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James Lange, CPA/Attorney

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What is the State of Southwestern Pennsylvania?
Jim Lange, CPA/Attorney
Guest: Bill Flanagan
Episode 95

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TOPICS COVERED:

  1. Introduction of Guest – Bill Flanagan
  2. What is Allegheny Conference on Community Development?
  3. Marcellus Shale May Draw Business Investments to the Area
  4. Environmental Concerns from Drilling
  5. Pittsburgh is the Brand for Southwestern PA
  6. Recreational Developments in the Region
  7. Transportation and Infrastructural Problems
  8. High Point Pittsburgh as a Downtown Attraction

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Welcome to The Lange Money Hour: Where Smart Money Talks with expert advice from Jim Lange, Pittsburgh-based CPA, attorney, and retirement and estate planning expert. Jim is also the author of Retire Secure! Pay Taxes Later. To find out more about his book, his practice, Lange Financial Group, and how to secure Jim as a speaker for your next event, visit his website at paytaxeslater.com. Now get ready to talk smart money.


1. Introduction to Guest – Bill Flanagan

David Bear:  Hello, and welcome to this edition of The Lange Money Hour, Where Smart Money Talks.  I’m David Bear, here in the KQV studio with Jim Lange, CPA/Attorney and author of two best-selling books, “Retire Secure!” and “The Roth Revolution: Pay Taxes Once and Never Again.”  From the mayor’s race to Marcellus Shale, surprising developments are reshaping the region.  What’s the state of southwest Pennsylvania?  On tonight’s Lange Money Hour, CPA/Attorney Jim Lange welcomes Bill Flanagan, long-time executive VP of the Allegheny Conference and television business reporter.  Bill has been watching the development of the region’s economy for more than thirty years.  He has also served as president of the Pittsburgh G-20 Partnership in 2009, and executive director of Pittsburgh 250 celebrations in 2008.  It’s sure to be an interesting conversation, and listeners, since our show is live, Bill and Jim are available to answer your questions.  To join the conversation, call the KQV studios at (412) 333-9385.  And with that, I’ll say hello, Jim and welcome, Bill.

Jim Lange:  Welcome, Bill. 

Bill Flanagan:  Great to be here!

Jim:  Before we get into the first substantive question, I just thought I would tell the listeners, I actually have a little history with Bill.  He had a column called “Your Money” with the Pittsburgh Post-Gazette, and he did something that I could never do, which is to write good, cogent financial information in a very, very short format.  I forget how many words you had, but it was very short, and Bill and I actually did 23 columns together, and I don’t think we spoke more than a half-dozen times.  He would e-mail me something and then I would e-mail him back and then sometimes it was a furious pace where there’d be an e-mail, and then one minute later, another e-mail coming back and forth, back and forth, back and forth.  When I didn’t get any more e-mails for about five minutes, I knew he was done with the column and this was sometimes at ten, eleven o’clock at night. Then the next morning there it would be in the Post-Gazette in its final form and I always admired your ability to cut right to the chase, you know, without footnotes, without hemming and hawing, giving great information.

Bill:  Well, thanks.  I used to call it my ‘columnette’ because it was basically a paragraph.  But if you actually looked at the number of words in that little column, it was almost the same length as the copy in a typical 90-second TV news story.  So, that’s essentially how much I was writing, and I’d gotten used to it in television, so I just adapted it to the little tiny space we had in the Pittsburgh Post-Gazette.

David:  We’ll give you more time than that tonight!

Bill:  Okay! 

Jim:  Well, I always thought that that was hard.  I even remember English professors saying, “Well, if you want me to do a two-page, that’s great, but if you want me to do a two-paragraph, that’s much harder.”  And so, you had like a half of one paragraph, so…

Bill:  Broadcast is good discipline, as you’ve learned doing this show, but the challenge now is to get it down from one hour to one minute and then you’ll know you’re really a broadcaster!

2. What is Allegheny Conference on Community Development?

Jim:  All right, as David said, we have a little bit more time tonight.  So Bill, I wanted to start with, there is this organization that has been here a long time that you obviously are intimately involved with, called the Allegheny Conference on Community Development.  Can you tell our audience a little bit about the Allegheny Conference on Community Development and also, what is your role in the Allegheny Conference?

Bill:  Sure!  A little bit of a history lesson because even though the organization’s been around for almost seventy years, a lot of folks here in the region really don’t know what it does. The Allegheny Conference on Community Development is a private sector leadership organization (that’s what we call it) that’s really dedicated to improving the economy and the quality of life in all ten counties of southwestern Pennsylvania.  What does that mean exactly?  Well, it was formed back during World War II and the civic leaders here in Pittsburgh were very concerned in the 1940s that without the artificial stimulus of the war effort that Pittsburgh would essentially be uncompetitive going forward.  The region was really living up to its name in those days.  It was truly a pit!  And we’ve all heard the stories, right?  Streetlights burning 24/7, businessmen wearing an extra white shirt to work every day and so the civic leaders at that time, and initially, it was the president of Carnegie Tech, said “We need to put together a committee for post-war planning, to start thinking about how we’re going to make Pittsburgh compete going forward.”  They formed the committee in 1943, so it was actually 70 years ago this year, and one of the outcomes was the formation of the Allegheny Conference in 1944, when it was legally incorporated.  It was the vehicle by which R.K. Mellon was able to bring together the business community to work with Mayor David Lawrence, who was ‘the boss’ in Pittsburgh in those days, in one of the first great public/private partnerships, to transform Pittsburgh.

Jim:  Was that the Renaissance?

Bill:  That was Renaissance One.  That’s how we know it today.  And they set four big objectives: one was smoke control, and it took about twenty years, but they actually managed to clean up the smokey skies.  We still have air-quality issues today. We’re chipping away at, but the big obvious pollution was dealt with very early on.  And then, it was urban redevelopment, so Gateway Center and some of the other urban redevelopment projects that we’ve seen around Pittsburgh in the year since.  That was spearheaded by the conference.  Another one, interestingly enough, was a regional sanitary authority.  Alcosan resulted from that first plant in 1944 and the last big project that they took on in those days was flood control, the lock and dam and reservoir system that keeps the city from flooding, for the most part, every spring.  They were big, long-term projects and the Conference existed as a way to bring together largely the business community in those days, but over the years, it’s evolved to now include the leaders of the universities, the big hospital systems, the foundations all participate on the board of the Allegheny Conference.  We have about 320 for-profit and not-for-profit organizations that work together now to put a plan together and try to improve the economy and the quality of life.  We are not, however, despite our name, part of Allegheny County government. 

Jim:  Okay.

Bill:  We’re a private, not-for-profit corporation that really is set up to address the issues of the entire region in southwestern Pennsylvania and hopefully continue to build a better place.

Jim:  And what is your specific role with the Allegheny Conference on Community Development?

Bill:  I’m the executive vice-president of corporate relations.  In my domain is all of our membership and fund-raising activity, any educational programming that we would do for our members and then the communications apparatus for the conference and now our three affiliates.  Ten years ago, actually, ten years ago this year, the Conference merged with the Greater Pittsburgh Chamber of Commerce, the Pennsylvania Economy League of Greater Pittsburgh, and the Pittsburgh Regional Alliance to form one unified economic development organization.  My team at the conference provides the membership, fund-raising support for all four organizations, as well as the communication support across the agenda. 

Jim:  And what is your relationship with, say, I realize you work with ten counties, but what is your relationship with the county governments, for example, because it sounds like there’s some kind of interplay.

Bill:  Oh, there is!  Back and forth, and it’s always been a public-private partnership structure going all the way back to the very beginning.  It depends on which side you’re talking about, whether we’re the improving Pittsburgh side or the marketing Pittsburgh side, right?  On the improving Pittsburgh side, we typically will have a very strong working relationship with the County Commissioners in the nine counties outside Allegheny and the county executive here in Allegheny, and as they tackle issues, they need support and they need the business community to either help them understand issues better, come up with strategies and plans, sometimes lobbying in support in Harrisburg if it’s a state issue.  We can engage with county government in looking for ways to make the region more competitive.  On the marketing side, we function as a lead generator for all ten counties, so the Pittsburgh regional alliance will go out around the world and try to convince businesses (for the most part) to invest here, to either expand here or move here or relocate here, and so when we get somebody on the hook and they’re actually very interested in the region, then we help them identify sights within the ten counties that might meet their needs.  Then, at the point when they say, “Well, okay.  We’re down to these couple of sites.  We’d like to talk with those counties,” we’ll hand them off to the economic development organization within each county to work directly with that prospect in hopes of getting them to invest in the region.  And it’s a big change.  I mean, twenty years ago, and really as late as the mid-nineties, there was no one-stop shop or unified economic development organization in the region, so it was every county for itself.  And then there was a study conducted by CMU about twenty years ago that determined that they were not handing off leads to one another.  If they couldn’t help the particular prospect, they often said, “Okay, sorry,” and the prospect would go to another metropolitan area or another region.  Now, the way it’s supposed to work and I think it really does because of what’s been built here, is if one county can’t help and they don’t have the right site, they’re more than willing to say, “Hey, I want you to talk to my neighbor across the river across the hill,” and they’ll now cooperate in hopes that we can generate more investment and more jobs being created here in the region. 

Jim:  All right.  Well, speaking of more jobs and more activity in the region, and I always kind of think of you as a little bit of an energy guy.  I don’t know if that’s a fair characterization or not.

Bill:  Well, energy’s one of the five, sort of, target sectors that we really pay attention to, but in recent years, in the last five years, it’s certainly been one of the big drivers of investment and activity in the region.

3. Marcellus Shale May Draw Business Investments to the Area

Jim:  All right, well, if we’re talking region and we’re talking energy, we have to talk about Marcellus Shale, and then there was the headline deal, the $500 million deal with the airport.  Could you comment from your perspective, and I realize that you might have certain limitations on what you could say, but maybe not, on what your perspective is, whether that was a good deal and where that money might find itself? 

Bill:  Well, number one, I think the whole Marcellus Shale, talk about an accident of geology and geography that Pittsburgh happens to sit on top of what may well be the second largest proven natural gas reserve in the world.  The bigger one, I think, is in Iran, and that one’s a lot harder to get to, right?  And if you actually ever look at the footprint of the Marcellus Shale from upstate New York down through West Virginia and you look inside the footprint and it’s kind of halfway across PA and into eastern Ohio, what you find is that there’s only one metro with a major international airport, really only one major metro anywhere in the footprint, and that’s ours.  And not only that, we are smack dab in the middle.  So, that’s sort of the accident of geography and geology and then we’re surrounded by most of the U.S. and Canadian demand for the gas and for the liquids that are part of it.  So, it’s an enviable position to be in and it’s an energy resource that rivals the one Pittsburgh first brought to the world 150 years ago with Drake’s oil well up in Titusville.  It’s a remarkable opportunity.  What it means out at the airport and this is something that the Greater Pittsburgh Chamber of Commerce, one of our affiliates, testified in favor of.  What it may enable us to do up at the airport is use that revenue in a number of different ways and it’s ultimately going to be up to the airport authority and county council and the county executive to decide exactly what they want to do.

David:  And by law, it has to be used at the airport?

Bill:  It has to be used at the airport according to FAA law, this resource underneath.  So, it has to be used on airport property.  But it can be used in a couple of different ways.  From our perspective, since one of our big priorities is improving air service at the airport, one of the big opportunities is, for example, to pay off the remaining debt on the midfield terminal, which is now twenty years old, to accelerate the pay down of the debt.  Once the debt’s paid off, then the cost of operating at the airport drops.  And so, our airport would go potentially from having some of the higher landing fees in the country to some of the more affordable landing fees.  That then becomes a reason to knock on the door of the airlines and say, “Hey, take another look.  It’s a much more cost-effective place to do business.  Don’t you want to bring more flights in here?”  We’re hoping that it’ll time out to an improving national economy, decreasing congestion on east coast airports, that are causing incredible delays and a nuisance and driving up everybody’s costs, and that’ll be an additional incentive for the airlines to look for a more cost-effective place to connect passengers.  So, the natural gas revenue offers the opportunity potentially to pay off that debt faster, have a more cost-effective business proposition to make to the airports, and maybe accelerate the day when we can have more service.  Beyond that it’s a great resource for the county to have at its disposal to put in additional infrastructure at the airport.  There’s a lot of available land out there and there’s no roads, there’s no water lines, there’s no sewer lines, and before you can get companies to invest in the region, they want to have that infrastructure already in place.  They won’t commit unless the infrastructure is in.  So, it potentially allows Allegheny County and the airport to be proactive in putting an infrastructure that then, hopefully, will draw additional business investment.


4. Environmental Concerns from Drilling

Jim:  Do you think that there will be sufficient oversight for environmental control and safety, and I have some friends who are totally freaked out that the government, in effect, is allowing Marcellus Shale drilling on its property so close to major waterways that could potentially contaminate drinking water for the entire city or even the region?

Bill:  Well, I cannot imagine the level of government oversight of a drilling operation on an airport, because not only are you dealing with local and state, now you’ve got the federal government and the FAA paying attention to everything that’s going on.  I suspect and I think CONSOL Energy has been the company that’s been tapped to do this. I suspect that this will be the most by-the-book safety conscious drilling operation we’ve probably ever seen in southwest Pennsylvania because the scrutiny is going to be unbelievable. 

Jim:  Well, that’s actually reassuring because usually, I’m for the little guy, but for Marcellus Shale, I sometimes prefer the larger companies that might have better oversight of their own operations. 

David:  I’ve heard, there was an article in the paper just recently assessing independently the lease deal that was struck, and the gentleman who was doing that said it was a remarkably good deal that the county actually got for it. 

Bill:  Well, and again, it has a lot of economic benefits to the region, and the reality is the big players that have come into the region in the last few years, and of course, CONSOL is homegrown.  I mean, they’ve been here for 150 years, I think.  I mean, they’re one of Pittsburgh’s oldest companies.  But we’ve also seen the big global players come into the region, Chevron, Shell and Exxon, and what they have told us, and I believe it, and I think my colleagues at the Conference believe it, is the big global players, they want to do it by the book.  And this is a technology-intensive, capital-intensive way of drilling and you need resources, and these big companies have the ability to do it right and do it by the book.  I think they know that if any one of them screws it up and doesn’t pay attention and doesn’t do it right, they’re all going to be in trouble.  So, some of these companies have been leading the charge, you know, for regulation and really smart regulation in Pennsylvania to make sure that it’s really done well. 

Jim:  The thing that I like from an environmental standpoint, let’s just say if you have a traditional gas or oil well, there’s obviously going to be a certain amount of environmental interruption in the area that you’re drilling, and then the transportation and the roads, taking the gas out or the oil out, well here, for maybe roughly the same environmental impact, now you’re going way beneath the surface and you’re going out horizontally, and you’re getting just exponentially more amount of gas per space.

Bill:  Well, yeah.  The surface impact, as you mentioned, is dramatically lower.  There are thousands and thousands of gas wells all over Pennsylvania, because the natural gas industry was born here, right?  I mean, the first commercial natural gas well in the world was in Murrysville, and that was 125-130-140 years ago and we’ve been doing this shallow gas well drilling ever since. Since the late nineteenth century and the whole state is riddled with these shallow wells.  And what’s happened with Marcellus is they’ve discovered this, it’s not a new reserve, the reserve’s been there for three or four hundred million years, but we didn’t have the technology to get to it before.  And so, that’s opened up the possibility for a whole new approach and to untap this incredible new resource and one of the advantages with this deep horizontal drilling technology, you actually are less disruptive on the surface.  Now, that’s not to say this is risk-free.  These are big industrial processes and even though they strive to be 100% in terms of safety and attention to every detail, nobody’s perfect and there’s going to be issues.  And there are big questions that still have to be answered as the industry scales: how are we going to manage all of the volumes of water and the overall impacts on infrastructure and everything else.  Personally, I think there’s an advantage to being on the frontier because the reality is Pennsylvania’s out in front and dealing with a lot of these issues. There are a number of companies here, not just the giants, but middle market companies, innovative companies that are developing the solutions they need to solve all these problems.  As we do and develop this resource, we’re going to be in a leadership position and then being able to market these technologies and innovations and solutions to other places in the United States and the world that eventually will be doing something similar.  That becomes an export opportunity for the region and for lots of midsize companies, as well.

Jim:  Well, going back to Marcellus Shale, what do you think about the city ban and what do you think about Harrisburg’s reaction to the city ban?

Bill:  You know, I can understand the angst among city council at the time that they implemented the ban.  There was no clear statewide policy.  The legislature had not acted and implemented any kind of statewide Marcellus Shale policy and there was concern among municipalities across the commonwealth about what would this really mean.  They didn’t want to plunge into things and they were trying to be careful.  They were trying to protect the interests of their constituents.  I think the reality is, today, there is a statewide policy in place and an approach to this.   I think the other reality is that, for the most part, the natural gas industry is not interested in drilling in urban areas right now.  It could be decades before they get to that point because there’s so much other land to be drilled.  So, in the short run, currently, the challenge the city has is they’ve sort of sent this anti-natural gas industry message that may be getting in the way of having the industry invest in other types of facilities in the city that have no relationship that are not directly part of the drilling.  That’s probably the biggest risk that we’re seeing, a lot of the investment in whether it’s support facilities, headquarters, everything else, ringing the city, especially on the I-79 corridor, and that the ban that’s in place may be enhancing the propensity of the industry to invest outside the city.  So, that’s the biggest short-term issue. 

Jim:  Well, let’s say that you were the czar, or perhaps locally, the mayor, would you try to change that?  Is that one of those questions that’s tough?

Bill:  No.  I think that from our standpoint as an organization, I mean, I think we’ve made it clear that we think it’s not in the city’s best interest, if indeed, they want to be able to capture as much of the investment that’s possible from the Marcellus Shale industry and get it into the city.  The reality is, the city of Pittsburgh is benefiting from what’s going on.  It’s filling hotel rooms, for example.  There are many workers in the natural gas industry who are living in the city and reverse commuting. 

David:  And Southwest Airlines just introduced, they said they’re going to start flying to Houston now.

Bill:  Absolutely and other airlines have upgraded the size of planes on the Texas to Pittsburgh runs.  We’re benefiting indirectly and people who live in the city and work in the city are already benefiting from this industry.  They potentially have the opportunity to get additional investment in the city without the ban, but that’s the kind of policy call that we elect council people and mayors to deal with and they have to weigh the pros and the cons. 

David:  I sense a segue here, but before we do that, let’s take a quick break, and when we return, if you have a question or comment, call the KQV studios at (412) 333-9385.

BREAK ONE


5. Pittsburgh is the Brand for Southwestern PA

David:  Well, welcome back to The Lange Money Hour.  I’m David Bear, here with Jim Lange and Bill Flanagan, from the Allegheny Conference on Community Development.  Listeners, you can join the conversation.  Call KQV at (412) 333-9385.  Jim?

Jim:  Well, Bill, I recognize that you’re really representing, let’s say, the region or the ten counties, but we obviously have a very interesting mayoral race with Mayor Ravenstahl deciding not to run for reelection.  How does this race impact the region and what is the importance of this race on the region?

Bill:  Well, the reality is, Pittsburgh is the brand for all ten counties, for all of southwestern Pennsylvania and when visiting delegations come here, whether it’s across the country or from around the world, who’s the elected official they all want to meet?  It’s the mayor of Pittsburgh.  I remember, years ago, when Tom Murphy was the mayor and there was a Japanese company that was making a big investment in Alcoa Center in Westmoreland County, not in the city, not in Allegheny County, the next county over and they insisted that Mayor Murphy meet with them and welcome them to the region and they wanted to have a photo op.  So, it’s clearly important and that’s clearly the stakes for the region from a visibility standpoint and a branding standpoint are important, but also how well the city is managed is important, because since most of the news coverage related to any municipality in the entire region is focused on the city of Pittsburgh, to whatever extent the city functions well or functions poorly becomes a proxy for the entire region.  It’s unfair.  I mean, we have, what?  132 municipalities in Allegheny County alone, but the reality is, no matter how many of them are well maintained, well-functioned, if the city of Pittsburgh doesn’t do well, it hurts everybody and so the stakes are very high.  And it’s all in the hands of the voters in the city of Pittsburgh.

David:  For the first time, yeah.

Bill:  For the first time in a long time, yeah.

Jim:  Well, I know that you are constrained by making an endorsement as your position.  I don’t have that constraint.  I will just mention that I’ve had Michael Lamb on the show twice and found him to be very knowledgeable about virtually every issue that I have thrown at him and I’ll also mention that he also was available to be interviewed by my daughter when she was in eighth grade and then also taught a course of how to use the Register of Wills in the Prothonotary’s office.  This was years ago.  So, nothing against any of the other candidates, I just found him to be very competent, knowledgeable and I can picture him, I think, in your words, being a good businessman and a good person to represent the city.

Bill:  Well, I’ve known all the candidates to a greater or lesser degree for many years, both the candidates who are declared and some of those who are being speculated about.  You know, what I can say, and obviously, I’m not going to pick a winner or even a favorite, but what I will say and what I know about all these guys is they all passionately care about Pittsburgh and I think they each have a different vision for where they want to take the city, for what the issues are that have to be addressed and where the city needs to go.  I think that’s what the election needs to turn on and that’s what voters need to try to understand.  But what I can tell you and I feel very strongly about, is that every single one of them really wants the city of Pittsburgh, and in fact the region, to be even better than it already is. 

Jim:  Well, you don’t get that very often.

David:  You know, before we leave this topic, I know you’ve also been instrumental in, what I’ll call, the perception of Pittsburgh from afar, and I know that’s been changing.  Do you want to speak about that for a minute?

Bill:  Yeah, well, I think you mentioned in the intro that I was sort of the chief of staff for the G-20 effort, at least on the private sector side of that effort, a few years ago, and I think, in a lot of ways, the G-20 was really a game-changer.  We also had done just the year before, the 250th anniversary celebration, and during that celebration, we really tried to emphasize Pittsburgh as this center of innovation, as an exciting place with a bright future, not just a great past.  The G-20 really gave us an opportunity to bring it into present day and really to have the attention of the world for a summer, as it turned out, not just the two days of the summit and really focuses the world’s attention on the Pittsburgh story and it’s been transformative.  Since the G-20 was here, we’ve had more than 25 leadership delegations, mostly led by chambers of commerce from around the United States, who have come here to benchmark Pittsburgh.  And many of them are from the cities that we used to compare ourselves to, right?  When people moved away here when the steel industry had its issues thirty years ago, they went to some of these places that are coming here.  This year, Denver is bringing a delegation to Pittsburgh. Tulsa, Oklahoma’s coming to Pittsburgh and everybody wants to know what the recipe was.  How did we engineer this remarkable comeback?  How did we get Pittsburgh back in the game?  So, among a sort of civic leadership-type of an audience, there’s a lot of buzz about Pittsburgh.  I think what’s even more encouraging is that there seems to be some indication that among twenty-somethings and young people, there’s also some buzz now.  If you look at current population trends, we are no longer losing our young people.  We’re net positive and have been for a number of years.  The population of twenty-somethings is growing here.  They’re extremely well educated.  And because our region, over the last five years, has outperformed the national average and most other regions in the United States, I think over the past five years, we’ve ranked consistently in the top five.  There is less reason to leave and there’s more reason to come.  And so, we’re watching the population demographics shift.  I think our biggest branding challenge going forward is how do we communicate the level of opportunity that’s happening here, in part because of energy, but in part because of the other sectors that are doing very well, and we’ve got to do a better job of telling that story. 

David:  Well, you said imagine Pittsburgh, you were telling us about that earlier.

Bill:  Yeah, imaginepittsburgh.com is a website we launched for the 250th, but really changed it in 2009 to really focus a lot more on jobs and career opportunity in the region.  So, it’s a searchable database.  If you go to imaginepittsburgh.com, you can literally find every single job that’s listed online in all ten counties of southwestern Pennsylvania and you can search it by profession, financial planner, CPA, lawyer, and it’ll tell you exactly how many…and as a matter of fact, I think ‘accountants’ is the number two category for job openings right now in southwestern Pennsylvania.  So in June, we’re rebuilding the whole site.  We’re going to re-launch it with a new marketing campaign and really try to get the word out that there are jobs here in the region.  There are thousands, if not 20,000 open jobs, right now,and we’re having a hard time finding enough people with the right skills to match the jobs.  So, we’ve got to get out the word.  We’ve got to convey the sense of opportunity and the future will be very bright for the region. 

Jim:  And it is interesting, because I always think of, let’s say, at least Allegheny County is maybe the second oldest county in the country, next to, maybe, Dade County in Florida.

Bill:  That’s actually a misnomer.  We are the second oldest among the major metros in the United States.  We’re actually nowhere near the second oldest county if you look at…there are, what, 3,000 counties in the United States of America.  We’re not number two out of all of them!  And I know, I’m being a PR guy for the chamber right now, but it’s not as bad as everybody thinks!

Jim:  Well, but I will personally attest, you mentioned the trails, and I use the trails for walking and biking and hiking and things like that, and there are a lot of young people out there, and I did not see that, and I’ve been on the trails for years and years, and I have not seen that.

Bill:  I’ve had the same observation and the other thing that I’ve been intrigued by just in the past few years, for many years, we’ve been trying to build the technology structure here, you know, get started up, so there were all of these high tech startups.  You had to be a software engineer, a robotics guy, or more recently, medical devices or biotech, right?  So, you had to have some advanced degree and you had to have a lot of capital and those were the kind of businesses that were getting started.  I’ve been a lot more intrigued recently by really fun, unusual businesses that are being started by young people that might be a restaurant, it might be a food service business, it might be some kind of new service business, that’s not in that technology space and thank goodness the technology stuff is still happening, but I think it’s a real sign of vitality in Pittsburgh when all of a sudden, you start to see the sort of café culture kinds of businesses pop up here.  We didn’t see that until maybe, I think, five years ago, and now there seems to be some additional momentum.  One thing we do know about the young people in the region is that they are growing, so that’s good.  They’re growing too slowly to meet the demand that we’ve got out there, so that’s something we have to work on, but they are extremely well educated.  I think if you look at the percentage of the work force, twenties to thirties with a Bachelor’s Degree or above, Pittsburgh has the fifth best-educated population of twenty-somethings and thirty-somethings in the country.  And if you look at that same population with a Master’s Degree or above, an advanced degree, we’re number one in the United States as a percentage of the work force.

6. Recreational Developments in the Region

Jim:  Well, that’s pretty impressive, and I know that the city and county and region has done things, let’s say, both in the recreational opportunities and we had just mentioned trails, we have a couple breakthrough events coming up in June!

Bill:  We do, indeed!  And I think the one big one is the completion of the ten year project to renovate and restore Point State Park and the fountain, and that will be celebrated on…it’s actually like a $45 million total price tag over the last ten years.  So, on Friday, June 7th, the fountain will be turned back on.  It’s been off, basically, for five years.  And it will be turned back on and once again become sort of Pittsburgh’s symbolic signature of our transformation.  So, that’s June 7th.  That’s at the beginning of the Dollar Bank Three Rivers Arts Festival and then the festival this year is book-ended by the other big event and that’s the celebration of the completion of the Great Allegheny Passage bike trail, a continuous biking and hiking trail that goes all the way from Washington D.C. to Pittsburgh across the Allegheny Mountains. 

Jim:  Well, I’m particularly interested in that because that’s what I do for exercise, and even during the summer when it is nice, before work, I will actually ride my bicycle from my house down to the river, bike along the trail, but up until now, if you turn towards the South Side, after crossing, say, the Hot Metal Bridge, there is an abrupt end, and that will no longer be the case in June.

Bill:  Right.

Jim:  It will actually be open, and if you have the time and energy, you can bike all the way to Washington D.C. on a continuous trail.

Bill:  If you’re in decent shape, it takes about a week.  If you’re in my kind of shape, you do it in two-day chunks over the course of a summer and you can get it all done!  But it’ll be an exciting event.  It’ll be Saturday, June 15th.  Actually, there’s going to be a week-long ride up from Washington D.C. to Pittsburgh for those people who want to have that kind of experience, but on Saturday the 15th, everybody in the community is going to be invited to bring their bikes and their kids and ride from Sandcastle, ride from the Hot Metal Bridge, ride just from Grant Street down the Boulevard of the Allies into the park for a big community celebration.  You know, the trail has taken forty years to build, the Great Allegheny Passage portion of it.  It’s almost entirely volunteered labor to get it done.

David:  It’s an incredible project.

Bill:  Incredible and maintained by volunteer trail clubs, tens of millions of dollars invested in bridges and tunnels and everything that had to happen.  So, it’s an enormous civil engineering project, volunteer project, it’s about American history, it’s about a great outdoor…there’s nothing else like it in the world.  I think, David, you’re the travel guy, I think it’s safe to say, right?

David:  And I have said it’s a world-class bike trail.  Well, the part between here and Cumberland, Maryland is what I think is the best because the towpath along the river is not as well maintained as…

Bill:  It’s a national park.

David:  It’s a national park.  But even that, it’s an amazing resource to have in the region, and in a way, it really does serve to knit the region together in a very tangible way.

Bill:  Well and increasingly so.  It was interesting when they did the Power of 32 visioning initiative the last couple of years and we found this too during Pittsburgh 250 through our community connections project, it was interesting that the publicity around the trail, which was one of our signature projects for the 250th, led people in almost all of the participating counties, and we had fourteen counties involved, to say that…you know, what they all seemed to have in common was this idea that we would like to have our trails connect to that trail.  Everybody seemed to see it as a real unifying property for the region and that’s continued as part of the Power of 32.  I also think that was one of the big transformative visible signs of transformation that really changed people’s minds about Pittsburgh, because if you hadn’t been here in ten or fifteen years, to see the riverfront redevelopment that’s happened, to see the trails, the rail-to-trail conversions, to see the linear parks, to see what was happening in Point State Park, it just sent a totally different message about what this place was and what our priorities were and what our priorities are and how we’re investing in the future, and so much of it was focused on outdoor recreation and beautiful places and sustainability.  Those kinds of themes I think it just changed the world’s mind about Pittsburgh.

David:  Well, the world was so much in mind of smoky old city and still is that way until people actually come here to see it.

Bill:  It’s still a challenge, but we’re chipping away at it, you know, one bicyclist at a time! 

Jim:  And the engineering marvel that you talk about, you know, particularly the most recently completed section, which actually one of my friends, Paul Heckbert, is on the board with, and he talks about, you’re actually having trails practically right next to live trains? 

Bill:  Oh, yeah.

Jim:  I think there were hundreds of bridges and tunnels and all types of very difficult infrastructure.  This isn’t just laying out a trail in the middle of raw land.  This is going over some pretty intense stuff up and through Kennywood and then there’s a lot of infrastructure and a lot of engineering. I don’t know how many thousands of man-hours went into this planning.

Bill:  Just enormous and the easy part was the rail trail over the mountains because that was converting an old railroad right-of-way and not that that was easy, but compared to the Allegheny County part, because I think within Allegheny County, once they hit the county line, you’re coming up the Mon Valley. There were thirty or forty different property owners, so they had to negotiate rights-of-way with every single one of those private property owners to be able to build this trail, and in fact, during the 250th, that was really the objective of naming it a signature project.  We felt if it was demonstrated to be that much of a regional priority, that it would help to pave the way for some of those negotiations about right-of-way because the property owners would understand that it was something the business community, as well as the public at large, really cared about, and so it was effective.

David:  Well, let’s take one final break here, and maybe when we come back, we can talk about another project that may have significance that way.

BREAK TWO


7. Transportation and Infrastructural Problems

David:  And welcome back to The Lange Money Hour with Jim Lange and Bill Flanagan.

Jim:  So, Bill, when mayoral candidate and treasurer Michael Lamb was on, he had some concerns that a lot of the land owned in the county was owned by non-profits and there might be some question as to, let’s say, whether UPMC, just to pick a big non-profit, is really a non-profit and should be treated specially and not made to pay real estate taxes and transfer taxes.  I think that he had some concerns that the U.S. Steel building might be purchased by UPMC, which would certainly significantly reduce the amount of taxes that the city could collect.  Do you have some concerns about the non-profits and the amount of land that is taken out of the tax rolls from the city?

Bill:  Well, there’s been a long-standing debate about what is the proper role and responsibility that non-profits should play in contributing towards city operations.  I know if you talk to the universities and then some of the hospitals, they’ll say, “Look, we operate our own police forces.  We kind of take care of our own property.  We don’t expect the city to do that, so we actually relieve the burden of the city in some cases.”  But, at the end of the day, the city’s got to pay its bills and try to resolve this issue and a city that’s largely dependent on property taxes, clearly having almost half the property or about half the property off the tax rolls is an issue that they are looking at.  I understand there’s a committee or commission that’s been put together now to really look into this, so I don’t want to get into detail.  What I will say is that Allegheny County and the city of Pittsburgh are not alone.  I mean, you can go to virtually every county seat in the commonwealth of Pennsylvania and you’re going to see enormous amounts of property owned by the government, maybe in some cases, the largest.  You take all the parks off the tax rolls, right?  You’ll see property owned by the hospital systems and if they have a college or university, that property comes off.  So, the issue is, how do you manage to pay for essential city services if they’re relying mostly on the property tax and they can’t tax large amounts of property?  And so, that’s a statewide issue.  It’s one of the challenges that have led to fiscal distress in many municipalities, not just the city of Pittsburgh, dozens of county seats and municipalities in Pennsylvania are essentially in serious fiscal distress.  And so, the issue does have to be looked at, but it’s a challenge.  I mean, if you look at the non-profits, they’ll say, “We are non-profits because we are charities because we are contributing services and relieving the burden of government.”  So, it’s not an easy issue to address and I think that’s why nobody’s come up with a solution before now.  Maybe this new committee or commission will be able to come up with an approach that everybody can live with and feels is fair.

Jim:  Well, speaking of insurmountable problems, things that are maybe common to the city, the county and the state, our transportation infrastructure in Pennsylvania seems to be crumbling and particularly in southwest Pennsylvania and you read about the bridges that need repaired and need to be replaced.  The enormous sums of money needed to get our roads and bridges and tunnels in shape and then you see projects going on that you might not think are the best use of money.  What, if anything, can be done to improve our roads and bridges and infrastructure in a businesslike manner?

Bill:  It’s a big issue and I’ll add another piece of infrastructure and that’s public transit, which is also important to move people around, get them to work, get them home, all the rest of it.  There was a governor who put together a transportation commission a couple of years ago and I believe they came out and put the price tag on what we really need to invest in Pennsylvania (this is over years) at $5 billion, and that would be to repair all the roads and bridges and the dams and whatever else was in the package, and also to sufficiently fund SEPTA and the Port Authority in Allegheny County to meet the needs of those regions.  So, it’s like a $5 billion price tag.  The commission came out with a recommendation to the governor for about $2 ½ billion, which is what they felt was affordable and they had a whole list of mechanisms to pay that tab over time to be able to do it.  That has led to a lot of debate and wringing of hands and consternation in Harrisburg about what to do, but in February, the governor kind of came forward with his plan, which was for something in excess of $1 ½ billion, to address this issue.  That’s now in the legislature.

Jim:  So, we’re only $3 ½ billion short?

Bill:  Well, of what it would take to totally fix it and I think that’s one of the realities that we all need to be aware of, that no matter how much we do, short of $5 billion, we are still going to be left with not everything the way we want and not a chance to really begin to invest in new things.  I mean, one of the issues is not just maintaining what we’ve already got, but it’s also where will we have the resources to put in the new road, or the new bridge, or beef up our transit system so that it does a better job of serving the community.  That’s what’s at stake and we’re already paying for this.  I know a lot of people are debating the different fees or taxes or whatever, but the reality is, if they downgrade a bridge, like one in Swissvale recently where they took the trucks off the bridge and they now have to make a detour for blocks around the bridge to get back to where they’re going, that’s lost time, that’s extra fuel that they’re wasting, that’s being spent and so we are paying for this right now because of the way we have to detour around the deteriorating roads and bridges.  We’re blessed that we haven’t had a catastrophic collapse here as they did, I think, in Minnesota not too many years ago.  You know, the Birmingham Bridge had a near miss not that many years ago, so there is infrastructure that’s a serious problem in Pennsylvania.  It’s got to be dealt with.  I think the hope is that the legislature’s going to take this very seriously.  The governor’s put a proposal out there. Good for him, he’s got the debate started, and now it’s got to work out in Harrisburg, but hopefully, they can craft a solution that will invest sufficiently to at least preserve what we’ve got, even if we’re not able to do a whole lot more.

8. High Point Pittsburgh as a Downtown Attraction

Jim:  Well, speaking of good things that could potentially happen if enormous resources miraculously came through, I believe David Bear, our host, has a project that he might want to mention, and that you might opine on.  So could you please tell us a little bit about High Point?

David:  High Point Pittsburgh.  Well, High Point Pittsburgh is the result of an investigation that I’ve been conducting for several years, since leaving the Post-Gazette, to see what might be done with the one acre rooftop of the U.S. Steel Tower, which happens to be flat and empty, and the largest, highest place on top of any building on earth, and it just seems like an opportunity that we need to do something about.  We’ve come up, over the last few years at CMU, a design plan and it could certainly happen. 

Jim:  So, maybe just putting up a couple chairs up there, and maybe a telescope so people can check things out, maybe.

David:  Well, you know, that might do, but…

Jim:  Cost a couple thousand bucks?

David:  Couple thousand bucks per person probably to get up there, but, you know, Bill, you’ve been up there.  You’ve seen, you know, the view…

Bill:  Oh, the view is spectacular.  You know, there’s no question that it is to be in an open space that high up and then to have such a commanding view…I remember years ago when I was in television news and we would have to do live shots around the region, you could be 70 or 80 miles out, but so long as you could see the top of the U.S. Steel Building, you could get a live shot.  These were the days before satellite trucks.  That’s how far I go back.  And so, the Steel Building was always the icon.  You had to look high enough to see the Steel Building.  But, in reverse, it means that from the top of that building, you have a commanding view of the entire region.  You know, it’s the kind of big idea that’s great to see here in Pittsburgh, because we don’t have, as much as we love the bike trail and I think that’s what they call a ‘first-day attraction’ as much as anything that we have, and we have our iconic fountain and our park, but we don’t have that single destination…

David:  First-day downtown attraction.

Bill:  Yeah, where everybody says, “That’s where I got to go.”  And, you know, in St. Louis, it’s the Arch, right?

David:  Right.

Bill:  “Oh, I got to go see the Arch if I’m going to St. Louis.”  Those are the things that you check on your bucket list.  And Pittsburgh has a lot of great things, and there’s more than enough to do here for a long weekend, or even a week, nowadays, but we don’t have that one big thing, and this is one of the big ideas, yes.

David:  It’s a possibility.  It’s a possibility and being that high, we also refer to it as ‘The Lighthouse of Southwestern Pennsylvania.’ 

Bill:  Oh!  That’s…’Lighthouse of Southwestern Pennsylvania’…

David:  And, you know, something that really sort of serves to unite the ten counties that you talk about and have us all realize that we’re in this together and it makes sense to try to work together for the common benefit.

Jim:  And David, so your vision is to really actually have a park with an infrastructure…

David:  Well, we don’t really call it a park, yeah.  You know, there’s a lot of space up there, and in fact, in the structure…

Jim:  One acre in the middle of downtown, that’s a lot of space.

David:  That’s a lot of space and actually, the structure that has come out of this investigation in the feasibility study that was done at CMU actually calls for a two-story atrium to go over the whole place.  So, actually, we’re going to have close to 60,000 square feet of indoor space, and then, on the roof of that, we’re having an open-air promenade where you can go out and be 68 stories in the sky and it would be an amazing experience, an island in the sky.

Jim:  And I understand one of the architects that actually worked on the U.S. Steel Building…

David:  Designer, yeah.

Jim:  The designer, he is on board and thinks that you have sufficient infrastructure up there.  Is that right?

David:  You can check it out in the Post-Gazette this Sunday, so…

Jim:  All right.  And the last question about this, if somebody is interested in High Point, where do you think that they should go, or what should they do?  

David:  Well, we have a wonderful website, highpointpittsburgh.org, and they’ll find everything that they want right there.

Bill:  And it’s a virtual reality tour, right?  You can go up there and kind of get a feel for what it would really be like?

David:  Not only a feel, but part of the project, we actually took, what they call, a Gigapanorama, which is a 360 degree picture of the roof.  So, when you go up in the simulation, not only can you wander around and take the elevators up and down and see the sights, you literally can see the sights from the roof.  It’s pretty cool.  So, but at any rate, let’s not go on about this.  We have other things to do, and I want to say thanks for listening to this edition of The Lange Money Hour, Where Smart Money Talks.

Jim:  And I want to thank Bill for coming down because he gave us some great insights to the region, and frankly, made me even more optimistic about the future for the region.  So, thank you, Bill.

Bill:  Absolutely.  A lot to look forward to, yeah. 

Jim:  It’s been a pleasure.

David:  Well, and as always, you can hear an encore broadcast of this show at 9:05 this Sunday morning, here on KQV, and you can always access the audio archive of past shows, including written transcripts, at the Lange Money Hour website, www.paytaxeslater.com, and while there, check out the new video segments of Jim’s interview with John Bogle, founder and long-time CEO of the Vanguard Group, and he talks about the differences between investment and speculation.  And finally, please join us on Wednesday, March 20th at 7:05 for the next edition of The Lange Money Hour, where Jim’s guest will be Jan Cullinane, author of “The Single Woman’s Guide to Retirement.” 

END

 

 

James Lange, CPA/Attorney

Jim is a nationally-recognized tax, retirement and estate planning attorney with a thriving registered investment advisory practice in Pittsburgh, Pennsylvania.  He is the President and Founder of The Roth IRA Institute™ and the bestselling author of Retire Secure! Pay Taxes Later (first and second editions) and The Roth Revolution: Pay Taxes Once and Never Again.  He offers well-researched, time-tested recommendations focusing on the unique needs of individuals with appreciable assets in their IRAs and 401(k) plans.  His plans include tax-savvy advice, will and trust preparation and intricate beneficiary designations for IRAs and other retirement plans.  Jim's advice and recommendations have received national attention from syndicated columnist Jane Bryant Quinn, his recommendations frequently appear in The Wall Street Journal, and his articles have been published in Financial Planning, Kiplinger's Retirement Reports and The Tax Adviser (AICPA).  Both of Jim’s books have been acclaimed by over 60 industry experts including Charles Schwab, Roger Ibbotson, Natalie Choate, Ed Slott, and Bob Keebler.

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