The Big Lease: Our Scholars Return!

The numbers are in:

The valuation results indicate that the parking garages and the meter system are worth approximately $199.8 million and $201.3 million, respectively, in net present value for the next fifty years ... These results incorporate fixed values for inputs such as elasticity of demand, annual growth rate, and the discount rate. Simulation analysis tested the sensitivity of the valuation in the presence of parameter value uncertainty to a likely range of parameter values. This generated valuation ranges of $152.4 million to $236.5 million for the parking garages, and $133.8 to $234.3 million for the parking meter system. (FSG, page 19)

So if guns were held to Council's "independent" consultant's heads, they'd avow the lease on the table to be worth $401.1 million. Which is exactly $50.6 million less than LAZ Morgan Draper Pryce is offering us.

And if you let them play it safe and account for all remotely likely variables, they would offer a possible value range between $286.2 and $470.8 million. Which, at its highest extreme, would be only $20 million or 4% higher than what is being offered.

That's what they're saying, right?



Right. But we knew that already. Pittsburgh will require relief from the state and/or statewide reforms to stay above the 50% pension funding red line and out of trouble permanently. And we can rely on them to do so right after they seriously regulate drilling.

Doug Shields on Fighting Drilling

"It really doesn't matter if you win or lose. It's how -- it's putting the fight on. We don't know what discussions and results are going to come out of this."

City Council member Doug Shields talks about how perceptions of natural gas drilling are changing rapidly for the worse at the grass roots level. He says his proposed ordinance that would ban all drilling within the City of Pittsburgh is intended, in part, to provoke realizations of such realities among state legislators while there is still time.

Section 5.1 of his proposal would ban the drilling. I asked him about the sections appearing thereafter, abbreviated here:

5.2 Corporations engaged in drilling in the City shall not have the rights of persons.

5.3 They shall not have the authority or power to enforce state or federal preemptive law, or to overturn municipal law.

5.4 No permit, license, privilege or Charter of any state or federal agency that would violate this ordinance shall be deemed valid within the City.

"It's pretty radical isn't it?" he responded coyly.

"That's the bill. What it ends up at the end, I don't know. I don't control that, how can I control that with, you know, nine members of Council?"

But is Shields comfortable with so much of his bill flying directly in the face of fairly well-established case law?

"It's called: the opener. It's the opener.

"And Councilman Dowd, his opener was -- and I don't fault Councilman Dowd at all on his legislation, not in the least, I have no criticism to offer -- but his opener was, 'Okay, we're going to go the zoning road.'"

Shields offered an analysis of that zoning road:

"If you write zoning law -- this is what the adult bookstore industry ran into with suburban communities in the early nineties -- they're legal, and as a legal use, then you have to provide for them under zoning code. But you can't say, 'Okay, you can come here, but, you can't be within 1000 feet of 800 different things', which basically is just as problematic as what I'm throwing on the table. Because [a court is] going to say, 'Yeah, you provided for it, but you wrote the law in such a way that you really didn't.'"

Speaking for both Councilman Dowd and himself together, he says, "We'd write something else, but the fact of the matter is, the state has preempted us on everything, and basically we're being treated as a colony."

##

To illustrate his point of political disenfranchisement, Shields cites the state Supreme Court case of Huntley & Huntley vs. Borough Council of Oakmont.

"Joe Massaro and his neighbor wanted to drill a gas well. A shallow well, I understand."

"Oakmont has the protection of the Municipal Planning Act of the state ... which asserts that there is zoning authority here at the local level, and the Supreme Court agreed with the Borough of Oakmont."

"And Huntley & Hutley and Mr. Massaro could not drill their well. I don't have the protections of the Municipal Planning Act as a city of the second class. I don't even have that. I think I'm being treated differently. I think there are inherent dangers to the public in this thing."

In addition to the host of environmental dangers we keep hearing about, Shields cited the city budget.

"What the Mayor's office said was," he began, having dug out a news clip, "What the Mayor is focusing on is balancing the two, noting that 'the City is going to prepare for any possible pollution, well fires or other risks.' Why? Because this business is inherently risky. This business just had four gas wells blow up in the last month and a half.

"Right now, we're talking about 10% budget cuts across the board. What am I going to prepare with? I can't even get a playground or a rec center open, and we're talking about preparing for 'pollution, well fires or other risks.' And I say, well, I really don't want to. And I don't think the taxpayer wants to either."

##

Shields hands me a couple sections of the Pennsylvania Constitution which guarantee that The People have the right "to clean air, pure water, and to the preservation of natural scenic, historic and aesthetic values of the environment," and that all rights not specifically enumerated in the Constitution are inherent to The People.

Moreover, he cites a section pointing out that state's natural resources are "the common property of all the People, including generations yet to come", which he says contradicts gas industry claims about the supremacy of individual property rights.

"No state legislature can preempt that," Shields insisted.

However, these portions of the Constitution come out of what's called the Declaration of Rights. In another state Supreme Court case, Commonwealth of Pennsylvania vs. East Brunswick Township, the Court said pretty clearly that reference to the Declaration of Rights is inappropriate where municipal corporations are concerned. Individuals may enjoy protections under those stipulations, but not cities which purport to be acting on their behalf.

In response to that, Shields tells the story of a water treatment plant near New Castle that is under stress from shale drilling operations, and that "the treatment for Marcellus Shale water is dilution."

"So the only treatment is, if you've got one bucket of water, with dirty water and bad chemicals in it, you add ten more buckets and you throw that in the river. But cumulatively, the amounts are beyond the pale."

Another treatment is to add Chloramine -- which, when performed at the Sewickley Township Water Authority, required public notice to go out warning dialysis patients and fish owners to stay away from public water.

I attempted vainly to steer the discussion back to the likely projected legal outcomes of his course of action, including practical outcomes in terms of legal expenses and what could happen next. Shields steadfastly steered it instead toward outcomes regarding the environment and public health.

"What tomorrow brings I have no idea," he said by way of attempting to resolve the impasse, "but I know if I don't put something into play here, then nothing will be done. Because no one's doing anything."

He reached that realization that fully, he recounted, when someone with which he was discussing legislative strategy said, "Doug, don't you get it? The government is the oil and gas industry."

##

Doug Shields is aware that some folks deep within politics view his crusade rather cynically, as a way to "make a big name for himself" (my words to him) in advance of elections this coming May.

"I made a big name for myself a long time ago. My support base is there. They know who I am and they know what I do. If someone wants view politics as a little cartoon in the Sunday paper, let me assure you it is not."

The Song: THRILLER

The effect: Drip wipes.

The Insecurity Bulletins: Embarrassing, Check.

I haven't been giving much attention to the ITRR security bulletins story, because I don't know -- it's like, "Of course The Man is spying on you and tracking hippie activists. What episode of Benson are you living in?"

But since the Slag Heap has been all over this like biocides in frackwater, and the furor is mounting higher than we might have expected, I figure I'll toss in the bit that irritates me:

"When there's a public gathering, a public meeting, who knows what intent people might have. So it just alerts local officials of the possibility. It alerts them to be on their guard." (WTAE, Bob Mayo)

That was Gary Tuma, Gov. Ed Rendell's press secretary, defending the surveillance program to a local reporter on Sept. 9.

Slam cut to an evening press conference on Sept. 13:

"This is ludicrous," Rendell said. "And I apologize to any of the groups who had this information disseminated about their activities. They have the right to protest."

Rendell said he was "deeply embarrassed," and said the fact that the state was paying for such rudimentary information was "stunning." (AP, Marc Levy, via Wash. Exam.)

The Governor was also "appalled," making for at least three colorful, high-impact words to illustrate his patriotic empathy. Yet apparently this did not culminate toward his becoming very "wrathful" over the whole thing:

Rendell said James Powers, the director of Pennsylvania’s Office of Homeland Security, which distributed the intelligence bulletins, would not be fired because “there’s shared responsibility here.” (Patriot News, Donald Gillian)

Perhaps he means that variety of shared responsibility which can lead to lawsuits after any dismissals, during which the injured party presents e-mails and memorandum from the Governor which read things like, "Yeah, baby. The spying program sounds good to me. Let's do this thing, but for gosh sakes keep it quiet." Perhaps?

Personally I'm not calling for anybody to get fired. Mistakes get made as well as stupid or silly decisions. But this whole "Gosh, I'm such a great and innocent guy who was ill-served by my staff" routine isn't quite taking.

Tiff Breaks Out Between One of America's Finest Newspapers and One of America's Finest Mayors

I just love it that the Post-Gazette and the Mayor's administration are having some kind of lovers' quarrel.

We all know how touchy Ravenstahl can get when his honor is impugned -- and I guess now we can see that the P-G doesn't appreciate it very much either.

From today:

The mayor's office initially said the bid-opening would be private, prompting the Pittsburgh Post-Gazette to seek a court order Monday to make the proceedings public. Common Pleas Judge Alan Hertzberg denied the request.

The mayor's office then invited the media to the bid-opening and a news conference that followed but excluded the Post-Gazette.

Mr. Ravenstahl briefly met with Post-Gazette reporters after the news conference to announce the high bid.

He said he has tried to be as open as possible about the lease proposal, and he viewed the newspaper's legal effort as an attack on his administration's credibility. (P-G, Joe Smydo)

"Trust but verify," anyone? Not familiar?

Somehow the P-G still came away with the most interesting information in their story:

The city received three initial bids -- $413 million from J.P. Morgan's group, $391.5 million from EQT's group and $311 million from a partnership led by the Carlyle Group. (ibid)

SIDEBAR: Seven consortiums went through the rigmarole of "pre-qualifying" to submit bids, yet only three followed through and actually submitted an offer? Seems surprising. The economy didn't tank during the interim, and nothing untoward happened to Pittsburgh or its automobile enthusiasts. Well, at least we came away with a super high number.

Anyway, back to the subject of stiffing media outlets: one can claim to be "insulted" by a line of questioning, but that often redounds to the effect that it looks like somebody has "something they'd like to hide". Which itself leads to more insistent, suspicious requests, and the vicious cycle continues -- until it ends somehow.

We've seen a good illustration of this principle play out recently:

Asked whether he viewed it as appropriate to help advance friends or family while in public office, Mr. Zappala [Sr.] said, "I have no public thoughts on that." (P-G, Lord N-1)

Charles Zappala declined to be interviewed, saying reporting on a network and its history "makes no sense to me." He asked for written questions, and the Post-Gazette posed 34 questions about his views on local governance, involvement in businesses that worked for public entities, appointments to public boards, participation in electoral politics, interactions with administrations, and business relationships with other network members. His attorney, Richard A. Sprague of Philadelphia, responded that the questions "go into personal matters" and that Mr. Zappala would not discuss personal matters. (ibid)

Mr. Brucker would not comment on his role with the district attorney's office, other than to say it is a matter of public record. Asked about his role in incorporating network-related businesses, he would not comment, other than to say, "I ask you as a private citizen, why you are invading my privacy as a private citizen?" (ibid)

Greg Zappala, who has left the municipal finance business, declined comment. (ibid)

Neither Mr. Grattan nor Mr. Viehbeck could be reached for comment. (P-G, Lord N-1a)

Mr. Maxcy, whose business card is taped to Bank Pittsburgh promotional materials still on file at the sheriff's office, could not be reached for comment. (ibid)

The person who handled such matters, Executive Assistant Michael M. Mullen Jr. -- no relation to the current sheriff -- has retired and could not be reached for comment. (ibid)

Asked about Mr. Verbanac's role with his administration, Mr. Ravenstahl said the reporter was "confused, and I'm not going to participate in your pursuit of something that doesn't exist. I'm insulted by it, to be honest with you. So I'm not going to respond to something like that. And if you want to quote that, feel free to. That's all I've got to say." (P-G, Lord N-2)

In July of this year, Mr. Verbanac declined to be interviewed for this story, and Mr. Pietragallo's response did not directly answer three questions about Mr. Verbanac's relationship with Mr. Ferchill's companies and involvement in decisions leading to Bridgeside Point II. (ibid)

Mr. Grattan did not respond to 13 questions posed by the Post-Gazette in July, and declined in April to discuss with the newspaper his business and political dealings. (ibid)

Mr. McTish previously made a $10,000 contribution to Mr. Ravenstahl's campaign in late 2006. He could not be reached for comment. (ibid)

Those contributors reached by the Post-Gazette either said they did not remember why they contributed, or declined comment. (P-G, Lord N-2a)

Charles Zappala declined to be interviewed for this story. (P-G, Lord N-3a)

Visited twice at his home in Rostraver after he did not respond to telephone messages, Mr. [Patrick A.] Risha both times declined to be interviewed. (P-G, Lord & Neiderberger)

The Post-Gazette left telephone messages and twice visited Canova Electrical's office in an effort to interview owner James Canova, but he could not be reached. (ibid)

Pennsylvania Coach president David Sunstein could not be reached for comment. (ibid)

Among other host committee members was Tammy Rockwell of Ford Business Machines of Connellsville, whose firm last year inked contracts with the West Mifflin Area schools that will bring it $623,460 in office equipment lease payments over five years. She could not be reached for comment. (ibid)

Mr. [Patrick M.] Risha, of Rostraver, could not be reached for comment. (P-G, Rich Lord)

It's funny that all the folks on the financial and legal ends have seemed very accommodating toward entertaining media inquiries, yet the closer a given subject is to politics and ultimately to government, the more important it seems to be to clam up and even shame the reporter.

Anyway: I agree with what has fast become the conventional wisdom that there was no fire revealed in that last round of reportage, and maybe even that there was no smoke -- but the ducking of so many key interviews is making the floorboards feel awfully warm. And when the floorboards are that hot, it suggests it's not so much time to head back to the fire house and play cards, but rather to take an axe and vent a room.

That is, if you're that in love with the metaphor. At any rate, I think we should all agree this is no season for swinging axes, and it'd be best for one side to reach out and try to bury the hatchet.

RELATED: PittsburghMagazine.com wants a scalp handed over.

$451.6 Million

Care of JPMorgan Investment Management. Confirmed with quotage.
Here's some perspective. And more. Trib reports that LAZ Parking enjoys pride of place, whereas P-G rolls with JPMorgan in this new "Pittsburgh Parking Partners". Statement from Peduto here. Infinonymous notes a bit of synchronicity.

Monday: On Your Horse!

Check out the way I segway around to everything that needs blogged!

"They're amiable. They're charming. They live lifestyles that are enviable," [Mike Dawida] said. (P-G, Lord N1)

Oooh, didn't that one part just sing to you! Bad enough the Network is out there donating to campaigns and parachuting operatives in to key races, but they're also fostering feelings of lifestyle-covetousness and privilege-envy in our elected leaders!

Ravenstahl was out of town when the institute-related controversy broke, attending a three-day forum on public funds in Laguna Beach, Calif. He said the forum "was very beneficial," given the city's pension problems. (Trib, Tom Fontaine)

Now, I know what you're thinking, but that Corporate Library public funds forum actually looked pretty legit. I don't know what Tom Brokaw and Condoleeza Rice are supposed to know about public investment, and Ben Stein just scares me, but anything with Warren Buffet is worthwhile even if he's joining via video conference -- and there were many more, professional speakers. If the Mayor even asked one person in a suit, "So, what would you look for in a parking lease proposal?" it was probably worth it.

For the conference's heavily encouraged "networking activity" (they just came out and said it!) they offered a choice between golf and sailing -- depending on if you are a Ravenstahl or a Dowd I guess. If you don't know how to golf or to sail, I guess you could have gone to hell remained unconnected.

Anyway --

The mayor's office on Monday will announce the high bidder for a proposed 50-year lease of the city's parking garages and meters. (P-G, Joe Smydo)

So we got that going for us, which is nice.

Mrs. Harris has suggested floating a bond to boost the pension fund, while Mr. Dowd and city Controller Michael Lamb have proposed giving the pension fund certain parking garages as an ongoing revenue stream. Mr. Ravenstahl has said both of those ideas are unworkable. (ibid)

Somehow the new Dowd-Lamb phlebotinum has been acquiring a faint aura of realness. Unknown whether the Finance Scholars Group study is looking at any option like that.

Mr. Peduto said the study will be council's baseline for making decisions.

"First and foremost, it will be independent of anybody who has an interest in the deal," he said. "It will be an expert opinion." (ibid)

Sadly, nothing in life is truly independent. Finance Scholars Group, as expert witnesses in litigation and as previously discussed, specializes in making credible arguments to support those positions which its interested clients want advanced. Its client in this case is Pittsburgh City Council, 66.6% of which desired political ammunition to support doing other than relinquishing management control over the city's parking business. Data is data and many persuasive arguments can stand on their own merits, but FSG's offices are not on Mt. Sinai, and they do not communicate via burning bush. Take it with at least some salt.

But when it comes to eventually unifying any opposition to the Mayor's preferred pension-funding option, things could get viciously dicey due to old wounds with new stress fractures:



What that means is, Councilman Doug Shields has proposed a flat-out ban on drilling in the city which is legally very assertive -- whereas Councilman Patrick Dowd has proposed fairly tight zoning restrictions on city drilling which are legally unremarkable (the kinds of things only very dense cities can do). To most Pittsburghers, this means that one of those individuals is a bad person who is crassly pandering to either bad or stupid interests, and must be shamed.

We'll deal with this in greater detail this week, but this blogger has two Guiding Principles on Drilling Regulations to throw out here:

1) Since Pittsburgh, on this one issue, is unusually dependent on activity taking place in other municipalities and at other watersheds, in order to protect its own citizens it must leverage its advantages to advance the football statewide in a game-changing manner, and...

2) While I agree we need to "fight the drillers", that doesn't mean I'm anxious to just throw our head at their fist.

More later. I will have time available, because it looks like we can file this project where we all knew it would get filed:

... to illustrate the perils of flouting federal law, the NTHP cited the Port Authority of Cleveland's continuing inability to obtain dredging permits along Lake Erie because it unlawfully demolished four historic iron ore unloaders -- structures far less attractive than the iconic Civic Arena. (P-G, Ruth Ann Daily)

A nifty little column, but on the other hand, the P-G Edit Board thinks it would be wrong for any Pittsburghers to exercise their rights to due process for redress under settled federal law, because of hockey development, which will occur exactly, as grandiosely, and as swiftly as recently touted because of hockey.

WHICH BRING US finally to education, I suppose, and a lovely puff-piece lacking a significant news hook in the Tribune-Review:

Arita Gilliam considers herself an advocate for parents who can't be as involved as she is.

She keeps an eye on Pittsburgh Public Schools as a volunteer with A+ Schools, a Downtown-based watchdog.

"I wanted to understand how the (school) board operates and offer feedback so that we can all begin to work together for the betterment of children," said Gilliam of Manchester... (Trib, Jodi Weigland)

There are probably worse efforts with which to join up.

Deputy Superintendent Linda Lane said the district values the information it gets from A+ Schools... //

She said having an outside organization critique the district and recommend improvements is an asset.

"If you can't defend against criticism, you should be asking yourself questions," Lane said. (ibid)

Are you hearing this, Pittsburgh? All legitimate input for the School District should be channeled through the foundation community certain temperate politicos A+ Schools -- "The Downtown Watchdog". They'll handle the actual activism for you, and inoculate against that unseemly urge to get political with your elected School Board.

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