Friday, April 29, 2011

Rust Belt Ball

City... region....city...region....

See the USAToday with the most ill-conceived thesis ever in this article today: Indians, Tigers, Pirates and Reds fighting population loss in the Rust Belt.

Does anyone in the world really think Pirates' attendance problems (worst in the NL according to the article) have anything at all to do with population loss in the City of Pittsburgh proper which is the only factoid they reference for us in that article. 

I do have a question though; what is the top attendance at AAA games around the country?

****

Speaking of population though..  this factoid may be more important as symbol, but something I put up over here is some recent census data released on the population in group quarters as of 2010. For Allegheny County the population in nursing homes is down significantly, while the population in college dorms is up a large amount over the decade.  Check it out.

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Thursday, April 28, 2011

Time to calculate those Wecht numbers again

Just being amazed as I am sure many others are that Cyril Wecht wants his old job back.  All I can say is just what I said a couple years ago

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Follow those stories

So both the Trib and PBT have stories on the likely outcome of the sale of the Steel Building escaping the payment of real estate transfer taxes.  Who would have expected that?

Still, does it have to be this way?  Here is an idea that I have to attribute to an anonymous commenter here last week..   Strange new world this blog thing.  How does one attribute anonymous commenters anyway?  Probably was some lawyer I know. 

What was suggested is that Philadelphia has local ordinances that make it much more difficult for real estate transactions to escape the payment of transfer taxes.  I found this legal article from a decade ago that explains what they did out east to keep them out of the predicament we are in. 

Without bothering to look up what may or may not preempt this discussion in 2nd class city code or related state statute...  certainly there is nothing set in stone that would prevent this from being changed for us.  Even if it took some tweaking of state code, this isn't anywhere near as big a stretch than other tax changes we might want locally.

There. We can share the commission if someone implements this and generates $millions for the city and school district next time.

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Wednesday, April 27, 2011

A picture is worth a thousand questions

Despite the occassional glimpse out there, the race for Allegheny County Chief Executive is still hull down on the horizon.  Just a few weeks left and only the occassional flicker of public interest can be seen through the fog.  I know there is often minimal focus on local elections, but it sure seems like we have reached a new level of disinterest, especially given the significance of the race.  I've sometimes seen more buzz in races for judge.  I don't even notice many yard signs in areas of town where placement is required by zoning code.  I guess we will see if interest picks up after Cinqo de Mayo?

As for what is coming from the candidates themselves; I get it, they all don't like property assessments.  Is there really nothing else to argue over?  The fate of the county rests in these candidates' hands.  If they are really challenged to debate something, I'll just throw this up there without additional comment.

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Tuesday, April 26, 2011

Wonk trivia

Here is a trivia question.  What has been the average unemployment rate for the region's labor market over the last 40 years?

6.6%

That certainly includes some bad times averaged in there, but it also averages in some pretty good times as well.  The question was prompted by the quote in the paper today describing the regional unemployment rate drop down to 6.8% as being "still a long way to go to return to normal employment".

So not even any light there at the end of the tunnel as yet?  Like waiting for Godot expecting a positive sign in the local economy.

Again, I like to keep track of the relative unemployment rate for a lot of reasons, but mostly because it is a decent predictor of net migration rates for metropolitan regions.  Here is what that looks like which when you combine the length (54 months since the national unemployment rate was higher than Pittsburgh's) and depth (2 full percentage points below the US rate) clearly now represents some unprecedented times for the region in terms of how the region is performing compared to the nation. 



So still not an absolute record in just hor far below the US we are.  There was one month in April of 1975 when we were 2.1 percentage points below the national unemployment rate. Darn rounding error is messing up my factoid.  And just for one other little sidebar to this all  The City of Pittsburgh unemployment rate is coming in for March at 7.3%.  The City of Detroit for example, seems stuck above 20%.

Lots more to parse of course.  Some confusion over what is happening in the labor force which has not grown much in recent months.  While the relative unemployment rate chart would indicate there is still net migration into the region, the fact that the post-recession labor markets are beginning to recover nationally means that the pressure to move out of many other regions is nowhere near as dire as it was a year or two ago.  So I would not be surprised if say the flow of folks from places like Detroit (which is now down to 11% unemployment) for example to Pittsburgh has come down.  There is also the issue of the folks who wound up remaining in the labor force a bit unwillingly because their retirement portfolios took such a hit in 2008.  That was the story with a lot of elderly deferring retirement.  Well... you may have noticed the stock market has done quite well the last couple years and at least at the margin, a lot of folks who were continuing to work may now feel empowered to finally retire. Probably a part of what is happening to the unemployment rate as those openings filter down.

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Monday, April 25, 2011

The 20 million dollar decision

Speaking of pensions ever again. The last post on the vast ambiguity in the value of the City of Pittsburgh pension fund was mostly a reflection of the lack of hard numbers in this story from February. It all sounds like accounting by Ouija Board.

I was going to follow up with yet another rant on the lack of useful information made available by the City's pension fund.  For the longest time the only interesting information there was a newsletter from 2007.   Yet, low and behold, there is all of a sudden real and recent news including the detailed performance of the pension plan for the 4th quarter of 2010.  It is indeed a brave new world.

Would be quite a step forward, except for what that report says. Be careful what you ask for may be the lesson learned.  Ignorance is indeed bliss. The report has a comparative metric of how the city's pension fund did in the quarter compared to a large benchmark of other investment funds.  The answer is that the city's pension plan came in at the 96th percentile. 

So I would really love to know what were the 4% of funds out there that did worse. Give those folks bonuses, that is hard to pull off.

The reason for such a pitiful performance, as clearly noted by the investment managers, was that the pension board's decision to remove virtually all equity risk from the fund earlier in the year.  Take away the risk, you also take away the reward and it turns out the 4th quarter of 2010 was a pretty good period for investment return...  if you had exposure that is.

To remove all equity risk at a single point in time would be what is called a massive bet based on market timing.  Go ask your own financial advisor if they would ever recommend such a course of action. 

So how much did that decision cost is the real interesting question?  A million or two?   Again according to the same report, the comparable median return was 6% over the quarter, while the city came in at 0.3%.  Given an assumption that the average asset value was around $300 million, the counterfactual loss of 6% is nearly $18 million.

That decision could become quite a massive irony if the actuarial calculation of where the pension fund is with the notionally dedicated parking revenue comes in short by an amount less than $18 million.  Hold that thought for a future blog post I guess.

There are some real questions I would love to be in a position to get answers for.  The primary one is whether they are still lacking equity exposure.  At the end of 2010 it says they were 57% cash (I'd put that into that annoying html flashing tag if it was not just so annoying).  That's what it says, really... I didn't make it up. 57% cash and 29% fixed income.  Remember this is a fund that presumes a continual investment return of 8% annually if it has any chance of not falling further behind.

Then you wonder how much in fees it took to get a few hundred million in equities liquidated to cash.. and how much it will cost to get back into the market assuming they did so.  Those fees could easily push up that notional $18 million 'loss' even further as a result of the decision last fall.

I really do wonder if they have remained out of equity markets.  Given that the Mercer contract is winding down, you could see the logic in holding the cash to turn over to the new fund manager to invest... but I have no idea.  If the new paradigm of data disclosure continues next quarter, then maybe we will see if and when they rebuilt an equity portfolio.  One would hope they did buy back into equity markets because the 1st quarter of 2011 had a pretty good return.  If they stayed in cash, that notional loss might be a fair bit larger still.

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Friday, April 22, 2011

Dysfunction Junction

In a sense there is no news at all to comment on in the latest episode of the pension soap opera down on the 5th floor. Hard to see how the outcome down at the Pittsburgh Parking Authority board would have been any different than is being reported. Great quote in describing the state of all things pension related for the City of Pittsburgh as "extreme dysfunction".  Points for parsimony.

Fun with words aside, there is something to read between the lines.  City news junkies follow along with me. It seems clear that no matter what happened on New Year's Eve, my reading of the news is that there is no intention on the part of the administration to facilitate council's plan as envisioned.  Sanctioned or not by the PERC it may may be.

Now realize that it really does not matter what council adds up, the whole plan depends on the city's own actuary certifying that the pension's assets, to include the NPV of the notionally dedicated parking tax funding stream, amount to 50% of the calculated liabilities. Realize that there are lots of judgment calls, let alone a lot of city-supplied data, that goes into the actuary's calculations.

Sooo..  If the city really does not want the actuary's calculation to show 50%, then there is a decent shot that the outcome of the determinative calculation will not be 50%.


Won't that be interesting.?

Think that is a screwey way to think of it?  Not as strange as some other things that have been going on in city pension world without much comment. Recently the pension board did not specify the value of its investment portfolio at the end of 2010 because that information might look bad as the state evaluates whether to take over the system in the first place.  An amazing position, and more amazing that they could get away with it.   

The reality is that at least some in the Harrisburg are preparing to take over the city's pension system.  Anyone asking if the city responded to the state's recent request for more data sooner?

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Thursday, April 21, 2011

Jobs Uber Alles

Can I nominate the most underappreciated economic story from last weekend. In the Valley News Dispatch is this detailed piece:

Which would have a host of great essay questions for students of economic development.  In there is a line about how local officals say the mall has "more than 4,300 job".  Anyone want to comment on the veracity of a claim that any retail mall has created jobs on net.
It was an even older Trib piece by Michael Yeomans that looked into the really long history of the site.  In the future there may be some interesting assessment issues with the site.

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Wednesday, April 20, 2011

Bricks, Mortar and Basis Points

One could go back over the whole month and really find a trove of parsable stuff still worth poking at, but best to stick to the present.  Recent news is the spate of Downtown buildings that are up for sale or disposal by various means. As always, the real stories go deeper than the headlines.


Maybe there is a silver lining lurking out there in all of this?  Some of those large Downtown transactions will likely not be able to escape the exorbitant transfer taxes levied by both the City and School District of Pittsburgh.  Nominally the city gets 2% of the transaction value, while the school district gets 1% (and the state its own 1%).  In reality, the tax is rarely paid on large corporate owners because the buildings in question are typically ‘owned’ by their own holding company which stays the same.  The ownership of the shell company changes hands, and that transaction is not taxable in itself.  I wonder if a creative lawyer might be able to challenge the veil so to speak for some of the impending transactions downtown and find a way for the city to collect on more of those potential transfer taxes.  Must be some lawyer willing to work on commission on this?
Imagine though.  If, as is reported in the news, the Steel Building is being sold for $250 million, in a highly leveraged deal mind you, there would theoretically be a $7.5 million payment to the two public entities. $5 mil to city and $2.5 to school district.  Not going to happen of course (or could it?), but lots of the buildings formally going through sheriff sales will not find it as easy to escape the tax.  The steel building has been a boon for city finances in the past.  In 1987 its nominal transaction value was a cool $billion even.  The city didn’t get its $50 million in transfer tax, but it did wind up with $4.4 million from the 1984 sale of the building.  The city had to sue to get an additional 444K which pushed that haul up to nearly $5 million.  Adjusting for inflation that would be worth almost $11 million today which would not be underappreciated given the fiscal climate on the 5th floor.


Yet that is just one of the many buildings up for sale Downtown.  Take for example the Old Alcoa Building, which literally is in foreclosure and will literally change ownership at some point after the sheriff’s sale. That transfer tax will likely be paid, but of course it is not worth what the Steel Building is worth. The price listed on the sheriff’s sale notice is $10mil, nearly identical to what the building was said to cost before it even was finished  skip the 60 years of inflation adjustment and it is not such a bad deal.  I found amazing this version of the story in the Trib which suggested the building is worth around what it's scrap metal content is worth. That gives a whole new meaning to demontage and I am not sure Construction Junction could handle so much new inventory.

It's a bigger story than the building value of course.  Now go and read Neal Peirce’s snippet history of the Alcoa Building’s transfer from Alcoa to the Southwestern Pennsylvania Commission.  Technically it wound up being  owned (reluctantly it seems)by the Southwestern Pennsylvania Corporation which is now being dragged into bankruptcy itself as a result.  That part of the story is the real story here.  A bad real estate deal is par for the course over the last few years.  This deal, however, is dragging into bankruptcy what was meant to be the center of regional planning for the entire region.  The Southwestern Pennsylvania Corporation is the alter ego of the Southwestern Pennsylvania Commission and in some sense the successor to the Southwestern Pennsylvania Regional Development Corporation (SPRDC).  Over the decades many keep trying to drag SPC, the region’s Metropolitan Planning Organization(MPO), into being something that it is not.  This one episode should be a big lesson why that may not be such a good idea and one might want them to stick to their knitting.  It’s not like transportation planning for the region is not hard enough in itself. How they got dragged into this whole real estate imbroglio is an important story at the core of our perpetual, and generally unsatisfying, debate over regionalism.
In other words, this isn’t about the building.
But since we are talking about the building, who remembers the original XPlorion built into the first floor.  Not the current version, but the original Google-Earth'ish-Before-Keyhole virtual reality Autometric powered one?

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Monday, April 18, 2011

Silence is Golden

Silence is golden, but the background noise is getting too much to ignore.  While obsessions don’t fade quickly, at least the need to watch NHK hourly drops a bit day by day.  So if the sabbatical is over I guess and the question is just where to dive in?  I guess I need some form of blog rehab?

So here is a question. Is it just my perception because I have been distracted, but is the current race for Allegheny County Executive an order of magnitude tamer than the first one 12 years ago?  At least on the Democratic side, compare the histrionics of the Dawida-Wecht race at the time to what you know of the race currently underway.  Is it even possible that a Flaherty and a Fitzgerald could find something to argue that loudly over?

Or is it just too early and we have more fireworks to look forward to?

Don't forget:  Last day to register for the primary election next month is today!

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Tuesday, April 05, 2011

From Chinmoku to Aimai

If you see me around, it is not an apparition.  I am back, but now am behind in most everything else in my life so I an not sure how much I will be posting for the time being until I catch up.  I'm sure something will spark the obligatory opine, but looking back over just the last few weeks it sure makes you wonder how much the news ever really changes. Change a few names, alter a few quotes, and I bet you could almost write much of the news on autopilot year after year, or is it decade after decade in our case? Actually... changing of surnames is often optional.

I can't not pass on this image I saw myself; says to me that some debates are universal.

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