Investigating the Port Authority, Drink Tax and the Onorato Administration

Originally Posted on January 25, 2008 Last Updated on February 8, 2008

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 According to Megan Dardanell of the Office of the County Executive, “if the drink tax and rental car fee were to be repealed, the County would be forced to take $28 million from County departments and services to fund Port Authority through property taxes.”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.

$347.5M
– $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
$32.3M

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

Discussion

julie 26 Jan 2008

Interesting, interesting. Does this profit however still include the estimated revenues from the drink tax and fees?

I heard the other day (unfortunately I can’t remember from whom) that Pittsburgh bus drivers are some of the highest paid in the country, and that another major source of the Port Authority’s debt is that benefits paid to retired bus drivers and families are out of this world. I’m not sure how the retirement benefits play into the numbers given, if they’re already incorporated or not?

Reducing the number of buses…it’s an interesting proposal. I wonder how that would work in reality. It seems like they do need additional analysis performed to maximize buses/routes. The rush hour buses are always beyond packed, but buses in the middle of the day are decidedly less so. I also wonder about their suburban routes, etc. And what about the trolleys?

I do have a feeling that any more decreases in service, if not done smartly, will result in discontent and even less people taking advantage of the service. An increase in crowdedness, a decrease in frequency of buses, and a decrease in available routes are all inversely proportional to my desire to take a bus, which might give that statistic of buses to people some problems.

But overall it’s an interesting proposition. It would be worth giving some more thought and lip service.

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nathan 28 Jan 2008

The profit does include the Drink Tax. The sticky situation there is that by getting the $30M, Port Authority gets another $183M. Even if the profit is greater than the $30M, if you eliminate that source of funding then the additional state and federal funds wouldn’t come in. Of course, if Port Authority was profiting, the county could take the $30M from its coffers, wait for the match, and then PAT could give that money back. Or so I would assume.

As far as reducing buses, it’s almost a guarantee. The situation in the streets here in the city, which is the one that you and I see, is vastly different from the suburban experience. That may be a large problem, if PAT is supposed to support the entire Allegheny County, that might be ludicrous. Bus routes in the City of Pittsburgh and its immediate suburbs, such as Dormont and Homestead, are more likely to have a higher passenger to rider ratio. But take the 54C for example, it begins in Allegheny Center on the Northside and goes way out into the South Hills. Now if 500 people ride that bus every trip, how many do you think are heading from North Side to Oakland or from Oakland to South Side vs. how many are going beyond South Side into the South Hills. Probably something like 450 to 50, making the route much more effective within the city rather than as a way to connect suburbs.

And as for buses like the 71C being completely packed at rush hour, only to have 98% vacancy during other times, a good solution would be to simply have the smaller neighborhood buses operating in times when ridership isn’t high.

Even beyond that, what the study found is that even with the fewer amount of buses, the same level of service could be retained. I personally believe that the routes are just not very efficient. Take the routes 71C, 71D and 500. They all follow such similar paths that it would make more sense to combine them or deviate their routes to cover more area, or more alternative areas than they do. I don’t have the information as to what these would be and I realize the challenges of our terrain, but not every bus needs to go through Oakland.

And yes, they have made large cuts in retirement benefits for the bus drivers, both existing retirees and those in the future, including eliminating $500 / month per person from pensions, reducing health care or requiring employees to pitch in more, and a few other measures. It sounds like the Port Authority is actually beginning to see where it’s gone wrong and now beginning to take steps to improve itself.

Other cities have shown that you can take a failing transportation system and turn it into something amazing, as long as the problem is realized. And it’s not for a lack of wanting to be great that the Port Authority has failed. The whole “Ride Gold” terminology was part of a campaign in the 90’s where they literally were claiming they were going to become the nation’s #1 transit system. It was just massively poorly planned and likely hurt the system much more than it did improve it.

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Jake 28 Jan 2008

Wow, this is a mother of a post. Good job.

Do you have any more information about the regional fare collection system? I’d like to learn more about it.

I heard mutterings through the grapevine that before the last service cut, the bus drivers proposed a plan that would lower all fares to a buck and eliminate transfers. Apparently, with the proposed increase in customers — people will do anything if it’s only a dollar — the books, if not balanced, were not any worse off. This was hastily rejected by management, however.

Regarding the rerouting of similar bus lines, I have two things I’d like to get off of my chest.

First, I’d love to see smaller, more frequent buses running loops through the neighborhoods. Take the East End for example: They could either dump people off at the East Busway or along Fifth, where they could continue their trip to Downtown or Oakland. On these main lines could be the larger, articulated buses, which run with increased frequency so as to resemble a train line that other cities are blessed with.

Failing that, staggered route times would be nice. It sucks to watch from a block away as the 71A, C, D, and 500 all blow by, only to be faced with a 20-30 minute wait for the next one. I don’t often find myself on one of these shared-route buses wishing I could get off and immediately board another one going in the same direction. I do, however, like to be able to show up at a bus stop without a schedule and know the next one is coming in a reasonable amount of time.

Whew, I feel better now. Thanks.

I hope, larger, more frequent buses.

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Jake 28 Jan 2008

I make no claim to the sense of that random sentence at the end of the last comment.

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nathan 28 Jan 2008

Heh… 🙂

I can definitely agree with you on staggering the routing times. I always see the 71C trailing the 500 over S. Highland. I’ve wondered how much of this is just inevitable, and perhaps Shadyside is just a hub for many buses on their way to Oakland, but I tend to side with you here and think that there must be some way to increase the efficiency of this.

I have very little additional information about the regional smart card based transit system. This is what I could find to date:

“In a 2006 survey of Port Authority customers, 62 percent said they would purchase a smart card to pay for transit services. Smart card technology would provide a major amenity for customers, allowing them to add value to the card automatically or on demand and making possible other purchases.”

source

And you can read the RFP that Port Authority has requested from interested company’s here. Though that doesn’t define what the regional system might entail as far as a pricing structure, it shows you what the requirements of the smart card technology would be. The language from these two sources indicates to me that there might be the proposition of this smart card being built for buses, but also being able to be linked directly to your bank account, which could mean that either you don’t need to prepay the card (ie, fare is charged to the card, which charges your bank account, similar to how PayPal works) or that you might also be able to use the card as a debit card in other stores (ie, buying a Frappuccino at Starbucks.) The latter is cool because it eliminates having yet another card in your pocket. I believe the Europeans have their Giant Eagle cards, driver’s licenses, credit cards and everything all stored in “smart cards” which can be placed into their mobile phones. Which is kind of irrelevant but interesting nonetheless…

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