Pittsburgh Tribune-Review - November 11, 2007

 

Critics question nonprofit's focus, spending

By Ron DaParma and Mark Houser

 

espite spending more than $55 million over a decade, the Allegheny Conference on Community Development has not stemmed the Pittsburgh region's population hemorrhage or improved its anemic job growth.

In the 1940s, local business and government leaders gathered under its banner to clear soot-filled skies, to lead a Downtown building renaissance and to spur area growth.

Today, as the private nonprofit prepares for its annual meeting Nov. 15, its critics accuse it of spending excessively — more than $10 million annually, including more than $2.4 million on pay and benefits alone — without producing tangible results.

They say the conference has backed grandiose projects and issued glowing reports — all as the city fell into near-bankruptcy, lost corporate headquarters and major employers, and saw key assets such as Pittsburgh International Airport dwindle in size or stature.

"We have wasted too many years not focusing on the kind of things that can make Pennsylvania and the Pittsburgh area grow better," said Jake Haulk, president of the Allegheny Institute for Public Policy, a Castle Shannon-based think tank. "Building stadiums and a convention center and things like that just haven't paid off."

The conference's supporters, such as Allegheny County Chief Executive Dan Onorato, credit it with persuading corporations to remain or expand here.

Yet other critics, such as urban-development experts Roberta Brandes Gratz and Joel Kotkin, dismiss the conference's reliance on outsized projects that don't work.

Kotkin, of a California-based economic research group, describes the city as "sort of the poster child of out-of-scale ideas."

He and others call for the conference to change its policies, its direction, its operating style, its leadership — to do something more than just talk about the region's precipitous decline.

New 'focus,' same old story

The Allegheny Conference's 2006 annual report says its "strategic focus is on creating a more competitive business climate and marketing the Pittsburgh region for investment and job creation."

In spite of that "focus," the region's fortunes remain worrisome.

More than two decades after the steel's industry's collapse here, Pittsburgh still suffers unlike any other region in America, contrary to conference claims of success.

Since 2000, southwestern Pennsylvania has lost 60,000 residents — more than any area outside of hurricane-ravaged New Orleans. Funerals outnumber births in the city.

Since 2001's recession, local job-growth numbers have trailed the national average, as well as every region in the state except Williamsport, according to the state Bureau of Labor Statistics. The bureau put the region's annual job-growth at just 0.26 percent in September.

All of the state's other regional economies — Allentown, Altoona, Erie, Harrisburg, Johnstown, Lancaster, Lebanon, metro Philadelphia, Reading, Scranton, State College, York — have more jobs now than before the 2001 recession. But the 1,149,000 jobs reported in the seven-county Pittsburgh metro area in September remain below the pre-recession peak of 1.17 million.

Ironically, some corporations that abandoned the city were among the conference's bigger boosters. Alcoa moved its top executives to New York in 2006, after more than a century in Pittsburgh. This year, Mellon Financial Corp. merged with The Bank of New York in a deal that eliminated another local corporate headquarters.

Onorato credits the conference with helping to arrange deals that kept them here: Westinghouse is building a $140 million nuclear energy campus in Cranberry, promising to add 1,000 workers; US Airways says it will open a $25 million flight-operations center with 600 jobs.

Yet those deals leave both companies with a fraction of their former workforces.

Westinghouse had more than 17,000 employees here in 1990, before moving its headquarters to New York and slashing its local payroll to some 3,000. US Airways employed more than 11,000 here as recently as 2000, before abandoning Pittsburgh as a hub and cutting its local workforce to 2,000.

The airline is gutting its local schedule, from a onetime high of 512 daily flights to 68, effective in January.

Reflecting those and other flight reductions, the county's airport authority has cut its own operations. Working passenger gates, which once totaled 97, soon may drop to 48.

'Big things that don't work'

So, where has the Allegheny Conference been as the region's bottom fell out?

Conference officials and its business backers insist it has had successes against a stacked deck.

"You are going to get opinions all over the board as to whether or not we're working on the right things, whether or not we're effective in working on the right things," said conference CEO Michael Langley. "But what's undeniable is, we have committed leadership making a difference in this region."

Onorato believes the region's economic prognosis is improving, partly thanks to the conference. "With the partnership of the Allegheny Conference and county government, I see great signs," he said.

Yet today's problems require a new kind of leadership, said Roberta Brandes Gratz, an urban expert and author of "Cities Back from the Edge: New Life for Downtown." Business and political leaders should focus on helping homegrown firms, she said, and less on larger projects that often don't meet expectations.

"The Allegheny Conference has tried all the conventional big things that don't work in the long run," said Gratz. "Now is the time to truly learn from the smaller, innovative efforts that produce great results, and stop looking for big-bang solutions."

Because the local economy has slowed, Langley said his organization has refocused "on a narrower set of issues, where we believe we can actually make a difference." Its top priorities, he said, include lowering business taxes and regulations.

"We believe that public policies that are more business-friendly and understand the issues of the economy better will help turn those numbers around," he said.

He said the conference lobbied for changes in state law allowing companies such as U.S. Steel and Allegheny Technologies to negotiate long-term, fixed-rate electrical service contracts. Both companies have warned that, without predictable energy costs, they will not expand here.

Despite the lower-tax talk, however, the conference has a history of backing tax increases.

This month it endorsed, with some restrictions, a proposed 10 percent drink tax and $2 daily rental-car tax to bail out the county's Port Authority — over the objections of local businesses.

A shift for the worse

A 2003 reorganization turned the conference into an umbrella for the Greater Pittsburgh Chamber of Commerce, Pennsylvania Economy League and Pittsburgh Regional Alliance.

Former conference president Harold Miller, who resigned in 2005, now describes it as "much more like a business association ... and less like a civic-leadership group."

The conference's $10.1 million budget in 2005, the most recent year for which complete figures are available, included:

• $2.4 million for salaries and benefits, according to the nonprofit's federal tax return.

Of 63 employees of the conference and its affiliated groups, more than half are listed as vice presidents or senior directors. In 2005, eight earned at least $100,000, including Langley's salary of $364,519 plus $22,281 in benefits and $9,600 for expenses.

• Spending of $351,682 to raise money from private donors.

In 2004, those donors included 118 foundations, corporations and universities which gave $8.57 million. The nonprofit did not make public its 2005 donor list.

• Conference-awarded grants worth $4.57 million, including $222,720 for a French & Indian War historical group and $10,000 for a Bassmaster Classic fishing tournament.

In addition, the Pittsburgh Regional Alliance maintained a separate $3.06 million budget in 2005 that did not include salaries but did cover $196,117 for conferences, conventions and meetings, $147,948 for travel and $126,742 for fundraising.

Langley says most of the conference's spending "doesn't go to staff, most of it goes to programs." He also contends it has "created efficiencies. Collectively, if you added all the staff together we had in 2003, it was in the 80s, and now we have 60 to 65 people."

Still, some critics contend the conference is bloated.

"It's shifted from being a sailboat to being more like an ocean liner," said Morton Coleman, director emeritus of the University of Pittsburgh's Institute of Politics and an aide to former Pittsburgh Mayor Joseph Barr.

"Its needs now include raising a lot of money for its own self-sustaining capacity. So I don't think it is the same kind of catalytic organization that it was before it took these large-scale operations under its tutelage."

In Cincinnati, with a population comparable to Pittsburgh, the regional chamber of commerce has a staff of 75 and paid its former president $307,000 and $120,000 in benefits in 2004, according to tax filings. Cincinnati's chamber, which undertakes a regional development agenda similar to the Allegheny Conference, has a $14 million budget.

"You pay what it takes to get the talent you need," said Richard P. Simmons, former chairman of Allegheny Teledyne, a predecessor to Allegheny Technologies, and a former conference chairman.

"The people we have at the Allegheny Conference are very competent people, and if it took $364,000 to get Mike Langley to leave Florida, where the weather is a little bit nicer, then you may have to pay a little bit more."

Lots of studies, few solutions

The conference's board includes 50 CEOs of the region's largest private organizations. Chairman James Rohr, CEO of PNC Financial Services Group, declined to comment for this article.

With so many equal voices and no dominant local company, local business leaders have to reach consensus on direction, said Glen Meakem, former chairman of FreeMarkets Inc. and now managing director of Downtown-based Meakem Becker Venture Capital.

He supports the conference but believes it could more effectively promote economic growth.

"Pittsburgh is not a place where three guys can get together in a room and make a difference anymore," said Meakem, a former member of the conference's board. "It's a place where we have to convince the broad population to support policies that will lead to growth."

Former conference chairman Simmons describes it as "a bully pulpit for those who try to achieve economic progress" but lacking "the ability to force things to happen."

Yet recent initiatives pale in comparison to past accomplishments.

In 1947, the newly formed conference decided to clean up Pittsburgh's air and water. It helped write environmental legislation as part of a raft of bills known as the "Pittsburgh Package," then quickly shepherded them through Harrisburg with bipartisan support.

Contrast that with its work on a new environmental challenge: a deteriorating sewer network.

In 2002, with the Environmental Protection Agency already working with Allegheny County's sanitary authority, health department and other agencies to fix that system, the conference released a study calling for a regional approach.

Then it commissioned a second study by the National Research Council, which reached similar conclusions in 2005.

Both studies suggested the Southwestern Pennsylvania Commission, which oversees transportation projects, should take the lead on fixing sewers.

Having made its recommendations, the conference moved on to other issues.

"They didn't really identify solutions to the problem," said John Schombert, executive director of Three Rivers Wet Weather Demonstration Program, a nonprofit working with ALCOSAN, the 83 municipalities ALCOSAN serves, and the EPA to devise a uniform plan.

Cutting taxes, regulations

If the conference ever starts to accomplish the business-oriented agenda it claims to support, it could help the region to recover, several urban-policy experts contend.

Cutting business taxes and regulations remain the best ways to expand an economy and jobs, according to John Charles, head of the free-market Cascade Policy Institute in Portland, Ore.

Portland is a darling of urban planners for its strict zoning, regional government and subsidized mass transit. But Charles thinks the Portland region is wasting money by expanding its streetcar network and unveiling a $57 million Swiss-style aerial tram.

"You don't try to pick winners and losers," said the University of Pittsburgh graduate. "You don't try to have this grand vision. The nice thing about cutting the corporate income tax is, everybody benefits. You're not cutting a deal for a handful of people."

Pittsburgh has done a good job of promoting itself, said Joel Kotkin, economic and social forecaster with the Milken Institute, an economic research group in Santa Monica, Calif. Yet now it needs to work on substance.

"Pittsburgh's sort of the poster child of out-of-scale ideas," said Kotkin. "Huge airports, fancy convention center, the stupid light-rail to the stadium — that kind of stuff. Stuff that I think is pretty secondary but apparently has support from the top of the business community.

"The city gets extremely good press in many ways nationally, but when you look at the performance, you say, 'I don't get it.' The city has made some progress, but a lot other cities have made a lot more."

He points to Houston, where the chamber of commerce hired him last year to analyze what makes it one of the nation's fastest-growing cities.

Kotkin coined a new term, "opportunity urbanism," to describe Houston's combination of low taxes, minimal zoning and an expanding highway network that, he said, attracts new companies.

The Allegheny Institute's Haulk, a frequent critic of the conference, sees hope in some of its current efforts, including the focus on reducing business taxes in Pennsylvania and working to improve schools.

"The problem has been (that) it's taken too long to realize that things like improving the region's labor climate, infrastructure and competitiveness are the kinds of things that are needed here," he said.

Staff writer Andrew Conte contributed to this report.

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