Feb. 6, 2011
In this era of bread, circuses, casinos and a declining empire, you won’t see sports commentators put a damper on the Super Bowl festivities by telling the sordid saga of Pittsburgh’s sports stadiums and its unfunded pension liabilities for city workers.
I’m not a sports commentator, so I’ll tell the saga, beginning with the pension liabilities.
The City of Pittsburgh has $700 million in unfunded pension liabilities, due to its generous employee pensions being funded at only 29.5%, which is among the lowest funding levels in the nation. To put the $700 million in perspective, the city’s total current annual budget is $450 million.
According to The Wall Street Journal, half of the city’s tax revenue currently goes to debt, pension, and healthcare costs for city workers. Under a state plan to close the city’s pension liability, that would increase to 70% and necessitate severe cuts in city services.
The pensions are obscenely generous. For example, police officers and firefighters (aka heroes) can retire at the age of 50 and 20 years of service and receive a pension equal to 50% of their pay. Because more weight is given to final earnings in the pension calculation, it has been a common practice for the heroes to “spike” the earnings with overtime in the last few years of service.
Now let’s turn to stadiums.
Over the last decade, the following three sports stadiums have been built in Pittsburgh:
- The $290 million CONSOL Energy Center for the Pittsburgh Penguins. It was built in a shady deal between a gambling company and the state and local governments. In return for being allowed to build a casino downtown, the company agreed to build the stadium.
- The $281 million Heinz Field for the Pittsburgh Steelers. After voters had turned down a special tax for its construction, local government came up with what locals called a scam. The new stadium was tied to a new convention center and funded without the need for a separate tax. The total cost of the stadium and convention center was $809 million.
- The $262 million PNC Park for the Pittsburgh Pirates. Once again, because voters turned down a special tax for the stadium, government found a way to fund it anyway, essentially by socializing the cost across all county and state residents. The county contributed $143 million, the state contributed $75 million, and the Pirates paid the remainder. Oh, and let’s not forget the city’s construction unions, which agreed not to strike during the stadium’s construction in exchange for the stadium being built with union labor at union wages and benefits. How generous of them.
Let’s review the numbers:
$833,000,000 for stadiums + $528,000,000 for a convention center = $1,361,000,000.
$1,361,000,000 + $700,000,000 in pension liabilities = $2,061,000,000
To put the $2,061,000,000 in perspective, that’s equal to the annual income of about 44,000 Pittsburgh households.
This fiscal insanity is compounded by the fact that the city is losing population, especially young people, and has one of the largest concentrations of elderly residents in the nation.
Ironically, the city is the former home of Richard Florida, who, when he was a professor at Carnegie Mellon University, developed his theory about how to revitalize cities to appeal to the “creative class” of new workers. Adopted by many cities across the land, including Pittsburgh, the theory has since been debunked by other thinkers and planners. Whatever the merits of Florida’s theory, I know one thing for certain: that taking more than $2 billion out of the economy for casinos, stadiums, convention centers, and public pensions is not a way to revitalize the economy and create sustainable high-paid jobs in the private sector.
“Mencken’s Ghost” is the nom de plume of an Arizona writer who can be reached at firstname.lastname@example.org.