Finance Pittsburgh Social Justice

The Economic Crisis Rolls on in Cities like Pittsburgh

» The U.S. economy may be improving in some ways, but transit services across the country continue to reel, thanks to lower-than-expected tax revenues.

The board of the Port Authority of Allegheny County, serving the Pittsburgh metropolitan region, announced last week that it would have to cut services by 35% by September 2 — the largest cut ever for the agency — if it is not provided an increase in state aid. The agency expects that it will have to increase fares and lay off 500 workers. This comes a year month after the agency reduced services by 15%.

The service cuts planned would be, suffice it to say, devastating. As the maps below illustrate, the Port Authority’s austerity plans would eliminate almost half of the region’s routes. This is in a city where, according to the U.S. Census, more than 25% of households have no vehicle available and almost 20% of workers use transit to get to work — figures that are far higher than the national average or even that of the vast majority of American center cities.

Before cuts After cuts

Pittsburgh, of course, is far from alone. From Boston — where a 23% fare increase and service cuts were approved a month ago — to Athens, Georgia — where night bus service is expected to be fully eliminated — American cities continue to cut their transit offerings. Friday’s U.S. national jobs report, which showed about 20,000 fewer people working in transit operations in April compared to a year ago (a 5% decline), only reinforced the fact that when it comes to transit service, cuts are the rule of the game.

What a paradox: These cutbacks are enforced even as fuel prices continue to rise and the demand for public transportation seems likely only to increase. Local revenues simply cannot keep up with demand.

At least part of the problem is the reliance on local and state revenues to subsidize operations costs for bus and rail services in cities across the country. Whereas the federal government was willing to cover more than half of the costs of a $523 million light rail expansion to Pittsburgh’s North Shore — opened in March — it can do nothing to cover the agency’s $64 million operating deficit expected for next year because of Congressionally imposed rules about what Washington can and cannot pay for.

The counterintuitive result is that cities that are doing well economically are able to pay for improved transit services whereas those with many economic problems — the ones where transit is often needed most — are left to cut operations dramatically. Thus regional inequities are reinforced.

One argument suggests that if the federal government continues to absolve itself of responsibility for providing for mobility of people across the country, public services like transportation will continue to be cut even if there is an important demand for them — and even if investing in them improves the economy in the long-run. Europe’s current economic crisis, which stems in part from a shared economic zone with differentiated tax rates, divergent social service provisions, and a demand that national governments enforce close-to-balanced budgets, has produced an environment in which downscaling of government investment is the norm, no matter the cost.

Is the situation in the U.S. so different? 49 of 50 states, unlike the federal government, have some form of balanced budget rule; cities are almost never able to operate in the red. Meanwhile, competition between states and cities encourages them to lower their tax rates, making the provision of public services all the more difficult. Only Washington is able to borrow during recessions, and thus it must play the role of providing the back-up for public services like transit agencies that are left behind by declining local revenues. Yet current law makes that impossible. The result is reduction in provision despite an increase in need.

An important report from the Center on Budget and Policy Priorities last year, however, suggests that states do have more of an ability to invest in public service provision than they are typically assumed to have. Evidence shows that states that have increased taxes have not seen excessive outmigration but rather increased government revenues.

What can we take from this? Cities and states like Pittsburgh that are facing massive cuts in public services should absolutely call on Washington to increase its provision of aid to local governments, especially through operations support. But absent that — and in this day and age we cannot count on the Congress for much — raising local and state taxes is a serious option. It takes guts for public officials to promote tax increases, but we need to keep the trains and buses running.

Image at top: Pittsburgh busway and light rail, from Flickr user Erik Weber (cc); maps below from Port Authority of Allegheny County

25 replies on “The Economic Crisis Rolls on in Cities like Pittsburgh”


Great article, as always.

Quick correction: Pittsburgh did have a major service cut, but it occurred in March 2011, not March 2012. At the bottom of the page for the link you provided, it states that that article was originally published January 2011.

A unique aspect of Pittsburgh’s transit issues is how much the city’s residents have already been putting up with. Along with several service cuts over the past few years, they also already have some of the highest fares in the country. $2.25 base + $.75 for the light rail during rush hours + $1.00 for zone charges + $1.00 transfers. The service reductions being considered increase the fares even more. Despite this, the transit network is still pretty strong and ridership is still very high, proving that transit is important to the city.

Despite its relatively small population, Pittsburgh has bad traffic because of the many river crosses and winding mountain roads throughout the city and region. As such, increasing the number of cars on the road there would be a very bad thing…

Well said, Yonah. The clear trend is crony capitalism for the vendors/contractors/consultants but extortion/service cuts against the riders. Real solutions will necessitate a serious eviction of the bought politicians. Don’t hold your breath. Whether the supposedly “progressive” SF Bay area or the economically betrayed former industrial cities funding for all public services is drying up while the right wing screams for tax cuts for the plunderers. Note the parallel DOD ever increasing purchases v VA deliberate understaffing leading to year long waits for treatment.

So Pittsburgh is actually doing relatively well in this economic cycle. It largely dodged the housing bubble and so had a relatively mild recession, and has also had a relatively strong recovery. It is now well above pre-recession employment levels, and the only reason its unemployment rate is elevated (but still well below the state and federal level) is that it has experience a strong increase in the size of the labor-force, implying it is getting job-seeking migrants–and indeed net domestic migration has turned positive for the first time in a long time. Incidentally, if you look at job gains in the recovery, Pittsburgh is contributing a very disproportionate share of the state’s overall job gains.

So what is behind the transit cuts? It is a long story, but to boil it down to its essence: the Port Authority of Allegheny County (known locally as PAT) relies heavily on state operating funds. Pennsylvania is well into a long-standing transportation funding crisis: it established dedicated transportation funds but then has not provided them with adequate revenue sources (e.g., it dedicated fuel taxes that have been frozen in nominal terms, which have not kept up with transportation expenses). It had a plan to provide more funding by tolling I-80, but then the feds disallowed the I-80 toll. This caused an automatic cut in state funding for every relevant entity, including PAT.

The current governor, elected in 2010, appointed a commission to study the problem and come up with proposals. His commission came back with a number of proposals, including proposals for increased revenues. The legislature was willing to act on those proposals last fall, but the governor shut them down. He is now suggesting he MIGHT consider supporting some solution to PAT’s imminent cuts, but it depends on how PAT’s negotiations with its drivers’ union go this summer (their CBA is expiring).

PAT’s management, ironically, has greatly improved its operating efficiency over the last few years (a new management team took over in 2006, and they hired professional consultants to help redesign the system, and they are well into the process of carrying out those recommendations). So that is why this threatened cut in state funding necessarily means deep service cuts–when you are operating more efficiently, every $1 cut in operating funding means a greater cut in service.

None of this really undermines the point about federal versus state/local funding. But here it is very much a state, not local, issue, and in fact the state is on the verge of killing the goose that is laying the golden eggs in this recovery (that being Pittsburgh).

The governor shut it down because he said he wouldn’t increase any taxes or fees. He is pretty anti any investment in the state. Still a shame the feds shut down the tolling. They had worked for years on it. I don’t understand why it was not allowed as there needs to be someway to get revenue for maintenance with the gas tax declining.

Usually “States ”rights” is bogus, but the states should be allowed to toll the Interstates as a general rule.

When the Interstate System was established, it took in numerous existing toll roads — the New York Thruway, the George Washington Bridge, the Pennsylvania Turnpike, the Chicago Skyway, etc.

Now surplus revenue from tolls on the George Washington Bridge over the Hudson River support other transit projects of the Port Authority of NY and NJ, which owns it. And I’m sure the tolls on the Pennsylvania Turnpike exceed the bond interest and maintenance costs.

So why not let all states collect tolls on all sections of the Interstates — like I-80, across the northern part of PA — and not just those few lucky enuf to have segments built before the System was established?

> Still a shame the feds shut down the tolling. They had worked for years on it. I don’t understand why it was not allowed as there needs to be someway to get revenue for maintenance with the gas tax declining.

The official rationale, at least as I recall it, was that money from highway tolls has to go back into the road that produced it–it can’t, say, be used elsewhere, or even to substitute for existing maintenance funds to allow that money to be used elsewhere.

Since the Return on Investment in highways is so low, they must always suck up revenue from other sources, and in order to ensure that the great suck up continues, they must never yield any funds in return.

The “must” in these rules would appear to be dictates written by the surplus suckers in the road building lobby.

“Unjust” as it might seem, in cities where users of transit are more so because they are too poor and/or don’t own cars altogether, it is easier to raise fares because there is a larger captive market than in, say, Denver or Salt Lake City systems.

A system that wants to be healthy in the long term would be much better off with a 35% fare hike and 10% service cut, not the other way around. A lot of the areas being served have pretty low density; service is going to be expensive (the disastrously union-friendly contracts that are par for the course in a machine-politics town are no help). Fares need to be steep to ensure a reasonable internal revenue base for the provider; otherwise there will continue to be massive whiplash effects as external, politically-driven revenue rises and falls.

I do believe the Federal governmnent has role to play to provide mobility between cities, metro areas. But the problem with Pittsburgh is not the federal government nor them absolving their responsibility. Its a local relieance for others outside the Metro area to pay for local services. That is not a healthy transit system and will never be.

Now, I’m I against transit? No. My former home in St. Louis was two blocks from metrolink and my family made use of it. I also voted for and paid an increase in a local sales tax specifically for Metro/Transit. My point, St. Louis and other regions provide transit without significant State funds. Pittsburgh is now getting a rude awakening. Not everyone outside of the Metro area wants to pay for those services. The community has to decide what is best for them.

Since the Urban Area would get a better deal if its gas tax revenues was spent on transport services in the Urban area, instead of subsidizing driving in outer suburban and rural areas, its hard to see how the argument about the Metro Area being dependent on “outside” resources flies. The Pittsburgh Metro Area is, after all, not “outside of” the State of Pennsylvania, its part of the State of Pennsylvania, and a part that is a net cross-subsidizer of ex-Metro suburban and rural road funding.

The fundamental problem here is the failure to index the gas tax to inflation. The gas tax is:
(1) Partly a diversion of sales tax revenues from the general fund, in states where gas is sales tax exempt
(2) Partly a user fee that pays a small portion of the road maintenance cost created by the vehicle on funded highways and
(3) Partly a cross-subsidy from drivers on unfunded streets to funded Interstate, National, State, County and Township Highways.

Adding a component that pays a partial compensation for the added costs that automobile reliance imposed on public transport does not eliminate the cross subsidy from urban and inner suburban areas to outer suburban and rural areas, but it cushions the blow.

And if that gas tax is not indexed to inflation, then as the nominal cost of gasoline rises even at the same purchasing power cost, the portion of the state sales tax that is a diversion from the general fund increases, and the portion of the state sales tax that is a user fee paid by motorists drops … and the real value of the partial compensation paid by motorists for the impacts they have on increasing the costs of operating public transport also drops.

Interestingly the governor’s transportation secretary admitted that overall, the urban counties in Pennsylvania are subsidizing the rural counties:

“But during the hearing, Transportation Secretary Barry Schoch turned the chronic complaint that the state disproportionately subsidizes mass transit on its head. ‘We actually subsidize rural roads at a much higher rate than we subsidize mass transit. If you think about a two lane road – if it doesn’t carry at least 10,000 vehicles a day, it’s being subsidized.’ Schoch says most rural roads carry fewer than 2-thousand vehicles. And he says most of Penn Dot’s revenue comes from vehicle fees and gas taxes; the lion’s share of which is paid by residents in Pennsylvania’s urban areas.[/quote]

Of course all that supports the proposition that Allegheny County would be better off if the state reduced its role in transportation funding across the board. But if the state cuts back on transit funding and leaves road funding in place, it will be a poor deal for the urban counties.

The feds should not be involved in local operations funding for large cities. This leads to poor cost control. I am upset that they have agreed to fund fuel increases. The problem with many transit systems is that they are not actively managed EXCEPT in a funding crisis.

Allegheny County’s population decreased from 1,281,666 in 2000 to 1,223,348 in 2010 or 4.6%. Its population has decreased in every census since 1960, when it reached its highest population of 1,626,587. There is a declining revenue base to support transit operations. Why should a system that was designed for many more people than currently live there? If transit lines are curtailed to far flung areas and maintained at current levels in areas close to the center, it will serve as an incentive for people to live closer to transit.

PAT’s system has already gone through several rounds of service cuts in recent years. Meanwhile, it is no longer true that Allegheny County is losing population:

“The Allegheny County population — a number that has steadily ticked lower for most of the last 50 years — went up, according to a new report released by the U.S. Census Bureau. . . . The report, the first since the official 2010 Census, measured slight population swells between April 1, 2010 and July 1, 2011, both in Allegheny County and Pittsburgh’s seven-county metropolitan area. During these months, the metro area’s population gained 3,461, for a new total of 2,359,746. The county total increased by 3,718 and is now estimated at 1,227,066.”

Note Allegheny County gained population while the rest of the Metro minus Allegheny County lost population. What is happening is that recent increases in net domestic migration are overcoming the lingering natural population loss that dates back to the steel bust diaspora. The net domestic migrants are disproportionately locating in the core part of the Metro, specifically Allegheny County and even the City of Pittsburgh.

“During these months, the metro area’s population gained 3,461, for a new total of 2,359,746. The county total increased by 3,718 and is now estimated at 1,227,066.”

In economics, this is called a dead cat bounce.

Actually, in economics this is a predictable result of the relatively healthy economy and job market in Allegheny County. Specifically it has maintained an unemployment rate well below the state and nation for many, many months now, and now is rapidly adding new jobs. Economics predicts that in such circumstances Allegheny County should be attracting job-seeking migrants, so the recent upward trend in net migration is not at all surprising (or in need of further metaphorical explanation).

No, first, because that’s in finance, not in economics, and, second, because a dead cat bounce is a market correction up in the middle of a collapse.

It would be a dead cat bounce if over the next decade, Pittsburgh again loses half of its population. I’m a bit skeptical that that will happen.

We should note that one reason Pittsburgh’s transit system is suffering is because labor costs have driven the cost of operation in Pittsburgh to extremely high levels. For example, according to the NTD the cost of providing an hour of service in Pittsburgh is $164, which is much higher than the cost of providing service in Philadelphia, a similar highly unionized city, – $141. Revising work rules to reduce the cost to something closer to Philadelphia would solve a lot of Pittsburgh’s problems. I don’t recall seeing SEPTA make any service cuts at all in the past couple of years. Also should be mentioned is the destruction of transit in the city of Detroit.

In recent years PAT has made significant improvements to its operating efficiency, including labor productivity, through a combination of renegotiated labor contracts and improved routing. Undoubtedly more can and should be done in those directions, but it is unlikely PAT will be able to match SEPTA’s operating efficiency because SEPTA has much more rail in its system, and it is extremely difficult for bus-based systems to compete with rail-based systems on operating efficiency.

By the way, SEPTA is also going to be forced to raise fares and cut service as a result of the state funding cuts. The reason they are trailing behind PAT so far is just that they were able to raid their capital budget to blunt the initial effects.

There is something smart about these cuts. They’re keeping all the routes through the densest, most centrally located parts of town and killing the suburban extensions. Hard on the suburbs, but tolerable for Squirrel Hill. If you’re *going* to cut, this is probably the way to do it.

Although I agree they are doing the best they can under the circumstances, there is not going to be enough capacity left on the core corridors to meet demand. Using Squirrel Hill as an example, the main buses through that corridor already get very crowded at peak times. What is going to happen is that as alternative service is lost in areas served by those buses, people are going to try to crowd onto those main routes, and there simply will not be room for everyone.

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