Friday, January 01, 2010

Prevailing Disharmony

What does the spasm last night in city council say about the future of Pittsburgh? Too much, unfortunately. So that at least one person reads to the end of this, here is a teaser for the ADB: Would Henry George have supported the prevailing wage bill?

It seemed pretty obvious to me the city’s prevailing wage bill was going to be vetoed. That nobody was talking about the impending veto had me quite confused and I really wondered if I was missing something. As conflicted the machinations Downtown seem to be, the results rarely stray from the expected at the end of the day… Though don’t expect me to predict who will become CC prez, something that has been the most unpredictable of things for the last two decades. I had forgotten, but was reminded that we all came within a nanometer of having Twanda C. elected as City Council Prez not long ago.. something that would have put her in a position to have become mayor on the passing of Bob O. If that had happened I wonder whether we all would have ever heard of Mr. Lee Otto Johnson. And that impending Democratic primary for governor here in Pennsylvania? It all looks to be just a less contentious replay of the fight here for CC prez in the early 1990’s.

I digress. Prevailing wage bill. My proof that it was going to be vetoed came in the form of the 9-0 vote City Council passed last week on this. City Council is rarely so unanimous, and certainly not unanimous on something like this. I really figured that the message went out that folks could have free vote in a sense and approve the bill knowing it would not survive. I am surprised that given the recent legal developments which make the survival of the bill a bit uncertain that the Mayor himself didn’t see the free nature of signing the bill even if he opposed it..

My take on it all is that the compound lame duck issues made this all a dubious thing to take up so late in the year no matter. Even those who wanted to support the bill in some sense don’t want to let outgoing CC prez get any fillip of credit on it. On that point alone I am not sure why anyone thought the bill would be signed this session. That being said, I think Shields as cc prez has to take blame to bringing this forward so late in the year that it facilitated the lack of options they were left with once the mayor vetoed the bill.

A big topic and the prevailing wage bill has some overlap with issues on the parking tax. It is actually true in itself that a bill like the prevailing wage bill ought to be based on a larger geography if at all possible. That is if you believe in the merits of the bill at all which I realize many do not. But given the 9-0 passage in council I’ll take for sake of argument that it has a philosophical level of support in the city. The city’s core pathology remains it’s geography. As a really small place in a larger and larger region it is quite true that anything that makes the city uncompetitive puts it at a distinct disadvantage to its neighbors.. and unlike almost any other region in the nation it has a lot more close in neighbors to deal with in that regard. It is the same argument you hear about parking tax issues and now the related topic of parking garage leasing and the potential for parking rate increases in the city. In fact, I would place good money that the potential parking rate increases that will likely occur from leasing the parking garages will have an order of magnitude bigger impact on business location decisions impacting the city compared to the much narrower impact the prevailing wage legislation could ever have.  Think about that some. 

But… and it’s an enormously huge but… there is this question of whether the city is suffering from any such disadvantage now and whether it would be hurt more in the future. I really swear that everyone in their psyche keeps confusing the story on the city's population (down in the past, going down now, probably going down in the future) with the story on the number of jobs located in the city of Pittsburgh which really are as stable as the rock of Gibraltar. Again the factoid: 300K jobs located in the city in 1960… same as today give or take some noise. If you realize the two trends are different then you get to some very different policy conclusions on just about every issue in local public finance.

The city honestly has lots of things that could make it a disadvantage to many a business. Parking fees of any kind are a killer for folks who like to drive to work and parking is nominally free for most suburban locations. In Downtown and Oakland that will never be the case. Other fees and taxes, inherently more restricted zoning in dense urban environments and innumerable other reasons make it hard to attract a new business to locate in the city proper.

Yet the jobs have remained. Go figure. Understanding that is the key to understanding most everything about the future of the city. Why do jobs act so irrationally and stay in the city? One could argue in Oakland it is a preponderance of tax exempt investment that anchors them to their location. A fair enough argument, but not something anywhere near as true for Downtown which continues to be one of the densest jobs centers in the nation.

So again.. Why? There are lots of details, but when you get to the core of it there must be something valuable in the location that makes businesses willing to put up with all the unique costs of doing business in the city.  The debate over the prevailing wage, or the parking tax for that matter, needs to account for the fact that there are lots of other factors in play.  The fact that businesses are willing to put up with the parking rates, the parking taxes, the congestion and all the other city hassles is remarkable.  In Pittsburgh there are relatively easy options to put jobs in Bellevue, Baldwin, Greentree… the list is long, vice the city proprer. Yet again, they don’t for the most part.

Anyone remember Henry George?

There really must be something in the value of the land and where that land is that keeps jobs located in the city. So if you have gotten this far what does it mean? The arguments over a prevailing wage or parking rates are not as they are portrayed by most. Will the city be less competitive as the result of higher costs on businesses. For sure, that is almost a tautology. But in Pittsburgh’s case there is ample proof those costs are things many are willing to live with and continue to invest and do business in the city. I’m actually not sure the city can support a job base higher than 300K which again is a remarkable number of jobs for an urban core city given it’s size and history.
The issue for the prevailing wage or the parking tax is thus something else. For the prevailing wage it becomes a more classic labor-management issue of how the economic rents (rent in the broad economic term) derived from the intrinsic value of city-located land gets distributed between owners and workers… for the parking tax issue it’s about how those rents gets distributed between the owners and the city. It's not about the return on investment, but the profit merely derived from location.

So no matter if prevailing wage passes or fails, or if parking rates go up or remain stable, I bet the core number of jobs in the city remain much the same… how profitable for those who own the land (which in many cases is the public these days... dare I mention the stadium authority), or can gain control of the land are the questions… and profitable for whom.  But if you read that far and want a simple take on the merits of the prevailing wage bill as it currently is being proposed.  If it were to be enacted and if it is as calamatous as some predict, the impact should be hard to miss in short order. There is no reason it could not be rescinded or modified once there was evidence that it was creating net job loss in the city. 

I was just wondering.. how long has it been since anyone on city council even knew who Henry George was?  One could argue this was once the center of Georgist philosophy, and the most George-knowledgable politicians anywhere.  Today?


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