- John Altdorfer
- Raise taxes or cut transit; Gary English, left, and Cullen Vandora, (pictured at a recent transit protest) aren't the only two people taking sides.
Last year's budget for Allegheny County Port Authority insisted -- at least three different times -- that the agency's finances were relatively stable.
"The Authority's financial situation is not at all dire," officials wrote in one part of the 2009-2010 budget. "It's crucial to note that the Port Authority does not anticipate any reduction in overall services, nor employment, during FY 2009-2010," another passage asserts.
Fast forward to May and June 2010 -- just a year later -- and the agency was discussing the possibility of "draconian cuts" due to a lack of state funding. In July, CEO Steve Bland proposed a 35 percent service reduction, a fare increase and layoffs in January. Fifty-five neighborhoods could lose service completely.
So how did we go from financial stability to a $47.1 million deficit, and the possibility of system-wide cuts, in just one year?
Port Authority officials point to everything from flat state and county funding, to increased costs for health care and diesel fuel. Primarily, though, Bland blames a federal rejection of a plan to toll Interstate 80. Revenue from that plan was already included in Act 44 of 2007, the state law establishing funding for transit projects. Tolling I-80, state officials believe, would have brought $1 billion in transportation funding for roads, bridges and mass transit to Pennsylvania.
The rejection "basically cut revenues under Act 44 in half," says Rep. Joseph Markosek (D-Monroeville), chair of the House Transportation Committee. "That's what has caused this crisis. We were barely getting by when it was fully funded."
Port Authority says its budget deficit would have been about $25 million with the tolling of I-80; without the tolling, it's at about $50 million. And if something doesn't fundamentally change in state funding, Bland warns, "This won't be the last of the service cuts.
"You can raise fares but only to certain point," he cautions. "You'll see what we refer to in the industry as 'the death spiral': Raise fares, cut service, ridership goes down, which causes you to raise fares, cut service and ridership goes down."
- John Altdorfer
- Ed Rendell has been advocating for transit funding
It's not that the Port Authority is going to get less money than it did last year; its state operating assistance is slated to be the same: $184.5 million. But when the I-80 rejection came down, Bland says that knocked out a pool of additional money that would have been used to help pay $36 million in debt service, for which there is no other source in the capital budget to pay it. Thus, the authority will have to spend money it would otherwise be spending on operations.
And debt service, Bland says, "gets paid no matter what." Compounded with "tanking" state sales-tax revenue, a percentage of which goes to transportation, Bland says the authority faces 15 percent less funding than what the agency expected.
Legislators believed the I-80 proposal would pass. "Was that a missed calculation? Yeah, no doubt. But everyone thought it would happen," says Sen. Wayne Fontana (D-Brookline), a member of the Senate Transportation Committee. "So now it's back to the drawing board."
Fontana, however, believes it's unfair to pin this all on the state, which provides more than 60 percent of the Port Authority's funding. "It's everybody's problem," he says. "The federal folks are the ones who blew up the I-80 idea and the county has passed a drink tax. ... [The drink tax] wouldn't fill the hole, and then [the county] says the state has to fill it. The Port Authority is a county agency. They need to be a part of the solution too."
County assistance is expected to be par with last year's funding, though Chief Executive Dan Onorato will not make his budget proposal until September. The Port Authority receives a 15 percent county match to the state contribution, or about $27.5 million for this year. County assistance is made up from the alcoholic beverage and car-rental tax. But Bland says that for all the controversy surrounding the drink tax, it really just substituted money the county was giving the authority anyway.
Prior to 2008, the county subsidized the Port Authority from the general fund, primarily from property taxes. In 2007 that amounted to approximately $24.4 million for operations, plus $5.19 million on the capital side. The drink and car-rental taxes have produced only slightly more money: They generated $27.5 million (with a 10 percent drink tax) in 2008; the following year, the drink tax was lowered to 7 percent, and the two taxes generated $27.7 million for operations and is expected to be similar this year. In addition to operating funds, the county has given the agency about $16.4 million for debt service and capital assistance from the two taxes.
"Everyone always says, 'What'd you do with the drink money?'" Bland acknowledges. "Well, we carried .... about 200 million riders with it. That just substituted for property-tax revenue."
Which means the drink tax has lived up to its promise, some county officials assert. "[It] promised to fund the local share for the Port Authority. ... It wasn't to solve all of their problems. It relieved a little bit of the burden from the property tax," says Rich Fitzgerald, president of Allegheny County Council. If the taxes hadn't been enacted, Fitzgerald says, officials would have had to raise property taxes.
But drink-tax opponents are still irked. "They told everyone this is going to take care of the issue, but it never did," says County Councilor Matt Drozd, (R-Ross). "We have this discussion every year."
State Rep. Chelsa Wagner (D-Beechview) believes the county used a "shell game" with the tax. Rather then determine a "responsible level of funding," she says the county just shuffled the funds back into its budget, and enacted the tax.
Drozd and other observers believe there have been efficiencies under Bland's leadership but also think shortfalls are compounded by the mistakes of previous managers. "Because of former problems and management, [the authority] unfortunately has a huge debt," says Rep. Markosek.
Most critics cite expensive pension and medical benefits promised under previous contracts. For example, a former program allowed employees to "retire" with benefits while still working. Another pledge offered lifetime health care for non-union employees. Those options have since been eliminated. But the agency will pay a combined $60 million in retiree health-care and pension benefits this year; the Port Authority has "more retired employees ... than we do active employees," Bland says.
The CEO contends that his hands are tied, because the law makes it impossible to renege on promises to government retirees. "People say get rid of the legacy costs," Bland says. "OK, how? Give me the keys to the way-back machine and we'll go back to 1959 when the authority was formed and we'll change that."
Port Authority isn't alone in its financial woes. Transit in Philadelphia and surrounding areas are facing a $110 million cut from budgeted renovations and upgrades. An April study by the American Public Transportation Association notes that 84 percent of public-transit systems across the country have raised fares, cut services or are considering such actions due the recession. Seven out of 10 public-transit systems are projecting budget shortfalls next year, according to the study.
Earlier this month, Gov. Ed Rendell toured the state to advocate for transportation funding. "We don't need to suffer those cuts," he said at an Aug. 6 appearance in Pittsburgh.
But observers believe that until a permanent, dedicated funding source is in place for transportation, it won't be feasible for legislators to make reasonable budget projections. Since the 1970s, funding sources have consistently changed for mass transit, roads and bridges, says Susan B. Hansen, a political science professor at the University of Pittsburgh. "Coming up with a dedicated revenue source is in everyone's best interest," she says. "Then [legislators] can make more reasonable projections if you know where it's coming from. It'd end some of this inevitable gamesmanship."
Riders say they are fed up, no matter who's to blame. Katrina Kilgore, creator of advocacy group and blog PublicTransit4Pittsburgh (publictransit4pittsburgh.wordpress.com) wants more involvement from city and county leaders. But she feels most let down by state lawmakers for not having a back-up plan once tolling I-80 was rejected.
"They essentially threw their hands up in the air and said, 'Now what do we do?'" says the Mount Washington resident. "Port Authority was relying on that money. It puts those of us who rely on the system in a corner."
Port Authority of Allegheny County will hold a public hearing and comment period on proposed fare and service changes on 8 a.m.-8 p.m., Thu., Aug. 19, at the David L. Lawrence Convention Center, Downtown. To register to speak, call 412-566-5437.