appointment of a receiver for the sewer system with power to raise sewer rates within the limits of the law to remedy such default.

  3. Pay the sewer debt in full by reducing the amount payable from sewer revenues and using various tax revenues to pay a portion of the debt. "

First off, which answer is the average taxpayer or sewer bill payer going to choose if that is the way the options are presented? What would local residents ask if some version of that was asked of City of Pittsburgh residents? I find the introductory sentence pretty amazing. I guess ranting about 'unfunded mandates' would come across as too esoteric for voters. And just what is someone voting for if they pick option #3? What exactly are 'various tax revenues' and what exactly does a 'portion' amount to.

It really is true that semantics matter in referenda, just ask the folks coming up with competing versions of how a drink tax referendum will be phrased. That's something I have been trying to avoid as a topic, but there is an odd odd thing in some of the proposed referenda wording that I will get to in the future.

Bankruptcy is a timely topic, not only because of last week's news on the Pittsburgh pension liability, but also check out the letter to the editor in the Post Gazette last Tuesday suggesting that the Port Authority just go bankrupt. So as not to repeat myself, I have touched the surface of the legal morass that would result if the City of Pittsburgh were to enter into a formal federal bankruptcy. That was in Why Vallejo Matters, and Why Vallejo Matters part II.

I saw the letter to the editor from KZ's new blog on the transit negotiations (http://nocommuterleftbehind.wordpress.com) where he also discussed the letter to the editor. BTW, I really wonder if there is any official ATU blog out there, I've seen a few ATU friendly blogs, but as best I can tell nothing on the web site of the local ATU (driver's union) web site has been updated in years. One thing that is indisputable in these Port Authority contract negotiations, one side has an extensive public relations strategy and a well funded strategy at that... the other side is MIA on the PR front.

But the legal issues over a potential bankruptcy are even more muddled for a public authority like PAT than for the City of Pittsburgh. Could PAT go bankrupt? It certainly isn't impossible. Would the buses have to be sold off to pay off the accumulated health care liability that PAT didn't fund? What it would mean in the end is just too hard to quite figure out and the precedents for letting a large transit agency go into a Chapter 9 Federal bankruptcy are hard to find. I would say the one example is one from my first public finance class long ago which is the case of the Washington Public Power Supply System (WPPSS). Who ever let that be name exist, and the acronym it engendered ought to be fired since it is forever sounded out as 'Whoops'. But it was one of the classic examples of bad forecasting in itself and resulted in one of the largest Chapter 9 bankruptcies then and since. There was a time not long before it happened when the concept of WPPSS going bankrupt was completely inconceivable.

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Monday, August 18, 2008

Transit metrics

The Pitt news had a story a while back on the pending Port Authority strike (the ‘pending’ is my description). It has a quote on how rising fuel prices are hitting the Port Authority's budget. No doubt that is true. Their quote is that for every cent fuel goes up their budget takes an $80K hit.

Port authority contracts for their fuel and I assume its an annual contract. According to that article, the Port Authority's fuel contract is due to be reset and their diesel prices are slated to rise from the $2.27 a gallon they have been paying recently to $4.27 a gallon. So a rise of roughly $1.70/gallon which at $80K/cent gives you ~$13.6 million additional fuel cost for the upcoming year. .

But what about the increased revenues???? Take the story from the weekend that Port Authority ridership is up 6% July over July. It's odd that the Port Authority goes out of its way to tell the public about their higher fuel prices, but fails the mention the increased revenues higher ridership is bringing in. Isn’t that part of the financial equation?

So for all the assignment editors out there, don't you think there is a story out there in what the percentage increase has been in farebox collected revenues over the last 6 months? Seems relevant to a lot of transit issues these days, not the least of which are the contract negotiations ongoing.

Can we guess at that? Making this overly simplistic, but assuming that the bus service in the short run is very much a fixed cost industry. That just follows from the number of routes and buses being the same even if ridership bumps up. At some point they would have to add buses but I doubt that is happening much just yet. So the added riders are mostly net new revenue. Also assuming that the marginal rider is mostly a full fare paying person. That I know isn’t true and maybe I’ll come back to that. But you figure the person really being pushed to not commute by car is someone who does not have a free or discounted pass already.

Round trip fare per day: $4 (which is lowball for the full fare, zone 2 and 3 fares go up to $6.50/day.. but I am ignoring the discount factor for monthly/annual passes so maybe the two assumptions balance out a little).

250 days of typical daily commuting per year. So I am undercounting by not even taking into account weekend ridership which is lower, but also increasing at a much faster pace in recent months. =$1000 per new full fare paying rider per year. To cover an $13.6 million dollar gas charge you need 13,600 new full fare paying daily commuters.

Funny how that number comes awfully close to the 13,379 increase in average weekday ridership being reported. Increased weekend ridership would provide additional revenue on top of what I calculated above. You have to wonder how much ridership would be up if routes had not been gutted by such a large magnitude right as the demand for transit ridership was about to spike up. Like a lot of things in town, even things that make sense to do here are done at the completely wrong time. Fighting the last war is another way to think of it... We're good at that around here.

Also consider the fact that the higher fuel prices have not been hitting the Port Authority's bottom line through the year. They contract fuel on long term contracts, so the cost side of the equation is only really going to hit them going into the future, yet they have been collecting the increased revenue from higher ridership for months now at least. Ridership has probably ramping up over the last year.

So yes.. I could be and probably am wrong on the back of the envelope calculations above. Why do we need to guess at things? Is there any reason at all the Port Authority could not put online in near real time its ridership and revenue numbers. It is a public authority after all. Wouldn't it make so much more sense to do that fairly trivial-to-implement bit of data disclosure vice going to the time, effort and expense to produce that biased "Rumor of the day" web page and associated web site. Think about it. I bet it's an order of magnitude cheaper to put online revenue numbers they already have collect compared to what they are paying someone to first come up with some 'rumors' to then to refute them online.

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Sunday, August 17, 2008

Not your parents Bloomfield

No policy discussion here. Only one number mentioned in passing. Just feeling old I suppose........

A few months ago there was a column in the Trib by Joe Mistick waxing poetically on Bloomfield and all things neighborhoody in Pittsburgh. So lest we forget that the city is not defined by the goings-on down on Grant Street, I think I will pile on.

I am a bit flabbergasted by another headline in the Trib last week that has the number '$300 million' and 'Bloomfield' in the same sentence. The story was just about the development being planned at the former Don Allen site at the corner of Baum and Liberty. See: Zoning board postpones ruling in $300 million project

I'm flabbergasted because $300 million represents a lot of change concetrated in one small section of the city. I guess its visceral to me because it still is true that I can pick a spot on Liberty Ave. and with a swivel of my head look around and see the places where I was born, baptized, and went to grade school among other things. There are an awful lot of visual cues that look identical to the day I was born. Granted, Autenreiths is long gone, there was no Thai food in Bloomfield long ago, Gordons Shoes has moved out to the Waterfront and the apostasy of a Dominoes Pizza in the heart of Little Italy is over.. but things ‘look’ the same. Thus for years when people would say to me Bloomfield was changing I would quibble and say that only on the margin that might be true, but at its core its still the same place. That many I grew up with had moved away was not news to me, but I realized about a decade after the fact that even most of their parents were gone as well.

How big an impact will $300 million have? Urbanidesdev on the Pittsburgh Rundown thread on the Skyscraper page posted that full plan for the former Don Allen site. Ambitious would be an understatment. See.

Developments like this are always unique and it may not make sense to compare this plan to things like Bakery Square or 'Eastside'. In fact the difference here is just how close in to residental neighbood this is compared to either of those. Bakery Square is taking advantage of the defunct old Nabisco plant on a stretch of Penn Ave that is mostly institutional. Eastside as it were is mostly on top of what was the parking lot for Yellow Cab for decades. On one side is mostly commerical/institutional development in East Liberty. As the crow flies it is close in to residential parts of Shadyside, but parts that are seperated pretty cleanly by rail and bus lines. Even the Children's Hospital development is really a massive infill of what was a large hospital. So from a sheer neighborhood transformation perspective, this one project is pretty different.

Add to that the planned expansion of the Hillman Cancer Center, let alone the nearby construcion of Childrens Hospital and it really adds up to a lot of development. Actually I was shocked a couple months ago when I saw a listing for a house nearby. When I bought my house in the mid 1990’s there were several houses for sale on a single block at the border of Friendship and Bloomfield (let's not even get started on neighborhood definitions around here). At the time the price for each of them was close to $50K. I saw one listed recently for over $300K.

Even the Bloomfield Bridge Tavern is documenting the change in its own way, and I suppose nothing will bring Winky's back?

Have not had a contest here in some time... who knows where Autenreiths was?

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Saturday, August 16, 2008

Fleeing the scene

KDKA had a video on how many new Pittsburgh police recruits wind up jumping ship and leaving to work in other departments soon after they graduate their initial training. For more see: Pittsburgh Police A Training Ground?

The lost investment that the city makes in employees it can't retain is an issue, but not the real issue that story uncovers. I keep being told that these city jobs, especially police and fire are some of the most plum sought after, highly paid, over-compensated jobs there are. Yet people vote with their feet as they say. If getting one of these jobs is tantamount to winning the lottery that requires immense political pull (as some believe), why are the folks who finally get these jobs walking away from them in droves, especially long before they vest in any of those benefits? Is the labor market proving all those slogans long since overcome by history.
Now I believe the city will always get some recruits to fill their rolls, but the issue will always be getting the right recruits for the job. Police and fire as well as lots of other jobs vital to public safety can't be the employer of last resort for folks looking for work. It makes you wonder what the impact of benefit cuts, greater restrictions on overtime pay and other Act 47 related impacts, either those implemented or expected in the future, are impacting recruiting and retention of city workers. Maybe there is an impact to working in a department down over 30% in total number of cops on the street in the last 10 years, I bet violence on the streets has not declined by that much over the same period. Anyone want to bet there is a lot of self selection going on in who chooses to stay and who is leaving the Police department. It's true in lots of industries that your best employees are the hardest to keep.

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Friday, August 15, 2008

pension update and clarifications

News is that the total city pension fund is now at $330 million, down a remarkable $55 million over just 6 months earlier in the year. At that rate the fund is going down $110 million/year which sounds awful and will not last long. Because of the timing of city and state payments, the current annualized burn rate comes to be more like minus $55mil/year. At that rate we are now exactly 6 years from a zero fund balance in the fund. Hopefully the market does not sustain its downward trend and the city will certainly be forced to increase contributions (that is a story unto itself) so that 6 years may be overly pessimistic, but things will be quite insufferable years before the funding ratio reaches absolute 0%. That and parts of the pension fund, especially that for retired police officers will run out of money long before the other parts.

Some may recall my most recent pension manifesto. The punch line was that pension liability in itself for the city of Pittsburgh has for the first time reached over a $Billion. I am told that the city disputes this a bit and that the total pension liability is only $899 million which is what you see reported.

That's fine, but here is the deal. There are different ways to measure pension liability. One measurement is the present value of future payments . A second valuation is the accrued liability. Both values are clearly itemized for a reason on the page 3 of each of the actuarial reports for the (Fire, Police and General Municipal) pension funds. Here is what the two different definitions give you as of January 1, 2007 (still remember 2007) for the city of Pittsburgh.

Present Value:

Accrued Liability:

Which is the better number? The higher PV calculation takes into account the future investment costs that the plan expects to have. There is a weird angle to this. If you are a pessimist like me to think the pension funds are draining away going into the future then its likely the investment costs will be lower than expected as well. So it's contradictory, if you are a pessimist, the lower value is better and if you are an optimist about how the pension funds will be faring over the long run you ought to believe the higher number for the total liability. So the best number may be somewhere between $899 million and $1.04 billion. I hope nobody feels comfortable thinking that the liability is only $899 million. Arguing about which one is better is quibbling while Rome burns. Realize at the very least that the low funding ratios that get reported in the news are the higher of these two possible valuations.

However, I would admit a bad graph in that I do what I often catch others doing either inadvertently or intentionally of mixing and matching data. That is always an easy path to bad analysis. In one chart I mixed past data with the lower version of the pension liability over time with the higher current version. So to be consistent here is the time series of the AAV version of the pension liability for the City over the last decade.

I think there is still a trend in there? It was however, not as big a jump this last two-year cycle as my first graph made it appear. Half of that jump was my mixup of the two definitions of liability calculations. Still, that trend is there. There are reasons to think the trend is still there (and some to think it may not), but barring an historic reversal there has been roughly a 3% increase annually over this period. So even with the lower number and extrapolating from 1/1/07 we are still awfully close to a full billion dollar pension liability.

And even assuming that the total liability number is the lower version, and has not changed at all since Jan 2007, then with $330 in assets the unfunded liability is just under $570 million, not the $462 million that was quoted in the news as recently as July.

It's a sidebar that these reports actually calculate future payments and investment appreciation based on the assumption that the fund will eventually get to be fully funded. That's not an error, but it's optimistic when you realize that that same assumption has been behind every actuary report since they began doing them under current statutes in the 1980's. Somehow the funding ratio has not been marching toward nirvana.

Here is the time series of the asset levels in the 3 major city pension funds. No disputes over definitions there.. money is money. There have been some periods when the stock market has done remarkably well and the pension fund has generally held its own. In flat or declining markets the pension fund has sunk.

So you have to ignore the one big jump in the late 1990's. Some know the history that pension funds for the city were due to run out of money completely in the late 1990's and the solution put forward at the time (by the Competitive Pittsburgh Task Force and by others) was to float a large bond, put the money into a balanced investment portfolio under the assumption that it would appreciate to the point of funding the pension system more fully. So that graph is supposed to have been marching upward. That has not exactly worked out as it was planned, nor is likely to at this point barring truly historic bull markets or other significant changes to how the pension system is funded. .

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Thursday, August 14, 2008

Braddock

JimR points to a link with a very moving documentary on the changes impacting Braddock, Pennsylvania.


I really can't add to that in any meaningful way. There is one little angle to the Braddock story that gets lost. These days most consider population loss in Braddock the result of industry decline which isn't really the core. If you look longer term at the numbers, Braddock's population loss was well entrenched while the local Steel industry was doing well. Local workers were able to move out into newer suburbs as their wages went up and did so long before the 1980's. I'd say the bulk were long gone from Braddock itself by the time the steel related job losses accelerated. It just highlights how difficult the problems in Braddock are being both an inner suburb losing population to further suburbs, and being at the center of the steel industry's implosion. It's an important point to understand Braddock's future as well as it's past.

But whatever the causes, the factoids about population loss in Braddock are stark and true. Braddock's population was once over 20K, by 1980 its population was already under 6K (so over 70% of the population loss came before the real implosion of steel employment in the 1980s's) and today is to be under 2,700. Not many places in the US have had demographic demontage on that scale.

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Wednesday, August 13, 2008

No Air... No Air

I can't resist this. Kind of tongue in cheek, but a funny story in Wired about how the tire gauge industry supports Obama for president. The tire gauge industry? I wonder if they have a lobbying group. I am reminded of the proposal former state rep Frank Pistella floated to require gas stations to provide free air, which is about as painless a gas saving idea as you can get.... and that was floated before the bulk of the recent run up in gas/oil prices. Probably too simple an idea for the folks in Harrisburg to focus on. Anyone try to find air at your local gas station turned convenience store recently. Whether for gas conservation or sheer safety it's a good thing to do a lot more than most of us do (because we can't find air?)

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everyone needs a job

Small newsoid today saying former City Councilman Len Bodack has only now resigned from the Pittsburgh Water and Sewer Authority because he is applying for a job with them. Not quite sure which of the jobs they have listed online he may be interested in. Either Director of Engineering or Part time Customer Service Rep both seem out of line with his interests or skill set? Seriously though, the news blurb says this all came from a letter Len himself sent out announcing this. Any reason the Water and Sewer Authority (a relatively large government by Pennsylvania standards) does not issue a simple PR on a change in its core governance. Almost any public corporation would be obliged to tell the public when a board member resigns. If a board member resigns and nobody knows about it, does it really happen?

Speaking of former council persons and public authorities. Looking at the ALCOSAN web page I was just wondering, is Michael Diven really still on their board?* Hard to tell from his bio online with them which says he is still a state rep and city appointee to the board. Hard to tell if its just an outdated bio or an outdated list of board members. Yes, I could probably make some calls and find out, but thats not the point. Actually, since I drafted this last week and right now it seems the Alcosan site has gone down, but here is the recent cache of board members, but maybe when the site re-emerges it will have updated info.

* Lest anyone really get bent out of shape over that. He isn't, but funny ALCOSAN didn't bother to mention that to the public for so long.

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Housing again

Another data source on housing prices with updated data now through the 2nd quarter of 2008 is from Zillow.com. Like most every other source it shows continuing housing price appreciation here when declines most elsewhere in the US are dire. But more interesting, and relatively new info to me is this detail in how prices are changing within the region. Take a look at the Zillow map of the region:




Which tells you something that is true for all of us who talk about region-wide metrics in any subject... what is going on in your specific neighborhood may be very different from what is measured for the region in aggregate. But overall the City proper is doing well compared to a lot of local municipalities and I am at a loss to figure how already near zero housing price in the Mon Valley are continuing to plummet.

Willow also has data for specific city of Pittsburgh neighborhoods. It shows Bloomfield one of the best performers over the most recent year at +10% year over year in value.... most of which came in just the last quarter. Eyeballing the map and matching it to that data seems a little odd to me. Looks like appreciation through a greater Bloomfield/Friendship/Lawrenceville nexus. Can you say Children's Hospital?

Another study out of note on housing is a recent NBER paper (subscription required): Housing Supply and Housing Bubbles by Edward L. Glaeser, Joseph Gyourko, Albert Saiz. NBER Working Paper No. 14193. July 2008.

That report looked at regional housing markets across the country. Pittsburgh housing is relatively cheap by another metric. According to the report Pittsburgh housing can be bought at over a 30% discount to what it would cost to build locally, one of the cheapest values for that calculation in the nation other than Detroit and DallasFort Wayne.

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Tuesday, August 12, 2008

Follow those stories

I really do not think I have anything to do with it, but it's funny to think if my past musings have anything to do with the news today that the city actually listed blaming problems with FSA bond insurance for their proposed bond deal being deferred for now. First time ever the FSA bond insurance firm has ever been mentioned in the local media I think.

But if there are problems at FSA, and its still a bit too early to say that there will be problems inpacting their credit rating, then there will be issues for both the recent variable rate SEA bonds and recent variable rate Pittsburgh Water and Sewer bonds. Hmm..........

******

just for those who have seem my musings on how demographics affects voter participation locally. See Political Arithmetic for the national version of the same.

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J-Watch

An anonymous commenter pointed this out, but Jero is performing at a free concert in town August 27th.

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Unsatiated Parking Demand

I have brought up the issue of how tight parking is Downtown more than a few times here. Even with the current price of gas that situation does not seem to me to have abated friends who do park Downtown tell me. That may be second hand anecdotal info, but the Allegheny Conference has another web site up related to the pending Port Authority Strike called: http://www.keeppittsburghmoving.com/ It has a slide on the state of parking Downtown which is pretty amazing. So even with the high parking tax, high gas prices, and difficult to find Downtown parking, there is clearly unsatiated demand for parking Downtown. Take a look:

If remotely correct, those are some pretty amazing stats. 150 open spots out of 21K available spaces is a vacancy rate effectively zero right Downtown. Is frictional vacancy a term? How many parking spots could spatially constrainted Downtown supply before running out of demand?

For those looking for parking price rollbacks when the city's parking tax has to come down further, you may be looking in vain. If that slide is true, I can't quite figure why Downtown parking operators don't raise their prices if their spots are really well over 99% occupied. That puts in a different perspective all those who complain about the high rate of the Pittsburgh parking tax, or parking costs in general. It's one of those fundamental axioms of a free market that things are 'worth' what folks are willing to pay for them. From that data, the completely market driven price for parking in the Golden Triangle must be higher (not lower) than what is being paid currently.... whether the money collected goes to taxes or operators. For O if nobody else, maybe parking taxes are a second cousin of a land tax?

You could say the market would provide more spots if the tax was lower, but you would have to ignore the sheer topography of Downtown which is about as dense as you can get at less than a half square mile. You would have to park cars at Point State Park (yes, I'm sure some would like that) or try something equally creative. There are few realistic options.

I have to wonder if the existence of quasi-regulated prices in the form of the Pittsburgh Parking Authority actually acts to keep prices down. and imagine what demand for parking would be if gas was $1.00 a gallon as it was not very long ago.

The only area that has any measureable vacancies at all is the North Shore, which I suspect includes some relatively distant stadia spots. Anyone want to guess what will happen to those few spots once the NSC and T extensions are completed?

Soo.... maybe its time to bring up the recurrent idea of selling off the Parking Authority. There was a time the city of Pittsburgh effectively sold off its water system to raise cash just to get it through operating expenditures for a few years, an immensely bad idea for the long run. If it makes sense to sell off core infrastructure like the water system (or the PA turnpike as has been floated as an idea), is there any reason something like the parking authority could not be sold off and use the proceeds to pay off some of the city's debt? Maybe just the large attended lots Downtown. The reasons the Parking authority was created in the first place 60 years ago are probably not still in play. Consider also that if a completely market driven price gets driven upwards, even a lower rate of parking tax could possibly bring in more revenue to the city in the end... and then there is this little issue of taking a significant amount of property off the tax exempt list.

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Monday, August 11, 2008

Continuing Transit Debate

Far more interesting than my original post, but there is a continuing debate and lots of comments in my post from last week on public transit issues and the state of Port Authority labor negoations. See the comments appended to the post from last Wednesday: Rumors on Wheels.

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Sunday, August 10, 2008

Sunday Roundup

PG forum section has a piece on what you get when you 'Google' Pittsburgh. It could have been inspired by what Governing had up last month on The Out-Googling of Governments.

no joke, I read Brian O's column on the quagmire of closing the gap in the bike trail system around Sandcastle right after coming back from some afternoon biking also stymied by the same bottleneck. It's a big deal to some of us. Part of me wants to say there has to be a solution to the problem of finding a narrow bike trail through the area, but if you have been down there it is really a narrow and congested strip of land. Call it spatially challenged. I'm sure there are solutions, but probably nothing cheap. My Seabee colleagues I am sure could plant an elevated causeway along the riverbank. I really wonder what that would cost. Too much I am pretty sure, but it's fun to think about. Might be worth the publicity such an architecture might get if built.


Grata talks about feedback on his piece recently when he talked about how absenteeism is up at the Port Authority. It does make me wonder, the whole point of his original article was based on how absenteeism is up in recent years and the strong implication that workers were just skipping work. Yet you can't quite compare recent years given the big changes in the law (Family and Medical Leave Act), military leave (nuff said), and other factors; all of which would be expected to have an impact on those numbers. I would be interested in how much individual sick days per worker (adjusted for age) has changed in recent years before drawing too many conclusions.


and if I could ever transform myself from the itinerant typist that this blog represents into a 'writer' I would try to be Bill Bryson I think. That just came to mind because of a reference in Toland's Next Page piece on Chinese, English and all things language. I still think there is an economic development strategy worth trying to issue visas to a horde of Chinese language teachers so that Chinese could be taught in every school in the region.

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Saturday, August 09, 2008

OpenPA

Gotta give credit where due. The Pennsylvania Treasurer has recently put up a searchable web database of state contracts. A big step forward in terms of open government and access. I can't quite tell how far back the dataset online goes, but it is better than where we were at before.

Anyone find anything interesting?

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Friday, August 08, 2008

Random Friday afternoon musings.....

PBT today touches upon the pension problems locally and across the state
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PG talks about the differing projections being made for what revenue a Pittsburgh casino would bring in. Not sure its a big surprise that there is a range of projections given how many unknowns there are. But if you want to look at a projection of Pittsburgh casino revenue that is at least objective in that it is not tied to any particular project or developer you can look at this study from a few years ago that said a Pgh casino would grow from 377 to 405 million annually over the first 5 years of operation.
*******

Maybe Pittsburgh is a desert? Missed this, but last week the Smoking Gun had an update on court filings in the case pitting a local household vs. Google over their street view program.

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Why are people always trying to blow up Pittsburgh. Governing has a proto-review of movie filming here that uses Pittsburgh as the background for a post-disaster wasteland. Great.

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An ADB put this up first, but I had seen this list worth burying on the fastest dying cities compiled by Forbes. How did we keep ourselves off that list?

*****
and from BFD... again just up the pike there is an interesting wiki project: http://mapthemess.net/wiki. There is an interesting map being generated of their ongoing corruption investigations. Yes yes, I know from innumerable emails I have received and indirect connections about the Pittsburgh Wiki project (not to be confused with the Pittsburgh Wikipedia project). It's a decent idea and I will keep an eye on it. Some years ago, a few readers of this blog set up a Pittsburgh development wiki, but I think it withered because I just didnt have time to help out much. If this new wiki goes over well, I may need to revisit the old idea.

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eye on the media

Just my two cents, but it seems to me that the media has a hard time reporting on itself. Makes sense especially in local markets where reporting on a media outlet means reporting either on your employer or colleagues most of the time. Even nationally I wonder whether news organizations are a bit gunshy to report on their competitors as much as they would firms and events in other industries.

OK.. long preamble and this may not be news in itself. But has there been an awful lot of turnover in local print media of late. Granted this may be par for the course and I may be misperceiving things a bit, but wither the career journalist?

Take the world I operate in mostly which is covered by the biz reporters in town. At the PG if you go back 5 years and look at the reporters they had assigned doing full time business reporting, a lot have moved on. I was already thinking about this before I learned that longtime biz reporter Dan F. over at the PG has recently moved on to the Wall Street Journal1. But it's more than just him. A few years ago the biz reporters included among others: Jim M., Pam G., Stephanie F., Corilyn S. each of which have moved on. And not to limit this just to the PG, other biz reporters that have moved on include Mike Y at the Trib, and to keep this a regional post even Stephanie W. who was the Biz editor at the Beaver County Times have all moved on. Some have moved to other jobs in journalism, but many have left the biz in some form. Many seem to go into the PR world. Others into new things altogether.

Again, this may all just be misperception on my part and I will be the first to say I don't study media labor markets. Maybe this much turnover is more normal than not. I also could be wrong that this has focused more on the business staffs than other beats though there has been turnover all around. Maybe it makes sense given that biz reporting is taking some of the brunt of changes. It was in the Trib that it was reported how the PG has eliminated its Monday business section. In the big picture, maybe the Internet is more apt to replace coverage of business content than other subjects. Maybe its the leading edge of bigger changes to come? I dunno.
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(1) The WSJ seems to have put him to work right away. I bet he will work his way from page C3 to A1 pretty quick.

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Thursday, August 07, 2008

Back to Predictive Markets: Will there be a strike at the port authority?

One of my pseudo experiments some time back was what I called the "New Pittsburgh Stock Exchange" which was using the predictive markets at Inkingmarkets. I put in there questions about the opening date of the casino and some local political races. It had some interesting results.

So I thought I would try again. I have created another 'market', again using InklingMarkets. You can go to their site to learn more about the concept. But this time the question is:

Will there be a strike at the Port Authority of Allegheny County?


So you can create an account and start to 'bet' on this question or any of the other questions others have set up at this particular predictive markets site. Right now it starts at 50/50, not because I think that probability is even my guess, but you have to start somewhere. If you think there will be a strike you buy this 'contract' and if you don't think there will be a strike you can 'sell' it.


I have put in the fine print onto the site, but basically the market will close whenever there has been a full day of labor stoppage or if a contract is signed without any such stoppage or it will close on December 31, 2009. There could be lots of disputes over definitions, but I will be the judge and apply what I hope is a reasonable person standard if there are any issues... i.e. so no lawyers involved.


The big problem again is that this is all for fun. It's not real money and I can't even think of a way to offer up a nominal 'prize' for the winners since this particular market is just one of many they run and you are free to participate in all of them I think. Am open to suggestions on how to entice 'play'. The site does also allow for comments, it might be an interesting place to be a nexus of comments related to the strike, or potential thereof, but I am not sure that will be a big draw.


But we will see if this produces any valuable results. Cast off.

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Wednesday, August 06, 2008

Rumors on Wheels

So here is a Port Authority "Rumor of the Day" that they put online last week:

"Rumor: Port Authority management makes too much money.

Truth: The average administrative employee earns $44,385.19, while the average Port Authority operator earns $48,653.74 a year."

What's wrong with that? Anyone notice the conflation? The words administrative and management are not synonyms in this context. I am pretty sure that when someone discusses management salaries in any industry the reasonable interpretation excludes most workers that are categorized as 'administrative'. Cute misdirection though. If you want a more thorough look at how lucrative management compensation is compared to workers you can read what the state auditor general said. I guess Jack Wagner didn't realize he was reporting all those rumors as fact.

I have no problem with the Port Authority putting up information like this. All sides should be heard from, but what I take issue with is the labeling . The casual reader may think that 'Rumor' site is really an objective attempt to clear up some misunderstandings out there. Yet it looks to me like an excuse to propound just one side of what will be some contentious public debates pretty soon. In a sense, the site is creating or at least amplifying more rumors than it is clearing up. Things may have seemed quiet on this front, but once state factfinding end this is again going to hit the news cycle and potentially remain there for some time.

Soo... if the Port Authority does not append some disclaimer to their posts on that site explaining to the reader that it represent management's viewpoint only, I may need to start up an independent "Fact of the Day" web site to respond to their postings. Just in case someone thinks I am not serious, I think I have enough fodder: I try to compile the most important documents relevant to transit policy locally in my Pittsburgh Transit Policy Bibliography. Which if anyone has scans, links or otherwise has suggestions for specific policy documents out there that should be included in that, just let me know. I've tried to focus it on the major policy research affecting transit in the region. (which means I don't try to cover the MFE if for no other reason than it is such a big topic unto itself... I'll wait until someone writes a dissertation on the MFE and let them do the work).

Also, some of the posts here that have looked at transit are itemized below:

  • Higher Gas Prices = Longer Weekend?
  • Traffic Jams and More
  • Transit Metrics Again and Again
  • Commuting Across the Nation
  • Rethinking Price Elasticity and Curibita
  • Transit Usage by State House District
  • Transit Visions
  • Inconvenient Elasticities and Forgotten Externalities
  • A Fare Too Far
  • you think parking is expensive now
  • Bus economics and the (proposed) demise of the 28X Airport Flyer
  • Is public transit usage in Allegheny County high or low?
  • confusing counterarguments
  • false choices and McAnalysis
  • Transit Disconnect
  • Permanent Bus Stops
  • Bus Fares
  • Public Transit Utilization
  • transportation factoid: kids on the bus
  • Bus Stops
  • public transit beyond the beltway orange belt
  • Transportation Tuesday
  • Photo Contest
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    Letters from Appalachia

    Passed without comment because I can't quite figure out what to make of the Brit's perspective on the election coming up... but there is a lot in this piece from the Sunday Times (UK): How Barack Obama can win over poor whites.

    For those watching presidential poll trends: Poltitical Arithmetik has some good comparisons of where we are today vs. some recent elections. For the comprehensive historical look at how presidential polls have evolved, I have pointed out what the folks at Columbia have compiled.

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    Tuesday, August 05, 2008

    refi followup

    If that wasn't enough. So here is the deal and it's interesting. Speaking of Tom Murphy even, everything and everything is related in Pittsburgh.


    The real story in all of this is that the bonds the city wants to refinance must be the bonds issued in 1998 during the Murphy years via what was then pretty unprecedented internet auction. Remember the days of B2B hype and Freemarkets and a local company called MuniAuction (now named Grant Street) that was pioneering selling bonds on the internet and not via traditional means. Great idea, but before its time back then if nothing else; this particular Pittsburgh bond was actually the firms first municipal bond auction on the internet. The problem was (is?) that the folks who need to buy the bonds are also folks who would lose out on fees over the long haul if the bond market evolved this way. But that is a big topic....


    The problem with this particular deal in 1998 was that even though the city said it saved several hundred thousand dollars on fees at the time, the insider talk was that the actual interest rate that the internet auction produced not as good as could have been had normally at that time. The bonds were also issued mostly uncallable for years. Or at least some of it was uncallable forever and some were callable only with the September 2008 payment onward. So this particular refi is happening, if it happens, at the very first moment this particular debt could be refunded. That makes a lot of sense since otherwise it would have been refunded in one of the past refi's when the savings captured would have been higher. Whether or not the current interest rates and insurance costs will justify it right now is a close call. If it is correct that these being the same bonds in 1998, what I saw in the Trib with some criticism that these bonds were not refunded earlier in the year may be a bit unfair in that I am not quite sure they could have been refunded earlier than they are going to be at this point. Timing the market this week or that week for things like this is about as problematic as trying to time the stock market.

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    sic semper debitum part ??

    OK... big big wonk quotient follows... but for public finance nuts out there...

    I was away when the news came out that the City wanted to refinance some $78 million in debt in the hope of getting $3 million in savings. I honestly couldn't quite figure where they were going to get that much NPV savings out of the deal given interest rates these days. Yesterday the PG had an early story online about how they wanted to do this deal on Thursday.. Funny thing is that I have not seen any preliminary official statement released as yet for such a bond and so I still can't quite figure what debt they thought they were going to refi. I was also confused because it was just a few months ago the city said they were not going to be playing in the bond market at all and I quote "for a number of years" (emphasis added). I am kind of losing track of time these days, but I don't think it's been years. Toland got it wrong a bit I hate to say (sorry Bill) in that the article's main point was that the bond insurance market troubles would likely not have an impact here. but then.....

    The Trib then has a fuller version today over the various issues involved, not the least of which is the escalating cost of bond insurance (who in the world ever talks about bond insurance as a policy issue?) all add up to more than the net savings at some point. If the Trib is right they are looking at an $800K insurance cost to refi $78 million which as a % I think is quite a hike over rates ever paid in the past. If the deal itself goes south altogether because of bond insurance costs I think that would constitute a real impact here.

    The issue in the end is whether they can get to some minimal savings for the deal to be worth going through with. Why should they need some minimal amount of savings? GFOA (that would be the Government Finance Officers Association) has best practice guidance that you ought not to do such a refi unless you can save 3-5% (and that's NET of costs) in the process. Why? There are a lot of fixed costs to this type of deal including lawyers and in Pittsburgh's case the fees for bond insurance. Bond insurance is an one time up from payment that good for the life of the bond...so it really does not make much sense to be paying bond insurance over and over again which is what happens when you refinance the same debt. It's a good deal for the insurer though which sees its potential liability liquidated after only a short time. and the legal beagles always get their fees of course each time a deal like this is engineered.

    These transaction costs add up if you wanted to refi over and over again and it does not make sense to pay them if there is a better chance you can get a better deal in the future. That is not to say that the city is required to follow such guidance. When the city refinanced $200 million in 2006, the net savings were only $3 million or so which really came out well below 3%, but who really noticed? It also makes me wonder which debt they are going to refund if they expected $3mil in savings out of $78mil in debt. Also, in the 2006 refi there was $3mil or so in transaction costs in that deal as well, so the lawyers and insurance companies came out almost as well as the city did in the whole deal.

    But the Trib article highlights something that is only recently hitting municipal bond insurance markets across the country, namely that this type of insurance has been escalating in price. No big secret since the bond insurance market has been collapsing and econ 101 tell you that when supply shrinks prices go up right? This may be the biggest public finance policy issue these days despite being too esoteric to talk about in the media.

    Consider the irony that five years ago the bond insurer FSA felt it necessary to issue a statement that it did not have any exposure to City of Pittsburgh debt following a downgrade of the city's debt rating. It's a bit interesting to see how the circumstances have switched of late. How much exposure do any local governments have to FSA is the question I have these days.

    From lots of sources you can read about the implosion in the municipal bond insurance market. Last month the specter of ratings downgrade of two more of the major bond insurers could hit home. Some big bonds issued locally are insured. In some cases it does not matter. For example, if a fixed interest bond is insured by a company that has its rating downgraded, the loss is mostly likely borne by the buyer of the bond. Where once they bought a bond with a high rating, they now own a lower valued bond. I actually wonder a bit if some of the older debt issued by the city of Pittsburgh which was insured by the insurers having trouble is part of the debt that they want to refinance.

    But for a lot of variable rate bonds insured by a bond insurer having troubles it's another story. For bonds where the interest rate gets reset periodically and which are insured, the downgrade of the insurer means that the bond is worth less, thus the interest rate it will pay out will be pushed up, thus forcing the borrower to pay out more. In some cases bond issuers also hedge their risk buy buying appropriate instruments that go up in value if the bond value goes down. Typically these instruments hedge against general market risk in the municipal bond market. I don’t think there are many cases where they hedge out the risk of bond insurers going belly up or otherwise seeing their credit rating downgrades.

    So who cares? As I explained ad nauseum on the bonds issued by the Sports and Exhibition authority for the bonds issued to pay for the new arena, some local bonds are insured by FSA. FSA has thus far not been hit by the turmoil hitting its competitors such as MBIA and AMBAC, both of which used to be large municipal bond insurers. The news of late is that FSA may have its credit rating downgraded which is going to directly hit the SEA bonds, but also some recent bonds issued by the Pittsburgh Water and Sewer Authority. I wonder what else out there could potentially be hit, there being lots of public debt issued by both large and smaller issuers. Again, lots of existing issuances will not be impacted. Only in cases of variable rate bonds insured by companies being hit by downgrades. However for new issuances, Pittsburgh's current experience is showing how heightened bond insurance costs are really hitting the bottom line. Since a lot of local public finance relies on new debt being issued regularly, this is a real issue.

    Don’t think this is an issue? It is across the country. You can read about how this is impacting public debt in places such as Louisville, Los Angeles, and Dallas, among many many others. Are there really no local versions of this story as yet?

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    Monday, August 04, 2008

    Mr Secretary

    I will admit this is mostly my mischievous side to even mention this... but Neal Pierce's recent column throws out in passing the possibility of former Mayor Tom Murphy being named the Secretary of Housing and Urban Development by the next President.

    I know some in town may go a little apoplectic reading that. I am kind of alone as best I can tell being a little less emotional over the Murphy years. I am on the semi-public record1 as at least suggesting that the pedestrian bridge built next to the Hot Metal Bridge ought to be named for his work in building the region's bike trail system.

    Curiosity makes me ask Mr. Google what TM is up to these days. here is something from about a month ago down in Raleigh where he is talking public transit.

    (1) or is that the public semi-record?

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    City and Suburb

    I see Harold's column in the PG biz section discussing the relative concentration of jobs in the City of Pittsburgh. For more on how the relative size of the city tends to impact all sorts of metrics see the story in the PG a few years ago: 'Day surge' puts 41% more people in the city. Also one of the last "benchmarks" section that the Post-Gazette put out was this table ranking the relative commuting flows into center cities across regions in the US. Much of those metrics stem directly from the inordinate concentration of jobs Downtown and in Oakland. The disconnect between the perception and reality of economic activity in the regions core I once discussed in "Is Downtown Dead? Hardly". For the pure policy aspect to all of this, from 1982 is the PEL report: Pittsburgh: A Regional City With a Local Tax Base.

    But a side note on the differences between city jobs and elsewhere,in 2004 (and in 2004$) the average annual pay for a job located within the City of Pittsburgh proper was $42,834 while the comparable annual pay for jobs located in the suburbs was $31,676. So its not just the number of jobs that have been retained in the city proper, but the relatively higher paying jobs in the region as well.

    The really remarkable thing about the number jobs located in the City of Pittsburgh is how stable it has been over not just recent decades but almost half a century if not longer. Jobs located in the City proper in 1960 were nearly identical to the 300K or so jobs that are located in the city today. When you consider just how much population has declined in the city, that is a remarkable factoid. As people have moved out, but kept their jobs within the City, one obvious result has been increased commuting. Here is a map of commuting patterns of workers whose jobs are located in the City of Pittsburgh proper as of 2000.


    or in the angle Harold was discussing, here is a map of Allegheny County in terms of Jobs per square mile by municipality, also as of 2000:


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    Sunday, August 03, 2008

    Warhol-Burra

    If only that Gatwick flight was still around. The UK's Independent does the travel writeup on us today in Pittsburgh: the ideas factory. Given how painful exchange rates are these days it's not inconceivable a few Brits would have popped over the pond for Christmas in July. I guess local retailers will have to settle for enticing a few Canadian shoppers looking for tax-free Pennsylvania clothing.

    The raison d'etre is what would have been the 80th birthday for disavowed Burgher Andy Warhol. Some funny cultural nuances in the article... the author describes the grave as being located in a bland Pittsburgh suburb (otherwise known as Bethel Park). Them is fighting words. The Warhol grave overlooks a tram? (that would be the T, who knew we were so Euro) and he confuses CMU and Pitt when he describes the former Carnegie Tech as being dominated by a scary, Orwellian skyscraper, 535ft high and built in the Gothic revival style. (that I take has to be Pitt's Cathedral of Learning... which I do have to say reminds me a bit of Mosow State University for those who have seen it.) and finally he describes local Byzantine Catholics as a sect that uses icons in their worship. Sect? Icons? Are there no Orthodox Christians in the UK?

    Finally, where are the obligatory local stories on the mysterious annual visitor to the Warhol grave site. Oh wait, that's the anniversary of his death, not his birthday.

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    Saturday, August 02, 2008

    wassup in Cleveland?

    Just wondering what's up in Cleveland?

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    Friday, August 01, 2008

    WSJ on Kalamazoo Promise

    For the ideal version of how this is supposed to work, here is something from the WSJ on the Kalmazoo Promise which is said to be the model for the Pittsburgh Promise. See: Kalamazoo's lesson: Educate and they will come. By Jeff Bennett. July 28, 2008.

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