By Jim Roddey & Glen Meakem
Published in the Pittsburgh Tribune Review
October 19, 2008

The consternation over consolidating the City of Pittsburgh with Allegheny County is equal to the differences between Upper St. Clair and Polish Hill. While both root for the Steelers and hope for prosperity in the region, both are fearful of draconian consequences should the two governments become one.

Although Pittsburgh Mayor Luke Ravenstahl and Allegheny County Chief Executive Dan Onorato pay lip service to the idea of consolidation, an immediate political merger between the city and the county is unlikely.

Unquestionably, the City of Pittsburgh is the economic and cultural hub of Southwestern Pennsylvania. The vitality of the region depends on the fiscal soundness of the city. Everyone in the Pittsburgh Metropolitan Area should, therefore, be concerned that the city is facing serious financial challenges.

Despite financial controls imposed by the state and the promise of future gambling revenues, Pittsburgh continues to impose punishing personal income, real estate transfer, parking and other taxes that push people and businesses out of the city. It is projecting budget deficits within the next four years.

The loss of population, the failure to sufficiently downsize government, the large amounts of property owned by nonprofit and nontaxable institutions and mounting deficits in the pension plan and health benefits for retirees increase the city’s financial problems.

Only $330 million (37 percent) of the $899 million obligation to retirees currently is funded. And Pittsburgh has the highest per-capita debt of any city in the nation ($5,083, or $1.6 billion total). Current talk of budget surpluses is nonsense when there has been no effort or will to address these problems.

For the past several years elected officials and community leaders have discussed city-county consolidation as a step toward solving the city’s financial decline. A recent study, chaired by University of Pittsburgh Chancellor Mark Nordenberg, laid out a plan for political consolidation of the two governments.

The plan eliminates the city government and creates a special tax zone (based on the boundaries of the city), which protects county residents from assuming the city’s prior debt. (The report did not address responsibility for future city debt.) The proposed structural change requires state legislation and the passage of referendums by both city and county residents.

The state Legislature has refused to move forward on the plan citing too few answers to the multitude of difficult questions posed by the rather complicated plan. City residents and city politicians fear political disenfranchisement while people in the suburbs are balking at anything that resembles a bailout of a city that they feel has been poorly managed.

Perhaps the time has come to consider turning consolidation into two phases by simply merging some city and county services now — functional consolidation — and leaving the question of political consolidation for the future.

The Nordenberg report suggested moving ahead as quickly as possible with functional consolidation. Successful consolidation occurred long before political consolidation in Louisville and Jefferson County, Ky.

It is wasteful for the city and county governments — housed side by side on Grant Street — to continue duplicating services such as purchasing, public works, parks, finance, human resources and fleet management. According to Brian Jensen, senior vice president of community development at the Allegheny Conference, at least $38 million could be saved annually by consolidating these services now.

In 2004 the city and county mutually agreed to combine their 911 emergency call centers. Since that merger the city has saved more than $1 million in capital outlays and more than $1 million per year in operating costs with no additional cost to the county. This should be the wave of the future.

Because both the city and county are “home rule” governments, no state legislation or public referendums are required to combine services. The city could contract with the county to take over certain city functions by agreement of the respective councils and the signatures of the mayor and chief executive.

It might be that some form of political consolidation ultimately will be needed to properly position the region for growth. But accomplishing that today is politically impossible and a failed attempt now could doom the chance of passage for years to come.

In order to move forward, Pittsburgh and Allegheny County should merge services now both to demonstrate the feasibility of these combinations and to save money.

Local leaders should then create a plan for retiring the city’s crushing debt aided by the benefits of the merged services. Only then should political consolidation be considered.

If we can show success in phase one (functional consolidation), then the odds of achieving phase two (political consolidation) will be dramatically improved.

Indeed, without the cost savings, both near and long term, that can arise out of consolidating government services, Pittsburgh probably has no real chance of ever resolving its massive legacy costs and debt problems.

Jim Roddey, Allegheny County’s first chief executive, is a senior consultant at McCrory & McDowell LLC. Glen Meakem is founder and former CEO of FreeMarkets Inc. in Pittsburgh and co-founder and managing director of Meakem Becker Venture Capital.