Rust Belt Watch

News is that Pittsburgh's unemployment rate is up to 5.8% in November, up 3/10ths of a point from the month earlier. Detroit's unemployment rate jumped a full percentage point, from 9 to 10%, between October and November. Cleveland's rate inched up a bit from 7 to 7.3%. Worth noting that that is Detroit's regional unemployment rate. The City of Detroit already has an unemployment rate over 16%, compared to the City of Pittsburgh which has unemployment measured at 5.5% for November. That is remarkable if for no other reason than that our urban core has lower unemployment rate than the region, the opposite by far from Detroit's pattern which is probably more typical of other big US cities. Detroit's problems were unique before the current recession. They have long been dealing with their urban core's transformation into new urban praries. So this is all going to be painful for them. We have those problems as well in certain areas, but as bad as it is for us, it's another whole scale of problems up there.

So here is the current version of my rust belt tracker looks like fwiw:

afternoon reading

I figure a lot of folks may want to read this oped in the Financial Times on the nonprofit sector:

Sacrifice notion sabotages our non-profits. by By Sean Stannard-Stockton today.

Also in the FT yesterday.. how bad is it in the steel industry? A lot worse than the 80's when you look at the industry globally. See:

Steel output set for historic drop.


and something else altogether. Read about the plan for an interstate bike plan. The actual map being talked about looks to focus on actual roads and thus does not include the Great Allegheny Passage. You would think that would be a part of the backbone. I really doubt such data exists, but I wonder how many folks participate in long distance (interstate?) biking each year and how many of those folks are people traveling on the trail between here and DC.

only in Pittsburgh

Just to have some fun, it's such a small town. I think I can connect some seemingly incongruous news of late.

So let's start with BP's proposal for a study of a rail line along the Allegheny Valley Rail Road line. Ignoring for now that I am not sure what $9K buys you when it comes to studying something like that. Anything meaningful would need a few more zeros for something like that, but no matter. Many folks have thrown out the idea of a new passenger rail line along the underused AVRR track over the years. The most recent person I heard trying to develop the idea was the ever-active David Tessitor who I know had some sort of comprehensive transit plan for the region that included regional rail and the AVRR. Have not heard from Dave much of late. Last news he made was when he was a third party candidate for one of the county council at large seats. That was the seat some may recall where Republican Chuck McCullough won the primary despite having dropped out of the race too late to have his name removed from the ballot. Who did he beat in the Republican primary? Kevin Acklin, who has popped up in the news again of late as considering a run for Mayor this time around... a race that BP dropped out of just before the filing deadline 2 years ago. And lest I forget, Dave himself ran for mayor as well not long ago. I suppose that if there are any formal announcements we can get around to handicapping a Ravenstahl-Acklin race, but quite honestly I suspect there is a larger chance that a local D will register as an independent to run in the fall mayoral race than any R going that far. We will see.

follow all of that? What's it mean? Just that we are all related and that this is not such a big town.

Honestly, my prediction is that Chuck M. may wind up being a candidate for County executive someday just because there are not many high profile R's in the county. He seems to get more press than most including today where he has put himself in the middle of the opposition to the drink tax. I was wondering what ever happened to the issue that prompted him to try and drop out of the county council race back then. You would think it was either resolved or lead to serious legal issues for him, but in either case there has just been little real follow up in the news which is odd. The only item I see must have been lost amid all the political news leading up to the fall elections was this news snippet on what is up with that. Has there really been a grand jury looking into this for more than a year?

Monday Morning Miscellany

PG reports that Downtown office market remains a Hotbed of Activity, global depression or not. Doing better than ever actually. What really amazes me is that just a few years ago people were so often predicting the demise of Downtown Pittsburgh that I felt needed to put some perspective out there in "Is Downtown Dead, Hardly. At the time, most people I heard from on that thought I was just nuts or just playing booster to some agenda I knew nothing about. As it stands, about the only thing limiting faster growth Downtown is sheer geography. Can't fit much more in a half square mile which is all that constitutes Downtown Pittsburgh proper.

Same is true in Oakland for that matter. If you are under 80 you may not appreciate the magnitude of the news that Duranti's Restaurant is closing. What is going in their space (under the original home of the Pittsburgh Penguins)? I am told its all going to be converted into offices which reflects just how tight demand is for space is in Oakland and immmediate environs. I bet it's tighter than Downtown by some measures even with the impending move of Children's Hospital out of the neighborhood which could create some supply.

Both Oakland and Downtown would be stories unto themselves in normal economic times.. That little of these pressures appear to have let up going a year into a recession is that much more remarkable.
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Is the Casino Journal shut down or just on indefinite leave? Looks like Neil Bluhm has also been awarded a license for a new casino in suburban Chicago.

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Mentioned in passing this WSJ article last week: Grim Debt Prognosis At Health Nonprofits is this quote:

West Penn Allegheny Health Care System, survivor to the $1.3 billion bankruptcy by Pennsylvania-based Allegheny Health Care Education and Research Foundation in July 1998, finds its Moody's Ba3-rated junk bond debt trading at about 48 cents on the dollar.

48 cents on the dollar is not good.

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Not really news, but the AP is running a blurb about how 2008 data will show that Pittsburgh passenger total expected to hit record low out at the airport.

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Sometimes you just have to fill space. What is the point of doing a quarter by quarter breakdown of the game yesterday. Also up in Cleveland the hopes that Bill Cowher will come to save them continue to escalate. The jaw came out fighting when the Titans were stomping on a Terrible Towel. You have to wonder a bit.

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And finally, my news filter caught this headline which I thought was about Pittsburgh: Layoffs, Pay Cuts Cast Shadow Across City of Steel. But it's from St. Petersburg, and not that St. Petersburg either.

Democratizing data

Random thoughts on data and democracy here and abroad:


Just something my colleagues are working on... from the Trib last week: Wilkins weigh expanding information technology


Which just reminds me to check in on the UK's Free Our Data blog to see if there is anything of interest.


Some think Pennsylvania is about to make a big step forward with the new open records law about to take effect. Yet it seems some folks from out of state find the Pennsylvania version flawed .


Which all just spurred me to make some updates on my Pittsburgh Policy Document Collection. Maybe the state will make it obsolete, but I bet it won't be this month. Someday before I retire I will finish digitizing my office collection of this stuff. Long long way to go.

Historic Steelers game Sunday

If football was as manic about statistics as baseball, someone would already be quoting exactly how many times in all of NFL history a team has started its 4th string quarterback as the neoBrowns are against the Steelers. The scale of demoralisation up there can be read in comments on that from the Cleveland Plain Dealer's blog/article.

I really wonder why the local papers (daily papers that is... CP does have comments though I am not sure they are used all that much) don't implement more commenting. Some of the articles in Cleveland get hundred of comments routinely. That has to add up to some palpable traffic. Maybe there just isn't a market for that type of thing here. Certainly in some corners of the burghosphere folks are going to comment. But are Pittsburghers as a whole just not so apt to interact that way?

and to be nice to the Cleveland Plain Dealer, it is worth noting that I do like their datacentral blog on their web site.

ebay, Homewood and ......... Henry George?

PG's Elwin Green picked this up in his own semi-official Blog on all things Homewood: My Homewood.

Elwin latest entry is about a property on his own block in Homewood be caught being sold on ebay. See the ebay auction here which is labeled "Deal of the Century". He expressed some concern that the ebay auction might just be a fraud. It might be, but I have to say the ebay listing looked at least semi professional. See the addendum below for some thoughts on that, but for the moment let's assume it is a legit offer. Whether a real offer or not what got me a bit curious was the actual current ownership of the parcel shows a tax mailing in the UK.

The Allegheny County real estate assessment info on the parcel is here. What is curious is the ownership, or at least the tax mailing is:

SNOWQUEEN OCEAN AND LAND PROPERTIES OF DELAWARE
18 LADYWELL
OAKHAM
RUTLAND
UNITED KINGDOM

I find no other mention of Snowqueen et al anywhere on ebay or google, fwiw. I think it is this place according to google maps. They have street view even, but google didn't seem to go off the main road down the block to the exact location.


Why do I notice? A couple things. Before the national real estate mania reached its apogee I would have a semi regular conversation with someone or another about an out of town person buying property in Pittsburgh sight unseen. What I was pretty sure was happening at the margin was that there were folks in other regions who just couldn't comprehend how cheap real estate was here. There could have been folks who had some nominal wealth, and were thinking they saw some great investment opportunity they didn't want to miss. In the big picture it's just another form of Tulip-vision. I am sure the buyers had lots of different stories, but I always imagined these were folks who had either gained a lot of paper wealth as their own real estate values skyrocketed, or felt they had missed the boat investing elsewhere and thought Pittsburgh was the place to get in on the ground floor as it were. When Pittsburgh real estate prices finally began to converge with the nation they would be set to make a serious return on their investment. What could be the downside?

Irony of course is that the expected reversion to the mean is happening with a vengeance. Just not the way some folks expected. What I always imagined was nouveau riche Manhattan real estate micro-moguls swooping in and buying these parcels, I never really thought about how advantageous the dollar exchange rate in recent years would have exaggerated that argument for folks in Europe. I am surprised we never saw some Russian oil money rain down on us. But if Pittsburgh real estate seemed cheap in dollars, it must have seemed virtually free in euro or pounds until the dollar's appreciation a few months ago.

But back to Homewood and ebay. For the sake of argument let's presume the seller is legit, which I suspect is the case. Don't look to that as a reason to believe the next Internet auction you see for real estate in Pittsburgh. It may just wind up being like the brief listing on ebay for the Illinois Senate seat.

Elwin expresses some dismay that this property could be sold at such a low price. But was the price really that low? Or lower than normal? One disclaimer on the ebay listing is that the buyer must 'pay back taxes'. As the county real estate site shows, real estate taxes have been unpaid for at least 3 years. While the tax amounts owed on the county web site appear low for the parcel, most county residents here know that the county portion of your tax bill is the smallest part of your tax bill. Bigger real estate millage is levied by your municipality and school district. So with 2009 tax bills about to be sent out, it looks like the county alone expects $600 on this parcel. Which means that the city and school district must want an additional $3K or so themselves. We say that those tax bills are capitalized into to transaction value. So the nominal price on ebay of $2,200 represents at least $5-6K in actual cost to the buyer... before closing costs even.

So according to the county again, this property was bought from what looks like a foreclosed upon VA auction for the grand sum of $4,500 in 2005. So given the tax accounting and incurred liability described above, the buyer may have lost some money by holding the property these last 3 years, but they may have come out ahead in a certain accounting sense. If nothing else, the ebay auction may have generated a higher price than the previous transactions...that itself would be remarkable given that Homewood prices have it anything been trending downward. As an added benefit, someone may have saved some real estate transaction costs/commissions by using ebay. Add in the dollar appreciation and you could almost get a profit in their "flipping" of the property. Ok, that's hyperbole.... In the end the current owners may not be out many pounds sterling, but it does not appear to have been the Deal of the Century for them either.

Seriously, this all may point out to the need to re-implement some form of a land tax in the city. If you want non-resident owners to sell and move on you want them to incur a penalty for holding and underinvesting in local parcels. It is almost the same type of land speculation that the land tax was first put in place to counteract. Does not always work here of course. Pittsburgh's big problem with essentially dead parcels (no owner in any form) is a problem that won't be helped by that type of tax policy. But if there really are these out of region, state, county owners holding property and just letting them deteriorate waiting to flip them when the awaited Pittsburgh real estate boom happens... you want that activity to stop cold. It just happens to be a problem with a tool already invented to deal with it. Won't solve all our problems, but it can't hurt:

Unfortunately we've been in the habit of actually incentivizing the opposite type of behavior. Anyone remember the long painful story of the city's tax liens which may represent the single worst policy in urban redevelopment ever implemented. Then we had a massive lien holder who had inventive to hold up transactions anticipating tax payments that could never come yet at the same time didn't incur any tax penalties since they were not technically the owner for any of the properties they held hostage:

http://www.bloomberg.com/apps/news?pid=20601109&refer=home&sid=aIr.34tYn5Bw


It was like the anti-land tax implemented as policy.
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All that being said, is it a legit offer? The ebay auction has some disclaimers including this one:

Terms of sale: You are bidding on the full price of the home. Winning bidder will pay $1,000 by paypal at the end of auction. The balance within 3 days. You will recieve a deed. The winning bidder will also pay $1,200.00 for costs, which cover the closing/completion, and deed delivered to you., etc. Title insurance would be extra at approximately $300, if buyer requires.

So I just wonder. How do you close on a piece of real estate contracted to buy via ebay? "Deed will be delivered to you". I think its a bit more complicated than that. My closing had lawyers and real estate agents and folks representing my mortgage broker. I am also a little curious if there are any title insurance complications with a foreign owner. The listing also does disclose that there the buyer must pay "past taxes of $171.72 to be paid by you in addition to the winning bid price". That is one year's worth of taxes to the county. As the county real estate web site clearly shows, there are more years of past-due taxes just for the county and there is no mention of the city/school district taxes due. I wonder if the winning bidder realized both of those things. Could be a case of buyers remorse.


Maybe Elwin will do a follow up?

A Holiday present?

Hull down on the horizon:

Pittsblog 2.0

Promising more than custard and cupcakes in the future!

Cleveland stream of consciousness

I feel for Clevelanders these days, they really must be developing a collective neurosis at this point. Not only are they put out by relatively negative comparisons to Pittsburgh in their own paper, but recently there was a big bruhaha over some ill-advised comments insulting Clevelanders by a New York City talking head. You can read about it in:

NYC says sorry to Cleveland with free tickets to Broadway shows

Then yesterday the news up the pike is that Continental is canceling their Cleveland to Paris flight... not long after Delta announced it is adding a Pittsburgh to Paris flight here. That should not be interpreted as gloating. Seriously the Cleveland to Paris flight was only started this year and it's demise is a warning that it's a tough market to sustain as Pittsburgh pins its 'international' airport status on the new flight. I just remember all the talk about how it was all the Pittsburgh firms with ties to Germany that made the Frankfurt flight so crucial. Will be be seeing stories about our new French connections soon?

and then there is this football game to look forward to. In fact, the main Cleveland football stories today start with this article all about Dan Rooney and Bill Cowher. So poor Cleveland fans can't escape reading about Pittsburgh. Just a random thought, however one describes the relationship of the Rooney's with Pittsburgh, it must come close to the opposite of the feelings Clevelanders have for former Browns owner Art Modell.

and more an aside since it's not about Cleveland... but actually even closer to Pittsburgh there is news that unemployment rates are rising dramatically across Southeast Ohio. Again, when you consider the big auto layoffs have not hit those numbers yet, there are going to be pockets of some pretty bad labor force numbers.

Political Numerology

Yesterday the gnomes at the Census Bureau released the latest state-level population estimates. More numbers, but the story that will be getting bigger is what those population trends mean for the political reapportionment that is coming soon. As this USA today story says, Pennsylvania is slated to lose a congressional seat if current trends continue as expected. Some people have told me they are worried we could lose 2 seats as happened after the last census, but I am pretty sure Pennsylvania is pretty solidly in a range to only lose one. Things would have to be awfully different from the trends in the estimates data to push us to either losing 2 seats or none at all.

Redistricting and reapportionment are about as political as these things get. What does losing a seat mean? From a sheer mapping point of view, losing one seat and not two means there will have to be some serious redrawing of districts all the way across the state. Every district is going to look pretty different once the map drawing is completed. Even if the main population loss is in Western PA, the redrawn districts here will impact boundaries all the way to NE Pennsylvania.

Mentioned before, but when Pennsylvania was last redistricted following the 2000 census, there was little secret made in the desire to create a district that would swap one traditionally Democratic congressional district for a Republican one in Southwestern Pennsylvania. With just a little help from those darn computers a congressional district was tailor made for then State Senator Tim Murphy who would win the seat. Jeff Toobin discussed the whole history of Pennsylvania redistricting in this article in the New Yorker. In the end the effort may have backfired. According to no less of a conservative source than the Wall Street Journal the process didn't work out too well for Republicans in the long run. What ought to have created were maps favorable toward a Pennsylvania delegation that was overwhelmingly R, the current congress about to be seated has 12 D and 7 R.

Year of the Billboard

First off, I really was joking when I said that once Pat Ford had finally moved on there wouldn't be enough fodder for the Burghosphere to continue on. Remembering what lead to that and the Burgh Report's connection to it all: this old PG editorial is a classic. It has a great quote that really sums up how odd things have become:

As first reported, we think, on The Burgh Report, the blog authored by Alecia Sirk, who has since Sept. 24 been the press secretary to Pittsburgh Mayor Luke Ravenstahl, went dead some time yesterday evening.

Prophesy? So over a year ago we had the media commenting on blogs reporting on blogs. Seems to be a trend of sorts. At the end of the day, Alecia was quite a trend setter and certainly a change-agent. For anyone who thinks they can predict the future, who would have dreamed that Pittsburgh's Person of the year was a bunch of unpowered transistors attached to a bus station.

So it is fitting that the Burgh Report closed its doors just a few hours before the City Zoning board ruled that the Downtown electronic board at the Greyhound Station does not meet code. What goes around comes around and back we are at square one again. Is that story over with? Not even close. It's already built right? Somebody is going to be paying for that thing. But that story also screwed up something I was tracking. I was going to try and get Nexis to figure out how many days we have gone without having "Pat Ford" appear in the local news, but it was too hard to do quickly. We must have been close to a record. Gotta start over there too.

You just couldn't make this stuff up. Only in Pittsburgh.

serious $numbers

probably just interesting to me, but Reuters comments on the midyear class of financial engineering graduates from CMU.

more Braddock

Vanity Fair catches that the current issue of the self-described socialist magazine Monthly Review has an article all about the economic devastation that is Braddock. The full article isn't online, but some may want to go track down a copy. They like others are more and more making the apocalyptic analogy of Braddock to what may be about to happen to some of the auto towns elsewhere. NYT has a few articles at least mentioning Braddock coming out soon as well..... including some video. Keep an eye out for those. As for me, I think I have already said my piece.

but on Detroit. AP has a story about how bad things are there which extend beyond the auto industry's problems. Nonetheless, Detroit's employment trends are dire already and looking for an unbelievably bad quarter coming up.

more Pgh economy perspective

My friend Stu H. was interviewed on Bloomberg Radio radio yesterday which you can listen to via this MP3 file. Worth listening to for the national perspective, but he also gets into some Pittsburgh specific discussions at around time points 3:30 and 14:30 that are worth hearing.

No specific projections from me for next year. But as Stu looks to see the national economy turning the corner maybe the middle of the next year, the fundamental question is whether locally we can push our momentum far enough into 2009 to ride out the worst of the national recession. The lack of real estate collapse, general stability in health care, the PNC acquisition of NatCity buoying local financial services, and some ongoing large construction projects have all worked to protect us from the tempest thus far and produced what is rare regional employment growth in the US. Most of those factors will not turn around in the next few months and we might really get some bump from the potential infrastructure build-out being talked about.

How far we get before the worst catches up to us is the question. When the national economy turns around will be the key. Stu said his forecast for the rate of GDP decline this coming quarter was on the order of minus 5-6% which is a frightful number and national job losses of -300K to -500K per month through the first quarter if I heard him correct. That is hard to really imagine, but when you look at Detroit by itself which has lost 70,000 jobs over the last year alone and the temporary (which as we all know could easily enough become permanent) auto plant shutdowns in the news have yet to really impact those numbers you have to believe Stu was being optimistic a bit.

But something I wrote years ago, in surely some different circumstances, yet still something I would say again today: Pittsburgh Can Carry On.

more Bill Strickland

Well, the hits are pouring in here apparently because the dissolution of the Burgh Report has risen to 'breaking' news....

Just so readers passing through have something constructive to read. This is nothing new to anyone in town, but new in something called Format magazine is: Bill Strickland : Rebuilding America, one slideshow at a time. Still worth watching even though it is from a year or so ago. The Youtube they highlight is Strickland's talk at last years TED conference. If you don't know who Bill is, you really want to watch the video.

I do have a question though. This isn't a comment about Mr. Burgher at all, but if it makes sense to be reporting the coming and goings of Pittsburgh bloggers, why is there so little reporting on what journalists down at the PG have taken the retirement offer that was on the table. I know, or at the very least can speak for myself, that folks want to know that bit of news. A lot of PG readers want to know who they will not be hearing from in the future. I bet there are readers have been following some local journalists for decades and are kind of left hanging. I know it's a painful bit of news, but it's still news.

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update: just a suggestion for my friends down at the PG. You all need to put up a map of where your online readers are from. Up to 300 hits in the last few hours referencing the link in Roddy's article and they are from some amazingly far flung places. I am not sure I believe this one, but according to my hit counter there was just someone reading from:

"Alaska, Wasilla, United States, 0 returning visit"

No joke. Will the reader from Wasilla please identify themselves? Could there really be a diasporan in Wasilla that nobody found to interview during the presidential campaign?

the next Deadmall?

CNN asks whether the US is 'overstored'. Read: The dead mall problem. Pittsburgh is certainly well represented at Deadmalls.com. Other than JP who once answered a similar question: who remembers Zayre's in the city and where it was? What could be the next greyfield?

Deep Blog gone

Did the Burgher go to ground? Just coincidence that Mark Felt passed away at the exact same moment? I think not.

AntiRust Redux

The Pittsburgh City Paper delves into some Burghosphere history, whether it knows it or not. The book section article talks about recent author Sam M. who was also the the author of the now-quiescent AntiRust blog which was a must read for a lot of us whether we agreed with him or not. Ending manifesto-less, Antirust was unheralded in it's demise, unlauded in it's impact and now even unmentioned in the CP article. Read all about Sam and The Urban Hermit: A Memoir which sounds like it may take personal introspection to a new level.

What we learn among a lot of other things (tmi)? He went to Yale . He's still ok though. The most fascinating thing to me? I bet Sam is the only strict libertarian over in the Pitt English department.

So hopefully Sam gets some more free press around town, although I hear Bob H, the book editor over at the PG took the buyout offer. Elsewhere in the country, book sections in local papers have been endangered species. Just wondering if there will even be a book editor down there in the future. If you didn't catch the related news, the PG has offered another buyout down there which is not a great sign given that they got a lot of folks to take the first offer. Makes you wonder how small a newsroom are they targeting down on the Blvd of the Allies?

B2B burgh

Burgher Jon is tracking a basket of Pittsburgh stocks. There is also a Bloomberg Pittsburgh index focused on Pittsburgh based firms. Looks like it has been doing at lot worse than even the market has been doing in the last few months which says a lot. I wonder how much local investors weight investments in local firms. That all just came to mind because on Bloomberg radio somebody mentioned that the stock for Ariba is having a high volume day or something like that. Ariba stock, currently around $7/share, was valued at an equivalent $989 in February 2000. Four years later it would buy out Pittsburgh-bred Freemarkets that was once Pittsburgh's beachhead in the dot-com mania that was going to save us all. Who recalls that when Freemarkets went public and it's IPO gave it a market capitalization of just under $8.5 billion that day making it one of the most valuable private companies in the whole region. It was December 1999, we should have had an anniversary party last week or something. But the point is, massive stock losses are not exactly a new thing, at least in specific cases.

Infrastructure Burgh... or so I hope

Forbes is reporting on the wish lists submitted to the Obama infrastructure plan by major American cities. Just wondering what we asked for? Are we even one of their 'stimulus cities'?

It's almost too hard to figure where you would put money first here, but the scariest thing to me is the state of the region's locks and dams. And yes, I know about the state of the bridges, sewers, roads and highways among other things. Nonetheless, a major dam failure would be very very painful for the region, and there have been some been some bad omens already. Maybe our request is just delayed in all the holiday mail?

Man Station Redux

News is that KDKA is making a bunch of changes to its radio lineup. Pintek on air from 6-10pm. Who will host Nighttalk on TV?

Which all reminds me. A half-written post I never put up from February had an interesting link on some other radio shakeups of late. From back then, but a little insight that might have played into the great Man Station (which I never got I have to admit) implosion from Marketwatch: CBS Radio CEO sees 'confidence' among advertisers. Just looking at other radio news of late. It looks like CBS is trying to get out of midsize markets altogether which could portend ever more changes down the road.

financial musings

I really find little of what is being reported about this Madoff guy or his scheme very credible right now. Never has so much news been written with so little hard information. I don't think anybody knows much of anything right now on the scale of what this guy had going on, or how he was able to do it, or just about anything. But how big is $50 billion dollars? The entire gross regional product (think of GDP, but at a local level) of the entire Pittsburgh region is about $110 billion annually. So this guy supposedly defrauded people out of almost half the entire output of all of us for the year. or put another way, all 2.5 million or so of us toiled away for say 5 months just to have it frittered away by this one guy.

What has me wondering...... I have not seen any stories to suggest there is, but are there really no Pittsburgh connections here at all? That would be good, but it seems a bit improbable.

Just on the general topic of financial pathologies... My favorite financial columnist Joe Mysak over at Bloomberg has a comment on how some investment banks are now advising clients to buy credit default swaps on some state governments. Pretty much betting that state governments will go bankrupt and default on their bonds. I'll let him explain how pathological that is given the firms' other business with states... but I really have been wondering if there are any credit default swaps out there on any City of Pittsburgh debt? I have found nothing to say there is. Anyone know if such a contract is out there?

Da plane! Da plane!

I know the real Browns' fans will not like this. Shannon Sharp's making an argument on the NFL radio network that goes like this. From the full NFL rulebook:

Rule 11: Scoring
Section 2 Touchdown

Article 1 It is a touchdown (3-38):

• (a) when a runner advances from the field of play and the ball touches the opponents’ goal line (plane); or
• (b) while inbounds any player catches or recovers a loose ball (3-2-3) on or behind the opponents’ goal line.
  

SUPPLEMENTAL NOTES

• (1) The ball is automatically dead at the instant of legal player possession on, above, or behind the opponents’ goal line.
• (2) The Referee may award a touchdown when a palpably unfair act deprives the offended team of one.
• (3) For a foul after a touchdown (between downs), see 3-11-2-a and 14-5.

Which has a bit of ambiguity. The 'break the plane' rule is only in part (a) of the touchdown definition and there is a (b). Part B does not say anything about the plane being broken. Shannon seems to imply the "or behind the opponents’ goal line" applies to the player. Should be some fodder for the sports-talk folks I imagine.

and down in Baltimore, they have a sports columnist literally named Schmuck?

Steel City 2.0

From the AP, but running in the International Herald Tribune is a headline that must strike a chord here: Laid-off Illinois steelworkers forge ahead. In one of the more curious angles of the recession's impact on Pittsburgh, not only is US steel consolidating jobs IN Pittsburgh, but other steel news is at least ok. See how Latrobe Steel just announced a big new defense order. Steel is going to continue to be hit by the crescendo of bad news in the auto industry. Bad news of course that the local GM plant is finally closing, although I really don't think that is about the current recession at all. GM had been trying to sell or get rid of that plant for an awfully long time so one ought not to overinterpret. The auto industry news and what it could mean here is too much to tackle. It is worth noting that the GM Lordstown plant just over in Ohio is scheduled for a couple weeks of downtime in January, but is otherwise exceptional. GM announced that it would idle most of its plants in the first quarter of 2009 but that the "The only G.M. plant in the United States or Canada not affected by Friday’s announcement is in Lordstown, Ohio. ". If GM really does blow up, I wonder if they will be making Tata's there or something at that plant some day. All in the near term is going to be a rough road for steel, but it's not like the world is going to stop needing steel forever. In fact, the legacy of steel is that Pittsburgh is a supplier of expertise to that entire worldwide industry unlike ever before. And of course still watching what the Obama infrastructure plan could mean for steel demand in the US.

But looking at the debate over what to do with the auto industry, it just keeps coming back to the history of big steel in the US. I really do need to write a book. The foil will be figuring out when the moment came that Pittsburgh realized it would not be a steel economy in the future. I think I have finally found the perfect foil for the opening chapter. The beginning of the end must be the amazing hubris epitomized in this 1959 film Rhapsody in Steel which is online via the ASIFA Hollywood Animation Archive. The 58mb Quicktime Movie is here, but you can pretty much imagine the whole thing from this one still:

To defease, or not to defease: more city debt wonkery

Wonk warning. If you can't name who the Finance Chair is for Pittsburgh City Council you don't want to read any more.

I have to admit, it's a little hard to make sense of the debate in the news over how the city plans to handle some of the cash surplus it has. As boring and esoteric as it may sound, the debate going on actually gets to several core issues of the city's financial future.

So to keep it simple (not). Lets try the cliff notes version first:

1. City actually has a cash balance at the moment.
2. Originally Mayor said a lot of that extra cash was going into the pension fund. It was going to be 15% above the minimum just a few months ago.
3. Then that got changed to pay less extra into the pension fund, but to pay down more debt. So in the end it was only 5% above the minimum this year (which is actually where the minimum will be next year anyway which itself does not begin to reflect the recent losses in the pension fund, more on the later).
4. Then in budget presentations, the plan became to not exactly pay down debt, but to set aside an amount for that purpose.
5. Debates arose as to what that means to set aside cash in that way. Is it legally possible to set aside cash that can not be shifted in the future to other things?

Got that? Who cares right? First off, why was the plan shifted from paying down pension funds to paying down debt? There would be no issue at all right now if the surplus in question was put into the pension fund where it could not be extracted. The city's debt level has not changed from its planned trajectory in the last year, yet the pension fund has been hard hit by the financial markets. You would think that the pension fund is far more in need of shoring up right now. I can only speculate the reasons for the shift, but suspect the mayor's budget reflects some of the preferences of the ICA. Without rambling more, I think the whole issue comes down to some key legal questions that I addressed when musing on the ongoing bankruptcy proceedings in Vallejo California. If you want more see what I said in Why Vallejo Matters.

But hold that thought and let's just look at the issue at hand of setting aside cash to pay off debt in the future. I'ts an odd odd debate for a lot of reasons. There is nothing at all strange about paying down municipal debt. The defeasement of municipal debt happens all the time and is a well understood process. The process involves creating an escrow fund, typically buying government bonds in an amount that will pay off future payments due on extant bonds and voila, you have effectively paid down debt even though the original bonds are still out there making payments to bondholders. As best I understand from the news accounts, there is no thought of doing this normal defeasement, otherwise there would not be this convoluted debate. So in a sense, this whole debate ought not to be happening.

Given that,why is there this debate going on about whether the surplus cash be set aside in some unique way, possibly under the control of a third party like the city controller? This is speculation, but there is a real problem out there in the debt markets which may not explain this. It may not be the explanation, but even so it would be a real problem if they really did want to defease debt the normal way.

The city's extant bonds are mostly at rates say between 4-6% (I'm too lazy to look up the specifics but it's something like that off the top of my head). Given all the other things going on in the economy (impending depresion and the like) one result is that most government bonds are at all time lows. Some T-Bills are now literally yielding zero percent!! So the potential bonds one would invest escrow funds into to pay off debt actually are paying out a lot less than the bonds one hopes to defease. Just to throw out a number, depending on the maturity of the bonds to be defeased the government bond rates that could be had right now cant be much more than 2-2.5% at most which is a lot lower than the rates of any of the city bonds out there.* The exact ratio could be worked out, but given the uber-low interest rates bonds are bearing today, it could possibly be up to a ratio of 2:1. Overly simplistically, but that would mean for every dollar in cash invested now, the city could only defease 50 cents of bond debt. That does not sound good.

All of this could have been dealt with just a couple months ago when the city called and refinanced around $50 million in debt. At that time, the refinancing could have incorporated this surplus cash and refloated debt could have been that much smaller if not zero. None of this debate would have even been necessary. This tells me the plan to shift cash into is a pretty new idea for what its worth. Again just my speculation, but I am guessing there is some idea that they may want to do this normally, but just don't want to do it anytime soon in this uber-low bond rate environment where for reasons explained above it would defease a low level of debt. If they wait out this period they may get more for it, but then the risk comes that the city will find other uses for that money. So this is all a poker game of sorts between the ICA, the pension fund, and all the other competing needs of the city. Kind of like wanting to have your cake and eat it to on their part.
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* I'm actually being generous. The current yield curve for government T Bills and bonds goes from 0-2.5% for maturities out to 10 years. For maturities out to 5 years the maxium yield is under 1.6%. At the low end, you can't really defease any debt these days.

the ink biz in the Burgh

The Financial Times has a good article on the state of the newspaper biz today: Who will mourn local newspapers? Which is timely in that today is the day when the folks at the PG should have learned who took their buyout offer. CP reported on the early names, but there will be more. Other than that, not much official word that I know of . Even the Pittsburgh Media Scoops and Gossip forum is awfully quiet. You would think there would be some rumor-mongering there at least.

transit/bailout nexus

Last month I mentioned the news elsewhere about how even large transit agencies were caught up in the AIG collapse and general mania over exotic investments.

Not sure folks have noticed that the whole issue is now caught up in the arguments over the Detroit bailout. I really have not have a thought for or against the bailouts, it's just too big a topic. But one quote from the Washington Times version of that article is some politician all but blaming the transit issue for the lack of a Detroit bailout:

"It's wrong for this auto bailout legislation to reward or bail out transit agencies for participating in these tax shelters."

That's fine, but at this point has not everyone and their brother been rewarded for investing in unknown and exotic investments that in the end never had a chance of paying off? Transit agencies are going to be the place where politicians hold the line on this and invoke moral hazard? Transit agencies? Not investment banks who are the ones supposedly knowledgable about risk hedging and financial markets?


But locally it might matter. In my earlier post I gave the links for the sources that listed the Port Authority here as one of the transit agencies at risk financially in this one little corner of the financial markets meltdown. I have to believe someone has looked into it and found the Port Authority's exposure to be de minimis since there has been no reporting on it specifically. But whether it is an issue here or not I sense some scapegoating going on. I bet someone will soon blame transit agencies for the problems in the financial markets.

knowledge town burgh?

I am woefully behind in journal reading. h/t to Ed Morrison for pointing out that the latest edition of the Journal of Regional Analysis and Policy focused on regional knowledge economies. Unfortunately the articles are not available online to the public. They are not Pittsburgh-specific, but I figure some folks in town may want to get a copy or look one up in the library.

Sony-less Burgh

Big news of course in how Sony is planning to close it's Westmoreland County site. What shocks me a bit is the news within the news that the plant shutdown will affect all of 560 total workers at the site. There was a time when the plant was responsible for 3,000 jobs in the region and hopefully expected to grow beyond that. There was even a brief period in the mid to late 1990's where you could have made a case that manufacturing employment in Pittsburgh was 'expanding', but if you dug into the numbers a bit what you found was that it was an expansion coming entirely related to the ramp up in employment at the Sony plant offsetting declines just about everywhere else. The expansion of the original assembly operation to include the glass operation there was once thought to be the beginnings of a new cluster of industries in the region.

The nominal reason being given for closing the plant is that it isn't needed with the switch to lower weight LCD televisions and thus less of a need to produce near demand in order to minimize. Not too long ago the switch to LCD production was said to be good for the future of the plant. The jobs were even expanding and were described as "jobs that last". Did anyone question that type of implied prediction? It sure sounded good. It wasn't long ago that I recall calls from journalists asking about a problem finding housing in Westmoreland County for an ever growing number of seasonal workers at the plant. I thought increasing transportation costs would have pushed up the importance of proximity if anything, but I doubt it really is at issue here at all. That type of location dependency for TV manufactuirng ended long ago I thought. Most TV's are made a long long way away and I believe the Westmoreland County plant was the it's last TV plant in the US. What is worth noting is that the plant went from growing faster than the region could sustain to just plain gone in a couple of years.

More interesting is how that site has been the focus of so much economic development effort. Some of the history of the site is discussed here. I also discussed some of the history of the Chrysler and Volkswagen plants at the site in this old oped. Suffice it to say, a lot of time, effort and money have been put into keeping employment going at that one site with successes for a period, but in the long run you can't make business do much different than it is going to do based on market conditions. Also, at one point a lot of effort was put into trying to create a chip-design cluster of industries in Pittsburgh. That was the original intent of the Pittsburgh Digital Greenhouse and Sony was a big part of that logic. It's biggest success may have been Sony's once had a small r&D operation at the Rubicon building in East Liberty. Though that didn't last long.

Lots more to say on the history of the Sony Plant here, especially its initial decision to locate here and the history of Volkswagen and even Chrysler before it on that one site. Maybe more later on. But as Sony's hardware biz looks as shaky as most manufacturing, they are also announcing new pushes into more ethereal software businesses and their new 3-D social networking site. Is the future of any Sony-Pittsburgh nexus focused more on that part of their business?

Who can believe gas prices?

Nothing Pittsburgh specific, but it was 10 years ago today that oil was at a recent low of $10.82/bbl, just a tad below the high a few months ago over $140/bbl. The lowest gas prices in Pittsburgh are now at $1.75/gallon. Reminds me of a post long ago on the economics of fuelperks. Soon we will be at a price where fuelperks will make gas seem to be veritably free for some folks. Certainly percentage-wise, those fuelperks discounts are now proportionally a bigger part of the price of gas than they have been in many years. There is probably some marketing research out there that gives some insight into whether that matters at all.

Foodie-burgh

From Spike TV is a video of the Food Channel show Man vs. Food and it's past trip to Primanti's. Worth noting because tonight at 10pm they are showing their trip to Pittsburgh's Deluca's Restaurant. Not sure why they are not swinging by Ritter's?

(h/t Matt H.)

Dying but ok?

I saw this Forbes headline: America's Fastest Dying Towns, and feared it would be pretty bad for the Pittsburgh psyche. Yet its summation quote goes like this:

"Pittsburgh is a good case in the sense that medical and biotech firms took the place of steel mills. That didn't help the steel workers, who don't have the necessary skills, but it helped their kids."

data fusion watch

No time to post anything other than this... Just another attempt at the ultimate fusion of the world's data (and maps)... like all the others it is far from where we want to get to, but this is pretty neat:

http://uuorld.com/

Infrastructure and the Burgh

If you are interested in transportation economics and policy, you should follow David Levinson's Transportationist Blog. He saved me the time to listen to the President-Elect's radio address last week and picked up this quote:

" ... Second, we will create millions of jobs by making the single largest new investment in our national infrastructure since the creation of the federal highway system in the 1950s. We’ll invest your precious tax dollars in new and smarter ways, and we’ll set a simple rule – use it or lose it. If a state doesn’t act quickly to invest in roads and bridges in their communities, they’ll lose the money."

What would a big infrastructure push mean for us? The number I see being tossed around is a fairly quick $100 billion. The political process tends to force spending like that to be evened out across the country. If it worked out like that, SW Penn. would expect to see 1% of that $100 billion. If need is taken into account at all, by any measure our infrastructure needs exceed most anywhere else in the US. Bridges, sewers, roads or the scary state of our locks and dams all have big investment deficits. If we were to get say2% of $100 billion, assuming it is net above and beyond what would be expected otherwise that you are talking about enough that would make a real impact on the local economy. That and $100 billion in infrastucture could also be a big plus for the steel industry. Most infrastructure uses a lot of steel and you would expect to see an employment here, not just in steel, but in the mining and production of coking coal.

and as an aside, if that 'use it or lose it' thought becomes policy..... what projects are on the books here that would qualify for a first big blast of funding?

altmire hart retrospective

So here is a map. There was a time when the thought was that the rematch of former Congresswoman Melissa Hart against current Congressman Jason Altmire would be at least close enough to watch closely. What was clear by election day was that it would have been surprising for Altmire to not win re-election. Word on the street that even the Republican national committee pulled some its money supporting Hart near the end as prospects looked bleak.

In the past I put up a map of the results from the first Hart-Altmire race. No reason to repeat that in itself so I wondered where Altmire gained on Hart. Altmire won 56-44 which was a decent improvement from the 52-48 results just 2 yeares earlier. Here is a map of the the differences between the 2008 race compared to 2006. Honestly I don't see much pattern in it, which would just mean Atmire gained a bit of ground across several groups. An incumbency bump, Obama coat-tails, some intra-regional migration artifacts, or something else? I dunno.

Change in Election Returns, 2006 vs. 2009. PA 4th Congressional District

pension funds and more

In case you didn't catch the news that the city's pension funds are down to $261 million, it's probably the biggest news you will read the least about... and the biggest finance issue that the city is facing that the 5 year plan put together by the Act 47 team pretty much ignores for reasons I really can't fathom. For those who understand the implications, the question for the ICA and Act 47 folks is just how much the city's minimum municipal obligation is expected to go up in the coming years based on the trends in the city's pension fund.

Beyond that, anything I have to say I have said before, and before, and before. If anything I have proven to be wildly optimistic. The number being quoted about how much the city pension fund should have to be full funded is $899 million. That number is at best the number for January 1st 2007 and so is now 2 years old at best. The realistic number for the unfunded pension liability is likely much higher if there was a current estimate, we just won't learn a more current number for another year to year and a half. If the actuary has to assume a lower inflation rate out the next 30 years, or a lower investment return over that time, the potential for a much higher pension liability is a bit scary to contemplate. Lower inflation rate is going to push up the NPV of those future pension payouts, something that could be a big big issue across the nation not just here.

*****

Unemployment rate did in fact come in at 5.5% as I suggested it would. Again the big curiosity is that despite nationwide, or worldwide, economic collapse... why is the local employment level and labor force continuing to go up from their historic highs for the region. Labor force participation rates do not move that fast month over month or year over year even. So my answer as I got into a bit earlier is: migration.

******

and it may seem like just a sports story, but maybe it isn't. NYT had a slightly different version of the story on Monday, but the International Herald Tribune talked Steelers-world yesterday. : Steelers are NFL's one constant. In a sense, it isn't saying something all that different from what Potter in the City Paper said about Pittsburgh this week.

Sticky prices: an application

Some may be surprised to know that I rarely watch local TV news. Just too many fires and murders. But I caught a bit of local news last night and there was a segment on the rollback of the county drink tax from 10% to 7%. The reporter ended his segment with a statement to the effect of.. it remains to be seen if local tavern owners pass on their tax savings on to their customers. Could be an unintended consequence if the public campaign against the drink tax gets vented back at the tavern owners.

But it begs a couple questions. Do we know the tax was passed on to the customers in the first place? Or how much of the tax was passed on? (all, some, none, or possible more than the tax?) How many taverns sell beer for prices that are not whole dollar prices which would make it hard to give back 3%?

Cleveland Plain Dealer postscript

So, I am not sure what this means. But there is a postscript to the story about the absolutely glowing article about Pittsburgh last week in the Cleveland Plain Dealer. If I understand this news article today, the Cleveland Plain Dealer is experiencing the same media biz miasma of all its print brethren and today laid off 27 editorial staff. Among them it lists Scott Stephens who was the journalist who wrote the Pittsburgh story. It actually lists "Chris and Scott Stephens". So husband and wife laid off together? Ouch. Reminds us that there is the news of the pending buyouts down the at the PG. I have not heard the official word if there is any, but what I hear is that enough folks took the voluntary buyout so that there will not be other layoffs for the time being. Anyone?

unemployment rates

The final October unemployment rates will not be out until Thursday. I am guessing Pittsburgh's seasonally adjusted unemployment rate comes in at 5.5%, which would be a tenth of a percent above September. I'll update that when I see the actual number.

But if you have to have java installed and permit ActiveX, a slightly improved version of my interactive tool showing historical unemployment rates for Pittsburgh is online. Yeah, it's a little rough around the edges, but every now and then I like to check to see if my programming skills have atrophied into oblivion or not.

From the Cleveland business news is a pessimistic story about how their financial sector job loss is greater than in manufacturing, and I am pretty sure a lot of the anticipated merger-induced NatCity losses have not even begun yet. Today Cleveland's mayor has had to come out publicly about the pessimism up there and in an editorial even has to refute "Pittsburgh's power over Cleveland". How bad is it in Cleveland? Here is a funny story about how Browns-nation has lost Erie to Pittsburgh and other meaningless connections between the economy and depression in Browns-world. They say the Browns franchise is the next Lehman Brothers. Ouch.

Speaking of Cleveland, missing only the Pittsburgh number for October, here is the current picture of my rust belt divergence graph:

Unemployment Rate: Pittsburgh, Cleveland, Detroit 2000-2008

Speaking of real estate - Braddock

Lest anyone think that my observations on the state of the regional real estate market means there are no problems here, I was just getting around to looking at not yesterday's but the previous Sunday's real estate section with its monthly focus on trends in selected neighborhoods. That week they get to the perennial poster child for failed urban development. I hate to pick on Braddock which may not be the only place we have failed, but it remains such an outlier. The PG's Realstats data has the year-to-date trend comparisons for 2007 and 2008 for real estate transactions in selected neighborhoods/municipalities. Let's just skip all the others and look at:

Braddock

2007: # of sales = 46, median price = $15K
2008: # of sales = 39, median price = $8K

Again, there is no zero missing there. That is $8,000. So five properties you could have if you were willing to trade in your Hummer. If it were just a few properties I would write it off as a small number anomaly, but 39 sales is not an exception. Half sold for less than that. That you can get price depreciation despite starting from $15K/property is beyond comprehension in most of the western world. I once calculated that property vacancy in Braddock was 2nd highest in the state other than for Centralia which is the municipality the state evacuated due to a mine fire decades ago.

I do hate focusing on Braddock which at this point is not responsible for its own situation any longer. Braddock depopulated for a whole lot of reasons and basically we let it happen and continue to leave it as it is. The whole topic of redevelopment in the Mon Valley has been talked about for decades, yet some of the core problems are as intractable now as they were ever in the past.

So here is a story. About a decade ago I was in Germany for a conference. There was a tour looking at redevelopment efforts in the Ruhr Valley which like us once had a concentration of steel plants that have closed. We were tooling around as part of this tour in a town that was essentially Braddock in that it was in the shadows of a former steel plant that had shuttered. The thing is, it was a very nice place it seemed to me. Good housing stock and looked like a very livable place. I made a comment to the effect that the Germans don't let things like Braddock happen. I wasn't making a statement about any person or policy at all. A certain former politician in town was with us heard the comment and sort of teed off on me a bit over how much progress had been made and that the public and in particular the media didn't appreciate that Braddock had turned the corner. If I was less kind you could say it was kind of delusion not only back then, but to this day. I was just in Braddock last week and I would make the same statement today. In some ways it's a lot worse than a decade ago. Something the real estate price trend would support.

Why is it so hard to fix Braddock? Even being someone who has looked at the issue for a long time, just the other day I learned something new about how intractable the situation is there. I was talking with someone who lived in Braddock for over 50 years until very recently. Born and raised in Braddock and probably would have lived there longer if they could.. but it just became impossible for them to stay. Why did they have to leave? First their immediate neighbors moved out. They could live with that. Then the plumbing from the neighbors house was stolen, copper being pretty valuable until lately. Still, that wasn't a problem itself, but it turns out that the water was supplied collectively to a group of houses. The water meter being in the house which had it's plumbing mined. No plumbing there meant no water for the group of houses. Still, even that didn't force them to leave, they really were going to stay and pay to have some plastic plumbing put back into the vacant neighboring house. But since the house with the meter was unoccupied, the water company would not restart service to what was essentially a vacant and abandoned house. Makes sense sort of... but it meant that the occupied houses next door couldn't get water. The water company's cost of putting in a new water line and meter was far too exorbitant an investment, probably several orders of magnitude more than the house was worth to begin with so that wasn't an option. No water, you pretty much have to move out. If you can't keep folks like that who very much want to stay, what hope is there of rebuilding population there. In the end the house was sold for a dollar to a 'redeveloper' who mostly stripped out the remaining plumbing and other semi-valuable pieces of the property. Probably had a decent return on the $1. Just unbelievable, and seriously not something that is allowed to happen elsewhere in the developed world.

safe real estate

Kiplinger's has a story listing Pittsburgh's real estate market as one of just 6 'safe havens' in the US. The other 5 being Clarksville, TN, Albuquerque, NM, Burlington, VT, and Johnson City, TN. Interesting company.