Sad but True

As preface, I was at a conference a couple weeks ago where I heard from one of the more objective academic political pollsters out there. You have probably seen or heard of some of his work. One point he made was that presidential elections can either be 'issue elections' or 'personality driven elections'. Which one is this he was pretty sure: personality. That seemed kind of shocking when I heard it. There is no shortage of issues out there and I can't really imagine the two parties could have picked two candidates who presented starker contrasts on most issues. We really could (should?) be having a great national debate right now.

But if I had any lingering illusions that issues mattered this election, the picture below pretty much dispelled them. I debated whether to post this. I just didn't want to touch national political stuff other than the purely wonkish angles... but this was so troubling that I would have felt guilty to ignore it completely. Where exactly this was put up is not as important as the mere fact that it exists. I'll just say it was 100 miles or so from Pittsburgh. If I only saw one sign like this I would still have just ignored it, but it was not alone. Someone clearly has a template to paint these in quantity. Three colors no less.

Debt in Venice

or put another way... Can local government exist without borrowing?

as bad as the news today is, there may be another shoe to drop in the evolving financial markets miasma. One well-reported reason for the fear out there is the view that the credit crunch was extending not just to real estate and financial markets in themselves, but that routine lending to business was drying up which would then lead to broad based economic showdown. Not mentioned in that argument is the impact a lending draught could have on local governments across the country. See what is happening up in Erie right now. Could have a big impact if the Port Authority is looking to use any debt to get it though a cash crunch at the end of the year. That is not to say they are planning that in any way, but you have to wonder what they are planning for given the public statements that they will run out of money in a few months... Maybe we will be in the middle of a blizzard?

More National City news....

for public finance geeks... Jefferson County is planning on defaulting on it's bonds which will then have bond payments made up by bond insurer FGIC and FSA's woes are bringing down it's parent Dexia. I have mentioned the potential impact on some of the big loans in town if FSA follows some of the other big bond insurers of late.

and has anyone looked at how the credit market meltdown might impact any of the big projects slated for the region? Things like Don Allen or the Chelsea apartments in Oakland?

Tracking the Rust Belt

So tomorrow we will learn the latest unemployment numbers for the region. I understand why we all get fixated on the latest economic data, but I wonder whether it's worth it most of the time. The changes that are happening here are not things that manifest them this month versus last month, or in many cases not even this year versus last year. Some have pointed out to me that my penchant to look at changes in the region over decades may be equally less than useful. What is a happy medium? Up or down, here is the updated version of my neo-Rust Belt tracking chart comparing the unemployment rates in Pittsburgh, Cleveland and Detroit since 2000 when all three were pretty comparable. In this chart Cleveland and Detroit have data through August, Pittsburgh's data is through July and we will learn August's number in the morning. Whatever Pittsburgh's latest number shows up as, why the three have been diverging so much is not a subject that has been studied all that much.*


* One exception may be some of the work I referenced in an old post: Shiny Rust Belt.

follow those stories - that presidential tie

I mused last week that there was a real possibility of an electoral college tie. I see on the reinvigorated PG ER blog that the Washington Times considered even more pathological tie scenarios that go beyond the electoral college. Now the WSJ is piling on. I will tell you, that if you take the polls where they stand on pollster.com, it has worked out to an exact tie for the last several weeks I think. Exactly! No movement either way. Some movement in the polls for sure, but if you take each state where they stand you keep getting exactly 269-269.

It could be much worse than the Washington Times suggests. In the event of an electoral college tie, the House of Representatives will elect the president. BUT..... each state gets one vote. Could there be state delegations evenly split who will never be able to choose one way or the other?

Think it's all beyond the pale. It's past a non-zero possibility at least. Long ago I recalled my days as a defense analyst and some of the pathological possibilities that go into planning for presidential succession.

Shades of Skybus

Dead but not gone is the ghost of Skybus. See the NYTimes article from last week on the Pod-Conference held recently at Cornell. No, not pod as in pod-camp, but the people mover pods otherwise known as personal rapid transit (PRT). PRT is in place down at West Virginia University and is at least the stepchild of Pittsburgh's doomed Skybus people mover system.

so no.. I am not so naive as to join in advocating anything like this here, especially in today's uber-cost conscious environment... but you know, given one of the densest employment centers in the country in Downtown Pittsburgh, it's hard not to see it as an ideal place to operate a PRT system. Crazy? For sure, but at least certainly more useful than my favorite transit idea in town: the aerial tram from Mount Washington to the North Shore. Financially inconceivable? Either a PRT system or aerial tram would cost a small fraction of still extant Maglev. Ken, if you think maintaining bus service is expensive, have you ever seen what Maglev's operating costs were slated to be?

tax metrics

The Tax Foundation has put out its county rankings of property taxes. They rank 788 of the 3K or so counties in the US using census data on property taxes. I'm not quite sure this census data is the best way to measure property tax incidence since in a lot of cases you can measure actual tax revenues directly and not rely on survey responses from people who may not recall their current tax bill accurately. Nonetheless, Allegheny county is ranked at 194th in terms with an average property tax bill of $2,539. That would seem pretty good as rankings go, especially for an urban core county which typically fare badly in metrics like that, but as a proportion of the average property value here ($113,800 in this data) it works out to an average 2.2% which is the highest in Pennsylvania and 20th in the nation. Lessons? Maybe you can't infer that all the costs of government necessarily become cheaper just because housing is cheap. That's a lesson many local municipalities and school districts here know very well. It also means that when you adjust for housing prices and don't include property taxes which is what many folks do, you really are not getting a full picture. The numbers for some other local counties:

Allegheny County $2,539
Butler County $1,951
Beaver County $1,905
Westmoreland County $1,838
Armstrong County $1,756
Washington County $1,565
Indiana County $1,409
Fayette County $1,105

American Political Economy

Watching the President last night trying to explain the financial markets miasma I tried to figure out how it fits into my understanding of political philosophy. So this is just me, but my own framework for understanding American political economy goes like this:

• If you believe market failures happen on at least a semi-regular basis, you are probably a liberal.
• If you believe market failures happen, but are extremely rare and isolated, you are probably a conservative.
• If you believe 'market failure' is a an oxymoron, you are probably libertarian.
• If you think markets are always failures, you are probably a communist.

How that all fits into the political machinations of late is hard to figure. and is it just me, but was that the most pessimistic presidential address since Jimmy Carter's energy address in 1977.

Ghost of the Pittsburgh Press

I know some folks only read the Trib and not the PG, or just the PG and not the Trib. So just as a public service for the latter, the Trib has the only story I see on the news that the PG is looking at buyouts and then layoffs. Looks ominous.

Media as an industry is a business in search of a model. I once even saw an article that pondered whether newspapers could exist as nonprofits. Could this be the first step toward Pittsburgh finally becoming a one paper town? Some speculate that the same financial issues face the Trib, but are not such an issue because of the financial backing of it's owner. I have no idea the specifics, but if true I'm not sure there is any reason any such financial backing would not continue into the future given that RMS is still listed in the Forbes 400.

As for the future? Should the CP be thinking of a daily version?

Youth-burgh and more

Trib today covers some stats coming out of the Census' American Community Survey. Something that popped out was an increasingly younger workforce in Pittsburgh of late. If you are reading this, you have heard more than you ought to of my thoughts on these things. If you see my friend Ed's comment, his longer work on the changing demographics of Pittsburgh is online here: A Demographic Overview of Metropolitan Pittsburgh, by Peter A. Morrison. published by RAND in 2003.

Forbes has a quick look at immigrant-less Burgh, a factoid that does not seem to have changed much with the recent census data released.

Forbes also is out with an index of regional housing and rental prices. We show up as having the cheapest rentals in the nation.

and just to show that there is life after Pittsburgh. The NYT has a piece on former Carnegie Museum of Art director Richard Armstrong in his new role at the Guggenheim. I didn't realize it, but the article says he started here in 1981.

and if you thought competition from West Virginia was the only thing that will impact local casino revenues, now there is news of potential casinos in nearby Western Maryland.

Transit Tuesday - metrics to be proud of (in the past)

Something I meant to comment on, but must have gotten distracted.

Last month there was a PG story on a Forbes article that listed Pittsburgh as one of the most commuter friendly regions in the country. The Pittsburgh profile points out a few reasons why including a high percentage of people who get to work by means other than driving.

That's great. Kind of not mentioned is that the metric used data from 2006 and 2007, mostly all of which came before the Port Authority cut so many routes. Even with some gas price induced ridership gains here, those gains pale in comparison to the increased ridership in most other major transit systems.

Bottom line, I can pretty much guarantee that we have moved down that list of most transit-friendly regions since 2006, and looking to move down even further as time goes by. Since so many routes were cut, the potential gains are proving to be that much less than what other major transit systems are experiencing right now. Where once we were ranked pretty high in transit usage, the only question at the moment is how far we have fallen. Will have to wait for some more data for answer that for sure, but that was the cost we will pay for the route cuts last year.

Don't believe that, or think it's just a marginal shift... I have taken the bus ridership trends from the American Public Transit Association which has this table of data through the 2nd quarter of 2008 and all I did was plot out the year to date percentage change in # of rides... We show up dead last by far. What's that new feature in the Post-Gazette these days??? facts that speak for themselves:

Some of the few regions that come close to our drop include yet again New Orleans and other places with some severe economic downturns of late such as Cleveland or places hard hit by the housing crunch including Los Angeles. In lots of ways we are doing ok economically compared to those places, so if you took those factors into account our transit drop off would compare even worse. Though what it means to be worse than last I am not sure.

So yes, a part of the explanation for that are the route cuts, but that is the point. Even if high gas prices gets ridership to sustain itself at where ridership was before the cuts, look at the big jumps elsewhere. Given our historically high ranking in terms of transit usage, you would think we have the potential to show some of the largest transit ridership increases. There is no reason that instead of minus 5%, we are not at plus 10% where several regions are or even greater. How much gas does 15% (-5 to +10) of 230K daily riders add up to? I bet it's enough to negate just about all other recent energy conservation efforts in the region combined and then some.

Still Steelers Nation

Here is a great mashup from: http://www.the506.com/nflmaps/ showing which NFL games played in which markets yesterday afternoon.

Labor harmonies

I try to get to the symphony a few times a year. Normally it does not give fodder for economic discussion. But I went to the season opening on Friday and not coincidentally there was news that the PSO management and the symphony members reached agreement on a new contract the same day. Think labor strife is limited to the Port Authority? In 1975 the symphony musicians went on strike for 45 days. A decade ago a large allocation of county RAD money to the symphony was needed to avert a strike.

Speaking purely economically. The job I strive for is to be the third percussionist who must be assigned the fewest notes over the course of the season. Alas, I think I even failed drum classes in grade school.

.. speaking of musicians. From an anonymous comment on the ADB's blog is a note that our wayward cellist Bernard Katz is listed in this music program from just last month in Brazil. He really is listed there on day 27 assuming there are not multiple Brazilian Cellists named Bernardo Katz that is. I kind of wonder whether Katz is even on any Interpol list that would pick him up if he traveled, let alone whether there is any effort by the Feds to get the guy. Come to think of it, I am not sure anything I have read says there is any criminal action against him at all. But it's fun to wonder how many cellists are on the lam anywhere in the world? I also am amazed at how many cellists pop up in Burghosphere discourse.

misc

Pennsylvania's unemployment rate is up.. Employment growth was limited to just a few sectors including education, health care, natural resources and mining... hmm. We will see what the region's unemployment looks like in a little over a week. The news for New York City is bad with their release of unemployment jumping from 5 to 5.8 percent between July and August, which is before most of the big events of the last week at Lehman or AIG. Could be ugly in Manhattan which has an economy driven a lot by the financial industry. But more comparable for us, Detroit's seasonally adjusted unemployment rate for August has jumped to 9.0%. Cleveland is up to 7.5%. Impacts here for sure, but it looks like local construction employment is actually hitting a recent high.

Unsurprisingly Detroit, Cleveland and NYC all make Forbes recent list of the most stressful cities. We don't seem to be in the top 10 at least. Can't find what our actual rank is in their list.

I will just note this here, but on my post earlier in the week on Port Authority fuel prices/contracts I have appended some clarifications of note which I received direct from the source. See the post from Wednesday if you want the details.

on Vallejo and bankruptcy... See this Bloomberg story which says others also think there are some important precedents that could be set. Coincidentally you get more folks talking about whether the Port Authority could "Pull a Vallejo". Yesterday County Councilman Mccollough brought up the topic by saying he was going to propose legislation that would force the Port Authority into bankruptcy. As I mentioned in a comment I think, I doubt there is much need for legislation, if they really run out of money and shut down they may be forced into court anyway though I am a little dubious (much more so than Vallejo) that a judge would allow a Port Authority bankruptcy to go forward given that they have no debt and there is this drink tax revenue very publicly being held in some sort of political escrow by the county.

Pittsblog Requiem??

I blame Fester for instigating this blog, but Pittsblog paved the way. For the 1% of readers here who do not also check in on Pittsblog, make sure to pop over there now. Mike claims he is packing it in for a confluence of reasonable reasons. I will choose to call it a sabbatical even if that borders a bit on denial. Whatever the status is..... Mike gives the first installment of his ultimate answer to everything, nails the Pittsburgh psyche and takes no prisoners in his latest (not the last?) post. I'd sum it all up as the ultimate question: what cookie is your Pittsburgh?

Election night could be really really long

If you take the current lay of the land on Pollster.com right now and assume every toss up state goes to whomever they are showing on top at this moment, by whatever margin it is showing (some are pretty slim) there are lots of options for a perfect electoral college tie. Right now it shows McCain 278, Obama 260 but with lots of toss up states.


but if all goes as they have with just a few differences you get exactly 269, 269. Some of those scenarios include what their map shows now except


Colorado goes D and not R.
or

Louisiana goes D and not R
or

Montana and Arkansas go D and not R


There are clearly lots and lots of others scenarios that get you to the same point, but those are just a few that were obvious or conceivable given the margins in those state. I'd have to get the Bayesian modelers set the supercomputers chomping what the probability of a literal tie is. Could the future of the US be determined by the by-district allocation of electors in Maine or Nebraska.

Time is ticking, but it is still a political eternity between now and November.

Transit Wednesday - fuel costs

See updated appendd at the end for further information on this post

I pointed out in the past how the Port Authority must be bringing in additional revenues from all the new riders of late, yet has not had to suffer the worstof the highest fuel costs because they contract annually for fuel. They have reported that their 2009 diesel price will be $4.15/gallon, up from $2.28 in 2008. When looking at those prices realize they pay wholesale prices and don't have to pay most taxes on their fuel purchases. So even though fuel costs have shot up, they have not borne the brunt of those increase over most of the last year. Of course those long term contracts end and they recently had to renegotiate their deal for diesel.

So since the Port Authority goes to so much more expense and effort to post a "rumor of the day" online vice putting up useful information like their fuel contract information I will pose this as a question for someone to ask:

Did the port authority lock in diesel prices at the very peak of the market, ensuring that they will be paying the highest prices for the entire coming year?

Oil has come down 33+% recently. If ridership gains unwind then will they be hit from both sides and not have the revenue gains as well? Could be ugly.

_________________________________

Update September 19th... The Port Authority has told me the following that relates to the above:

Typically, Port Authority purchases its fuel under long-term (approximately 2-year) contracts, butdue to the market volatility of this past Summer, Port Authority enteredinto a relatively short six-month fuel purchase agreement for its dieselfuel supply. The contract provides for the purchase of approximately90% of the Port Authority's diesel fuel at $4.15 per gallon. Theremaining 10% is purchased on a spot-market basis at daily market rates.The contract expires at mid-December, and before its expiration PortAuthority will attempt to lock-in a longer term contract at theprevailing market rates

So maybe it's not as bad as it seemed. I would add that I got some of my information from this Pitt News article which was pretty clear and explicit quoting the Port Authority that the $4.15 price was for 2009, not the latter half of 2008. But dealing with media queries enough myself, I am more than willing to accept that something was just lost in translation. If someone meant 'half of a fiscal year' then you need to explain that to a reporter who would not assume that is what '2009' means.

another casino financing deal bites the dust

Can't keep up with the second order financial news these days... News just out that Credit Suisse is not going forward to finance the proposed casino that is slated for Lawrence County. Whether they can find alternative financing these days will be a challenge no doubt.

So two points: the issue is not so much whether other financing can be found, the question is at what interest rate. Interest rates have actually come down of late, but if this is deemed a riskier project than in the past and the developers need to pay a hefty premium, can it be a viable project in the future.and two, if the Lawrence County casino never happens, or does not happen soon, does that work out to a higher value for the Pittsburgh casino which would then be expected to capture some more revenue.

That and you just have to wonder... even if Don Barden had found a way to keep the Majestic Star financed earlier in the year, financing which for a while was going to include Credit Suisse... would whatever deal he came up still be in place today given all that is going on in financial markets.

Park-less Burgh

Funny stats… per the PBT is word of a new study showing that Pittsburgh has one of the highest parking rates in the country.

Yet at the same time, parking utilization is clearly at full capacity. What's it mean? Is Downtown parking a market failure or just a reflection of the tight geography and density of jobs that have remained there. Maybe the high parking rates are an unavoidale consequence of just how successful business retention has been Downtown. It's one of those simple things that shows how a number may be bad or good ( or is that bad and good) depending.

But I wonder..... Does Pittsburgh have the highest ratio of parking rates to housing prices in the nation? And yes this is a ridiculous thought, but are there any areas close to town where people might find it cheaper to buy a parcel merely to gain a place to park?

Risk by other means

I really do have more transit posts... but this news keeps piling up. here is a question that would have been inconceivable not long ago... is a bit inconceivable today.. but for real:

Would you want to foreclose on a sewer?

Lehman's bankruptcy involves such huge $ amounts that everyone's finances could be impacted. The Vallejo bankruptcy can clear a path other cities may follow, but also on the verge is a bankruptcy of the Jefferson County sewer system. Sounds boring.. but the $ amounts involved are in the $billions and you can draw a lot of parallels between plight of local water systems here and how Jefferson County got into its current predicament. To meet clean water standards they invested in significant infrastructure investment that left then with massive debts they have now been unable to pay off. Likewise the water and sewer systems here are facing similar EPA consent orders that will only be addressed with equally massive investments. But that is an issue unto itself. For the moment the financial linkages are worth noting.

Yesterday Jefferson County was sued by none other than our own Bank of New York/Mellon which holds (see update below) warrants for most of the system's $3+Billion debt. I think BoNY Mellon is not at that much risk itself in that most (but not all) of the debts in question are insured, but still it highlights the connectedness of the myriad problems in financial markets these days. We may be the Birmingham of the North in more ways than you can imagine.

update: I said I didn't think there was much risk to Bank of NY/Mellon and I was at least half right. A note direct from the folks at the bank tells me:

"Bank of New York Mellon serves as trustee in the Jefferson County case. It has no financial exposure whatsoever. It's simply acting on behalf of the majority holders (the bond insurers) in its role."

Transit Tuesday

Maybe this is a good time to go back to last Wednesday's PG is a response to KZ's previous Sunday oped on the state of labor negotiations between the Port Authority and its drivers. See: Don't punish transit workers by Joseph J. Pass who I believe is the ATU's attorney. I've mentioned a few of the obvious things that Mr. Pass brings up, namely the bad metrics used for cost of living adjustment and the positive aspects of what workers received in negotiations with the Chicago Transit Authority. I still need to get into that some more because it is not how it has been presented, but I'll get back to that.


There is an interesting factoid in there that would be interesting to dig into. He didn't do the division for some reason, but take this paragraph from the oped:

"over the past 19 years [workers] have contributed from their paychecks more than $100 million to their pension plan while the Port Authority has contributed $30 million. And while the Port Authority was making this contribution for some 5,000 to 6,000 Local 85 employees and retirees, they contributed more than double that amount to the pension plan for only 200 to 300 management employees. "

If those numbers are right that works out to ($30mil/5000=) $6k per worker (I presume he means driver) but a phenomenal ($60mil/300=) $200,000 per management employee. I am suspecting that is off somehow, there is no way that much disparity can be remotely accurate can it? at least I would question it, although past coverage of the issue and especially the list of top pensioners for the Port Authority would seem to confirm the disparity.

financial musings

I did have a transit post for today, but seems a bit trivial given the other doings in the world. I am kind of amazed that the stock market sell off has not induced even more panic type behavior than it has. A 5% selloff is pretty large by any measure, though the markets are used to a lot more volatility these days than in the past. Others may remember October 1987 when the market sold off by over 20% one day, so if things seem bad right now consider what some felt like that day.

The bankruptcy for Lehman Brothers gives everyone pause. I have mentioned that I once worked for Lehman in the early 1990’s. I can’t say there is the tie that makes me fret over its demise. I don’t think I know many there these days, I think a few friends from college are there, but I have not caught up in a while to be sure. But for me it brings back other memories. Lehman is (was?) located in the World Financial Center right next to WTC and my commute every day was via a subway stop across the underground concourse at the WTC. When I saw the area post 9/11, there was a chunck out of the WFC tower where Lehman was located near the floor I worked on. It’s all awfully strange to think about to this day.

Locally what does it all mean? The Pittsburgh Business Times ran a headline this afternoon I thought a bit presumptive: “Pittsburgh financial institutions may feel short-term effect from Lehman bankruptcy” . That headline was changed to a more precise and narrower: “BNY Mellon not among Lehman's unsecured creditors”. I can’t imagine the full fallout from Lehman’s bankruptcy is known yet. Lehman might owe certain institutions money, but if their debt defaults what about those creditor firms who then can’t pay their debts. I think this would all be described as a cascade failure. If I were a business editor with some interns around, I would be seeing who in town owns up to large holdings of debt or equity from Lehman or Fannie of Freddie, etc.. etc. It's the 'etc' that is going to bite someone unexpected.

Last thought. How big a drop has wall street endured… another way to look at it is to ask how much growth has there not been on Wall Street for some time. One way to look at the drop today. The level the Dow close at today was first hit in April of 1999. The Nasdaq was nearly twice its current value as far back as 2000. To put that in some perspective, the October 1987 crash put Dow Jones back to where it had been less than a year to a year and a half earlier.

With that I will go back and stick to the knitting.

Texas, Oil, Water, Pennsylvania

Worth a read, the view from Texas on Pennsylvania's energy resources:

Barnett Shale a template for other shale plays

watching the bus drive by

Obligatory comment on the latest developments in the labor negotiations going on at the Port Authority.

First off, will there be a strike? It's amazing to me how many people I have spoken with recently who have been scared into believing a strike was imminent. Despite the fact that the two sides didn't mutually agree to the state factfinders report (which by the way has never happened in previous negotiations) nobody has said a strike was about to happen this weekend. Yes, the union drivers have made noise about striking if negotiations fail, but they never said it was going to happen anytime soon and this is still considered early in the process. The drivers have gone on strike four times in the 45 year history of the Port Authority: for 3 days in wildcat strike in 1971, for 7 days in 1973, 5 days in 1976 and 28 days in 1992. Works out almost exactly to an average of a day per year. I doubt they feel any more empowered to strike this time around than in any of the regular rounds of labor negotiations. People lose perspective, this happens every few years. Why does it seem like a much bigger deal this time is a great question. More politics involved this time for sure, but one of my answers is that the Port Authority's upper Management and fellow travelers have spent a lot more time and effort on PR this time around. Think about that some.

For those worried about an extended strike. The longest local transit strike in recent history was not against the Port Authority at all, but a 56 day strike against the then-privately owned Pittsburgh Railways Co. in 1956.

Anyway... I'll leave it at that. I have a lot more transit stuff that has been building up since I figured it only made sense to see what happened with the factfinders report. But it ought to be a quiet week on the transit-news front now that we are passed that. Maybe I will make this 'transit week' for posts. Assuming Pat Ford does not pop up in the news some more that is.

polls, polls and more polls

Just for the quantitative political junkies out there. I don't know how I came across this, but more crunching of poll data for the fall election data than even I can digest is at: http://www.fivethirtyeight.com/

for a different take on the innumerable campaign ads that we will be watching, a new (and temporary?) blog keeps an eye: CampaignFreak.

Traditional sources for political numerology:

http://www.pollster.com/

http://politicalarithmetik.blogspot.com/

http://www.gallup.com/poll/election2008.aspx

and more PA stuff from the folks at Franklin and Marshall.

But still, for the history you have to check out:

The New School's Parsons Institute for Information Mapping (PIIM) Voting Tool. You really need to try it out by launching the application (click on the map on the left of the intro page).

and for the definitive look at how polls have played out in presidential elections you have to look at what the folks at Columbia have compiled.

Defenders of the Pop frontier

Begone ye soda believers. Finally, definitive proof that we are indeed part of the 'midwest' and defenders of the "Pop" frontier comes from this amazing map.




Even more amazing, there is a web site and an entire research program built around the pop vs. soda 'controversy': http://popvssoda.com:2998/ It has extensive pop-stats and interactive maps.

I want to know the appropriate way to order pop in the places where 'other' rules? and is the one defining characteristic of the "Great Lakes" region it's semantic 'Pop' linkages (except for the Soda apostates between Chicago and Green Bay)?

follow those stories

Not the most prescient of predictions, but I think I mentioned that the Steelers' worth had hit the Billion dollars that Forbes now reports as the franchise's worth.

Equally unremarkable was my point that we all should expect more mining in unexpected places. Looks like the folks who run the airport saw the cash cow at their door. Any predictions on where next the drill will be pointed?

Dennis Roddy breaks a story about the nexus of computers and politics in Harrisburg. It does not exactly follow, but it reminds me of the story of computers used for the 2000 Pennsylvania reapportionment. The 2010 reapportionment is coming pretty soon and will be an equally contentious issue. In the Roddy story the commercial company involved is called Aristotle, which was founded by a fellow I learned about in college. He was kind of a legend in that his senior thesis designed a nuclear bomb. As a result it was supposedly classified and they say it's the only thesis that is not held in the Princeton thesis library.

Another take on the Port Authority negotiations are in an oped in the Wednesday PG. See: Don't Punish Transit Workers, by one Joseph J. Pass. I have to admit, I didn't even realize there were Wednesday opeds. With the deadline for acceptance or rejection of the state factfinder's report coming due, maybe there will be some interest in the prediction market I set up to look at whether there will be a strike at the Port Authority.

The AP version of the Supreme Court hearings the other day over the Constitutionality of the base year assessment system. No news coverage as best I can tell of what I pointed out that Judge Wettick's standing order (no matter whether the Supreme Court makes it ruling or not) is that a mass reassessment needs to be completed in the next 6 months? Do I misunderstand the ruling?

Eureka Financial says it will write down its fannie mae/freddie mac holdings. I just have to wonder if there are any more local stories like that out there. Maybe a few pension funds as well? It would be surprising if there weren't, but that is pure speculation.

Maybe a chair is just a chair from now on? Pat Ford's ties to the URA come to an end. Does it spell the beginning of the end for the Burghosphere? I mean, will there be enough fodder for people to write about going forward. It's debatable. People are surprised that there is a cash 'settlement'. I say the only semi-rational explanation for the irrational exhortations of Mr. Ford's lawyer of late was to throw up a bunch of chaff into the air to occlude the fact that he had no legal case to make. So like a puffer fish he blew up the story for the public so that when a settlement came it would all appear a painful, but acceptable deal for the URA to make. But in the end, it's worth some $$ amount to have this all come to an end as quickly and conclusively as possible.

8:46am

Akron's Promise

I mentioned this in the past, but Akron is having a referendum on whether to 'lease' their sewer system to raise a lot of cash for their version of a "Promise" program that will fund college scholarships.


Could that work here? Oh wait. I guess not.

white noise

stream of conscience mostly.....


So United Air lines dropped 75% briefly because google news posted a news story from 5 years ago that surfaced in Google news and made it onto a Bloomberg box. Just the other day my google news filter popped up a story on how Google is going to be archiving more and more news. It was interesting because it highlighted a Post-Gazette front page from the 1960's when Apollo first landed on the Moon. Most who read that, however, did not jump to the conclusion that there was a stealth space mission that we were just learning about, Capricorn One or not.

Why I connect this I don't know exactly. But the financial news these days is all about the problems at Lehman Brothers, which as disclosure I once worked at. Real problems there, much like elsewhere. The thing that gets me is that just a month or so ago I heard the Lehman CEO, Dick Fuld, on TV complaining that all of Lehman's problems were just the result of Hedge Fund rumors trying to push down the . From some folks I would just write that off as bluster, but most say Fuld is a competent and down the line kind of guy which makes me wonder if he really believed that and what it says if he does.

Could Lehman Brothers, one of the larger and more respected financial firms in the world be failing because of a 'internet rumors' or related talk? It makes Lehman appear to be no more solid than say Pittsburgh's own National Record Mart, itself once thought to be hit hard by pesky internet talk. Of course, NRM would liquidate not long after that. Are analogies like that what Lehman wants to put out to the world.

Lots of denial going on across the board.

decimals are destiny

When I started typing this, I thought the issue of the two competing referenda over the county's drink tax was over with after a county solicitor voided both of them from appearing on the fall ballot. It looks like one side at least is appealing that decision so it may not be a dead issue just yet. I have no comment on the merits of the tax or its potential repeal, but there was something really odd about the referendum proposed by the Friends Against Counterproductive Taxation, the group mobilizing support to repeal the tax. Here is a part of what they proposed being on the ballot:

".... The tax shall be levied at a rate established by County Council not in excess of one half of one percent (0.5%) of the sale price of each beverage......"... yadda yadda

I never saw anyone comment on the wording of that. The referenda was not proposing cutting the drink tax in half. That would have meant going from 10% to 5%. It proposed going from 10% to 0.5%. That's zero point five percent. In other words, cutting the tax rate to 1/20th of what it currently is set at or an incidence of 1/200th the sales price. Why wouldn't you just propose eliminating the tax altogether. I bet at 0.5% the cost of collecting and administering the tax may not even equal the revenues it brings in. It makes no sense on its surface.

So why do it? The only reason that makes sense to me to propose a tax rate a sliver above zero is that it might have confused some who would take the Solomonic position that the tax ought to be reduced, but not eliminated; that something in the middle would work out all around. But cutting a tax to 1/20th of the current rate is not near any definition of the middle and is tantamount to eliminating it altogether. On a $4 drink, the tax would be 2 pennies. I know pennies add up, but that really might have come in below the administrative costs of a new tax. I have no idea is there was any justification for the rate of 10%, but it's hard to figure what rationale there could be for 0.5% vice 0.1% or 0.9% or something else.

I really have no comment on whether the tax ought to be there or not.. maybe it should be eliminated. I'm not a big fan of the fictitious debate that has been set up between a drink tax and transit, but any referendum ought to be clear.

Your future as a video game mogul

OK, thats not really the title of this lunch/lecture Downtown.... The Economic Club of Pittsburgh invites you to hear:

Speaker: Michael D. Gallagher
President and CEO,
Entertainment Software Association


When: Tuesday, September 16, 2008
11:45 am - 1:15 pm

Where: The Omni William Penn
530 William Penn Place, Downtown Pittsburgh

Cost: Members: $30 Non-Members $40 Students $20.00

RESERVATIONS ARE REQUIRED. Please make your reservations by email to: reservations@econclubpgh.org no later than September 12, 2008.

If you find that you cannot attend or arrange for an associateto attend, please cancel by September 12 or you will be billed for the cost of theluncheon. Please call (412) 762-2671 for cancellations. Please pay at the door, bycash or by check made payable to "The Economic Club of Pittsburgh

Join us for an engaging discussion and learn about the fascinating relationshipbetween economics and video games! Video Games in the 21st Century: Economic Contributions of the U.S. Entertainment Software Industry is the first study that quantifies the specific contributions of the U.S. entertainment softwareindustry to the nation's economy. Conducted by Economists Incorporated and releasedby the Entertainment Software Association in November 2007, the study found thatfrom 2003 to 2006, the entertainment software industry's annual growth rate exceeded17 percent. Over the same period, the entire U.S. economy grew at a less than fourpercent rate. Last year, sales nearly quadrupled from 1996 figures to $9.5 billion.And, despite uncertain times in other economic sectors, recent data shows thatcurrent 2008 sales are up 30 percent over last year.

Actuaries Strike Back

More public finance wonkery which I will not get into in detail.. but the WashPo has a must read article that pertains to lots of things around here. See:


Revisions Considered for Valuations of Public Pension Payouts


I personally would love to see actuaries duking it out. It would be a little like bloggers doing ultimate fighting. I suspect it's not as dramatic as the Post makes it out to be, no matter that the stakes really are measured in $Billions, if not $Trillions.

The article explains how the nations actuaries are debating whether pension liabilities should be calculated assuming a 4% or 8% rate of return on investments. 8% being common in the public sector, despite as the article points out it is "about twice the market-based rate that private firms are allowed to use under federal regulations". The alternative is to use 4% which some argue is more realistic and the standard in the private sector. What does the City of Pittsburgh use for its actuarial calculations? 8.75%. If you are going to be optimistic, why play it safe? So by pushing the boundary on even the optimistic assumption for investment return, that extra 0.75% has allowed the city to lower its required payment into the pension system by say $3-$4 million a year. If they had to use 4% as an assumption the increase in required payments into the pension system would be quite a bit more than that.

and I don't predict stocks.. but the Fannie and Freddie new is scary. Who knows how the market will react Monday. Thus far, the 2nd half of the year has not provided any reprieve from the losses the city pension fund took in the first half.

Wow... Vallejo Bankrupt

Wow.... I am shocked and my prediction that a Federal court would not allow this to go forward has been proven wrong. Read from the SF Chron:

Judge approves Vallejo's bankruptcy filing

My own blog thoughts on what Vallejo's bankruptcy means to Pittsburgh are repeated in:

• Why Vallejo Matters
• Why Valley Matters II
• Vallejo Ruling Imminent

Before Vallejo, some of my general thoughts on the potential of a formal Pittsburgh bankruptcy include:

• Bankruptcy should not be seen as answer to city's woes
• Forum: Candidates, be careful what you wish for
• The City's Stealth Crisis

Does this mean the City of Pittsburgh could file for bankruptcy tomorrow? Not really. One problem is the Act 47 process and state law on the subject.... That and municipal bankruptcy is judged more on cash flow issues than assets and liabilities. So since there is some money in the city's bank account at the moment, it isn't about to happen this week.

But it does raise a big big question. City officials believed that the City of Pittsburgh would have been precluded from filing bankruptcy in the early 1990's. As I think I have shown pretty clearly, whatever financial state Vallejo is in now, Pittsburgh has been in a far more precarious situation for a long long time. In 1994 right as Tom Murphy took office he learned that city finances were in far far worse shape than anyone outside a few really knew, certainly far worse than the public had been lead to believe. Within his first year and without any doubt, there could have been a very fundamental cash crunch that would have forced either into a technical default or formal bankruptcy.

What happened at the time was that the city 'sold' (sort of sold, its a long story unto itself) its waterworks to raise cash to make it through the next several years of operating deficits. The sad thing is that in a Chapter 9 bankruptcy, no public entity would really be forced to sell any assets. It means to me that a major city asset was liquidated for almost no gain when it didn't have to be. There may have been good reasons to privatize the water authority. In fact the Allegheny Conference had been advocating for that for decades. But if done so in anything other than duress it would have produced some significant cash that could have been invested or used wisely. Not just used to eek through a few more years. It was just a waste, but the folks in office at the time really knew of no other solution at the time if bankruptcy was not an option.

Why was bankruptcy not pursued more than it was? Realize that at the time the Bridgeport ruling was in closer memory. Bridgeport was and remains a major case in which the City of Bridgeport, CT tried to file for bankruptcy, but was not allowed to by the Federal court. Basically they were deemed to not be in enough financial collapse to warrant the remedy of bankruptcy. The judge in that ruling pretty much said that Bridgeport had in its power the taxing capacity or debt capacity to continue on without defaulting on any debt or liability. I bet publicly that the same answer was going to be given to Vallejo, but apparently not!

Think I am just a loon even talking about this? I know that the original Intergovernmental Cooperation Authority seriously considered whether the city of Pittsburgh could or should be taken into a bankruptcy proceeding. They have never been terribly clear in public on why they didn't pursue that path. Given the Vallejo ruling, I would say that if the ICA has any formal opinion from its past solicitor on the matter of a potential Pittsburgh bankruptcy it should make such an opinion public now. It really matters.

One way or the other, there is a real question as to why Vallejo is allowed to file for bankruptcy and many other government entities in far far worse financial shape feel they can't. What would it mean if all the places in similar circumstances headed to Federal court.

public finance

A little north of here, but the Erie School District is suing JP Morgan for the fees it charged in setting up interest-rate swaps... What are interest rate swaps? Let's just leave it as the Erie Times does: 'highly complex unregulated financial derivatives' even though that may border on bombastic... if a muni interest rate swap is really 'highly complex' I shudder to think what the description would be for what most hedge funds are up to these days. Can anyone say "LTCM"?

Bloomberg's commentary on the situation is just a tad harsh: Magic, Mumbo-Jumbo Were Used to Sell Muniland Swaps.

Relevant? I dunno. It's international news today that JP Morgan is exiting the business of municipal interest rate swaps as was used for the Water and Sewer Authority bonds here as discussed in that article. Also if you see the last line in the Erie Times article, it says the SEC in Philly is preparing enforcement action against JP Morgan related to this. Just in terms of scale, the Erie bonds in question were for $37 million. The Water and Sewer bonds here were over a $414 million dollar deal.

Cleveburgh must wait

Several ways to look at this. Ohio has put out a long awaited new strategic plan to advance economic development in the state. Sounds like a good idea, but one goal is for Ohio to achieve job growth at a rate 25% above any of its neighboring states. Those would include Michigan, Indiana, Kentucky, West Virginia and ...... well, you know. In fact the lead measures (see page 6) are all defined by just doing better than those other 4 states and Pennsylvania.


Should those really be the goals for any state? I suppose Ohio could achieve that if things just went to hell in a handbasket in those bordering states, Pennsylvania included. Would that really be success? Not exactly a mega-regional view of economic development in that. It sounds a lot like something I once argued against, namely tax competition as we know it. There has to be a better way than what we do now and I am not sure what Ohio is thinking of is really anything different. It has a few different tactics in there, including greater emphasis on workforce, innovation zones and related things. That's good, but remember, the biggest flows of migration both into and out of Pittsburgh always include Cleveland and several other Ohio regions. That type of workforce integration works across all the metropolitan and micropolitan regions through out Ohio and its neighbors. So I am not quite sure what it means to aim for greater job growth than the neighbors you are most integrated with. Maybe the goal ought to be a strategy that improves conditions across the greater region. Anything less and it has to devolve into some form of Russian roulette. Why try to take economic growth away from.... yourself?

Wondering if Wettick need not Wait?

So less than a week from the oral arguments that could reshape public finance across Pennsylvania there is little notice of the property assessment case being held in the PA Supreme Court. Why does this deserve more attention? How much news is devoted to the new revenue being brought in by casinos in the state? Property tax revenue for local governments in Pennsylvania was over $10 billion in 2002 (I'm too lazy to look up a more recent number, but I bet it's higher). This ruling could upset the core revenue source for each and every municipality/school district and the bills paid by every homeowner across the state.

Something I didn't realize and gleaned from a local real estate blog (local-knowledge.com) is that Judge Wettick's order had a clause that could force the county to conduct a mass reassessment really soon. He ordered the county to void the base year assessment system currently in place for Allegheny County and conduct annual market value assessments from here on out. However, he delayed the implementation of that order pending what was seen as almost certain legal appeals that came in due course. But he didn't delay them forever. The actual deferral comes from this language:

If all proceedings pending in the Pennsylvania courts are concluded prior to Oct. 31, 2008, property within Allegheny County for 2009 shall be assessed based on the reassessment prepared pursuant to paragraph two of this Order of Court; and even if a final order has not been entered in these proceedings property within Allegheny County for 2010 shall be assessed based on the reassessment prepared pursuant to paragraph 3 of this Order of Court. (see entry for for June 6, 2007 and emphasis added)

Paragraph 3 of the order is on page 101 (per the PDF numbering) of Judge Wettick's 119 page opinion in the case. That specific order says that

By March 31 2009 the Chief Assessment Officer of Allegheny County shall complete a computer-assisted reassessment for use in 2010.......

Soo... even if the Supreme court does not make a ruling in the next 2 months which is unlikely... the standing order in place is that new assessment numbers must be used 2010 and that a new mass reassessment needs to be completed by March 31, 2009.... this is a big project that takes more than a few months to complete. So that isn't that far in the future so you would think the county would be working hard at updating their data and running the assessment models pretty soon. I wouldn't be surprised if there are additional appeals made to defer the deferral, but as the order now stands there is an imminent assessment coming due.

Vallejo Ruling Imminent

Here is financial news from last evening: Vallejo (California) Bankruptcy Ruling Imminent. Why do I keep mentioning this? I won't repeat myself, but here is a graphic I put together comparing the city's bond debt historically and where it compares to Vallejo today.

Should probably treat this as a work in progress. These are my own calculations of the real (2007 dollars) debt per household in the City of Pittsburgh since 1970. I have appended to that where the bond+unfunded pension liability is per household for Pittsburgh and also the current comparable data (as comparable as I could deduce) data for Vallejo.

There are several caveats to the the comparability of the numbers for the two cities, most not worth getting into. The numbers I used did not include any health liabilities for either of the two cities and I'm not sure all of the long term debt for Vallejo is bond debt, some of it having been called. but from media reports I infer Vallejo has ~$80 mil in bond debt and ~$83 million in unfunded pension (again, excluding OPEB) liability and around 40 thousand households currently. Those numbers drive what I plotted for the Vallejo Data. For the city of Pittsburgh current bond debt is say $764 million + $569 million in unfunded pension liability and the number of households these days is around 130 thousand.

So does the Vallejo ruling matter? You decide. Honestly, I predict the Vallejo judge is going to throw out the petition by the city there to enter a formal Chapter 9 bankruptcy. Their financial condition just does not justify it. If debt levels mattered and Vallejo is declared bankrupt, then Pittsburgh should have declared bankruptcy years, if not decades, ago. One legalism is that technically debt levels do not matter the way they do in say a commercial bankruptcy, municipal bankruptcy, it's more about cash flow. So since there is money in the bank, the city is probably not about to declare bankruptcy right now, but there have been points in the past (say around 1993 when they decided to essentially sell off the water authority to raise cash to pay bills) when a bankruptcy filing would have been mostly undeniable.

It's kind of an aside, but possibly a more important story coming out of the Vallejo situation. Vallejo city government is not simply city workers' access to blogs and or the internet, but selectively blocking sites they can read.

Labor-less Day

I thought the Sunday paper was pretty telling on the state of organized labor in the US these days. Not even a tip of the hat kind of labor hagiography in the holiday spirit over the weekend as best I could see. Not just in the paper, but across all local media I think there was more coverage of the Labor Day parade, than about labor in any form. The PG Sunday Forum section's only labor related content was, to be kind, not exactly labor friendly.

Which oped was that? Most readers here will have already seen the oped in the Post-Gazette on the Allegheny Conference's view on the labor negotiations between the Port Authority and it's drivers. If you didn't catch it, the state factfinder's report came out on Friday with her recommendations on an solution. The Trib pointed out how the report was supposed to have been kept confidential initially by mutual agreement with the Port Authority, but wasn't. Funny that.

I will give the benefit of the doubt to the Post Gazette folks that they sought out an opposing viewpoint to the one that was printed. On such contentious issues they would normally do that. That they would print such a one sided union bashing without an opportunity for the other side to say something side by side would be strange. But given how relatively quiescent the union has been in public I suspect they tried to balance the page and didn't get a taker.

So let's parse a bit. Beyond the rhetoric, the key substantive seems to be that other transit unions have made concessions recently in similar labor negotiations. Fair enough and the prime example is the agreement between the transit workers for the Chicago Transit Authority(CTA).

So what did the CTA workers concede? The biggest part of that deal was that the union agreed that in exchange for being given $549 million by the CTA they would take on their retirement health care liability. That $549 million represented over half of what the CTA calculated their health care liability to be at the time.

Could that work here? The Port Authority says it's health care liability is $700 million and growing rapidly. It's worth noting that their health care liability is the entirely the result of them not setting any money aside to pay for a liability they knew they were accruing. You might ask yourself if their plan all along was to have this unfold just as it has.. i.e. to let the liability accrue and grow until they could claim publicly they were facing unsupportable expenses. If true, they never expected to make good of their past contracts. They certainly made no plans to ever pay those anticipated expenses. That complete lack of planning if why the Port Authority has the unfunded liability it does today and what is at the heart of the current contract negotiations.

But back to the CTA concessions. Would the Port Authority be willing to do as the CTA did and float a bond to capitalize an equivalent $350-400 million dollar fund to be turned over to the drivers union in exchange for responsibility for their health care in the future. The Port Authority should be ecstatic at such a plan to instantly wipe out several hundred million dollars in liability on their books. I bet the union would agree to such an offer, but it's worth noting that no such offer is on the public record anwwhere as I see. Bottom line, unless this is what the Port Authority is asking for and willing to do then all the talk you see on the drivers here being unwilling to make concessions similar to their Chicago brethren is a meaningless analogy. Though you would never know it reading the oped, it's all about the intransigence of the workers.

Beyond that, I couldn't find too much substance in the Sunday oped, it being filled mostly with anti-union rhetoric more than proposals. The sad thing is that I know KZ the author knows the details and the issues in depth and is willing to go out of his way to discuss them (both here on this blog and on his own these days). That the message boiled down for the public is mostly a combination of invective and ad hominums is unfortunate.

The five mentions of local ATU union president Pat McMahon within a short 900 page oped is not gratuitous if it was by design. Trying to personalize and demonize union leadership is a common tactic. Just as the anti-union rhetoric is depersonalized with KZ acting as a point person for that message. He abates a lot of anger that would otherwise be directed elsewhere. It's sort of like Captain Hawks and his red sailboat in Away All Boats*. It makes you wonder why a non Port Authority employee is heard from publicly much more than all of the Port Authority leadership combined, including not only its executive leadership and everyone on its Board of Directors.

* OK, OK.. I know, only an analogy a real old time movie buff might get.

eek

Thought it would only be fair to point out the great letter to the editor in the Trib yesterday that takes me personally to task. Apparently one David L. Brock of the North Side thinks I am overly positive on the region. With semantic creativeness that I envy Mr. Brock says that I

"minimize our endless decline with unctuous baffle-gab and deceptive half-truths, seemingly to convince people that if we just think positively, we'll all live to see a wonderful future -- a future that has never arrived and, with Mr. Briem's help, never will. "

It is always a good day when I learn a new word. Indeed bafflegab is a word. Amazingly enough, the phrase "unctuous bafflegab" exists nowhere in the google universe other than this first use.

I always encourage the people who write to me disagreeing on this or that to write letters to the editor, so more power to Mr. Brock. What is bizarre is that the folks I am supposedly in cabal with are typically folks who complain much more loudly than he about what I say and as often as not call me Dr. Doom or some other such nonsense. So it is always curious to me how people take what I say. A lot of confusion is probably my fault as often as not for not being clear enough.

Semi-seriously, if you read the original article that seems to have set Mr. Brock off, it was such a nothing little article of 350 words that was little more than a pro-forma look at recent census estimates for the City of Pittsburgh. I am not sure I am anywhere very positive on the state of the City and he seems to conflate my prognostications on the state of the 'region' generally. It's such a common confusion that you always need to ask people which Pittsburgh they are talking about when discussing nearly anything.

The letter attributes Mr. Brock as being from the North Side which is a bit odd since the letters punch line is about how he and fellow disgruntleds are going to move out. (move out of the city or region I am unclear). Think about that though. I presume Mr. Brock has been here for more than a few years and has not left yet? People do indeed vote with their feet. Just odd that he is still around.... logic has it he must be more positive on city living than the thousands who have indeed left before him.