Act 44 - Port Authority of Allegheny County

PORT AUTHORITY OF ALLEGHENY COUNTY
Labor Contract Structure Concerns
• Union employees’ healthcare and post-retirement benefits package
is far more generous than the national average and is far more than
county employees and regional taxpayers receive.
• Continuation of the union employees’ current healthcare and postretirement
benefits package will require Port Authority to significantly
cut service, raise fares and layoff employees in 2009 and every year
thereafter until transit service eventually becomes insufficient to
adequately serve the region's mobility needs.
• Port Authority management and non-represented employees have
already accepted wage and benefit concessions, including the
elimination of lifetime health benefits and reduction in pension
benefits.
• Represented employees have been asked to accept a fair contract
with wage and benefits concessions comparable to those put into
place nearly one year ago for non-union, management and Police
Association employees.

PORT AUTHORITY OF ALLEGHENY COUNTY
FY 2008-09 OPERATING BUDGET
Objectives
• Improve System Effectiveness and Achieve Cost Reductions as
Recommended by the Transit Funding and Reform Commission and to be
addressed through the Transit Development Plan
• Successful Negotiations of the ATU-85, Transit Police, & IBEW Contracts
• Maintain Current Service and Fare Levels
• Continuation of the North Shore Connector Project
• Maintenance of Capital Assets/State of Good Repair
Assumptions
• The State will Provide Operating Assistance at the Level Recommended in
the Governor’s Budget
• Allegheny County Operating Assistance is Sufficient to Match State Funding
• Increased Passenger Revenue Due to a Complete Year of Higher Fares and
due to the Increases Negotiated into the Pitt & CMU Contracts
• $10 Million minimum savings will be achieved through collective bargaining
process.

PORT AUTHORITY OF ALLEGHENY COUNTY
Multi Year Issues - Objectives of Bargaining
• Balanced FY09 budget must achieve savings in healthcare, pension, and labor
costs or reduce service.
• Funding flat- healthcare, fuel and pension expense growing at higher rates.
• Benefits costs expected to exceed wages and salaries.
Projections for Fiscal Years 2010 – 2013
FY2010 FY2011 FY2012 FY2013
Revenue $ 93,522 $ 94,891 $ 99,932 $101,632
Oper Grants & Caps $260,735 $258,683 $258,705 $258,728
Gross Expenses $373,888 $394,454 $416,247 $441,373
Proj Oper Deficits ( 19,632) ( 40,881) ( 57,609) ( 81,013)
OPEB Liability ( 36,000) ( 35,600) ( 35,400) ( 35,400)
Objectives of Bargaining
• Additional Savings in:
- Healthcare costs for current and future retirees
- Pension
- Wages & Salaries
• Changes in work rules to promote increased service efficiency.

PORT AUTHORITY OF ALLEGHENY COUNTY
Cost Structure Concerns
• Healthcare costs have risen from $38.8 million in FY 2002 to a
projected $67.9 million in FY 2009 (75% increase).
• Pension contributions have increased from $1.2 million in FY
2002 to $16 million in FY 2009.
• The Other Post Employment Benefits (OPEB) funding
obligation for FY 2008 is $37 million and is compounded by
approximately the same amount every subsequent year.
• Diesel fuel prices will rise from $2.28 a gallon in FY 2008 to
$4.15 (or more) a gallon in FY 2009. Every penny increase in
the cost of diesel fuel adds $80,000 in expense to Port
Authority’s budget.

Budget Challenges: Healthcare Costs
(In Millions)
$70
Annual Cost
* = Projected
$65
$60
$55
$50
$45
$40
$35
$30
$25
PORT AUTHORITY OF ALLEGHENY COUNTY
OPERATING BUDGET CHALLENGES: FISCAL YEAR 2009
Exclusive agreement
w/ Highmark
$38.8
$35.3
$39.4
$51.5
$60.6
$59.3
$60.2*
$67.8
2002 2003 2004 2005 2006 2007 2008 2009
Fiscal Year

Budget Challenges: Pension Expense
Annual employer contributions
(In Millions) $22
$20
$18.4
$18
$16
$14.7
$14
$12.1
$12
$10
$8
$6
$3.3
$3.1
$4 $1.7
$2
$1.2
$0
2002 2003 2004 2005 2006 2007 2008 2009
Annual Cost
PORT AUTHORITY OF ALLEGHENY COUNTY
OPERATING BUDGET CHALLENGES: FISCAL YEAR 2009
* FY09 primarily due to asset smoothing for 2007.
Fiscal Year
$16.0 *
Projected
2009 Costs

PORT AUTHORITY OF ALLEGHENY COUNTY
Liability for Other Post-Retirement Benefits (OPEB),
Currently Unfunded
$ Millions
$40
$35
36.6
36.0 35.6 35.4 35.4
$30
$25
$20
FY2009 FY2010 FY2011 FY2012 FY2013
OPEB Liability

PORT AUTHORITY OF ALLEGHENY COUNTY
Budget Challenges: Diesel Fuel Expense
$40,000,000
$35,000,000
$4.15/gallon
Budget
$30,000,000
$25,000,000
$20,000,000
$1.94
$2.13
$2.28
$15,000,000
$1.33
$10,000,000
67¢
88¢
$5,000,000
$0
FY2003 FY2004 FY2005 FY2006 FY2007 FY2008
Fiscal Year
FY2009
Budget

PORT AUTHORITY OF ALLEGHENY COUNTY
State & Local Funding Structure: Act 44
• Act 44- creates Public Transportation Trust Fund (PTTF)
• Provides dedicated, predictable funding
• Structure is simple and transparent
• Funding linked to need and performance
• Designed to strengthen accountability and promote operating and financial efficiency
• Act 44- expected to generate $946 million Statewide in FY08/09
• Program will fund Transit Operating Assistance, Asset Improvement, Capital
Improvements, New Initiatives and Programs of Statewide significance.
• PTTF will provide Port Authority with $184,457,990 in Operating
Assistance in FY09
• Act 44 requires 15% local match or $27,668,699 in County Operating Assistance in FY09.
• Increase in State Operating Assistance less than 1%.
• Future Act 44 Assistance anticipated at levels below FY’09
• Assuming a 3% annual inflation rate, lack of growth in Act 44 a concern

PORT AUTHORITY OF ALLEGHENY COUNTY
225,000
200,000
175,000
150,000
125,000
100,000
75,000
50,000
25,000
0
Projections of Act 44 State & County Income
$ ,000
FY2008 FY2009 FY2010 FY2011 FY2012 FY2013
State
County

PORT AUTHORITY OF ALLEGHENY COUNTY
The Bottom Line—Collective Bargaining
• The Collective Bargaining Agreements negotiated this year must
take major steps toward reining in healthcare and post-retirement
benefits costs.
• Taxpayers, transit riders, and Port Authority management and nonrepresented
employees have all done their part to preserve
affordable, accessible public transit in Allegheny County.
• Represented employees have been asked to accept a fair contract
with wage and benefits concessions comparable to those put into
place nearly one year ago for non-union, management and Police
Association employees.
• Without union concessions, Port Authority will be forced to
significantly cut service, raise fares and layoff hundreds of
employees.
• If Local 85 ATU agrees to Port Authority’s contract proposal,
operating expenses would be reduced by at least $10 million in FY
2009 and at least $20 million in successive years.

PORT AUTHORITY OF ALLEGHENY COUNTY
Bottom Line—Act 44
• Act 44 funding is dedicated and predictable.
• Act 44 funding is simple and transparent.
• Absent major and immediate cost restructuring through
the collective bargaining process, the design of Act 44
(rewarding efficiency and cost-effectiveness) will result in
reduced funding for Port Authority and reduced transit
service for Allegheny County residents.
• While Act 44 is a good dedicated, predictable and
transparent source of funding, it is not a windfall and will
grow at less than the rate of inflation.