Investigating the Port Authority, Drink Tax and the Onorato Administration

This report will attempt to demonstrate how, given the available data, the Port Authority could actually profit considerably more than $32M per year, if it gets its act together.

I have been doing considerable research (relative to my other posts, anyway) as to the purpose of the Drink Tax and its affect on the Port Authority, namely: Will their be measurable results to indicate if the drink tax is a success? The concern being that this becomes just another tax which has no visible results. I submitted questions to the Port Authority, Dan Onorato, County Council and FACT (Friends Against Counterproductive Taxation) in an attempt to get this question answered.

Port Authority should require 46% fewer buses to deliver the same level of service.

The Facts

Fact: By raising the Drink Tax, restaurants’ and car rental agencies’ customers pay for the Port Authority as opposed to property owners. According to Megan Dardanell of the Office of the County Executive, “if the drink tax and rental car fee were to be repealed, the County would be forced to take $28 million from County departments and services to fund Port Authority through property taxes.”

What this means is that currently the Port Authority receives funds from the county from the same place that fire departments, policemen, etc. receive their funding, namely through the revenue generated when the county collects property taxes. So the Drink Tax alleviates that money to be appropriated in other ways.

– $91.0M
– $256.5M

Fact: The Port Authority, as a business, loses $256.5M annually. The Port Authority estimated its total operating expenses for its last fiscal year to be $347.5M. It estimated its revenue, generated primarily from fares, advertising and interest, to be $91M. Therefore, as a business, the Port Authority is $256.5M in the red. As a side note, it’s employees wages and benefits total $238.7M.

– $256.5
+ $213.0M
– $43.5M

Fact: The $30M the Drink Tax will generate locally will result in an additional $183M. That’s according to the Port Authority’s Senior Government Affairs Representative, Dan DeBone. So basically every dime you get taxed on a drink becomes 70 cents by the time it gets to the Port Authority. Unfortunately, by last fiscal years projections, this still falls $43.5M below the amount needed to operate the system.

The Conclusion: The Drink Tax does not increase the Port Authority’s revenue and therefore can come with no additional measures of success, as the money will likely still result in a shortfall annually.

Existing Measures of Success

When asked about actual measures of success, Mr. DeBone provided me with a list of cost savings initiatives the company has taken thus far, primarily comprising pay and benefits cuts, including accelerating the rate of retirement and benefits during retirement, changes to healthcare, and senior management salary freezes (including a 3 year freeze of the CEO’s salary; a look at the company’s Fiscal Reports shows that the Office of the CEO will have a budget cut of $161,000 / year, or 41%, spread over two employees). Additionally, 370 jobs were cut including 50 administrative positions and a reduction in senior management from eight positions to five. These cuts are estimated to total a savings of $11M in savings.

Additionally, Mr. DeBone provided the following list of “Goals and Objectives”, which I have summarized here:

  • An 18-month initiative to implement a regional fare collection system based on smart card technology.
  • Reached new agreements with Pitt and CMU that significantly increase payments to Port Authority, which will generate more than $35 million over five years for Port Authority.
  • Leasing the park and ride lot adjacent to South Hills Village Station, generating more than $131,000 annually for Port Authority.
  • Reduced service by 15 percent (10 percent less than the proposed 25 percent) in June 2007, resulting in less than a four percent decrease in ridership and 13 percent increase in service efficiency.
– $43.5M
+ $18.1M
– $25.4M

If the first step sees fruition, a regional fare collection system could be used to charge riders based on distance traveled rather than flat fees, all while providing for an easier public transit experience. Everything Mr. DeBone alludes to indicates an annual increase in Port Authority dollars of $18.1M, reducing the yearly shortfall to $25.4M.

Additional Conclusions

– $25.4M
+ $57.7M

According to a report issued by Allegheny County Controller Mark Patrick Flaherty, “the Port Authority is significantly higher in the number of buses to people serviced. If the Port Authority performed at an average level in this capacity, it should require 46% fewer buses to deliver the same level of service.” Currently approximately $107M of the Port Authority’s budget goes toward drivers. With 46% fewer buses and the proportionate drop in drivers that would presumably entail, this number could be reduced to $49.3M. That’s an additional $57.7M annually, which would put the Port Authority back in the black, even profiting.

And that doesn’t even take into consideration the resulting fuel, insurance, and maintenance savings that would also realize in this situation. I am fully interested in anyone’s input as to the validity of these numbers, all of which were gathered from Port Authority officials and the 2007 Operating and Capital Improvement Budgets, the Office of the County Executive, and the First Phase of Study by the Allegheny County Controllers Office. If you’d like more input on how a guy with access to the Internet, the willingness to write a few emails and no bachelors degree could propose a valid plan to balance our county’s transit system budget, please feel free to fire away in the comments…

Up Next: Presidential Transportation