PittsburghToday

Local Government in the Middle (by John G. Craig Jr.)

At last week’s Southwestern Pennsylvania Smart Growth Conference, there was a session on what companies look for when seeking a place to locate Northeastern University’s Center for Urban and Regional Policy directed the discussion and used 10 questions to help those in attendance determine how ready local government in this region is to attract business and industry.

Each question had three possible answers: this subject is "very important" to businesses, it is "important" to businesses, it is "less important" to businesses. The audience with the moderator’s direction went through the subjects one at a time and with a show of hands indicated its choice.

In the exercise it did not matter what members of the audience themselves believed to be important; what counted was what the Northeastern Center’s accumulated knowledge about preferences in site selection indicated business decision makers care about.  It was also made clear that the 10 questions were a representative sample and many more factors are involved in location decisions.

For reasons I will get to in a moment, it was notable if not surprising that two of the four most important factors in the demonstration involved motor vehicle operations: the availability of on-site parking and a major arterial highway within two miles.  The other two "most important" factors were (1) a well-educated population and (2) local government that is able to move quickly and efficiently on matters of consequence.

I did not count hands but it was doubtful to me that any of these hot factors came as a surprise to an audience heavily populated by people involved in local government.  Bankers and developers and newspaper columnists have been telling us for years, "go suburban young man, go suburban" and we have Monroeville and Cranberry and Southpointe to prove it.  If the region wants to get ahead, government needs to be quick and simple, employees need to be smart and adaptable and you always have to have a place to park.

What made this presentation notable for me was that it came immediately before the keynote address by Christopher Leinberger, Brookings Institution fellow and director of the University of Michigan’s Graduate Real Estate Program.  Leinberger made it clear that from his perspective the opposite is true: the suburbs are no longer the center of the action and not likely to be so ever again if development trends now underway in the United States continue.  The wave of the future, Leinberger said, are urban areas made up of "walkable communities."

By way of example he cited the mushrooming neighborhood that has sprung up in South East Washington D.C. around the convention and Verizon centers.  Real estate prices are solid, places to work and play are abundant and a wide range of shopping and dining is within a comfortable walk.  Leinberger also described the Main Line communities of Philadelphia as examples of historic walkable communities in the process of rebirth.

He was a bit vague about the optimum size of such places, but 25,000 to 50,000 residents would seem to be the range with the key determinant being building height limits: if you can’t go up, population numbers are circumscribed by walking distances that become uncomfortable.  By Leinberger’s count there are 14 of these communities in the greater District of Columbia area with Metro service obviously being a key element.  He said Pittsburgh had two such neighborhoods but had a long way to go.  (He did not elaborate on what neighborhoods he was citing, so I found myself thinking that Mt. Lebanon and Squirrel Hill might fit the bill.)

Adding to the irony of mixed messages for me was the fact that for the previous two days I had attended the annual conference CEOs for Cities that was held in Pittsburgh this year.  Its theme was summed up in a paper delivered by Chicagoeconomist, Joe Cortright:  "Driven to the Brink.  How the Gas Price Spike Popped the Housing Bubble and Devalued the Suburbs."  There was also a session on "Sustainable Urbanism" at which another Chicagoan, architect Douglas Farr, emphasized the same message.  He quoted liberally from his recent book of that title which explains why cities composed of viable neighborhoods, linked to each other by easily accessible corridors (as in mass transit), are what regions should be developing.      

The conclusion that drove all these futurist sessions: The Era of the Automobile is over in the United States because the infrastructure subsidies necessary to support its ubiquity are increasingly beyond the economy’s capacity to sustain and the annual operational costs of motor vehicles are beyond the means of more and more people.  Add to this, the new realities of climate change, global food shortages and housing bubbles and it is obvious to these experts that the handwriting is on the wall for the three-car garage and cathedral ceiling. 

I have two reactions; first, one has to take notice even as you have to be cautious about any such sweeping conclusions; second, and more important, sympathy for the plight of the elected local official.   On the one hand she is being urged to consolidate with her neighbors in order to act with dispatch on zoning applications and approve an extra lane of highway in front of Wal-Mart, and on the other being told by the deep thinkers to just say "no" to demands that are already out of date. Pittsburgh Indicators is presented with a similar challenge, if not comparable pressures.  If you look at our topic areas indexed on the PittsburghToday site, you will find links to 260 indicators.  The unstated bias of a great many of them is measurement of the very sort of growth that CEOs for Cities and Brookings experts are warning against.

I do not believe this makes these data suddenly irrelevant, but it is clear that we need to supplement it.  We should provide not just government officials but also the general public with relevant measures on matters like the accessibility of mass transit and annual miles driven per capita, affordable housing and the region’s capacity to sustain over time a healthy and productive life for its residents.  As we do this, I would welcome your reactions and recommendations on other indicators that we should be developing.

The Enormous Problem of Municipal Distress (by George W. Dougherty, Jr., PhD)

The fiscal health of communities in the Pittsburgh Region has been a major concern for the past 30 years, but much of our understanding of the problem is based on intuition, sensational stories of fiscal catastrophes, and filings for Act 47 Distressed Community status. A more informed discussion of local government financial health requires a thorough analysis of the available data to identify the scope of the problems. PittsburghToday.org and the University of Pittsburgh’s Graduate School of Public and International Affairs have teamed up to provide the data necessary for improve public dialogue. 

Download the summary tables here.

Annual Deficits
The most basic measure of municipal fiscal health concerns the annual results of municipal revenue collections and expenditures. Healthy communities run a small annual surplus that allows them to build a rainy day fund and budget for long-term capital and infrastructure needs. Even healthy municipalities face the occasional shortfall due to unexpected events. Governments that run regular deficits, commonly defined as two or more annual deficits in a 5-6 year period, show significant signs of fiscal distress.

Using data from the Pennsylvania Department of Community and Economic Development surveys of municipal governments (cities, townships, boroughs) over a six year period from 2000 to 2005, Table 1 shows that 58.5 percent of municipalities in the ten county Pittsburgh Region experienced two or more annual deficits. A full 80.2% of our local governments experienced at least one deficit during the period, with only 101 of 509 (19.8 percent) cities, townships, or boroughs able to avoid deficits during the period. This is an astounding finding and represents widespread financial problems beyond expectations.

Structural Deficits
Because annual surpluses and deficits simply give us a snapshot of governments’ finances, a better measure of fiscal health compares growth in revenues and growth in expenditures over a period of time.  Structural deficits occur when expenditure growth is greater than revenue growth over at least a five year period, a trend that is not sustainable. One would expect struggling municipalities to increase revenues and/or reduce expenditures in response to poor financial performance, but there are substantial impediments to doing so. On the revenue side, elected officials face state imposed limits on tax rates, citizen sentiments strongly opposed to increased tax burdens, and placing their town at a competitive disadvantage if rates are raised higher than surrounding communities. Expenditure cuts are limited by statutory requirements to provide specific services, labor contracts, and citizen demands for services. After all, someone needs to police our neighborhoods, respond to fires and car crashes, and plow our roads.

Table 2 shows that 48.9 percent of municipalities in the region experienced a structural deficit from 2000 to 2005. This means that expenditures grew at a faster pace than revenues. A closer look at the data shows that 29.3 percent of our local governments faced severe structural deficits where expenditure growth was more than 3 percent larger than revenue growth. Cities, townships, and boroughs in the severe category will quickly run out of rainy day funds and face increasing annual deficits. Once again we find that almost half of municipalities in the Pittsburgh Region face fiscal distress.

Factoring in Inflation
One important factor that we have yet to address is the effect of inflation on municipal finances. Inflation has the awful effect of reducing the value of money raised as revenues and decreasing the level of services we receive for a given level of expenditures. It may be the case that even those municipalities that have not experienced annual or structural deficits are providing lower levels of service due solely to the corrosive effects of inflation. While 87.9 percent of municipalities experienced revenue growth from 2000 to 2005, Table 3 shows that a little less than two thirds (63 percent) of local governments were able to increase revenues at or above the rate of inflation. On the expenditure side, 77.4% of local governments saw expenditure growth in real dollars. Table 4 indicates that 58.2 percent experienced expenditure growth at or above the rate of inflation. In both cases, substantial numbers of our cities, townships, and boroughs lost buying power by not keeping up with inflation.

To download the complete dataset, click here.

Summary
The purpose of presenting this information is to improve the quality of dialogue on an extremely important topic. The findings presented here do not constitute a thorough review of municipal fiscal health in the region, but they review a handful of the most important measures analysts should use. It is shocking that most of the measures above suggests that almost half of our local governments are facing financial crises.

These results lead to a number of important questions that we hope to see discussed in this forum.

• What tools can elected officials and managers use to stem the tide of red ink?
• How can currently healthy local governments avoid financial distress and maintain their competitiveness within the region and nationally?
• What actions should state officials take to respond to local government distress?

Note: The revenue and expenditure figures used in this analysis remove the categories of “other revenue sources” and “other expenditures” since these categories traditionally include transfers from surplus accounts, nonrecurring revenues, and nonrecurring expenditures.

George W. Dougherty, Jr., PhD is Assistant Professor and Public Service Degree Coordinator in the University of Pittsburgh’s Graduate School of Public and International Affairs.

Get more data on parks (by Rich Ekstrom)

Regarding statistics on dollars per resident for maintaining parks, I would like to suggest that the Pittsburgh Today site should also include the data (population and acreage) by which the quotients are derived in order that the data can be validated.

Recently I asked the Pittsburgh Parks Conservancy about comparative statistics and was directed to the Trust for Public Land where there are numerous statistics related to parks. This source gives a somewhat different picture.

Download ParkSpendingPerResident.xls

Some of the differences may be that the Pittsburgh Today data is from 2002 and the TPL data is from 2005. I am always concerned about data quality when there are extreme outliers or statistics from one source are very different than statistics from another source. (The TPL site does not disclose their sources and it is not always clear if they are using MSA regions or just cities.)

As indicated in the above table, the $/resident is very high for Denver on the Pittsburgh Today list, but 61% lower on the TPL list. Boston’s spending per person is 167% higher on the TPL list. There are also big differences with many other cities. The $/resident for Pittsburgh is similar on both sites; but the TPL data appears to be just for Pittsburgh, not the MSA. But my expectation was that the numbers for non-city $/resident would be much different.

It is often very helpful to look at data from different perspectives. This often yields new insights. For parks, maintenance cost is heavily a function of size. If you look at spending per acre, (using TPL data), Cleveland appears much higher than any other city (assuming the data is accurate). If the Cleveland data is excluded, than Pittsburgh's spending (per acre) is about average.

Download ParkSpendingPerAcre.xls

All this is not meant to suggest the TPL data is better. Indeed, there are many anomalies in what they present. Good data is vital to decision making, but anomalies need to be validated if the data is to be useful.

Richard Ekstrom has served as an executive or consultant for public and private healthcare and biotechnology companies for over 15 years. He is a Principal at Socius Partners, LLC.

Better preparation needed for social consequences of casino gambling (by Tracy Soska, Ray Engel, and Danny Rosen)

With the region absorbed with the economic benefits and development issues of video casino gambling, the School of Social Work took interest in the national research that underscores the adverse social impacts of problem gambling that tends to rise in the wake of casino gaming. Mental health, substance abuse and key social service and faith-based organizations that will be called upon to address problem gambling and its related mental health, substance abuse, family and social problems were surveyed to ascertain if and how they were preparing for this likely role.  Professors Ray Engel, Danny Rosen, and Tracy Soska released the results of their "Raising the Stakes: Assessing Allegheny County’s Human Service Response Capacity to the Social Impact of Casino Gambling" at a press conference on January 22, 2008 at the University. Among the study’s key findings for this region:

• With the exception of a few agencies on the front lines of addictions treatment – about one third of those surveyed, the majority of agencies are not interesting in training staff, don’t see problem gambling as an issue among their clientele, lack the resources to train or don’t know where to find training.
• More than three-quarters do not screen, treat or refer clients for gambling-related problems. While about of one-fourth of those providing mental health and substance abuse service do screen, the most common reason offered for not screening, treating or referring was that problem gambling is not seen as an issue.
• Only slightly more than 30% of human service providers surveyed were aware of any public awareness or educational campaigns on problem gambling; fewer – less than 10% - are education their own clients on problem gambling and even less – under 4% - are engaged in educating the community on gambling-related issues.

Given that the state has been engaged in bringing video casino gambling to venues across the Commonwealth for nearly two years now, these findings are somewhat surprising and, perhaps, speak most loudly to PA’s failure to give a more balanced focus to preparing the community for both the positive and negative impacts of casino gaming.  While our region’s long-standing culture of gambling, i.e., daily numbers, bingo, strip tickets and other small games of chance, that are often part and parcel of our nonprofit and faith-based sectors, might account for many not seeing problem gambling as an issue.  The research on pathological and problem gaming cited in the study stresses two critical findings:

• Most problem gamblers have other co-occurring disorders, including mental health, e.g. depression, mood, personality disorder, and substance abuse issues.
• Casino gambling increases the number of individuals who gamble and, therefore, also increases the number of individuals who will become problem gamblers.

Pennsylvania has set aside $1.5 million to cover the education, prevention, training, treatment, and monitoring of problem gambling, but this might increase as .001% of gaming revenue are dedicated to these social costs.

With these concerns strongly in mind, the study recommends:

• The human service providers, County and private providers, cannot wait on the state any longer and should develop a comprehensive human service educational program on the nature of problem gambling, as well as undertake a corresponding community-wide education campaign;
• A simple screening process should be developed for human services provider to use and a centralized database – perhaps through the new www.humanservices.net – should be established to make providers aware of regional resources for problem gamblers and their families.

Relative to the limited state support for social costs, which the investigators note amount to about $15.50 per potential problem gambler in the state, the study further recommends:

• An expansion – actually a better start – of a statewide public awareness campaign on problem gambling associated with casino gambling.
• An increase in the set-aside to address issues of problem gambling – the study notes that in Ontario, Canada, fully 2% of gaming revenues are targeted to offset social cost and for research and monitoring.
• An expansion of training efforts to be more inclusive and accessible to both mental health and substance abuse clinical practitioners, especially those with PA professional licenses, which the current state guidelines are not fully involving in its training initiatives.

Finally, the study cautions that while the state and the gambling interests have allocated modest resources to monitor the impact of gambling and problem gambling, no effort made to benchmark current gambling behavior and issues that would establish a baseline to legitimately measure impact.  Without a baseline, monitoring is meaningless.  The investigators further recommend that

• In lieu of state or gaming interest support, Allegheny Countyand the Pittsburgh regional funders and policy-makers will need to step up and insure that a benchmark study is done before the Pittsburgh casino opens to help plan for services and legitimize monitoring.

The School of Social Work and UCSUR stand ready to take on this critical benchmark/baseline study that might help this region “Beat the Odds” of the adverse impact of casino gambling.

Tracy Soska, Ray Engel, and Danny Rosen are Professors at the University of Pittsburgh School of Social Work and co-investigators on the gambling study.