Tuesday, November 30, 2010

Pittsburgh, you're no Vallejo

No time to parse this as it deserves for us, but big developments in the bankruptcy of Vallejo, California.  Some may recall when I compared the fiscal state of Pittsburgh to Vallejo.  I have not updated that, but the basic situation will not have changed much.  If there is a change, some of the city's GO debt has been paid down, but the calculated pension obligation has jumped up. The bottom line was that when looking at total debt and liability, Vallejo in bankruptcy is in nowhere near as dire shape as we are in no matter what we like to think...  Compared to Vallejo we would be worse off even after this whole notional parking lease were to go through by the way.

The news is there is finally a proposed plan to have Vallejo emerge from bankruptcy.  I am sure I will try to parse all this better in the future, but the short version I see (via first link above) has these key points:  1) unsecured creditors paid 10 cents on the dollar (ouch) 2) at least a 3 year moratorium on bond interest payments and possible other bond debt restructuring and 3) a big haircut on retiree health care benefits.

Probably not news in this, but I notice the confirmation that the bondholders of city debt are being paid by the bond insurers. 

and as a former battleship sailor I am obliged to point out what may be bigger news out of Vallejo today.  They are making efforts to bring the retired battleship the USS Iowa to Vallejo.  If you thought the LST visit was cool...  can you imagine?  If only the rivers were deeper and the bridges higher.   The lesson though is that life goes on in bankruptcy, for cities as well as people and more than a few firms.


daily ranking



Great Auto-burgh history from the Daily Reckoning: http://dailyreckoning.com/the-rise-and-fall-of-the-american-middle-class/

Which leads to an intreresting question... how many auto plants have there been in the region over the last century?  Or just a curious side note:  how many American regions have been selected to be the home of not just one, but two new auto plants in the US since WWII?  Note I didn't ask how many were actually built.  For us you have to include not only Volkswagen, but also the underappreciated history that Chrysler almost opened a factory on the same site in Westmoreland County decades earlier. It really is an important note that we were not doing badly at site selection over the decades before the collapse of steel employment in the early 1980's.  The attraction of Volkswagen which opened its factory here in 1978 (just before the season leading to Superbowl XIII mind you) and would add several thousand jobs to the region was not only one of the fiercest competitions in history for new investment to date with many states working hard to win the new factory; it would also be the first major investment of a foreign auto plant in the US, long before Honda, Mercedes and others would follow along and build plants elsewhere in the US. It was truly a historic 'win' for the region.. or so it seemed until the plant closed roughly a decade later.  The seeds of our miasa came from what we were continuing to focus our economic development efforts on, not that we were unsuccessful at those efforts. My two cents of course, but if even half true ponder what it means about the common wisdom version of our economic history...

Go back to the link and look at the building in question.  Still there.  I don't know the status, but I thought at one point it was going to be part of the Hillman Cancer Center expansion?  I'll have to check on that, but that would be a symbolic conversion.


Monday, November 29, 2010

All roads made of shale

My internal stream of consciousness, which is even more random than my public stream of consciousness, is tying together some random newsoids of late on Marcellus Shale.

First, if you accept the source as one that is unpersuedably anti-drilling , nonetheless some great photos of new Marcellus Shale drilling activity from the folks at the Allegheny Front  Defense Project.  (see note*)

They focused on some pictures of an Atlas Energy pad there in the forest.  Atlas, as the expanding ranks of neo-shalologists know, has been bought out by Chevron (nee Gulf).  So this financial blog post has been making the rounds: Fighting Over Rocks: Shale, Chevron and the Versailles of Natural Gas Fields

Chevron has taken over the role of Atlas in a joint venture Atlas had partnering with India's Reliance Industries which makes it one of the bigger players in the vast Marcellus play.  Reliance's owner and CEO is making news for his housewarming party this weekend

It really is just a fascinating thought to consider if you went back in time and asked any of the local coal barons of a century ago and told them in the future they would be seeking, if not desperately needing, financial capital from Bombay...  what would they say?  They probably would not have been able to process the concept at all, let alone identify where Bombay was.  The world, and mountaintops, get flatter every day.

* NOTE:  I am told that I mislabeled as Allegheny Front what is clearly from the Allegheny Defense Project, two organizations which share no more than part of their monikers.  Apologies.


Sunday, November 28, 2010

We're Phil, not Gus

Did we notice this already?   Like the Groundhog Day of economic stories these days.   I don't think anyone caught the latest dump of housing prices from the Federal Housing Finance Agency last week.  Not much news in that local real estate prices went up +1.9% over the most recent quarter and +1.6% over the year. Both through the end of September.

What is a bit more interesting is that local real estate prices rose the fastest over the quarter among all large metros in their  benchmarking.  See page 29 in the link above for that, but you will have to do the ranking yourself. So we are now doing a lot better than the few places whose real estate prices were holding out along with us for some time; places like Houston and Dallas.  Houston looks like it actually had a quarter over quarter price decline, and Dallas' was positive at all of +0.06%.  That makes this a noteworthy story, or at least a change from most of the previous stories.

Probably related to another story unnoticed from a few weeks ago. Credit scroing company Experian has some metro benchmarking of debt and expenses. See: Pittsburgh has lowest monthly payments in the country.   Same story on costs for the most part... plus that old Scotch-Irish frugality I am sure some will argue. 


Saturday, November 27, 2010

Remembering when the Henry George Club ran Pittsburgh

You have to go over the pond to hear a heartbeat for Henry George these days..   and if you don't know who George is you probably want to skip all of this.......

But via Dublin is something on Pittsburgh's history with the single tax.  Looks like there is a chapter on us focusing on Henry George in: Review: Flaming Vesuvius Edited by Richard Douthwaite Argosy, from the Irish Independent.

Curious.  I guess Dan's connection is an Irish name?

Gotta pull out all of my tiered tax notes because I am teaching Urban Economics in the spring..   Those kids will be the last generation of folks in town who know Henry George's impact on Pittsburgh if it is the last thing I do gosh darn it.  Long long time since Pittsburgh was run by the Henry George club and an even longer time since the graded tax was first implemented in Pittsburgh. If that seems ancient news, it was not all that long ago that the single tax was still a headline item for Pittsburgh.    At least until it all went away. Hold that thought though or skip to the last paragraph.

Wonder what George would think of the whole parking tax/lease/privatize debates ongoing? (Slap!) Down, Briem, down.  OK, let's not confuse those issues any more than the powers have already.  Best not to introduce any actual economics into the debates to confuse the issues further.

Stop there.  Not going to get into a primer on the single tax.  The rest of this will be complete gibberish if you don't have that. So the rest is just for the ADB. Others will want to refresh themselves on who Henry George was. You can always check Wikipedia or for those with academic access there is also: The Operation of the Pittsburgh Graded Tax Plan.

Seriously...  if only because the pre-reassessment real estate data for the county was so completely unworkable, there really was an article or two to be written on how the demise of the single tax (or technically tiered in our case)a decade ago helped some and hurt others.  It is a lot more compicated than it may appear.  It appears to have been done in by the perception, the true perception in itself, that the tax aided large Downtown owners.  Yet it also hurt those on all of the relatively smaller real estate parcels in the city.  For a good contemporary omni-history on the demise of Henry George in Pittsburgh, again talk to Tim (and Mark).

What I do remember looking at was that the Downtown issue was not as stark as it may seem.   There was a benefit to the parcels that were the most built up on small footprints.  So the Steel Building and Gulf Tower benefited from a tiered tax (which was the entire point mind you).   But the owners of other large structures like Gateway Center(s)?  Not as much as you would have thought since the buildings are large, but the real estate parcel they sit on were collectively pretty large as well.  The remainder of Downtown is not worth as much as you would think so their values were indeed more in the land than you may have thought. 

Alas..  all that and the truth is even more complicated.  If you really parse it, Henry George may be having a revival of sorts right here in Pennsylvania.  When you really deconstruct the tax-math-accounting of it, a lot of TIF's and tax incentives are really a tiered tax by other means, though some Georgists react a bit badly to the analogy. We can debate TIF implementation, here and elsewhere, another day. That and things like the Pittsburgh tax abatement program (modeled a bit loosely on Philadelphia's groundbreaking tax abatement program) are effectively Georgian in intent, if not name.


Friday, November 26, 2010

Daily Ranking

Forbes: Where Americans Are Getting Richer

You betcha...  No. 6.

They have a companion piece: 10 Highest State Income Tax Rates For 2011.  Might be worth noting that Pennsylvania is not on that list, nor anywhere near close.  Look at those state income tax rates and compare them to Pennsylvania's.   A lot of those states will also have sales taxes far above Pennsylvania's in addition to that.. and most without the exemptions we do for things like food and clothing.  The clothing exemption has a minor news point today in this in the Trib: Canadians to cash in on Black Friday in W.Pa. Worth a read for all those who think Pennsylvania is taxsylvania or something like that.  Busloads of people coming here because our taxes are much lower.  Maybe all those shopping tourists will stop in Pittsburgh along the way and make up for all the Marcellus Shale businesses that are boycotting us?

Now go back to spending some of that increased income. (update:  I was joking with that last line, but check out the first line in this Black Friday roundup from Businessweek)


Black Friday wonkdom

Yes, there is a Null Space shopping desk. Not only that, but my Black Friday shopping is completed thank you.

Most know that the good Carl Kurlander made a movie: My Tale of Two Cities. So to support my fellow Morewood alum we will make a rare exception here and pass on a solicitation of which we receive many... some quite worthwhile, others less so, but most all too much for me to deal with.   He has sent around a soliciation for a new DVD version the movie which you can buy (I presume via the link above... or try this link).  Maybe you can make it into a stocking stuffer.   I will admit that what really caught my notice was the pitch that said it has additional unseen footage including more of former Treasury Secretary Paul O'Neill interviewed at Ritters.   For that reason alone I may need to get a copy.

Speaking of Ritters and film..  here is the best clip ever filmed insider Ritters.  I am a little unclear why WTAE/Hearst has this copyrighted... maybe they filmed it?


Thursday, November 25, 2010

Nothing else to say

The IP lawyers have made this ever harder to find, but the Null Space A&E desk worked overtime to find this for you.  If you endure the advertisement you will get to what is still one of the greatest 4 minutes in sitcom history...


Wednesday, November 24, 2010

architectural predestination

Yes, I know it is being held in abeyance.  Still, the only thing that confuses me about this decision is why anyone, let alone so many, thought there was any chance at all something else was going to be the result there (of that meeting that is).

Is a bit fascinating that everyone remembers all of a sudden that it is the Civic Arena. Was there an official renaming ceremony?

Like the illustration?  To me it looks like the building is on a small tropical island floating in a sea of grid-like waves.

Random long tail note... there is even an arenadigest.com/ out there now.  About all arenas everywhere.


Tuesday, November 23, 2010

on high risk investments

So in reading the WDUQ snippet on the otherwise boring and esoteric machinations of public finance: 2 Votes move Bond Plan Forward, is a awfully important factoid.  In it there is a mention of the size and scale of the 'illiquid assets' held by the City of Pittsburgh combined municipal pension fund.  The line I note is " some $50 million already in the pension fund in high risk investments that the PMRS did not use in previous calculations".

So we have a $50 million number in the record now.  Progress is progress.

So the pension fund which is as woefully underfunded as a pension fund can be, that is at risk to need all of its remaining cash in the very near future, somehow has roughly a fifth of it's assets invested in what are as kindly as possible characterized as "high risk".   Can anyone think of a justification for that?  Can anyone figure why these assets are not being identified?  Can anyone verify that these $50 million in assets are actually worth $50 million currently?? 

So let's be clear.  High risk and illiquid investments are not only not illegal, they are common enough that the GFOA has guidance on their use in pension fund investments.  So the existance of illiquid assets is not the issue, yet the magnitude of these investments in such a vastly underfunded pension fund is arguably malfeasance and I would be glad to argue the point.  That roughly $50 million of such assets exist in a pension fund holding give or take $270 million is a huge proportion for a fund as distressed as it is. 

The GFOA guidance has what may be the most understated advice for these assets.  Footnote 5 in the previous linked reference is:

Due to the increased risk of misstatement inherent with these investments resulting from incorrect valuation, part of the increased due diligence could be to obtain a reasonable understanding of the procedures that may be applied to them during the independent audit of the financial statements.
There it all is in a nutshell.  "risk of misstatement"...  "incorrect valuation"... anyone have a warm fuzzy that the numbers being cited represent valid valutions of the assets involved?   If you read through to the end you get GFOA's admittedly broad guidance on use of such investments which is that they should: "exercise extreme prudence and appropriate due diligenge."  You can read the document to see the specifics of what that appropriate due dilligence should involve.  Since we have no idea the details, do we know what due dilligence has actually been implemented.

What is a bit scary in the context of all of this.  All I have been able to glean on this personally are some comments made to me that the pension fund has in recent years been bringing down their investments in these high risk, or illiquid, assets. I can neither verify or dispute that. If true,and if it still has $50 million invested this way, then it begs the question of how big big a percentage these high risk investments made up of the pension fund in the past?

and I know I am a broken record..... but will someone please please do a follow up of this story:  City acts to curb further pension losses.  I'll stand on my head if it helps.  Do I need to wander around Downtown aimlessly wearing those big dual placards over my shoulders you used to see folks wearing... Are any of those folks still around?  Problem is that the placards would have to have messages written in tiny type to explain it all.  People would think I was walking around with the Rosetta Stone or something. 


Pittsburgh wants your business

CNN has us as first of 8 'cities' that want your business: http://bit.ly/fwHNLK


Forensic Actuaries

So this is for the uber-geeks out there. No, I'm not going to try and make sense of the machinations Downtown today.... Unfortunately I am going to look at even more convoluted city financial issues. 

I missed this story from last week: Team 4: Alaska Sued Pittsburgh Pension Manager For Big Bucks

A really worthy topic, and a story that I feel bad I did not catch.  but it gets the story wrong in one big way.  The topic is about Mercer, which is the hired investment manager for the City of Pittsburgh's pension funds.  The story goes into some seemingly relevant history that Mercer was sued by the state of Alaska over some pension issues and that in the end Mercer wound up paying a whopping $500 million to settle the suit. 

Before I go on...  see disclosure below*.

You would think the story is that Mercer was sued in Alaska for its management of pension funds and raises the obvious question whether Pittsburgh's pension funds were invested wisely.  Yet that is not the story it seems.   In Alaska, Mercer was sued not for its investment management of pension funds, but for actuarial services.  So the Alaska story has nothing to do with how Mercer managed investments as it is under contract for in Pittsburgh.  Pittsburgh's actuarial services are handled by another firm.

It all raises a really interesting question, possibly the story at the very nexus of all the pension problems facing the City of Pittsburgh.  Was the City of Pittsburgh prudently advised by its own pension actuaries?  Mercer was accused in Alaska for "not taking into account realistic data"... or put another way the assumptions that went into the calculation of required pension contributions were far from prudent. Has anyone really wondered why Pittsburgh pension fund has generally fallen ever farther behind when it comes to it's full funding level.  In some good years it would catch up a bit, but far less than it should have.. and in most years the funding ratio of the city's pension funds fell ever further behind.   Did the City's pension actuary fulfill its fiduciary duty in its work?

At the very least, it seems a worthy comparison to look at what happened in Alaska with the history here.  Any forensic actuaries around?  Would an individual pensioner have standing to sue?

* Ok.  I am not quite sure on this, but it turns out that I may have worked for the entity now known as Mercer.  How can this be ambiguous?  Well I once worked for a firm in NYC: Oliver, Wyman and Co.  Through some corporate machinations it looks as if Oliver, Wyman merged with Mercer and the distinct entities are both now parts of the greater Marsh and McClennan companies.  So it's a loose and distant connection, but don't want to obfuscate anything ever so I thought I would throw that out there.


Monday, November 22, 2010

Daily Marcellus

WDUQ: Dr. Barth: Shale Studies Flawed

Times-Leader: Expert: Amount of Shale activity may be shocking, subtitle: Hunting site access may be restricted in areas near active gas drilling operations.

Great photo from the Buffalo News: Jobs at stake as state mulls gas drilling

For the bigger perspective: Natural Gas Producers Squeezed by High Costs and Low Prices

From an investment site: Marcellus Shale Debate Takes a New Turn

This last one deserves a bit of parsing.  The main quote says: "Make no mistake; the Pittsburgh community has every right to ban drilling within city limits."   Yet that quote has it completely wrong.  The whole point of the city's legislated 'ban' is that the City of Pittsburgh does not have any of the power every other municipality has to regulate drilling activity in any way whatsoever.   If you don't get that point, then you are missing the whole debate going on.   Every other municipality has the power to regulate drilling activity in some form, yet 2nd class cities in Pennsylvania do not... and the only 2nd class city is??

But the best story marginally related to Marcellus Shale??  It's all about the Elk.  You know, I've been to Benezette to look for the Elk.. and the Elk wouldn't come out for me.


Sunday, November 21, 2010

Veterans Day Every Day

Am embarrassed I missed this obit.

It would be one of the most amazing sea stories ever... even if it was not true. And that is before you realize that the detonation of the rocket that started it all is literally underneath one John McCain. In a higher resolution version of the video below you will see then LCDR McCain scurrying out over the forward fuel probe on his plane and through the flames seconds before the bombs on his plane cooked off.  The resulting damage to the USS Enterprise would precipitate his transfer to the Oriskany from which he was flying when he was shot down and taken prisoner.  That butterfly controls all our our lives in ways we just don't know.


We're walking... we're walking...

Remember Walkscore.com?    DNJ takes a look at some iterations on the site and what it says about Pittsburgh.   Lots of stuff going on in public health world when it comes to walkability and neighborhoods, especially what it means for the elderly.

Wither the diaspora report? At least in name, but it lives.  Remember the post about yet another diasporan in DC?  Toland follows up: Pittsburgh native to be postmaster general.  Not a fun time to be the top stamp.

and for a completely random comment, but this is true.  I had no idea whatsoever that the US mint was producing new presidential dollar coins for circulation every year... and have been for years.  Someone better tell the Canadians!


Saturday, November 20, 2010

Not all shale leases are created equal

Some interest of note that shale gas developers are abandoning efforts in some counties where there was a lot of lease activity... impacting more than a few landowners who had thought they hit it rich.

From Wilkes Barre Times Leader:   First gas site owners sad at news.

So yes... it may not be surprising and the article will point out the leases had verbiage to the effect that the development was explatory..  Nonetheless, the article also points out that more than a few folks went out and spent their anticipated earnings already.  For the one property owner interviewed, his earnings amounted to $1,500 compared to $300K anticipated in the spring if the development had proceeded.  Read the news article to see that there was a lot of leasing activity going on before the developers got to this point.

So no.. I don't think this indicates most or even much of the development elsewhere in the state will cease or even slow, but am pretty sure there are some folks spending anticipated royalties that may not add up to what they think they do.  Those news stories will come.

For the folks in Luzerne County...  there is always a new technology over the horizon. 

On the other edge of the development though... despite the fact that I have heard industry representatives try to explain how Pittsburgh is on the edge of the pressure gradient for shale gas and thus probably not economically viable to develop, there is growing development west of us.  From the Columbus Dispatch today: Eastern Ohio swept by drillers land rush.  So I guess it works to the west of the City of Pittsburgh and to the east... But we are in some geologic void? 

From a workforce/economic development perspective, the most interesting Marcellus Shale story of the day is out of New York state where it seems the demand for truckers is having some bad impacts on the dairy industry which is seeing its workforce poached.  See this from the Hornell Evening Tribune: Area Farms Hurting From Marcellus Shale Boom. Who says rural journalism is dead?  Good stuff.. and stuff not being looked into elsewhere.   Where else is other economic activity being impacted by Marcellus-related development?  That is a big economic story for the state. 

Remember the tempest over security bulletins warning local police against anyone opposing development? Developments there.


Friday, November 19, 2010


I really am fascinated by the news that Marcellus Shale drillers are building and opening Man-Camps in Pennsylvania.  They sure do look stark and very temporary and are said to be gated communities.

There is so much to comment on you almost don't know where to begin.  First off, what do you need to gate yourself off from in Bradford County?  The Elk? Bears?  Deer?  Locals?

and I was just wondering about something.  No doubt it is mostly men working these rigs, but are there any women at all?  Never see any pictures in the media with any women out working the Mighty Marcellus.  Without any data I am aware of to confirm or deny this, I was just wondering if there are (proportionally) fewer women taking part in the vast Marcellus play than say there are female Marines in combat in Afghanistan? That would be a pretty amazing factoid to come up with?  Anyone have data on the gender balance in the rig crews that everyone says is the #1 economic story in Pennsylvania?  The excuse I hear why so many out of state workers are here is that it is so hard to recruit the necessary worker locally.  You would think that would increase the opportunity for local women to participate, or is this just one of those occupations that women can't break into?

Survey anyone?


Thursday, November 18, 2010

All Pittsburgh, All the time

It's like a marathon. I think they are done?  Changing Gears: Reinventing Pittsburgh - Part 4, Answers for Detorit.

OK..  it really isn't about Pittsburgh. Makes you wonder a bit... if we are the answer to everything, what was the question?

and this... Lots o Pittsburgh from the National Journal. and just some unrelated daily reading for the uber-wonky... of note from the Economist folks:  America in numbers -One nation, divisible.  Actually.. it's not so unrelated to the National Journal commentary. 

How bad is the Marcellus Shale induced housing/hotel crisis across central Pennsylvania?  Your daily marcellus:   Man-Camp?? Where is Adam Carolla when you need him?   Gated compounds of temporary structures?  That Saudi analogy may be more apt than I thought. 


Paradoxes Now, Paradoxes Then

For me the most intersting thing about the latest news on the real estate front is that there just isn't anyway anyone could find to spin this as less than positive news.  As news on the real estate front nationally continues to be described as anemic at best, locally real estate prices have gone up over 6% in the last year.  6.6% exactly which is quite a remarkable annual price increase for Pittsburgh.  I wish I had a long term time series to compare, but net of inflation that must be a record of some kind.  Granted the Trib version lead with the downer: Sales of new, existing homes fall 26 percent in W.Pa..  Sales being a volume metric and reflective of the big tax credit last year. The nugget buried in that version however is that in the region "New houses sold for an average of $304,841 last month".  I am not sure folks in town will believe that... Over $300K!?  Tell your grandmother and see what she says about that. 

It occurs to me that if there really was this mythical link between mortgage risk and Marcellus Shale it would only be the opposite as the news accounts described it the other day.  If Marcellus pushed UP real estate values, that would make the risk of future depreciation increase as well... our low risk of price drops in the future is really a reflection of anemic price apprciation in local markets. Anything that is pushing up prices is pushing us down on that ranking of safest markets looking at potential future price drops. So the last thing some would want to do is to take credit for our mortgage risk 'safety'.   OK, enough counterintuition for the day.

But I liked the phrase "Pittsburgh Paradox" as used in that story.  Here is my contribution to the world of equations.  This is going to be really deep:

People + Income = Real Estate Prices

So there isn't that much paradox in a sense.  Regional migration has turned positive, incomes are trending up...  not included in the equation, but our housing stock is old and not exactly oversupplied across many markets.   The prices follow. 

Ignore that for now.  I was curious how far back the "Pittsburgh Paradox" term has been thrown around here.  I came across this article on local public transit from 1976 that is curious in lots of ways, but really worth a read these days: Transit Scene here replete with paradox.  Of course that paradox may soon be gone as transit itself here may soon be gone.  Looks like the Port Authority has failed to get public sentiment raised enough to save its funding.  Not all that surprising. In fact they succeeded.... all too well.  They spent so long, and spent so much money on PR consultants, convincing the public that public transit had to be cut back in recent years that it really is no surprise that the public is not responding when they want to send out the opposite message now.


Wednesday, November 17, 2010

Reinventing Pittsburgh - Part 3


correlation, causality and common sense

WSJ looks at an updated metric of 'low risk housing markets'.    

Yeah, yeah, there we are... just as we have been for years at this point.  What makes this year's iteration noteworthy is the WSJ's summary for why Pittsburgh's ranking is so low. Verbatim from the WSJ:  "Pittsburgh, where the natural gas industry is creating jobs and wealth".

I bet the Marcellus Shale Coaltion makes a press release out of that. 

So here is the deal.  I think the source of this metric, the PMI group, has been regularly ranking us as the single safest (i.e. least risky) real estate market for years.  Just one cite, but we were the single safest real estate market back in 2007.  I am pretty sure few were talking about, or noticing, any big boom in natural gas related jobs in the region in early 2007.  If that does not convince you, then lets go back further...  2004?  Ditto.  How about more recently?  2008: Check.   I am pretty sure with a a few minutes I could find the same story repeated each and every year going back some time.

So we have been the least riskiest market long before Marcellus Shale was rediscovered, and we have not budged much from the top ranking in recent years.   So the reason to gratuitously say natural gas is part of this year's ranking is what exactly?  Maybe the local economic impact of shale has been positive... maybe not...  but the implied causality with mortgage and real estate risk is completely non-sensical as described.  Any undergraduate completing an introductory statistics class would hopefully not use such logic in any context especially in light of the observed history. 

Thus the state of quantitative reasoning these days.  It's just that it's the WSJ no less in this case.  If we describe this so badly, it kind of explains how we missed all the problems with those slightly more complex credit default swaps. 


Tuesday, November 16, 2010

Part 2

Again from Michigan Public Radio:  Reinventing Pittsburgh and now with Part 2


(in)elastic Pittsburgh

Why the spat over differential water rates within the City of Pittsburgh?  It is a tempest that comes in city council on a pretty recurrent cycle... really....  really, really  (read 2nd link there for a most thorough history of whole boring mess...  you're welcome Tim).  Someone may want to work out whether a few Homewood residents deserve a subsidy as well.  Just saying is all....

But why?  Well, the city's southern neighborhoods were effectively the last geographies added to the city of Pittsburgh...  so generally they were annexed by the city after the era of water provision.  Thus they probably had a pre-existing set of privatized pipes.


Parking on my mind... and your daily marcellus

Headline of note from Bloomberg: Morgan Stanley Chicago Parking Makes Cities Redo Deals

Among the things I still don't quite get about the parking story thus far..... if it was such a good idea to lease much of the city's parking assets, then why did the county recently reject outright considering  a similar leasing plan for airport parking? They spent a fair bit studying the concept. That is a bit more perplexing given the newsoid yesterday that airport parking revenues are up.  The airport parking really ought to be a much more attractive asset for potential leasors...  All cheaper to maintain surface lots, no big unknown cost of maintaining old vertical structures.  Virtually none of the uncertainty introduced by the political process now or in the future.  Pretty much a captive demand and what I understand are pretty high utilization rates out there.  Just makes you wonder what the back story is behind both deals that makes leasing city parking such an attractive idea to some, but leasing airport parking a complete non-starter.  There is a story there somewhere.

and for your daily marcellus, I find the whole story that the drilling industry is threatening retribution against the city of Pittsburgh because of efforts to regulate drilling in the city a really fascinating little spat. I am racking my brain to think of comparable attempts by an industry to hurt a specific municipality over proposed legislation.  This really has the potential to be a big story in public administration world.  Certainly ranks way up there on the Dale Carnegie (how to win friends and influence people) scale.  It also is a fascinating case study when it comes to municipal finance and regionalism.  The things the industry are threatening to hurt Pittsburgh with are indeed for the most part potential economic negatives for sure... but in most cases they are negative for the Pittsburgh region or Allegheny County, NOT things that will impact the City of Pittsburgh much as best I can tell.  Things like threatening to not have conferences in Pittsburgh.  Well, guess what.. the hotel tax goes to the county?   The hurt put on the Sports and Exhibition Authority (SEA) could conceivably hit the city in part some day, but the SEA is half a ward of the county.  Could hurt some Pittsburgh-located businesses I suppose, but most workers in the city are not city residents so it's hard to see any income tax hit.  A property tax hit?  Possible in the very long run, but a base year assessment system makes incremental changes in real estate valuation pretty inconsequential to municipal finances.   Maybe those marcellus shale firms will stop locating in the city of Pittsburgh proper?  Oh, wait.. nevermind that one.  So you can really tie together whole bunches of policy issues in this. It really is pretty fascinating; I hope this one heats up some more.  I see a journal article on it all some day.  All sorts of great titles possible for it: The City vs. The Shale or something like that.  Probably does not rise to the level of movie script fodder.

The stranger thing is that I thought for sure the Marcellus Shale Coalition was on record once saying none of its members were engaged in development of shale drilling inside the city proper.  So why do they care so much?  I suspect the sheer symbolism of a municipality saying no has implications elsewhere in the state is pretty important to them.

and just because the Pittsburgh 2 degree rule is ubiquitous...   Airport parking revenues I suspect are up because of the news that airport traffic has actually turned up after a long period of decline.  Why is that?  Nobody ever really wants to talk about it, but I will lay good odds that airport traffic is up because of Marcellus shale workers flying in and out on their temporary work shifts.  


Monday, November 15, 2010

Pittsburgh 3.0?

Out of Michigan Public Radio is more Burghonomics:  Changing Gears presents Reinventing Pittsburgh: Part 1.

Reminds me of another public radio perspective some years ago:  The Rustbelt, Again, which was part of the Global 3.0 series out of American Public Media.


Pittsburgh Past. Pittsburgh Future?

Required reading in itself is Harvard's Ed Glaeser latest in City Journal: Start-Up City Entrepreneurs are the heroes of New York’s past and the key to its future.

What I caught first was the reference to former Pitt Economist, the late Ben Chinitz, and his thoughts direct from his seminal work. Contrasts in Agglomeration: New York and Pittsburgh, American Economic Review, Papers and Proceedings, Vol. 51, 1961, pp. 279-289.   Read Glaeser on the crux of Chinitz's argument desribing where Pittsburgh was 50 years ago:
Fifty years ago, the economist Benjamin Chinitz used the apparel industry to compare New York City, which then seemed like a model of small-scale entrepreneurship, with Pittsburgh, a city of massive steel companies. “My feeling is that you do not breed as many entrepreneurs per capita in families allied with steel as you do in families allied with apparel,” Chinitz wrote. “The son of a salaried executive is less likely to be sensitive to opportunities wholly unrelated to his father’s field than the son of an independent entrepreneur.” Few economists would use the word “breed” today, but Chinitz’s hypothesis remains legitimate: a vast industry of small-scale entrepreneurs leads to the development of entrepreneurial skills, which are used in other industries and also passed along to children.
Measuring entrepreneurship is one of those nearly mythical metrics we talk about far far more than we can really generate meaningful numbers for.  When it comes to Pittsburgh people seeem to talk as if the entrepreneurial climate in Pittsburgh has improved in the half century since Chinitz wrote the article referenced above. Yet most measurements of entrepreneurial activity in Pittsburgh have never shown much improvement at any time since when Chinitz wrote. If you accept that observation as a premise it begs a big question?  Are our perceptions correct?


"Expectations were never rational"

Worth more parsing than I have time for, but the Cincinnati Enquirer has a look at our Rivers Casino: Pittsburgh Casino: Impact Takes Time

The money quote: "Expectations were never rational".

I just wonder about the use of the past tense in statements like that.


Sunday, November 14, 2010

Follow those stories

PG on a story on a new anti-billboard initiative.  Mentioned before is this which really does hightlight how much what goes around, comes around. See:

Fighting "Civic Smallpox': The Civic Club of Allegheny County's Campaign for Billboard Regulation, 1896-1917, by Kristin Szylvian Bailey. Western Pennsylvania Historical Magazine, Vol. 70, No. 1 (Jan. 1987)

also in the PG is this about Marcellus Shale pipeline companies wanting to be declared utilities so they could use eminent domain.  Who mentioned that?  Which came from the Inky anyway. 

Our omni-story of the day is of course the game against the Patriots..  Does anyone  think it is odd there was never a stitch of follow up about allegations of technology misuse by the Patriots.  Some other angles were followed up on I believe, but there were some frequency-use items that seem to me were just left hanging out there until people forgot about it.


Saturday, November 13, 2010

Burghonomics everywhere you look

Recall when the news articles first started appearing from points afar looking at Pittsburgh in a positive way.  I still think the very first one that planted the seeds for many that followed, potentially cascading to the G-20 itself, was this from Detroit Free Press:  Different City, Similar Story.

Detroit is one thing, but when places like Las Vegas cast less than disparaging eyes at us, curiousity became something more.  Remember this from Las Vegas: Lessons Las Vegas can learn from the Rust Belt.

There is a follow up of sorts today with the likely cast of characters I will admit.  See this from Clark County: Las Vegas population in decline; will it reverse?

The quote of the day however comes from Philly ('Era of less' is arriving, real estate report says)
which is reporting on a new report out of the Urban Land Institute.  The money quote for us is:
"We're going to see a lot more places end up like Pittsburgh, if they are lucky,"
Not quite as positive a story overall. There is an earlier quote out it being the twilight zone era for real estate.
Speaking of ULI and Pittsburgh.  From Detroit, but you will see why I mention this article : Detroit, Flint may be diamonds in the rough, real estate investors say.  TM is an awfully busy guy. See this from San Diego recently as well.  Still can't get a measly little bike bridge named for him at home.  Must be something in the local water that reacts with the name to give bad results.


Friday, November 12, 2010

Notes from the Great White North

Sometimes Toronto seems so close, and sometimes it seems so very far away.

From the Guardian's inimitable Data Blog is this:  How Canada became an open data and data journalism powerhouse

if only....  oh nevermind. 


Thursday, November 11, 2010

Bankrupt books

So last week we noticed the announcement that Joseph Beth bookstore was closing its South Side Works location.  I still think there are things to talk about the state of retail there along the Mon, but it looks like it was not a story about the location much at all.  Turns out Joseph Beth is filing for bankruptcy. Looking to reorganize, but I wonder how much will survive.


Think Pittsburgh lacks Harrisburg clout now?

Same data I put up before, but everyone likes the maps.  This is my projection for the county by county change in the number of state house districts likely to result from the redistricting soon to come.

This is just a straight line extrapolation of population changes from April 1, 2000 (the reference date for the 2000 decennial census) through July 1, 2009 (the latest Census Bureau estimates data) extended 9 months through to April 1, 2010 (the reference date of the 2010 decennial census, and thus the reference date for reapportionment/redistricting).  This map is showing projected changes in the number of state house seats, which is impacted by the size of the county.  So the colors should not be interpreted as a rate of population change in itself.  Big counties may have a greater change in seats just because they are larger or smaller than other counties.  Thus note the middle of the T showing up as neutral.  That more reflects the low population densities out there, not that their populations are steady.  Of course, the numbers are notional with respect to actual legislators since the maps will be drawn any way the powers that be want them to be.. but on average the map reflects the overall shift in representation.

No matter how you slice it you see the writing on the wall.  West is down, and East is up.


Interview a Veteran Today

Just because I can't think of anything better, I will pass you over to Joe for today: Old Veteran

The estimated number of World War II veterans still living in Pennsylvania as of Sept 2010: 109,827. It is a population that will not be with us much longer with 16,254 World War II veterans in Pennsylvania expected to pass away in 2010.


Wednesday, November 10, 2010

Parking and debt... not the debt you are thinking of either

There is bit of debate inside the fence over whether the pension/parking imbroglio would hit the city's credit rating.  Seems that the city is issuing some new bonds in the midst of the tempest and overall there is not a hit on the ratings of new or old debt for the time being.  See:  Fitch Rates Pittsburgh, PA's GOs 'A'; Outlook Stable.

So Fitch is generally unconcerned with the situation here, although these are folks who have had curious Pittsburgh-logic in the past.

I learn something new everyday.. I had never heard this term before,but the parking lease we have been considering is apparently called a brownfield parking concession

Speaking of bonds....  it is actually big news that bond insurer Ambac has filed for bankruptcy.  Anyone want to poke at what public debt locally is insured by Ambac..  also a bit interesting if you poke at who Ambac itself owes money to.

and while were looking that up, what do we see?  Looks like the city school district has a big bond issuance going out the door. Looks like a refi from 2002 debt.  Which brings to mind a real basic point that interest rates are low and it really is an historically good time to be issuing bonds if you have the capacity and the credit ratings to justify it. 

and finally...  on the topic of who might not have the capacity to refi debt.  Bloomberg has a great tutorial and update on how screwed up municipal finance world was for a time. Wall Street Collects $4 Billion From Taxpayers as Swaps Backfire.  Swaps being among those things that almost did the PWSA in last year. I wonder what is up with the whole deal that brought that situation under control because there is a recent debt downgrade hanging out there that might have consequences for all that.. but who is noticing?


Last look at the election

OK, probably not the last since there is always something to parse in the election returns, but for now the last.  So I am not sure if this means anything at all..  but I am curious about the differences in the results for senate and governor. Here is a state-wide picture to go along with the county map I put up earlier. This has county by county results showing the difference between the votes for Sestak compared to votes for Onorato. Pretty much all counties had a difference of between 1 and 7 percentage points and this is what the pattern looks like:

Difference Between Sestak and Onorato - PA Senate General Election - November 2010


Tuesday, November 09, 2010

Daily Marcellus: Tulip Harvest and Timing

I already mentioned the big news that Chevron is buying Atlas energy for the Marcellus play. 

But this has all gone to a new level with no less than Foreign Policy publishing this piece: The Oil and the Glory: Why does big oil suddenly love Pennsylvania.

Forbes has a look at some of the new billionaires being made out of the new Marcellus investment in Pennsylvania...  I don't notice any Pennsylvanians.

There is this.  A new report says there will be a glut in natural gas for the next decade, followed by a 'golden age' later on.

So why are we rushing so fast to develop as much shale gas in Pennsylvania now when prices are so low, leaving that much less for when demand and prices go up.  One thing for sure is that natural gas as a declining pressure curve.  You get the most gas out soon after you drill.  A recent overview of the pressure curve issues is in this: Marcellus Shale Decline Analysis. Looks like a college paper, but not bad and covers the basics pretty well. 

Someone should work up how much Pennsylvanians are losing by developing the gas at such low prices compared to what they would get if the gas was produced at prices as projected.  I also wonder if a slower pace of development would allow more Pennsylvanians to be hired and trained to work on these projects. 

Anyway... you will know when the Marcellus stuff has escalated to a new level when we get new direct flights to the Middle East just as Houston just added.


City drilling

For those watching what is up with City Council today and a proposed ban on gas drilling in the city (also being live tweeted by Bob Mayo).  Nothing new, but a map of where we have found recent oil and gas leasing within city limits is online here fyi.   Not much, but some and mostly concentrated in a few neighborhoods.   I am a bit curious by all the attention of late.  I think some firms wanted to come in and do this, but for the time being have already been dissuaded by the political push back.  When I first noticed commerical interest in drilling within city limits, there was not much notice.  I guess nobody really thought it was for real.  I still am a bit surprised a couple firms were trying to aggregate parcels in Lawrenceville which just has such tiny parcel sizes.

There is a picture out there somewhere of a natural gas derrick right in the middle of East Liberty during the great natural gas binge a century ago.  I can't find it at the moment.. anyone know what I am referring to and have a source?


Gulf Oil returns to Pittsburgh

Wake up the business desk, this is huge news.   Back to the Future:  Chevron Announces Agreement to Acquire Atlas Energy

I would imagine many in town no longer have any recollection of what the Gulf Building is named for.   Chevron should move its offices back into the building to complete the saga.


Monday, November 08, 2010

Have you died and gone to heaven? No, you've gone to Pittsburgh.

You know you have succeeded when your opponents are fans:  What Cincinnati can learn from Pittsburgh (the 5 minute video with that is a must see).  It may have a new iconic quote:
"You are about to see the light: Have you died and gone to heaven? No, you've gone to Pittsburgh."
I'd be a bit worried if I were those journalists.  The poor fellow who wrote this pro-Pittsburgh article up in Cleveland a couple years ago was laid off the very next day. 


Planning for Snowmageddon

It is exciting to see the city has a new plan to deal with snow this year.  A good thing.  It would be an even more important item if the whole LAZ parking lease plan goes through.  Why?  Well, it turns out that in the plan that LAZ notionally won there is a limit to the number of days that the city's parking meters would not be accessible and thus earning money for LAZ.  If the number of days is exceeded in any given year, the city would wind up owing LAZ money.   Might be an interesting exercise to apply the parameters in the parking lease as it was bid out with last year's experiences with snow removal in the city to see if money would have changed hands. Deep down, this was all a plus in my mind for lease.  City might respond to that kind of incentive to clear the streets.  Speaking of LAZ, check out the writeup from its home base in Hartford: Valet Venture Grows Into Parking Behemoth

Anyway, here is my personal snowmageddon plan this year.  Anyone know how these things work?


Sunday, November 07, 2010

Waiting for Gerry

Snippet in a PG piece today about all the reapportionment/redistricting that is about to land on us in Pennsylvania: GOP gets freer hand to redraw districts

In that is mention of something I did several years ago which projected the change in state legislative districts by county.  I've updated that quickly.  I've put into google docs a spreadsheet of what current population projections show for what the redistricting is likely to look like for each county in Pennsylvania.  The headline in that is that Allegheny County is still looking to have the biggest loss across all counties in state house representation. My projection showing a loss of 1.7 state house districts.  The biggest gainer is Chester County which will gain just under 1 whole state house district.   I will put below a table of the biggest projected gainers and losers (by county) in terms of total population, and what those translate into in terms of state house districts.

How those maps are drawn is another question altogether.  States as politically diverse as Florida and California recently enacted reform legislation that will inhibit Gerrymandering as we know it..  or more accurately as they know it since Pennsylvania is not even dreaming of approving any such reform for the redistricting process about to begin.

Biggest Projected State House Losses by County
2010 - My

        State House Districts


.Allegheny 1,281,6651,218,4941,213,37221.219.5-1.7
.Westmoreland 369,993362,251361,6236.15.8-0.3
.Luzerne 319,260312,845312,3255.35.0-0.3
.Beaver 181,412171,673170,8833.02.7-0.3
.Cambria 152,630143,998143,2982.52.3-0.2

Biggest Projected State House Gains by County
2010 - My

State House Districts

Chester 433,501498,894504,1967.28.1+0.9
York 381,753428,937432,7636.37.0+0.6
Northampton 267,077298,990301,5784.44.8+0.4
Lancaster 470,660507,766510,7757.88.2+0.4
Monroe 138,690166,355168,5982.32.7+0.4


Saturday, November 06, 2010

Does anyone at all really know what is going on inside the Pension Board?

Being at the end, beginning, make that the middle of the parking pension imbroglio here in the City..  this really caught my attention. Unfortunately it may only be me.

First off, what is the most important pension story of the month?  The parking lease, or lack thereof?   Possibly, but there may be something else.  Yes, it is what a ranted on about recently.   The story that the city of Pittsburgh was reported to have made a really big bet on the stock market in August.  A bet which it would appear has cost the city a lot of money given how the markets have performed over the last couple of months.

Did it happen?   An anonymous commenter here...  and I have always said this blog has the most knowledgable commenters around I am proud to say...  put up a comment saying that the city in fact did NOT implement the plan reported upon.. i.e. it did not 'freeze' the pension funds assets at their levels of late August.  I would have believed that.

Now I made clear that I really had no idea if the city actually did what it said it did and 'froze' the city's pension assets. Just because that is what the news said gets a bit irrelevant.  I infer from the article on this that they were never going to actually sell all their equities for cash, since for an asset base in the hundreds of $millions that would be pretty costly when it came to transaction costs.. especially since they would clearly want ot be reinvested in their portfolio come the beginning of the year it would make little sense to actually sell any stock to accomplish what was intended..  It really sounded to me like they had bought a bunch of market put options that would effectively do the same thing.  A guess on my part, but straighforward enough a possibility. Begs the question how you hedge an illiquid asset, but let's leave that for another post someday.

Here is the deal.  On PCNC's Nighttalk which aired Friday there was a general discussion of all the weeks talking points with folks who really should know all that is going on in town. The only point that caught my ear was Allegheny County Council President, and City of Pittsburgh resident, Rich Fitzgerald making the point that the city did in fact literally sell it's pension fund assets and lost a big chunk of money in the process.

Really gets me wondering...  is the council president correct which would mean the city really is underwater with a huge bet they placed with the pension funds' assets.  As troubling as that is, it is more troubling to think he had it wrong since if he is not being told the situation then who is?   Does anyone at all know what goes on inside the pension board?  Did they do what the news reports said they did and if so what were the consequences?  It may be the most esoteric, but most important question impacting the future of the pension fund.  More than whether the parking lease deal goes through. 

Why so important?  How much of a loss are we talking about?   I benchmarked the notional loss at $14-15 million, though the potential is for twice that.  Just for bracketing a worse case, call that high end loss to be $30 million.  Now couple that with all the talk of the last week of pension asset appreciation and the impact of the state's 6% appreciation assumpion on the future of the pension fund.  City would prefer a presumption that pension assets will appreciate at 7.5, 8 or 8.75% in perpetuity.   In fact the city has been assuming 8.75% for most of the last decade, which is the real root of the problem we are having now, but hold that thought for now.  If that notional $30 million is allowed to appreciate at a presumed 8% over a 30 year amortization period, the loss we are talking about really becomes $300 million.   Over 40 years:  $650 million.  Do I need to add an exclamation point?

But again, it's about the transparency.  It seems it is not just something Joe Q. Public is being left in the dark on.. it seems even the most important local politicians in town are equally being left out of the loop. Scary.


Friday, November 05, 2010

Daily Weekly Marcellus

Lost in the politicial buzz... 

From Bloomberg is this for the 'hmm....' file:

Natural Gas Consumers in U.S. Miss Full Benefit of Drop in Futures Prices

You wonder if the same political forces that hate emminent domain when used by others will object to this:

SW Pa. Marcellus company seeks 'utility' status

This is fascinating...  one of the biggest Marcellus developers wants its $220 back.. :

Drilling firm wants money back for Donora claims

and from Platt's I am just curious about this tweet

and I'll just append this here... Isn't this the creepiest video? The Pennsylvania = Syria segment is really just amazing. It's so screwey I wonder if it is really produced by the anti-Marcellus factions out there as more of a poisoning the well kind of thing.  Note the youtube video still that comes through has a Gordon Gecko inset?  Not exactly an image that leads toward positive feelings.  Just weird. 


Is Young Voter still an oxymoron?

Tempest in a teapot it may be, but there is yet another round of angsting over all our young people voting.  Did they vote? Didn't they?

In one version of it from this cycle, the focus is again the handful (or less) of Oakland voting districts that are predominantly students.   The dorms provide a pretty consistent base for measurement.  I myself have occasionally quipped on the stats from Oakland's Ward 4 District 8 which is literally made up of Pitt's Litchfield Towers.  So virtually 4,000 residents and they are almost all 'young' as voters go.  The population is pretty consistent year in and year out, as are the demographics.   So the turnout in that one district is a perpetual natural experiment in youth politics.  Well, that isn't really true.  It may work for comparing general elections, but for spring primaries, the timing is such that the primary most often happens after Pitt has finished its spring term and most folks evacuate pretty quickly once their last final is completed.  So you do have to take the primary turnout stats with a grain of salt. 

With all those caveats.. here is a hodgepodge of turnout stats from that one district going back a decade or so.  These are the counts of votes or ballots cast in a variety of races.  From the peak turnout in the 2008 general election when over 2,100 votes were cast.  The lowest count was in the Republican primary for mayor of the City of Pittsburgh in the spring of 2001.  A total of 1 ("one") vote was cast in that particular election. Granted it was the party primary, but still.  The Democratic primary that year had a total of 15 votes cast.  So use 16 if you want, but still a pretty small number. 

So interpret that as you will.  Looks like 2010 was less than the anomalous 2008, but better than a more compareable 2006 and a lot better than some older comparable non-presidential general elections. 

And the winner of the 2001 Republican primary?  With one vote Mark Rauterkus was victorious.  I was thinking that the city-wide turnout in the Republican primary that cycle was so low that if you had gotten a decent turnout from just from the dorms, you could have won the whole election.  There would have been a headline on youth voter impact.  Maybe a student could run?  next time?   Where is Josh Pollock these days?