Wednesday, August 31, 2011

Datum Super Omnia

I have to say I have not read any of the details on the case against former state rep Perzel, but reading the news summary is interesting to a data wonk.  The Trib's version has this snippet describing the core of what lead to Perzel's downfall:
The unrelenting drive by Perzel to collect data and acquire the latest technology was done to expand his own power, according to a 2009 grand jury presentment. The computer gadgetry purchased at state taxpayers' expense was intended to help the House Republican Caucus, Perzel's own campaigns and a bid for governor contemplated by Perzel, the grand jury charged.

It truly is all about the information. Some political folks are the ones who realize that the best. Perzel himself must be a quite a wonk at heart. To think he is going to jail because be bought SPSS.  OK, probably not SPSS, but fun to think of that way.

Speaking of data.  The city sure is waiting until the very last minute to let us know what the final actuarial results are in their calculation of the pension system's funding status.   I can see some poor clerk rushing to the post office just before it closes to get a postmark as they send out the official report via snail mail. 

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Tuesday, August 30, 2011

Two degree Pittsburgh: First Amendment Edition

News and developments in the cases against former state rep. Perzel and state sen. Jane Orie, among other things, have me thinking about GrantStreet99.  Remember, it was the senator's sister, then superior court judge and now state supreme court judge Joan Orie Melvin, who filed suit in Virginia of all places to out the clearly local and pseudonymous proto-blogger for various reasons.  

In the end she failed, but not after many years of presumably costly litigation against the extended family of John, Allen, Bruce, Carl, David, Edward, Frank, George, Harry, Irving (Irving?), Kevin, Larry and Jane Doe.  I guess they get points for not sticking to the "J"'s.

The thing is she was not the only one to attempt to rout out those who misbehave on the Internet.  At one point there was the attempt to find out who was behind CasablancaPA.blogspot.com. The argument was that prosecutors thought convicted Mike Veon aide Brett Cox Cott was behind the site and that fact, if true, would have been relevant to his sentencing.  That case was dropped when Cox Cott was sentenced.  I was just checking and CasablancaPA is still posting as of this month even even though some recent news accounts decribe Cox Cott as well ensconced at  a state penitentiary. I can't speak to the possibility one could be blogging from prison.

Truth be told, and one of those things that only time can provide prospective for, but Grantstreet99 provided a rare opposing view on the way things operated in town.  Obnoxious at times no doubt, and biting as all muck reads inevitably are... but I am not sure anyone has quite filled those shoes locally since GS99 faded into the white noise.

Speaking of missing voices in town, and as a student of the uber-connectivity of that which we call Pittsburgh... if you didn't already, go check out who wrote the piece via the very first link above.  It's a great read.  Only in Pittsburgh.

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Monday, August 29, 2011

A tale of two economic impact reports

Well, let's wake Wiz up.

Now we have two specific numbers, both by Penn State researchers, with comprehensive economic impact analysis of the development of Marcellus Shale in Pennsylvania.

Just out and dated August 2011

Economic Impacts of Marcellus Shale in Pennsylvania: Employment and Income in 2009, by Timothy W. Kelsey (Penn State), Martin Shields (Colorado State), James R. Ladlee (Penn State), and Melissa Ward (Penn State), in cooperation with Tracy L. Brundage (Penn College), Jeffrey F. Lorson (Penn College), Larry L. Michael (Penn College), and Thomas B. Murphy (Penn State)

and this from last month, dated July 20, 2011:

The Pennsylvania Marcellus Shale Gas Industry: Status, Economic Impacts and Future Potential, by Timothy J. Considine, Robert Watson and Seth Blumsack

The former said the 2009 employment impact in Pennsylvania was 24,000 net new jobs while the latter says 44,000. Future projctions are always fraught with uncertainty, but with this being late 2011, these are both ex post numbers for the most part.  Both use the same economic model (IMPLAN) and they both state they attempt to capture direct, indirect and induced economic impacts of all known Marcellus Shale related activity.  It goes without saying that the differences must come from variation in what numbers are fed into the model to begin with.

Just  one of the differences between the two studies is the attempt in the more recent one to account for out of state ownership of Pennsylvania's Marcellus resources.  If you doubt how big a deal that is, note how the recent revision in shale gas resources has made news in India.  It impacts the supply chain as well which you can see how news from last year on pipeline manufacturing for shale gas demand actually made news in Russia.

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A Taste Bud Too Far

I'm all for innovation and fusion, but this may be a culinary clash beyond repair. Yes, Wasabi Kit-Kats:


If you are not up on your Japanese, the side made the flavor clear:


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Saturday, August 27, 2011

Daily Ranking - Metroversities

Daily ranking via an oped in the Boston Herald - Top 10 Metro Areas impacted by higher education listed in: Education a Growth Industry. The Pittsburgh quote in it:
But the Pittsburgh Metroversity, ninth? It is powered by 120,000 students led by Carnegie-Mellon, Duquesne and by itself the University of Pittsburgh with its Medical Center that now employs 83,800 people and spends more than $2 billion in the community annually.
Without that, Pittsburgh would be hemorrhaging economically as would Cleveland without Case-Western or Richmond without Virginia Commonwealth. And the world is now turning to the “industry” of higher education/allied health.

Someone didn't get the Marcellus Shale impact memo?

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Friday, August 26, 2011

A Random Walk in Pension Accounting

PBT Today: Pittsburgh Pension Loses Out on Millions

Personally I am going to send each member of the pension board a copy of a book just about everyone who invests in the market should have anyway.  The inimitable Burton Malkiel's classic:


Beyond that... there is a companion story with that: Lamb seeks answers to pension plan delay. Something does not add up to me.  If you were to dig into it, it sure sounded to me like the pension assets were not exactly converted to cash.. which is implied in the 'delay' in reinvesting into a more normal portfolio.. It sure sounded like the intention was to buy some form of option which would have effectively created the same synthetic investment return as cash for precisely the 3 months in the fall the pension board was worried about.   If they had done that, then once the option ran out, the portfolio would have immediately revert to having the investment returns it should.  This option strategy should also give some advantages in not incurring the costs of moving several hundred $million out and then back into the market.  Apparently that isn't what happened which raises its own questions. 

The net result however it happened could really be pretty sad.   Pension fund cashes out in fall 2010 which turns out to be quite a big run up in the market.  Delays getting back into the market in first quarter of 2011 which continued to be a great quarter for the market.  Assuming they finally got cash reinvested by April, it was just in time for the horrific returns from the market since then.  There you go. 

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Thursday, August 25, 2011

Politics of Small Numbers

There's local reverb on some recent polling data on the Mayor here in Pittsburgh. You might think the Mayor would be concerned.  Yet, I find the number being reported remarkably similar to this pre-election poll from from just a few years ago. The subsequent election turned out pretty bad for him no?

Non-sequitur, but the title reference and a great book by the way:

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Wednesday, August 24, 2011

Monotonic Mensis Horribilis

Calling Stats Geek! Here is an only in Pittsburgh kind of factoid.  Today was the first day the Pirates gained a whole game on the NL Central leader in exactly a month.... since July 24th to be exact. (On August 8th they faked us out with a half-game gain in the standings.)

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Minotaurs R Us

Long tail science at its finest... and never more apropos than now.  The must read powerpoint of the day:

PYMATUNING EARTHQUAKE IN PENNSYLVANIA (USA) AND LATE MINOAN CRISIS ON CRETE by Yuri Gorokhovichm Center for International Earth Science Information Network (CIESIN) at Columbia University and Gary Fleeger, Pennsylvania Geological Survey, Department of Conservation and Natural Resources.

I really missed my calling as a paleolimnologist.

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Tuesday, August 23, 2011

Shake, rattle and roll

From the Null Space archives on earthquakes in Pittsburgh.  Commenters here have said the closest fault is actually under Erie, and thus not something to worry about.  I am not a geologist so I can't add value to that evaluation in itself.  The fact that an aftershock was felt in the region at least raises a few questions.  Even if the general risk is low, there are some things to think about. Not all regions are as earthquake-tolerant as others and what would be benign elsewhere might have more impact here. I'm pretty sure a 5.8 earthquake might not even make it into the local news in Tokyo. Pittsburgh, on the other hand, has an infrastructure that is a bit less prepared than the situation across the Kanto plain.  I would bet the greatest risk from even some moderate shaking probably  lies with...  yup...  the PWSA.  Probably takes a lot less shaking here to have impacts on some of our archaic pipes than in a system which has had more investment over the decades century. As I went into in the old post, the smaller earthquake near Pymuntang, north of Pittsburgh,  had  a palpable impact on the water table, and thus local well water and as a result even an impact on some some specialized local labor markets. 

and these days Pennsylvania has a lot more pipes in the ground eh?

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All Politics is in the Numbers

Looks like the state has an interesting new web site up: http://www.redistricting.state.pa.us/.  Its content is kind of sparse, but we will give them the benefit of the doubt for effort.

Earlier in the year I put up what the 2010 numbers look like for the state house and put online a list of the population change in each of the 203 districts.  To repeat the main point there, of the 10 districts with the largest population losses since 2000, literally all were from the Pittsburgh MSA and most were from Allegheny County. 

The biggest population losers:

DistrictIncumbent  2000  2010            Change
24Preston, Joseph , Jr. (D) 61,76551,004-10,761-17.4%
35Gergely, Marc J. (D) 61,89353,932-7,961-12.9%
19Wheatley, Jake (D) 61,88455,312-6,572-10.6%
34Costa, Paul (D) 62,20655,844-6,362-10.2%
27Deasy, Daniel J (D) 61,09655,311-5,785-9.5%
51Mahoney, Tim (D) 62,00156,731-5,270-8.5%
52Kula, Deberah (D) 62,07156,814-5,257-8.5%
20Ravenstahl, Adam (D) 61,00755,871-5,136-8.4%
21Costa, Dom (D) 62,61557,711-4,904-7.8%
22Wagner, Chelsa (D) 60,99756,304-4,693-7.7%

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Monday, August 22, 2011

Fluid Leadership

On water: While ER pulls a quote from here in their synopsis of the commentary on the flooding impacts, they are good enough to note my comment was from last week.. and thus before any of this happened. I am apprehensive of commenting on the flooding specifically since the consequences were so dire and the circumstances not fully understood. It is just clear to me observing the PWSA’s response at least that leadership matters. It is a tautology that leadership always matters and right now the PWSA is hampered by having no single leader since the last executive director departed. The bifurcated and acting leadership in place now is never a good model for an organization of any kind. While I want to be clear that there is no reason to think the two top folks holding down the fort (make that 'holding the bag') are responsible for the current situation, looking forward the PWSA needs its top spot filled. One might hope that this situation accelerates the PWSA’s leadership search process.
*******
On pensions: Bram diligently goes through the quite the extensive history of the city’s pension imbroglio. The recent history at least. The longer history could legitimately go back decades. Despite the fact that would take an even longer tome than he has there now.
Bram starts out with a foil of faux ‘agreement’ mentioning me and others on the mutual acceptance of the dire state of the pension fund.  How long has their been acceptance of any such thing you have to wonder?  Here is a quote from not long ago which highlights where the city was at just a couple years ago on this topic. See the Trib: City Councilman Returns to Deficit Spending. The money quote:
City Budget Director Scott Kunka likened that to yelling "Fire!" in a crowded theater.

"I think that the data was inaccurate. It's quite a bit of a distortion," Kunka said. The city is legally required to fully fund the pension and is on track to do so, he said.
The source of the projections being so maligned back then? and for the record it was not a new message. Anyway, the date of that quote was December 2008. When did the "fully on track" thing fade away?  December 2008 is not that long ago and I will guarantee nothing structurally changed in the state of the city’s pension system between then and now… certainly nothing between then and when the city changed its mind and started to ‘agree’ that there was an imminent danger of a zero fund balance. Somewhere though the city’s tone changed 180, at least in public.

There is one fundamental truth:  pension funding problems compound over time.  The longer efforts to improve the situation have been deferred, the far worse the problem becomes. Even a decade ago, if a moderate improvement in funding for the pension system had been implemented consistently then the situation would be far less dire than it is here now. That argument is true going forward as well, but there is a point of no return in terms of what is going to happen to the pension fund assets. That may be one of the few points of agreement between me and the ICA which years ago stated clearly that and I quote from the ICA's long-time Executive Director: "At some point it's impossible to catch up".  Things have only gone downhill since they made that quote.  Are we still thinking that point is in the future?

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Sunday, August 21, 2011

News junkies maybe not

Just a note on some new interest focused on potential Marcellus Shale development within some local cemeteries.  The odd thing about that article comes from multiple quotes in there from folks saying this was all news to them??  There was a whole news cycle on the leasing of gas rights of local cemeteries....  over a year ago?!  I think it was Bob Mayo who first noticed that the preponderance of local cemeteries have recent oil or gas leasing deeds on file.  He had a piece focused on this very topic on WTAE.  I can't find a link to that original piece, but it was followed up by stories focused precisely on the topic of local gas leasing in cemetaries including stories in the Trib, a feed from the AP that ran in papers cross the state and beyond, even the region's top blogs all were interested at some point over the last year.  So much news coverage was there that the Pittsburgh Catholic newspaper had its own editorial reply to the story as well.  That is a pretty wide breadth of venues for a local story here.  Still didn't quite register I guess.

Anyway... the interactive map of oil and gas leasing in Allegheny County is still up if you want to poke at it yourself.   Everyone can find the leased parcel closest to them if you tried.

More general on Marcellus issues.  The Atlantic has the in-depth piece of the week: Can the Fracking Industry Self-Regulate?   Also,  Marketwatch has some key points on Consol Energy's decision to sell away a lot of its Marcellus Equity. Inky has: Is Gas-Drilling industry sucking PA's creeks dry?   And from Centre County here in PA a cautionary tale of negotating with the land man. What did they get for leasing their land in this big Marcellus boom? $125 and acre.  Total net over the last 4.5 years probably does not pay a single years cost for a single teacher.  Who is to say that in the future looking back the leases being signed today don't look equally ill-informed on the part of consumers?  We need a statewide crowdsourcing project to find the landowner who signed the lowest valued Marcellus Shale lease.  Folks quote that $3/acre number. Is that for real, and is that the lowest?  Yes, I know there is a state minimum on royalities landowners have to get.  Some might thing that an overbearing bit of regulation, but I wonder what royalites people would be accepting if not for state law that prevents anything too low from being valid.


More marcellus....  The Cleveland Plain Dealer has the most economically fascinating little story about Ohio, which even though everyone thinks it is about to be hit by the gas development wave, is actually at an all time low for gas drilling within the state.   To be precise, the lowest level of activity since 1887.  The cause it says is low natural gas prices causing drop in drilling by half in just the last couple years.  So what is the cause of that natural gas price drop??   No time to get into the general equilibrium discussion at the heart of that, but think 2nd order effects to begin with.  It's really an important little story in lots of ways.   Some of the impact studies like to throw in the benefit consumers see from lower natgas prices if they can be attributed to Marcellus development.  Fair enough if you do it right, but is not another indirect impact the lower employment/impact of non-Marcellus drilling also to be factored in if you are doing that comprehensive a report? 



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Saturday, August 20, 2011

Sic Semper Edgarus

Non-sequitur it would seem, but this poster just cried out for a photo.  Makes me feel like I am home. 

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Friday, August 19, 2011

random wonkery

I am a little far away so I don’t know if this is an error in the print edition or not. PG’s online headline on its main web page says “Regions’s unemployment rate rises“ (emphasis added).  But the news out was just for the state's labor force.  The online story itself has the right title though. 

*****

Obligatory Marcellus Shale coverage.  We would retitle the big biz story today as 'Voting with your shale'

Speaking of Marcellus.  I wonder what those who like to confuse correlation with causality have to say about the two main stories today: 1) Marcellus Shale natural gas output in Pennsylvania spiked (which Platts pointed out earlier in the week) this year and 2) state unemployment is up (see link earlier). But we are all too smart to be that superficial.  Looking in depth into the numbers we see that jobs are indeed up in the state and by industry are being lead by job growth in health care and education services. Clearly Marcellus Shale development is getting people into the hospital more and pushing folks to enroll in higher education.

Joking aside I really am wondering more and more about the displacement of employment in other industries being caused by the demand for workers derived from Marcellus Shale development. Could be a part of the jobs story for the state. 

*****

I see the headline about how the Mayor wants to return expanded parking meter hours to their traditional 6pm. They were expanded to 10pm as part of the great pension imbroglio (as short as I can put it). Two big things to me. In terms of sheer transparency, and easy transparency it would be… there must me a giginormous amount of data the Pittsburgh Parking Authority has that would be fun to play with. Wouldn’t it be fun to parse the changes in revenues and tickets since the hours were expanded. If you are reading here you might actually say yes to that, but think about what we could do if that data were available in aggregate or even by neighborhood or finer detail?  Can you say 'parking revenue elasticity'?

The bigger point on the parking story is that it is curious the relatively minor story of parking hours is in the news at all right now. The city is on the hook to deliver to the state very very soon the most important number relevant to all of this. Is the city really taking to the very last minute to produce the benchmark pension actuary report which will be the key datapoint in deciding if the state will take over the pension system??  That number will be the single most important factor impacting the city for the next decade and beyond yet we seem to be on silent running. No way they don’t have that number already. Waiting to the last minute to actually deliver it is only going to make the state's situation worse as they try to evaluate the numbers... oh, yeah....duh!    Seems to me that the most important story all around is why we don’t know the ‘final’ numbers on any of that yet. Gonna be an interesting ride.

*****

And everyone is talking bees. Multiple stories in the PG and even Mike is into it. We be bees here from the beginning. Ha. I do wonder what happened to Bob’s bees.

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Thursday, August 18, 2011

The Balks of August

For the last 19 years there was a moment every summer around when the MLB All Star Game was played that you could suspend disbelief and say, yes, it was still possible for the Pirates to pull off a winning season and even make it to the playoffs.  Thus was the the fairy tale of the 1973 Mets who went from last to first in just the 2nd half of the season.

Who knew the Pirates were destined to emulate the 1973 Mets, but in a perversely opposite kind of way.  For a few days at mid-season the Pirates were at least tied for first place.  For a few hours, and it really was just a few hours, they were indeed there all by themselves atop the NL Central. Could they really drop from first to last so quickly?  OK, it seems unlikely they will really drop below Houston, but even if they don't we are on the verge of an epic choke.

We are now well entrenched in the pachinko path that is mostly indistinguishable from any of the last 19 (it's actually 17 and two half seasons of course) seasons.  Sad, but true.



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You gotta disbelieve

The title was going to be for a baseball post, but then I saw the latest stories on Pittsburgh region real estate prices. Baseball geeks can probably deduce what the baseball comment was going to be unfortunately.  For real estate we have something really odd continuing. The Trib's headline is not the first, but may be an escalation in some peculiar cognitive dissonance.  The title of the article is: Housing Sales in Pittsburgh Region Continue to Decline.

That headline is true enough, but if you read the story you see it is reporting local real estate values increased by over 8% and 5% in terms of median and average prices year over year.

+8.3% and +5.6% to be precise..... when comparing to national real estate prices which are continuing to plummet, why is the headline about a very marginal decline in the number of sales.  I still am not so sure the number of sales is inherently a good or bad metric for a region, important as it may be to the livelihood of individual real estate brokers or sales agents.    

I've said this before, but when you factor in the relatively low inflation level of late, the 'real' real estate appreciation going on in Pittsburgh must be maintaining a near record pace. 


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Tuesday, August 16, 2011

Sewerology 102: Reinsurance

So I hate to waste time doubling back on the PWSA, but here is another news item that just flattens me.  See WTAE’s story: Homeowner's Sewer Line Surprise Proves Costly

The story says most homeowners tested have failed a required test on how their sewers are tapped. The first phenomenal factoid is just that nearly 20% of homes tested failed. Clearly it is a costly repair to redo a sewer line.

What I can’t believe some unnamed person at the PWSA had to say comes from this section in the story:
A representative for the PWSA said they were starting a line warranty program at the time, which would have covered repair costs, but that a Federal judge found the program to be illegal earlier this year.
Holy Preexisting Condition....   So let me get this right. An insurance/warranty company, a new and undercapitalized insurance/warranty company at that, taking in $5/month is about to be able to shell out nearly $10K per property on more than 20% of the insured. There is a business model for you. If you really think that was going to happen, that Brooklyn Bridge is still for sale on some infomercial somewhere. I think I am beginning to appreciate how they got themselves into the bind with the variable rate bonds.

And when did Judge Wettick get put on the Federal bench? Good for him. I know there was a brief Federal appeal of his ruling, but that was not really the core of it all was it?

Fundamentally it makes me wonder if this ULS company itself had any reinsurance to make sure payouts were made in such extreme circumstances… but again, it was a warranty. Is there a market for rewarrantification?  I'm sure Lloyds would have written something if you really pressed them, but at what price?

Seems to me the real story hidden in that is a lot more interesting. The story seems to say that the PWSA tested the parcels but did not tell the homeowners over a period of time they were insured through the program. Did the PWSA withhold information that would have allowed homeowners to make claims on the warranty when they were covered? That would be interesting now wouldn’t it?  It would depending on the timing mostly.

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Eco-jobs or Echo-jobs

Out of West Virginia University is a new report focused directly on us and greater Westsylvania. See:  Regional Pittsburgh: The New Energy Economy.

A lot of it focuses on some macro level energy issues for the US and really only gets to local issues at the margin.  However, the new coverage of this report highlights the 'quarter million' jobs forecast for Marcellus Shale development in the US.  I was curious if this meant there was some new independent validation of the big jobs forecast for shale gas development in Pennsylvania, but no..  the report states that number, but merely references one of the now many Penn State reports on Marcellus Shale.  So it is the exact number as in the Considine et alia, reports in recent years.  There is no new analysis of any jobs forecast in the report as best I can tell, it is just an echo of the one report as updated and does not mention at all any of the other controversies over the Marcellus job forecasts..

Mapophiles will note they discuss what the greater Pittsburgh region means geographically...  they note on page 15 or so some maps with distances centered around Pittsburgh.  The most curious thing about this is that it is a report out of West Virginia that really accepts a Pittsburgh-centrism you rarely see even here.  It really represents a big step forward in a lot of projects promoting regionalism here (P32, Indicators among others) that such an idea would come out of WV.

I have a hard time characterizing the overall report.  Is it a policy report, an economic report or something else? I say that because in the 'The Opportunity' section is this paragraph which I guess borders on political economy:
Sometime in the recent past, we became complacent; letting the good life lull us into a sense that all is well and someone else will handle all of the problems. This approach has clearly fallen short of the world leadership position that we grew accustomed to, leaving us lagging behind in technology, the value of the dollar, loss of the more technically based jobs and capabilities, and the disenfranchisement of our youth for the future that they will soon inherit.
It's like a pep talk more than anything else and certainly has a magnum opus kind of feel. Curious. 

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Monday, August 15, 2011

Retracing the Orange Belt maybe?

You know, they better be careful or else they are going to get the Bat-Plane jammed inside the Squirrel Hill Tunnel.  I do want to see them parallel park that thing.  Like maybe in one of those spots in along an alley street in Lawrenceville.

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iBurgh-redux redux?

Since I was given such a straight line by Jon Geeting who points out a story in Allentown's Morning Call: Pothole problem? Allentown's got an app for that.

According to Jon: "Allentown Is 1st PA City to Have an App"......  Is he correct? Huh?  However one classifies any software in Pittsburgh here, you have to notice that the Morning Call story didn't feel that a mention of anything going on in Pittsburgh was warranted.  Not a single mention!  It is all yet another odd datapoint in the great Pittsburgh mystery I explained the other day where all the great technology in town is transmuted into a form of dark matter when it crosses the Rubicon into the region's public sector.

Does that mean iBurgh is kaput?  The Morning Call story could be like revisionist history.. it's more like it is saying it never existed in the first place.  If nothing else there is a PR problem here.  Maybe it is all just a semantic distinction with regards to who actually published the software. Allentown's publisher appears to literally be the city there, and not a third party in most cases locally. 

Anyway..  I should have copyrighted iBurgh once upon a time.  That or the idea of a pothole repprting app.

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Adam Carolla's Pittsburgh

Holy Cubic Splines Batman!  For the record something I only learned of from the vast Null Space peanut gallery, but it seems that Pittsburgh has made Maxim Magazine's 40 Best Man Cities. Seriously?! Seems unavoidable fodder for comment.

So take that Forbes Magazine worst place for singles... or at least some singles I suppose.

Before we get carried away though..  I really wonder if it is an artifact of our demographic of females exceeding males.  If it does, then I really wonder if they looked at the age distribution of that imbalance.  I guess I will need to study their extensive man-metrics, which is actually a tad bit intimidating. Might be a bit frightening if we are really ranking high on some of the specifics.  Whether those individual parameters are good things or bad things for a city or region is clearly a matter of debate. In terms of sheer methodology, I have to say their understanding of aggregation theory is actually a bit better than most fwiw. If you want to find the specific page on Pittsburgh, you have to scroll through to #8 for their brief, if annoying, writeup.  Nice picture provided them from VisitPittsburgh though.

I refuse to connect this to some of th public debates going on down on the 5th floor these days, but maybe Bram has some comments there.  It all really is kind of strange.  This was the town that for a brief moment had a 'Man Station' on FM.  It imploded very quickly which has to say something about the potential market for such a concept here.  Remember even John McIntyre had an evening talk radio program which does remind me that the whole station seemed a bit conflicted from inception.

Isn't that all more interesting than random discourses on yield curves?

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Sunday, August 14, 2011

Quantitative Absurdism... or If Godot Traded Fixed Income Securities

This article from Friday just is killing me. The title is "Pittsburgh Water and Sewer Authority counts on $1 million in savings“

OK.. the ‘savings’ is at best relative to the huge costs the bond in question has cost the PWSA over the years. So they are moving a small bit back toward normalcy from what was a major major problem… and still is in many ways.  So maybe it will cost less in the future, but 'savings' in this case has to be a euphemism too far no matter how much a half-full glass kind of person you are.  Gotta be a good water pun in that somewhere.

Those types of bonds were such problems that a lot of other (I emphasize other since I have heard of no attempt to recoup costs here by similar means) public entities who were advised into similar loans have been suing the banks that foisted the deals on them. Of late the SEC, along with some Federal and state attorneys, have been coming in and suing a lot of financial folks who sold public entitites like the PWSA on screwey bonds they should not have been involved with; or for some shady shenanigans on some deals remarkably similar to ours.

I personally would love to have someone go in and audit this PWSA bond (the same bond which was caused everyone such fits) to see what part of it actually finally made it to expenditures on actual infrastructure and to quantify just how much went to unanticipated financial costs, fees and and legal work that all ballooned.  It won't be a small number. Worth it for posterity’s sake for when you know someone tries some similar scheme in the future. Won’t look the same of course, but someone will think they have a great idea for something that really is not any better a deal than that bond seemed at the time.

But I am not done with Friday's article yet.  I really love this quote near the end..  I almost feel the Trib editors left it in there just for me. 
....the board would consider fixed-rate bonds when interest rates drop. "It's just the cost of credit, and our costs of maintaining this credit was less this year than it was last year. There's an element of risk involved no matter what you do."
I mean…. "when interest rates drop"??   From where they are now??  This may supercede what I thought was the greatest example of doublespeak from the PWSA from earlier in the year if you remember that.  Just makes me wonder again who is in charge down there and why is it taking so long to fill the top spot at the PWSA?  It is getting to be almost as long as the time it is taking to find a permanent BBI head for the city as well.

But waiting for lower intrest rates? I am waiting for my variable rate mortgage to send me a check for the interest part at the rate things are going.   Open the business page or any news anywhere. Financial markets are pricing in the end of the world almost and virtually all interest rates in all markets are at or near all time lows. On top of that, municipal bonds have seen a lot of recent gains (meaning that interest rates in new issues are going down) as investors seek out something... anything... that appears relatively safe. Bottom line: it might be true that interest rates will go lower, but if that is something you yourself are actually planning on then you are likely also someone who is building a cave and stocking it with provisions and ammunition.

OK.. I admit none of that is as much fun to talk about as some of the PWSA's travails with the Iron City Brewery (now itself officially a diasporan... if Jim R. counts corporate entities among the list of diasporans that is)... but I try to make the esoteric readable.

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Thursday, August 11, 2011

Tex-Pats out there somewhere

There is a new report via Penn State and some partners on the economic impact of Marcellus Shale development.  According to the news coverage the report has some new data on the great Marcellus worker mystery.  From Somerset County's Daily American:
"The study also suggests that a large majority of industry employees are coming from out of state. While overall employment increased in about half of the municipalities, only 28 percent experienced lower unemployment rates in 2010."
This all gets to just a small debate over whether the development of shale gas in Pennsylvania is generating jobs for folks residing in the state already, or for folks coming into the state from elsewhere.  My version of that is that it makes a difference whether you are talking about folks who are flying in temporarily in stints, versus people moving into the state from elsewhere.  If folks are actually moving into the state it clearly will have positive impacts on state-wide population trends as well as economic growth.  If folks just fly in and fly out,  but continue to make their permanent residences elsewhere, it makes the Pennsylvania T akin to a large North Sea oil platform. Or to use a US analogy.. maybe places like Altoona, or even Pittsburgh are the Port Fourhon's of Midatlantic?  If folks are not living here permanently, they will be buying their homes elsewhere.  Making all of those home related purchases elsewhere and raising their families elsewhere and so forth and so on.

Clearly there are new jobs in Pennsylvania resulting from shale gas develoment.  The scale of employment projections I have seen make it impossible that all the new jobs are being filled by folks in the parts of Pennsylvania where most of the drilling has been happening.  The fundamental question is whether the folks are itinerant or permanent migrants into Pennsylvania. 

So is this migration happening?  It was brough up specifically recently by Brian O. in the PG.  Brian isn't the only one who has brought up this issue of Marcellus Shale induced migration...  for some rather colorfully named "Tex-Pats" I learn.  I thought I might try to find the migrants in the data.  Has there been some shift in migration flows that correlates with the beginning of shale gas development in Pennsylvania is the question.  Seemed the best place to start was to look specifically at migration flows between Texas and Pennsylvania. That is obviously just one particular migration flow, but since Texas is the place with the shale gas expertise, it is the place you would expect to see some of the specific shale gas talent diaspora.  Here is what I get from the IRS migration data which will capture those who are telling the IRS they have moved in or out of Pennsylvania.. probably correlates pretty clsoely to where they are paying most of their taxes overall: 


So maybe there are a few net new migrants resulting from shale gas development, but I don't think you will find much evidence of a change in trend in the data state-wide as shown there.   At least from this data the answer to whether the the shale workers are moving to Pennsylvania is no.. but it may be it is too soon to measure the full migration flow that shale development may be inspiring.  This data reflects moves that have happened in 2009 at the latest. So the better answer is at least through 2009 is 'not yet'.   

Still, look at the scale and for state-wide migration flows those are not the biggest of numbers. It will not take much new migration to really show some shift in the trend.. or any shift in trend.  Seems to me that the argument that folks are moving into Pennsylvania because of shale development has been floating out there for a couple years now at least so you would see something by now in the IRS data.  So we will keep watching.  I would be surprised if you do not see some movement in this trend in subsequent years.   Just an exogenous extra 1,000 migrants a year (roughly a total of 15 people per county in Pennsylvania...  in other words just a few housholds) from Texas to anywhere in Pennsylvania would cut that net migration time series in half from where it has been recetly.  Given the scale of employment impacts that are floating out there, seems like it would be hard to hide any meaninfulg impact on migration flows. 

For those who want more detail, this is the table that I made the graph from.  

TX to PA
PA to TX
Net
2004-20055,2046,488-1,284
2005-20065,2367,405-2,169
2006-20075,2207,452-2,232
2007-20085,3727,834-2,462
2008-20095,4887,637-2,149

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Contingent Failures

Not much notice of some coverage of the now-failed sewer line 'insurance' programin the city of Pittsburgh.  See WPXI:  PWSA Insurance Fails Customers; Legal Action Taken. Seems to me someone might want to go in and audit the rump company to figure how big this potential problem is with clients being hit with bills and legal actions derivative from the insurance company's collapse.  I don't think they had just one contractor doing the work out there did they?

Here is the fundamental issue that nobody really talked about from early on and long before we got to this point.  There is a reason that insurance markets are some of the most regulated markets everywhere and always.  It is far too easy to set up an insurance program, take in premia for a long time, and along the way not put aside enough in cash or assets to cover the future contingencies supposedly being insured against.  Some future bankruptcy devolves the 'insurance' into a ponzi scheme.  Regulation comes into play to make sure there is some semblence of assets held in reserve to the potential future claims.

So was the PWSA sponsored program ever really 'insurance'?  Legally probably not.  As pointed out quite accurately by a commenter here (MH?, I forget) the PWSA program was actually a 'warranty' program.  The legal distinctions between insurance and warranty are not as great as the semantic ones.  It can be a fine line between a warranty and an insurance contract.  The distinction means less in economics than it does in the law where the difference is palpable with regards to regulation in most states.  So I am not saying anything was illegal and most sewer line 'insurance' programs are really warranties in their contract verbiage.  Economically they really appear to me to be insurance nonetheless.. let alone in the popular vernacular.

So go back to the WPXI story today.   Does it really matter that the PWSA program was shut down?  Short term or long term, if there was a correctly calculated amount of cash being put away for the contingencies being insured against then there should be no unmet contingent claims.  The fact that there seems to not be sufficient assets for the few claims already taken in by the program only raise bigger questions about whether there would have been sufficient assets over the longer run. 

This all gets to the most difficult question for insurance markets whether regulated or not.. how much to be saved and what price to charge?  Contingent claims markets of all kinds are some of the hardest to ever determine an efficient price in a free market.  The problem is that so much depends on the unknown parameters of the future.  That is true of all insurance markets, but for some that unknown future has been studied to death.. quite literally.  Most all of actuarial science is dedicated to the mortality quantification that is the heart of life insurance.  So I bet they come pretty close to getting the numbers right. 

Thus the number one question is whether such actuarial accuracy could ever be replicated in predicting the future of the city of Pittsburgh aging and ageless water infrastructure.  The PWSA cant even identify all the leaks it has in its backbone now and I bet there just isn't any meaningful estimate of what it would cost to replace the whole system.  What they know about the condition of individual taps to each and every home in the city is likely an order of magnitude even smaller.   So it seems obvious to me that worse than most any othe water system in the nation (because of it's age and relative lack of investment for so long) nobody can really know what a fair price would be for a sewer line insuranace program.  

At the core then is why a new company jumped into the breach and try and fill this apparent lack of market for a decently priced insurance program, whether sold individually to homeowners or collectively via the PWSA.  There appeared to be a big profit and some entrepreneurial sorts jumped in to fill the gap with winners all around.  Sort of the way the free market should work.  But it was likely an illusion.  The mispricing of the future risk is all that was really going on here and eventually.... down the road it may have been.. it really was impossible to collectively insure the failure of Pittsburgh's aging water infrastructure at a price that anyone would accept. I won't get into the pseudo-profit built into this particulal scheme which was the offer of the insurance program to pay for some rehabilitation of the PWSA's public drains at the same time... there certainly was not money for that and may be a core reasons some homeowners are being left adrift because of lack of assets.  That could in some parlances be called a 'side payment'.

and don't get me going on the economic failings, and impossibilities, of the defunct WEHAV insurance once thought up for Pittsburgh's West End neighborhoods.  Insurance can fill great gaps in the market by reducing risk when desired, but it can't solve all problems.

PS.  Brings up a real question for the future of the system.  Have they made any progress finding anyone to actually run the PWSA?

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Wednesday, August 10, 2011

Deconstructing Marcellus Metrics

Worth a read by all from some (other) folks at Penn State:  - Reverse Engineering the Economic Impacts of Pennsylvania Marcellus Natural Gas Industry.

Just to make sure the vanity surfers catch it..  we will just add the keyword here: "Marcellus Shale".  That always bumps up the readership here...  for real. 

Some key points in there.  Look at how much of the economic impact they show there is coming from construction and related hotel/hospitality industries.  When you do economic impact analysis, or lets be clear that when I (and most everyone I know for that matter) does economic impact analysis,  you do not treat the up front construction employment associated with most any project the same as the net new jobs created for the long run.  

You might also note that this Penn State study (I do wonder if some in the industry will ever refer to more than the one series of studies as being from Penn State researchers) make available their work product calculations.

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Tipping point fallacies

Beaten to the metric I am.  Hard to blog at 36K feet.  I note the news out of the BEA is that personal income growth in the Pittsburgh ranks pretty well.  It all begs an interesting question where all this (relative) good economic news for the region is coming from.

To answer that, first read this:  Pittsburgh’s Big Rank Jump

Then look at the date.

Go back and reread that every time you read some newly written story about how the economic story of Pittsburgh is something new or recent.  I just am not a big believer in simple stories or 'tipping points' in most economic stories for the region.  As Jim R. will point out, the mesofacts are closer to the real facts, but they don't make such easy stories to tell.

But going back to the news today.  The PG version compares Pittsburgh's income growth to some of the smaller metro areas in Pennsylvania.  Might be worth noting just now much smaller some of the noted metro areas are in comparsion to Pittsburgh.  They note we have not grown as much as the Williamsport metro area. Is Williamsport half the size of the Pittsburgh region?  A quarter?  Looking at the income data of note today, Williamsport had $3.9 billion in annual personal income.  The Pittsburgh region has over $103 billion.  So you are talking about a region less than 1/25th the size of Pittsburgh.  Statistically, the entire gain in income in Williamsport would not even be a blip if diluted across the larger Pittsburgh region.

Williamsport is itself an economic giant compared to some of the smaller areas of Pennsylvania that really are at the heart of the Marcellus Shale development that is said to be the cause of some of the the income growth in the state.  You have to keep the scale of these numbers in mind when thinking about that.  It goes back to a basic point that the Marcellus Shale story appears so outsized because in the places where the development is happening the economies are so small that new economic activity is inevitably very large in comparison to the status quo.

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Tuesday, August 09, 2011

Transit access deserts

Something it looks like I drafted, but never posted.  Since I am traveling I thought I would put it up. 

PG a couple months ago:  "Private transit service from the North Hills to Downtown Pittsburgh has attracted only a fraction of the riders that Port Authority carried before it eliminated the routes in March. Literally a fraction.  The article says the new private routes have attracted 1/16th of the riders the Port Authority had. Does anyone in the far North Hills of Allegheny County take transit (public or private) any longer I wonder?

The question is why was anyone expecting anything different?  The examples where this has been tried elsewhere have shown similar results. Actually that example is a bit different and more akin to a legalized 'jitney' service.  Jitneys R us of course.  Maybe jitneys are taking up the slack in all the Port Authority cuts in recent years? Who knows? 

But hey, the local news story is from a couple months ago now.  Maybe things have picked up since then?   and I still wonder why nobody ever follows up with what is up with: www.pittsburgh-oaklandconnector.com/.
Maybe it is moving forward? Maybe it was abandoned?  But very little in the public record since it was announced with some fanfare. Strange. There is one snippet in the news, and we are now halfway through the 2.5 year timeline it mentions. So maybe we are on the verge of a big new announcement?  Maybe it all could be a topic for the ACE race that some believe is going on.   

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Monday, August 08, 2011

Score past, with a score to go

No, this is not about the Pirates.

This is a true story.  When I was getting ready to graduate from college, a couple of friends and I were archiving all our files on a 6250bpi magnetic reel tape we purchased which was just about the only option for such an operation at the time.  Seemed like it made sense to do; what can I say?  One of the files we saved, thinking it might be worth having, was a complete network directory of every IP address then in use.  Seriously, long before dynamic addressing, if you had a computer connected to the Internet you had a name assigned to it and it was still all possible to have a complete index of all connected machines in a concise text file. Sounds like the dark ages now.

When was all this you have to ask? .... well, nevermind, let's just say it was even before the first web page started up, which was exactly 20 years ago Saturday.  As seminal as that was, it was the next spark that expanded the universe of ideas on what the Internet could really do. That spark came right here when 4 CMU students connected a Coke machine to the Internet.  Genius. Followed by folks who connected a coffee maker to the Internet.  People just don't have fun like this any longer.

It all just gets me thinking.    From Chicago the the other day was a great story on the uses of public data by local governments.  Now think about us.  As simply as I can put this: is there anywhere else with a greater mismatch between the technical capacity of folks in town and what we do with that expertise in the community?  To be clear, that critique extends to just about every layer of government we have.  City, county, and state for sure... but think about literally every municipality around and let's not get going on what the many public authorities are not doing with the information they generate, or could generate. It's not a lack of technology that builds these silos we have, but something else. 

I hate to say we then confuse the public with the state of technology in the local public sphere.  So we get exicited last week with nearly front page size news about a new 'app' that folks can use to 'track' bus schedules and related info.  It's great and all that, but the only reason we need to crowdsource bus schedules is because the Port Authority is so far behind at putting out a meaningful (i.e. real-time) GTFS data feed. It's not like they are one of the largest transit agencies in the nation, but others are doing it.  I bet if they just put out the data, if they could that is, then the apps would already be out there. As long as the data remains behind the moat, the crowd can't do much to be value added. So we remain a technology backwater for the most part, but the snippet of movement forward makes it appear as if we are cutting edge.
What constitutes progress often just highlights how far behind we are.

  ... and I hate to pick on the Port Authority for that one example. You could find analogies almost everywhere in the region.

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Sunday, August 07, 2011

Ruh-Roh!

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Saturday, August 06, 2011

Daily Ranking: Cleveburgh Ascendant

Pittsburgh is just barely across the marker, but still check out Bloomberg/Businessweek's list of top 10 places for tech job growth.

Number 1 is..........

It must make the Greater Youngstown juggernaut!

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Friday, August 05, 2011

Monty Hall Meets Public Finance

So I admit this all more Public Finance 102 than most care to get into, but some important things going on that could mean real $$ for some local folks.

First: go back and read RL's piece on some regulatory judgements against big finance players for past (bad) practices in municipal finance land: Local school districts recoup money from bid-rigging settlements
Then go read the more recent WSJ article: Bid Rigging Pact Hits a Snag

Local dots to connect in those two stories. Some local folks should really be looking to get their share of $$ in all of this, but I have this sinking suspicion that they might not be pushing too hard.

More generally on public finance.  If you recall the little tempest with the bond deal that wasn't for the City of Pittsburgh just recently.  It was a bit strange. Bond offerings do fail, but not all that often and when they do you have to ask yourself if your underwriter priced the debt correctly.  Whatever happened last week, one of the fallouts from the bigger Wall Street tempest in the last week has been that municipal bond rates have really collapsed.  If you can't get a good rate as a municipal borrower these days, then there is something going on worth digging into. 

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hold em like they do in Texas plays

Remember when the Trib reported that the  Marcellus Shale Coalition threatened to boycott business within the city limits of Pittsburgh if they pushed ahead with legislation unsupportive of drilling within the city?  Seems to me that since then City Council has pushed ahead much further than they were planning to back then with the proposed ammendment to the city charter on all of this.  The boycott must be on don't you think? I mean, if they wanted to boycott the city before, they must really want to now?

Boycott is such a harsh word; makes me think of the Cuban Missile Crisis.  To be fair the article says "industry officials said they could take their non-drilling business elsewhere", so it is all hypothetical though still very threat-like.

At least to date, there does not seem to be much impact from a story today in the PG on local commerical real estate demand.   While it gets into some suburban developments, the article focuses on the rapidly tightening Downtown real estate market.  The irony is that I suspect many of the new property assessments for commercial property Downtown will actually be decreasing no matter.  More  some other time on the impact that is likely to have for residential property taxes.

But despite a lot of popular belief to the contrary, the ability of the City of Pittsburgh to attract and retain jobs has almost never been problematic.  If you ever hear someone talk about folks taking business out of the city because of (fill in the blank: taxes, politicians, crime, traffic, ???, oh and don't forget the potential of regulations on gas drilling that does not exist), you should call them on it.  They may have an anectdotal example for sure, but for every job 'fleeing' the city for some suburban location, some job is being created elsewhere in the city.  

I've said this before, but time series of jobs located in the City proper are about as stable as any economic metric in the region, or in any other Northeastern US urban core, over many decades.  In 1958, the late Edgar Hoover and his team studying the Pittsburgh economy counted 294,000 jobs located in the city proper and 107,000 in the Golden Triangle specifically.  1958!  So well before the collapse of heavy industry in town.  Those numbers are virtually identical today which tells me there is a certain limit to how many jobs can efficiently be located in what are some relatively (very) constrained areas.  So those jobs 'forced' out of the city are if anything, being forced out by the jobs that want to be located here, or are fairly immediately replaced.  Not exactly a bad situation to have and one that has persisted through some very good and very bad economic times for the region.

More recently, and with some more specific data here are the trends in jobs located in the city of Pittsburgh this is what you get:


So there is not more recent data for that, but if you believe the story today the recent trends are as positive as they have been in decades so there is no reason to think the fundamental picture has changed.

If you think the city is retaining lower paying jobs while the 'better' jobs are the ones fleeing to the suburbs you would be wrong again.  From the same data as that chart, the average annual income for jobs located in the city proper compared to the remainder of the MSA:

Average Annual Pay
Pgh (City)Rest of MSARatio
1991$35,119$29,1221.21
2007$47,669$35,7151.33


It seems that the pay premium for jobs located in the city of Pittsburgh proper is well ahead of where it was 20 years ago.  Go figure.  Looking at the ratio should get you past any inflation factors which you would think would apply equally to city and suburb within a region. Again, I would just speculate that more recent data is only expanding the divergence of pay at city-proper and suburan jobs within the region.  

So I dunno...  since I don't see any retraction of the MSC's threat against the city, one might presume they have pushed ahead with their intent to disuade members from business in the city.  Maybe the annual Furrie (Furry) convention makes up for the lost business.

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Thursday, August 04, 2011

était-ce un rêve?

There might be a stock market analogy here......

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Daily Ranking

Not quite sure if this is from data any different from what we have seen before, but here is a ranking of real estate markets nationally.  Year over year almost everyone is down.  Seems like this may be more of a source of this data.  If you read through it, there is a lot of focus on the impact of Real Estate Owned (REO) properties on real estate markets.  REO properties are those owned financial institutions for the most part.  Some local data on the REO impact in Pittsburgh is in this newsletter edition

Not terribly relevant, but my Pittsburgh real estate news filter caught this in passing.

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Wednesday, August 03, 2011

Magic of (in-flight) Cinema

I almost choked up the thawed pasta when I heard this movie line unexpectedly:
"I'm from Pittsburgh.... and now I own skyscrapers"
It also reminded me that I think Zap owes me a gold star for my 5th PIT-CDG direct flight.  Good thing I don't travel as much over the winter.  Deep down I doubt the Delta flight itself is long for Pittsburgh, but the chatter is that Lufthansa and/or United may drop another international route here.

Speaking of flights and unrelated to anything, but I am fascinated by this story on a DB Cooper opening because I actually once took a flight that used the very same aircraft he jumped out of. 

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Tuesday, August 02, 2011

Jobs Über Alles

By far the best look at the jobs issues surrounding Marcellus Shale to date.  WSJ: Gas Drilling Bringing Jobs to Pennsylvania, but How Many?

Still deserves a lot more poking, and I suspect folks will be writing long ex post on the jobs projections many take for granted compared to what we eventually will measure.

and yes...  the regional labor force stats are out and the center of attention is the discrepancy between the big jump in jobs and yet the rise in the local unemployment rate.  Various creative ways to describing the confusion; PBT says "quirk of statistics".  While I admit I have some questions myself it comes down to one of three things that has to be going on in the data.  One is the 'quirk' which would mean there is a sample frame in the CPS for the region that is capturing a bit more folks unemployed than you might expect. It is possible, but it is enough of a discrepancy with the jobs count that I don't quite believe it can be more than part of the story. At some point the sample frame will rotate folks out so we will eventually know if that is having an impact.  Could be some jump up in labor force participation among local residents; though that would be odd to happen fast enough to be showing up as it is. Would be a story unto itself.  The third big possibility which I am leaning toward is just sheer migration into the region which would be a direct way to produce the seemingly anomalous increases in jobs, yet rising unemployment rates.   

and to just throw everyone for a loop... unemployment rates are up, even seasonally adjusted rates, out in the middle of where so many of the Marcellus-related jobs are located.  How can that be possible since some projections clearly have every man, woman and child with a pulse out in the 'T' being employed by Marcellus job demand?

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