Monday, June 14, 2010

AuthorityLand: Why Be So Content?

Let's use the Pittsburgh Water & Sewer Authority as a case study. It is led after all by an extremely typical Authority board comprised of two political officeholders, two executive branch employees, one "lifelong friend" of a past mayor, one inscrutable mystery person and one vacancy.

Here is the track record:

After plunging into debt through the ill-advised purchase of variable-rate bond swaps resulting in cuts to necessary capital improvements; after letting a popular brewing company skate on seven-figure debt for years under the pretense of a failed attempt to retain about 100 jobs within the city limits, only to recoup a fraction in an overdue settlement; and after voting to corral all of its customers into purchasing insurance through a surreptitious opt-out program followed by revelations that its executive director has a clear conflict of interest with the insurance provider; now it reveals an inability to bill customers correctly, then overcompensates by spending a whopping $2.7 million on a company which has it own notable problems.

These particular weaknesses do not manifest out of the clear blue sky: the conflicts of interest among vendors and their middlemen growing like mold, a near-structural inability to understand transactions contemplated until too late, a propensity to let politics rather than rationality drive decision making. These are the hallmarks of management by political appointees in an ossified faux-liberal government culture.

AND YET, and yet, and yet...

A few of us are reacting to the prospect of handing off the function of one of these Byzantine relics to the private sector -- in exchange for hundreds of millions of dollars in cold, hard, sorely needed cash, no less -- with knee-jerk indignation.

It's as though we are defending some Aristotelian ideal of how these authorities were originally conceived to serve us -- without taking into any account whatsoever how they have operated for the entire history of Pittsburgh, and how they are likely to continue operating for all time.

Do you think I'm over-relying on the PWSA example? Which authority was it that once upon a time sold us an innovative "multi-modal" transportation center, and instead bequeathed to us a plain old parking garage with a train running through it (though not stopping in it), decked out on all sides with expensive, thoroughly useless electronic gizmos -- a literal Christmas tree for the electronics industry -- including an attempt at a gargantuan digital advertising billboard steeped in still more politics and conflicts of interest?

Was that efficient? Was that either good government or good business management?

Some individuals are leery at the prospect of City government leasing -- or should I say, mercifully shedding -- its parking garages to the private sector, where such things more naturally belong, because it is a proposition forwarded by one Luke Robert Ravenstahl, Esquire. And I can relate.

Yet when you think about it, it's unlikely that our mayor (or any Pittsburgh mayor) would ever dream of doing something like this -- surrendering the City's death grip over a power-and-patronage generator -- were he not actively compelled, indeed checkmated into doing so. There was a reason the state stepped in and threatened to seize control over our pension funds; it was because of decades of this self-same mismanagement of these funds, and by extension everything else having to do with the city. The legislation was specifically (though not delicately) tailored to enforce fiscal discipline and motivate hard decisions before we took all of Pennsylvania down with us; to get us to relinquish that which the private sector can better manage, and to focus in on core public functions of which the parking business is not.

Let's seize this lucky, uncharacteristic opportunity. Let's by all means study the prospective lease agreement -- let's try to make it a good one -- but let us look optimistically forward to living life with one less ridiculous backwards inaccessible government Authority weighing us down. This is as close to manna from heaven as it gets.


  1. A valid criticism Dude, however you are suggesting that we cut off our nose to spite our face.

    The Parking Authority is a revenue producer. An asset. I'll repeat it for emphasis, a revenue producer.

    It is not in Pittsburgh's best interest to shed an asset at a discount to an "independent" third party. Even with the short term infusion of cash, Pittsburgh will still fall short and the state will take over our pensions. (Consult with Chris B if you think I'm wrong.)

    Pittsburgh needs to maintain as many revenue producing assets as possible. Selling the parking garages at a discount for political reasons is not a long term solution. It is a horrible idea and will only benefit Morgan Stanley, friends of Morgan Stanley and their investors.

  2. How the heck did Jabo get on the board? What else do you know about him, besides his life long O'Connor connection?

  3. The Hutt- I'm not 1000% sure, but it appears Jabo might be a consultant for Towers Watson, a professional services company which used to be Towers Perrin, which was involved in some interesting news in Pittsburgh -- oddly enough -- for NOT having sufficiently close ties to Mayor O'Connor. No clue how all that unpacks.

    TheTruth- If it's a revenue generator for us, how is it over $100 million in debt?

  4. The debt was issued to build the parking garages.

    1. How do they make those large payments to the city every year and still meet their debt obligations every year?

    2. Why would an outside party want to lease the garages if they didn't have the potential to produce large positive cash flows in return?

  5. Think- Thanks, that makes sense, why it carries debt. Although those transfers from Authorities have been criticized (by Dowd) as "raids" and shell games.

    As to your second point, I am not categorically against somebody somewhere making a profit IF they can better manage the city's (note the small "c") functions AND solve an expensive neigh-historic present-tense problem.

  6. Truthie -- if you're still out there -- what do you think of privatizing the state stores? That could be considered a revenue generator for a government that's in debt, or it could be considered a wasteful and inefficient den of patronage.

  7. FOOTNOTE: About two and a half years later: Bear in mind this was all written before the bid came in SO MUCH MORE OUTRAGEOUSLY HIGH than Council's study estimates and all published expectations.