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Executive Summery

How the Allegheny Conference blows sunshine rather than admit fault

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Edward Abbey, the prickly environmentalist and western Pennsylvania native, once said there was only one difference between capitalism and communism. In communism, the government tells an industry how to behave, he wrote, whereas in capitalism it works the other way around.

 

So it was at Oakland's Carnegie Music Hall for the Nov. 12 annual meeting of the Allegheny Conference on Community Development -- Pittsburgh's very own politburo, minus the trendy fashion sense. Judging from the proceedings, we've got the Soviet-era rhetoric down, at least.

 

There was the kindly face of historian David McCullough projected on a movie screen, reminding his audience about the historic partnership between Pittsburgh's first Renaissance mayor, David Lawrence, and his private-sector partner, Richard King Mellon. (Any such gathering must pay homage to the greatness of these two men, it seems: One wonders why the conference doesn't just put their corpses under glass like Lenin's.) And there were endless paeans to the proletariat, including innumerable video clips lauding Pittsburgh's "blue-collar work ethic."

 

And just like their Soviet counterparts, those humble workers can be sure that everything is going exactly to plan. Sure, the Pittsburgh region lost 15,000 jobs last year, reversing an economic performance that was better than the national average in previous years. But Pennsylvania Economy League head Lawrence Wagner was on hand to tell us that the newly established "Measurement and Reporting Committee" had begun assembling "metrics" to pinpoint just how lackluster the region's economy is.

 

Take that, recession!

 

Indeed, the buoyant speakers and film footage were so upbeat it's hard to imagine how we keep losing jobs and people. McCullough, a Pittsburgh native, is especially effective: He speaks in a warm, reassuring tone which promises that, despite all appearances, history makes some sort of logical sense, that it marches in some dialectic fashion toward the New Man.

 

But McCullough knows another Pittsburgh story, one that confirms the suspicions of any wayward Marxists in the audience. (I can confirm the presence of at least one.) It's a story McCullough wrote, in fact, and one with less optimistic overtones than the Lawrence/Mellon pas de deux -- the story of the 1889 Johnstown Flood. As McCullough's book The Johnstown Flood recounts, that disaster was caused largely by the private-sector indifference of Pittsburgh's 19th-century industrial tycoons, who owned a private hunting and fishing resort upstream of Johnston but failed to properly maintain their crumbling dam. Heavy rains one May night swept the dam away, taking some 2,000 Johnstown residents with it.

 

Now Pittsburgh, too, is about to be washed away -- in red ink. The city recently filed for financially distressed status, and though you'd never know it from the self-congratulatory tone of the conference's annual meeting, today's corporate titans are part of the reason why.

 

As Mayor Tom Murphy has been saying, there are flower shops that pay more taxes than some of the city's Fortune 500 employers. Banks, manufacturers, newspapers -- all are exempt from the city's business privilege tax, its principal levy on employers. And a growing percentage of the city's land is tax-exempt, occupied by non-profit hospitals and cultural institutions or even convention centers and sports stadiums -- facilities built to suit the demands of luxury-box-loving CEOs.

 

Is this generation of business leaders ready to help stem the tide? The fact that the annual meeting took place in the tax-exempt Carnegie Museum complex seemed a bad omen. So did the fact that the conference's chairman is Marty McGuinn, whose company happens to be one of those exempt from the business privilege tax: Mellon Financial Corp.

 

The conference has backed a plan cobbled together by two of its own: a commission led by former US Steel CEO David Roderick and Republican grande dame Elsie Hillman. Their plan would raise property, garbage and wage taxes on residents and property owners while levying on businesses a $99-a-year tax for each employee on its payroll.

 

The plan, though, is hardly more than a finger in the dike. Businesses that have paid their taxes all along will have to shell out for the new levy as well, and exempt companies like US Steel still get off easy: While Murphy hoped to raise $60 million in new taxes from non-profits and exempt employers, Roderick's plan generates only a quarter of that. And while no one wants to mention it, Pittsburgh's debt payments are slated to increase by some $20 million a year in the next couple years, which means we could be facing deficits all over again.

 

Of course, a more comprehensive and equitable tax structure might demand more from employers who've paid very little up until now. And since those employers make up a good chunk of the Allegheny Conference membership, you can see why such issues weren't on the agenda.

 

We did get plenty of aerial film footage of the city and its environs, though, layered over with Hallmark sentiments about the region. "We still have the bakeries, the five-and-dimes," observes one such sentiment, attributed to Christopher Donahue, head of Federated Investors. Funny thing is, as Mayor Murphy might point out, those five-and-dimes are paying more in tax revenue than Donahue's nickel-and-diming employer. Federated skirts the business privilege tax too, having won a midnight tax exemption from Harrisburg in 1996.

 

There was also plenty of condemnation of state legislators, whom Conference leaders blasted for not acting on Pittsburgh's problems sooner (as if they hadn't waited years before addressing the city's unbalanced tax structure). And Equitable Resources CEO Murray Gerber, who heads up the conference's efforts to reform public education, similarly blamed school boards for poor student performance. Organizations, like fish, "rot from the head down," he said.

 

It was the applause line of the night, though there was something decidedly fishy about it. When Marty McGuinn's bank lost 71,000 federal income tax returns last year, did the conference call for McGuinn to be eviscerated? Chris Donahue's firm just admitted violating federal securities laws last month; is anyone suggesting he be canned? Given that we lost more than 15,000 jobs region-wide last year, shouldn't we be calling for the heads of our "public-private" partnership? Or is it only unpaid school board members we hold accountable?

 

It was doublespeak to bring tears to a Kremlin insider's eye. Earn a fortune making people work too hard in unsafe conditions -- then praise their work ethic. Duck your share of the tax burden, and praise the character of the corner shops who have to carry it instead. Claim to solve problems you never admit any responsibility for, and try to ignore all the problems your solutions create. 

 

In the Soviet Union, they'd blame capitalism for their ills. Here in Pittsburgh, we blame government instead. And that may be the only real difference.

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