What Fresh Hell Is This?

November 15, 2006

Phantom Revenues - what does it mean?

Yesterday, I pointed out that Coucilman Bill Peduto invariably used the phrase "phantom revenues" when discussing the Mayor's recently presented city budget. There was this from the Trib:
But that's not stopping Councilman William Peduto, who is likely to challenge Ravenstahl in the spring mayoral primary, from criticizing the mayor's budget and five-year spending plan for including "phantom revenues" in the form of state grants and donations from nonprofits.

"This is no different than what we were doing in 2002 when (former Mayor) Tom Murphy came up with minimal reductions in expenditures and revenues that didn't exist," Peduto said. [emphasis added]
I began to wonder. While the above is pretty clear, I wondered whether a fuller definition could be found someplace - more examples of "phantom revenues" and so on.

It isn't the first time Coucilman Peduto used the phrase to describe the city budget. Nor is the phrase exclusively Peduto's . From the Trib in December, 2004, in an article describing Mayor Murphy's (remember him??) decision not to run again:
Throughout the past year, Murphy repeatedly said he was taking responsibility for the city's near-insolvency. In a move that stunned some political observers, Murphy last month finally owned up to submitting "phony" budgets -- city spending plans balanced by one-time Band-Aids or based on phantom revenue.
From Peduto, we have this from the P-G in April, 2005:
Peduto said O'Connor did little to stop Murphy's "phantom" budget for 2003, which was balanced with unapproved payroll and alcohol taxes and ultimately plunged the city into near-bankruptcy. Peduto tried to replace the phantom taxes with a garbage collection fee and other plans.
I think "unapproved" is the important part. And this from November, 2005:
Peduto said other problems persist. For example, the mayor's proposed 2006 budget still calls for $6.6 million even though the nonprofits have pledged only $4.4 million.

"Put what the revenues really are, instead of using phantom revenues and placeholders like we did in the past," Peduto said.
It even showed up in an interview I did with him in September. Take a look:
The most important issue facing the near-term future of Pittsburgh, Peduto said, is the budget. Not necessarily the 2007 budget, but the financial problems facing the city in the next 5 years or so. How the city deals with its budgetary issues now will detemine its overall health for many more years to come.

He said that he'll be paying close attention to upcoming revenue projects - to spot any "phantom revenue" plans that might pop up. Started a couple of years before Act47 was implemented, "phantom revenue" streams (like revenue projections from the Casinos not yet built) have, according to Peduto, left the city on the 'brink of bankruptcy." The practice of relying on "phantom revenue" needs to be broken, he said. City government needs to be restructured with some services merged with the County, he said. [emphasis added]
So now we have another example - the projected revenues from Casinos not yet built. There's more from this P-G article from Mid-October:
Mr. Peduto said he's concerned about "phantom revenues" in the proposed budget and five-year plan. It counts on $17.7 million from a yet-to-be-built slots casino next year, $10 million from the state each year, and $5.7 million annually from nonprofit groups starting in 2008 -- none of which is guaranteed, he said.
Now we have some more examples. Anything that's added to the budget as revenue that isn't guaranteed or could possibly shift downward (like non-profit donations) is then called "phantom revenue."

Looking back at the P-G article I linked to yesterday, I wonder if these too are "phantom revenues":
Mr. Peduto said the five-year plan overestimates deed transfer and parking taxes, and state and nonprofit contributions. That, he said, would lead to yawning deficits beginning in 2008.

A consortium of nonprofit groups has said it doesn't plan to give the city money after 2007, but the city's plan counts on $5.7 million a year from such organizations through 2011.
Can I use an adage here? Isn't "phantom revenue" an example of "counting your chickens before they hatch"?

If so, and since the Mayor is dealing with millions and millions of dollars isn't it, uh well, incredibly unwise to do so?

I'm just asking.


PtBreeze said...

I don't think it is unwise. The budget five years out should be considered a goal, not a set in stone spending plan. If certain revenues do no materialize then you adjust. Peduto's idea of not including revenue from the non-profits will be used by the non-profits as an excuse to not contribute. From a bargaining standpoint those projected revenues must stay in the five year plan and at a higher rate than the city collects today. Bill's stance here is completely irresponsible.

Maria said...

Hmmm...a budget as a "goal."

My goal is to win at lotto, but I certainly do not spend my money that way.

Remind me never to let you balance my checkbook...

Mark Rauterkus said...

A budget is part art and part science.

A budget should be realistic. The phantom part is when inserted amounts are overboard. Fake.

With Tom Murphy, the expression that fit is, "When you only have a hammer, then everthing looks like a nail."

Murphy was bankrupt morally, politically, fiscally -- and without any hope of a leadership advantage. So, Murphy had to use the budget as a tool to get what he wanted. Murphy couldn't use anything elese as he had spent all of his trustworthyness and Murphy had no other creative forces within him and his administration.

So, the budget turned into a political weapon.

The budget shouldn't be a blunt object used for postures nor for blackmail nor for advancing political agendas.

When everything is done at the last minute, when everthing is over complicated, when hidden funds can be spent from years ago and transfered at will -- then we've got problems.

Peduto watched and played a role in those follies on Grant Street for many years.

Phantom Budgets are not how it should be done. Nobody is talking about HOW we should "move forward" :) in an ideal situation.

Priorities and philosophy -- even issues -- should be crafted before the budget.

PtBreeze said...

Maria, get your head out of Bill's butt. What we're talking about are revenues that are reasonably expected. Not the lotto. Is it reasonable to expect non-profit contributions in to the future when the current agreement ends prior to that. I think it is reasonable. What was unreasonable was including revenue from slots a few years ago when it was clear that the parlor would not be operating yet.

The Burgher said...

What about the 8 million in Casino revenue? Do we really think a casino in atent is going to get the city8 mil this year?

Maria said...


Why don't you TRY for one minute to forget you obvious dislike of Peduto to consider what he's saying:

The non for profits only pledged $4.4 million for this year, have said that they don't expect to give more after 2007, yet the budget counts on them giving 5.7 million annually for the next five years.

Tell me how that adds up, please?

The budget counts on revenue for a casino including for next year despite the fact that not only has no ground been broken yet to build that casino, we don't even know who or where or when it will be built.

Etc., etc.

Mark Rauterkus said...

The fastest way to get casino incomes into reality is to insist that the temporary casino be built ONLY at the Convention Center.

I would like to sell the Convention Center to the new casino operator, as a part of our deal. But, they all want to set up a temporary casino. Have them buy the Convention Center.