To great fanfare and hoopla, Governor Rendell signed the new Transportation bill into law and in so doing once again bailed out the grossly inefficient, outrageously expensive, financially struggling Port Authority of Allegheny County. The new law authorizes nearly $1 billion in annual spending on transportation to be funded primarily with bonds issued against new and higher tolls on Interstates 80 and 76 (the Turnpike). From these bond proceeds $300 million will be allocated annually to mass transit, of which the Port Authority (PAT) is expected to receive $55 million. This is in addition to the $130 million PAT allocation already available through the general fund—for a total state subsidy of $185 million for the current fiscal year.

The bill ostensibly places “strings” on this new funding. Local governments must provide matching dollars before the money is released. Not surprisingly however, the bill’s language does not impose strict enforcement of the strings. As stated in the legislation any financial assistance provided by the state must be matched by 15 percent of the amount being provided. The catch is that the new language also makes the 15 percent rule flexible. If the local government cannot provide the 15 percent, then it must do what it can and then be required to raise the local contribution by 5 percent each year until it reaches 15 percent of the state grant—however long that takes. Or if the local government can prove that the matching funds would provide an undue burden, the local match can be forgiven altogether. In other words, there is little danger any of the state money for transit will ever be withheld.

And in Allegheny County the ruse is even more calculated. Presumably, under the new law the County would have to come up with 15 percent of $185 million or $27.75 million. Currently, the County is contributing just under $25 million, about 13.5 percent of the proposed $185 million. Thus, in order to satisfy the law’s requirement of 15 percent, the County would have to find an additional $2.75 million. Given the putative importance of public transportation as claimed by the County Executive and Council, this should be reasonably easy to accomplish from current revenues. Spending choices must be made, but if mass transit is viewed as critically important, they can find the money. But most telling, even if they cannot find the additional $2.75 million, the new law requires only that they raise the contribution by 5 percent or $1.25 million next year. Alternatively, they can always plead poverty and get an exemption from any additional requirement.

What the new transportation bill has actually done is to provide the County with an excuse to levy new taxes under the guise of meeting the local match—taxes which are neither necessary nor welcome by already overburdened taxpayers.

The law permits Allegheny County to levy two new taxes. The first is a “tax on the sale at retail of local and malt and brewed beverages within the county”. This new levy is modeled after the drink tax passed in 1971 to raise money for the Philadelphia School District. The Allegheny County rate may not exceed the rate levied in Philadelphia, which is currently 10 percent of a drink’s sales price. According to Philadelphia budget data, the tax should bring in $14.1 million to the treasury. However, in fact the City only collects $6.3 million. Obviously, this tax is a very hard tax to implement. One must wonder how much it costs to administer the collection of the drink tax and whether it is even worth the effort. Presumably, collection of the drink tax in Allegheny County would pose serious problems as it has in Philadelphia.

The second new tax Allegheny County has permission to levy is “an excise tax on each renting of a rental vehicle in the County.” Again this is based on a Philadelphia tax, a two percent ad valorem levy on vehicle car rentals garners approximately $5 million per year. Of course, a key question would be “how much revenue would the tax raise in Allegheny County”? In terms of population Allegheny County is smaller and is the hub of a much smaller metro area than Philadelphia. Thus, vehicle rental tax revenues might be significantly lower in Allegheny County as well.

Still, every dollar they might happen to raise is a dollar the County could shift from its transit contribution to other areas of the County’s budget. In short, the new taxes would provide some additional new revenues, taking pressure off the Council to vote for a property tax increase. Under the Home Rule Charter, a two thirds vote (10 council members) is required to raise the property tax rate. Obviously, that is very difficult vote to get as indicated by the fact that there has been no millage increase since Home Rule went into effect.

The optional new taxes are, for all intents and purposes, simply a way to increase taxes for the County’s general fund, disguised as a way to save mass transit. Besides which they would be more trouble than they are worth. In any event, these new taxes should never be implemented without approval by voter referendum. After all, a key justification for adopting Home Rule was to give the citizens a greater say in their government, especially as regards the amount of tax they must pay. It doesn’t matter if the Governor and Legislature give permission to impose new taxes—it’s the people of Allegheny County who by right must have the final say.

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Jake Haulk, Ph.D., is President and Frank Gamrat, Ph.D. is Sr. Research Assoc. with the Allegheny Institute, www.AlleghenyInstitute.org