Achieving Dedicated Local Funding in Tough Economic Times June 2, 2009 Presentation 2009 Transit Initiatives and Communities Conference Center for Transportation Excellence Salt Lake City, Utah

Pittsburgh Experience: Outline What We Ended Up With The Pittsburgh Context Precursors to these Funding Measures The Moral of the Story

Allegheny County Dedicated Funding Sources for Public Transit: Outcomes First dedicated local funding sources for public transportation in the Pittsburgh region in history. Collections began 1/1/2008. Total funding for operating capital purposes of approximately $37 million annually. Leverages an additional $284 million in State and Federal funds. 10% tax on poured alcoholic beverages –Subsequently reduced to 7% for 1/1/2009 –Generating approximately $33 million annually at 7% (was about $45 million at 10%) $2 per day tax on rental cars –Generating approximately $4 million annually The lesson is not how you should undertake your funding initiative, but how you should make best use of your local context and “not make the perfect the enemy of the good!”

Pittsburgh Context Economy in transition following 80’s collapse of the steel industry –Heavy industrial to “Ed’s and Med’s” Significant population loss from the early 80’s to present day Declining tax base –Local funding heavily dependent on property taxes –State Constitution that prevents most local funding initiatives Population that skews heavily older (anti-tax/anti-service) Mature transit system –Heavily used –Need to focus on renewal, not expansion –Negative perceptions associated with labor costs and past (and current) capital projects

Precursors Statewide Transit Funding Crisis Governors Transportation Funding and Reform Commission –Real need for additional State dollars –Also a need for local communities to contribute more –Opportunities for increased cost efficiencies In Pittsburgh, a need for better service efficiency and a head on assault on “legacy costs.” Act 44 Results –$400 million in new State Dollars –Increased local match requirement –Legislative authorization for Allegheny County to enact local funding measures

The Context A largely “anti-tax” population who resented “back-door” tax measures in the past and smelled another one A County whose own financial struggles made paying for the increasing cost of transit difficult A transit system that was not expanding and was, in fact, on the verge of contracting and potentially facing a work stoppage

The measures 10% tax on poured alcoholic beverage and $2 per day rental car tax –Authorized as non-Pittsburgh legislators sought sources that were already in effect elsewhere. “Drink tax” was in place in Philadelphia for the public school system. In Pennsylvania’s curious sales tax system, if you go into a restaurant in Pittsburgh and buy a meal, you will pay a 7% sales tax for the food, but there was no tax on purchased alcoholic beverages

Local Adoption Adoption required by vote of County Council and County Executive Approval, not voter referendum “Drink Tax” issue was more about transit reform and property tax relief than transit enhancement –Business community buy in: Improvements in operating efficiency and in cost structure –Political buy-in: relieve pressure on property tax and perception that these two sources impacted core constituencies less (senior citizens particularly). Same party held County Executive seat and majority of Council seats –Editorial support from primary newspaper “Interesting” communication techniques from primary opponents –Lead spokesman runs one of the most exclusive restaurants in town – “they won’t keep buying $300 wine if there’s a $30 tax on it.” Occurring in parallel with transit reform measures – growing sense that riders had paid enough.

Transit Reform Service Efficiencies: The “Empty Bus Syndrome” –Service scorecarding used to surgically reduce service levels where impact would be least felt 15% service hour reduction netted a 3% drop in ridership, since regained Now carrying more riders than 2 years ago with 150 fewer buses and 380 fewer employees –Legacy cost structure affected significantly in new collective bargaining agreement Political leadership call to withhold funding unless major gains were made in collective bargaining. Annual OPEB obligations reduced $92 million over 4 years of contract. Current costs held constant.

The Moral... Though challenges over the funding sources continue, the issue has calmed down. –Lower courts have held that the taxes are proper, and can only be used for public transportation Restaurant Association opposition is largely restricted to a small group, and has lost most steam. No longer on the forefront of public consciousness Currently generating about $37 million annually, with 3% unused drink tax capacity (probably about $12 – 15 million). Of 11 County legislators (of a total of 15) who voted in favor of the taxes: –9 sought reelection –All 9 won. So far, a close to recession proof a source as we can think of, as long as the Penguins and Steelers keep winning!!!