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Opinion & Commentary - November 14, 1999

What's next? CMU prof offers exacting framework for county's future

The election of Jim Roddey as Allegheny County's first executive and the election of former county Commissioner Tom Foerster to the County Council (along with nine other Democrats) portend conflicting visions for the future.

All agree that getting the county's economy moving forward to generate jobs so that our children and grandchildren can flourish in the region - instead of continuing to move out - is foremost on the electorate's mind. Realism requires the recognition that government in a region cannot defy the forces of the marketplace and expect the market to flourish. Rather, government can serve as either an enabling or disabling factor as people and their financial capital and talent decide to move here, stay, expand or depart.

What next should be on the newly elected county executive and council's public policy agenda that will credibly enable the region to grow and prosper? Here is an outline for several important first steps.

PREMISES AND OBSERVATIONS

Political uncertainty and distrust create economic uncertainty that undermines business decisions. Translated, this means that if the council and executive concoct half-baked ideas and/or begin to squabble where the old form of county government left off, prospects for economic growth will diminish.

Taxing to pay for public services that are mediocre or simply not delivered is no longer tenable in a region that is competing in a world economy, let alone a national economy. This means a lack of professionalism or petty corruption (or worse) in government can no longer be afforded.

When the industrial center of the world was headquartered in southwestern Pennsylvania, government sloth (or worse) was tenable because business could afford to overpay for key public services it needed. When companies here dominated their markets and dictated prices to their customers around the world, they could pass on the inefficiencies in the public sector.

Those days are largely over. To keep and attract world-class companies that pay world-class wages requires confidence that the public sector is world-class, not a predator.

The state legal framework within which Allegheny County government can credibly enable the private sector does not yet exist. This means two things:

• First, the Home Rule Charter has been, at best, psychological and therapeutic and unlikely to be meaningful and effective in the future. At worst, the charter was cooked up by those who think you can fool all the people all of the time about the prospects for meaningful change. After all, Act 149 of 1997, proposed here and enacted in Harrisburg, provided for a charter that precludes changing the fundamental way the county administers its property taxes, and precludes changing the ethics by which it spends.

• Second, to create a meaningful legal framework requires not only some rather tedious trips and negotiations in Harrisburg, but also to Philadelphia and its suburbs for some fairly serious horse-trading. Western Pennsylvania still controls the destiny of southeastern Pennsylvania just as southeastern Pennsylvania controls the destiny of western Pennsylvania. They want the commuter tax in Philadelphia fixed, and we need their agreement to create a framework for governance that will finally free economic forces in the region to grow. Is it wishful thinking to get movement in Harrisburg? If we don't get movement on issues that count, then we are consigned to watching helplessly as our children and grandchildren are forced by economic necessity to move away.

Jim Roddey: Under a new financial control system, he and County Council would be in charge of their own financial destiny. (Philip G. Pavely/Tribune-Review photo)

PITFALLS TO AVOID

Don't kid the public about the county's current financial situation or the debt-service bubble in a few years. Now that the election is over, the county executive and council need to be straight at the outset with each other and then with the public about just how bare the cupboard is, and what kind of medicine is in the offing.

Do not get emotional about Pittsburgh's financial woes. Everyone who knows the numbers (look at Pittsburgh's bond rating if you doubt this) knows that Pittsburgh, within a few years, will wind up in municipal receivership (like Scranton for the past 10 years) and will fall under Act 47.

A legal framework that will make a difference: taxes and financial record-keeping.

But what of legal frameworks that will make a difference? We must in Allegheny County get the Pennsylvania General Assembly and governor to act to convince business around the country that Allegheny County not only makes financial and economic sense, but is also a government to trust.

The county's property tax assessment and appeals institutions and financial control mechanisms need to be fixed now. Not only does the Pennsylvania Second Class County Assessment Code require amendment, so do other parts of state law that determine the way the county controls its finances. Let me describe a new property assessment and appeals regime that can make a difference both to the reality of the property tax and a new financial control regime that will enable the new executive and council to be in control of their own financial destiny:

First, redefine through state law the county controller's responsibilities to include full authority over the making of assessments and the maintenance of maps and real estate records. Controller-elect Dan Onorato is a bright, ambitious, talented young man who will, under this proposal, become responsible for implementing Judge R. Stanton Wettick's decisions and will be in charge of the Sabre Systems reappraisal contract. Also, through state law obligate forever Allegheny County to assess at 100 percent of market value and (of course) automatically roll back millages to their revenue-neutral level. Thus, end the assessment ratio shell game.

The new County Council and executive will then be free to concentrate on managing county government, and an independent, elected official, under judicial oversight, will be in charge of the current assessors now under the Board of Property Assessment, Review and Appeal. The board will be solely responsible for hearing appeals. It will no longer supervise assessments.

Moreover, to ensure independence of the assessment and appeals process, through state law, create a small millage to finance separately each of these functions (assessment and appeals) so they are free from County Council and executive meddling.

To function effectively, the new county government must control its own finances. Through state law obligate the new county government to be in charge of its books and records, rather than the county controller. Currently, the person who keeps the books (the controller) is also in charge of their audit. This is not credible or acceptable practice in the private sector, let alone in government outside Pennsylvania. Federal and state audit requirements, which accompany federal and state grants to the county, cannot be met by the controller, because he is not independent of the books and records to be audited. Thus, the county has had to pay for both private third-party audits and the Office of Controller.

What to do with the county controller's current financial staff, which now keeps the books and financial records, which it also audits? They should be incorporated into the new county executive's administrative unit to establish the obvious relationship between an elected executive and his government: The executive should be in charge of keeping the financial records and books of the county, but subject to an independent, external audit that is publicly disclosed.

Is this radical change? No, this is the Ohio model of what a county auditor does, and it has led to high quality assessments and effective county government. Should this newly defined county controller, now in charge of assessments and property records, continue to be in charge of the now-independent, external audit? As long as there is a professionally accepted, independent audit each year of the county's finances by the controller, and the audit is publicly disclosed, the controller should continue to perform this function.

Can the role of the county controller be redefined through state law in a way that differs in other parts of Pennsylvania? Yes, because the county is a Second Class County, the General Assembly can create specific responsibilities of government just for counties of the second class (e.g. Allegheny County).

SERIOUS ETHICS STANDARDS

We should raise the bar for all public officials in Allegheny County's government by enacting through state law a separate ethics code that applies only to Allegheny County government. Thus, set a much higher standard for ethical conduct in Allegheny County than elsewhere in the commonwealth (including Harrisburg, I hasten to add). Why just Allegheny County? I simply doubt the General Assembly would be willing to do so generally for local government, or for themselves.

Why is raising the bar essential to economic development? Unless and until local government officials are both statutorily barred from direct and indirect conflicts of interest, and subject to serious legal and financial sanctions, external perceptions and internal realities of what passes for acceptable and legal behavior will simply not convince those out of state, looking to establish new plants or business activities, to come here.

Let me provide a simple comparison in the area of the property tax of what happens here and in Washington state to make this point. Under current Pennsylvania assessment law, if a local assessor takes a bribe to lowball an assessment, the worst outcome he faces is a fine of up to $1,000 or imprisonment for up to 60 days, and being guilty of a misdemeanor. In Washington, the general penalty for false statements by public officials in official reports (i.e., the lowball assessment) is a gross misdemeanor, which leads to as much as one year in the county jail or a $5,000 fine, or both. Moreover, in Washington, receiving a bribe is a Class C felony, which leads to five years in jail and/or a fine of $10,000.

Giving the bribe in Washington is a Class B felony that leads to 10 years in jail and/or a fine of $20,000. The incentives facing local assessors and property owners here and in Washington are thus radically different. Is Microsoft in Seattle or Allegheny County? Is Boeing in Seattle or Allegheny County?

Defining ethics standards for Allegheny County public officials that can be respected around the nation does not require any original thinking; rather it simply involves cutting and pasting from what other states (or the federal government) have done for decades - and finding the political courage to get it enacted in Harrisburg.

Pennsylvania's penchant for legally allowing the laundering of money and influence through third parties to public officials and their families is precluded in many states. Moreover, Pennsylvania's permissive attitude toward executive branch officials holding private-sector jobs is also precluded in most states. Having full-time county employees may wind up costing a little more but surely will help convince the world outside Pennsylvania's borders that we are serious about changing both the image and reality.

Many may find the above agenda unrealistic, unnecessary or premature. However, if I am correct that the current state legal framework governing taxation and government ethics does not break with a past which has been rejected by the voters, how else can their vision of the future be realized?

Luck and wishful thinking are probably not going to be sufficient.

The writer is a professor of economics and public policy at Carnegie Mellon University.