2011 (Out of the Frying Pan)
*-UPDATE 2:13: I have a rinky-dink liveblog of the afternoon session in the comments underleaf, and this just came in over the wire:
Starting to think he’s not happy about how things went down and is not coming. He was cooler than lukewarm towards this idea from its inception.
***-UPDATE 3:47: Striking that:
Hie thee to 2 Political Junkies, which is carrying a lengthy process story…
The hold up — the reason why Council must meet again tomorrow — is that upon further reflection by everyone (PERC, ACT 47, ICA) it was decided that the City must dedicate $735,680,000 over 31 years instead of $414.7 million (the difference between a 5% and 8% discount rate). (2PJs)
The P-G update linked to therein places a different emphasis on who first noticed there was a maths issue:
But the city’s actuaries, brought in this morning to review the plan, thought otherwise, firefighters union President Joe King, a city pension board member, said. (P-G, Joe Smydo)
According to Maria, it’s all going to be finished at 11:00 PM tomorrow. I had a strong feeling all along it was worthwhile to keep running the countdown widget to the right.
MORE: You’re giving Null Space skin failure: LINK.
*-UPDATE: Now this is innovative — in an e-mail labeled “RELEASE — PENSION PLAN TO STAY IN CITY”, the Council President’s office forwards a PDF document of a preemptive, anticipatory veto override of a bill that hasn’t been passed (written?) yet, signed by six members of Council (Dowd’s not in town).
**-UPDATE, THE DEUX: In a sneak-preview of an article running tomorrow…
Responded Doven: “You don’t need to be an economics professor from CMU to understand that council’s latest three-ring circus act puts our city’s financial future in great distress. Council’s actions will put a giant hole in the city’s budget next year and for each and every year after that for 30 years. And our pension fund will still face serious funding obstacles, even with council’s action to drastically increase parking rates.” (Trib, Bill Vidonic)
Well, then what is this? I mean, really? All of the concerns about the near-term solvency of the fund, the holes in future annual budgets, the inefficiency of investing this funding stream in this way and the uncertainty of it being judged sufficient yet being utterly intractable really do make sense. And clearly it’s important for the Mayor to signal his disapproval by vetoing all this. So then why not do what’s available to put a stop to it? Enough has changed.
“It seems like everybody has squared off and they aren’t really communicating anymore,” state Sen. Jim Ferlo, D-Highland Park, said Wednesday. “What people feel out in the community is this sense of dysfunction.” (P-G, Lord, O’Toole & Smydo)
One thing making yesterday’s public meeting necessarily awkward was the continued entrenchment of positions — Council’s majority still not open to sharing any assets with the private sector, and Mayor Ravenstahl of the conviction that no pensions strategy not involving an assets deal could possibly be worthwhile; that it would be like trying to bail out the Titanic with a Styrofoam cup.
Another factor was Council’s continued bilious, ill-concealed frustration. At one point Councilman Peduto openly theorized that the administration was now trying to engineer a state takeover in order to place the determination to privatize local parking assets before an incoming, privatization-friendly Republican state legislature.
And yet a third factor, perhaps at the very forefront: many participants and observers cited a pervasive sense of “bizarreness”. Others spoke of a feeling like “living in an alternate universe.” Quite aside from the whole “cooperative veto” thing, something about the conversation with the Mayor was like he was participating from inside an aquarium, or wearing a wire, or on careful alert not to be tricked into saying his name backwards. It was not a subtle thing.
And we’re moving…
“It’s still unclear to me how you can make use of future revenue streams to meet your unfunded pension obligations up front,” said state Rep. Mike Turzai, R-Bradford Woods, the incoming House majority leader. (Trib, Bill Vidonic)
One would think that’s not a good sign as far as dodging the takeover, certainly not for very long — but apparently for now the decision on how to calculate assets is in the hands of the state Public Employee Retirement Commission, whose director now seems to be flashing the thumbs up signal. One hopes the City will not get tripped up in a game of Red light / Green light.
“Right now, there’s only enough money in the fund to pay our obligations for the next three or four years,” Ravenstahl said. (P-G, Joe Smydo)
That — what? That is a bracing shot of frankness out of nowhere! What? Holy cheese!
Best to change the subject….
Downtown’s only strip club is proposing a $1 million expansion.
Blush, located on Ninth Street near the Pittsburgh School for the Creative and Performing Arts, is “looking to significantly upgrade the facilities and operations of the club,” said Jonathan Kamin, attorney for owner Albert Bortz. (P-G, Mark Belko)
I still think this city-wide deluge of investment from the adult entertainment industry is indicative of some species of economic good news — all happening without a sliver of public subsidy! But not that there’s anything right with that.
Council at first voted 8-0 to divert the entire Local Services Tax or “commuter tax” of about $13 million a year for 30 years into the pension fund, in a bid to avert the takeover. The Mayor, not liking the idea, pledged to veto it promptly, so that his veto might be promptly overridden and Council’s will be done before the deadline.
Then suddenly specific legal covenants were discovered upon revenues collected from the LST. So now they’re instead going to pledge $13 million annually from the Parking Tax (which also ordinarily becomes a part of the city’s general budget) along with cashing out the $45 million Fund-No-Longer-In-The-Nature-Of-An-Irrevocable-Trust-For-Debt-Service-Reduction. I don’t recall the Mayor promising anything specific about what he’d do or not do with this “new” wrinkle, and there appears still to be some concerns over whether the present value of this pledged revenue will ultimately be calculated as sufficient to achieve 50% funding when the figures are calculated on both ends. But politically, we seem close to settling on this course of action.
APPLICABLE TROPES: It Was With You All Along, Too Spicy For Yog Sothoth
Today once again, Mayor Ravenstahl is being fetched, clapped in irons and hauled before the Council, so that he might discuss with them — oh I don’t know, the forecast for Sunday’s Winter Classic.
Quickly right now I simply have to share with you my favorite exchange from yesterday’s meeting. I’m not trying to embarrass anyone with this selection, and I don’t think that I am. It’s just my favorite for so many reasons. It works as a very belated closing argument, or as Jerry Springer’s Final Thought, or on so many other levels.
We join Councilman Bruce Kraus’s second round of questions; he has arrayed before him Controller Michael Lamb, council Budget Director Bill Urbanic, city Finance Director Scott Kunka and city Assistant Finance Director Cathy Qureshi. Kraus and Kunka have been jawboning at each other, as you do…
Kraus: And Ms. Qureshi’s chomping at the bit here, and I don’t mean to be disrespectful of you — we should have included you from the beginning. Because I value your opinion and you’re here for a reason. And I’m going to formulate an opinion based on the four different versions that I’m hearing here today. But I damn well guarantee you my decisions going to be based on making sure our obligations are met to our pensioners, and we are going to meet those obligations. That is the sole focus of this conversation. That’s what we’re going to accomplish here today. No matter what. However, in terms of parking and pensions being tied together — I didn’t offer that up from day one. That clearly was the will of the Mayor’s office. That was the wishes, that these be co-joined.
Kunka: That was something completely different though.
Kraus: Okay, but — and clearly that’s where we are six, eight, 10 months later now so. And I apologize, we’d like very much if you would, Cathy, to weigh in on this conversation and offer up your perspective.
Qureshi: Sure, um. If it [slightly inaudible] state takeover, I hear everybody saying that, but I certainly haven’t heard anything from McAneny or anybody yet. If there was some statement this could work, that’s a good thing. But there are some serious concerns about the liquidity of the fund — and that’s something that we should, you know, as we work toward, we should not forget that we have 300 years left of payments. We can’t — on paper we can get to $565 million or 50% funded, but our real money is still what it is. And so all the interest earnings are only going to be based on the real money — and presumably the negative cash flow concerns will still all exist — and we’ll get less and less percent funded, and become less and less liquid.
Kraus: But what was virtually offered up to this Council for consideration did not solve the inherent problems with the pension system either…
Kunka: It did!
Kraus: If I may — thank you. It didn’t inherently solve the problems.
Qureshi: It didn’t solve them, it came a lot closer. Put in several hundred million dollars, which you can get interest on…
Kraus: Listen, we’re projecting about $287 million…
Qureshi: Not — you can’t get interest on it.
Kunka: It really is a paper transaction, it’s not a real asset to the fund.
Kraus: Having said that, um. Um. What I am, uh (oh god) what I am charged with accomplishing here today, it is to avoid the state takeover. I don’t believe the first plan helped to inherently solve what the pension problem was. And yet there’s a strong will on this Council to make sure reform does take place. We don’t have but 2 or 3 days, but I guarantee that’s going to be a topic of this Council clearly in the next year, to ensure reform. But um, on the plus side, of this agreement as opposed to the lease agreement, is that: we do not see borrowing of money, we do not see us paying interest, and we do not see us losing physical assets. To investment bankers. On that alone — we avert state takeover, we ensure our pension obligations to our pensioners, we ensure that public assets remain public, we incur no debt and interest. Somebody better convince me why that’s not a viable plan and why I shouldn’t be saying yes to that today. Sounds pretty good to me!
Urbanic: It — it is a temporary solution. It is simply to avoid state takeover. As Mr. Kunka and Ms. Qureshi said, it does not solve that problem. Uh, however, regarding cash flow issues: if we put in approximately between, um, between employee contributions, $50 million; and additional revenue of approximately $10 million, you get in the 60’s; um, we have approximately $300 million in the fund; if the fund earns a conservative 6% as it would in PMRS we should be able to receive about $20 million additional — $18 to $20 million additional in interest payment; um, that is if conservatively, the market does okay next year, even with conservative investment, we should be able to at least float even, and not lose money in the fund.
And then Kunka took issue with the optimism of Urbanic’s “rosy” assessment. And that’s where we’re at.
Pittsburgh’s body politic has “advanced” to the point where we’re mostly kneeling before each others’ favored golden idols — No new debt! No investment bankers! No state takeover! — but somehow, that to which everybody pays lip service as being most important — the health of the pensioners’ retirement fund and the seriousness of our long-term commitment to it — keeps winding up rather stubbornly in the back seat by comparison.
This is blasphemy! This is madness!
Wait, no. WDUQ is reporting that though Mayor Ravenstahl won’t sign the measure, he won’t veto it either — thus the law-parts would become law. He says the Parking Authority would have to commission a study before it could raise rates(*). He says he doesn’t like the plan because it relies on taxpayers as a backstop, because it won’t solve the pension crisis and because there’s no guarantee the state won’t take over anyway. (On that first point, Council’s plan states that should parking revenue fail to meet the required total in any year, the city’s general fund would be tapped to make up the difference. No idea how likely or how significant that would be.)
Hmm … well, if he wants zero credit for holding off the state takeover then all the blame if something turns sour later on, then this is the right play call. Unless there’s more to come.
(*) – That … that could be a death knell.
… I mean, like, in a good way?
*-UPDATE, POST-GAME: “Mr. Lamb said revenues from increased garage and meter rates could total nearly $900 million over 30 years,” provides the P-G, along with “Council President Darlene Harris and members Patrick Dowd, Bill Peduto, Natalia Rudiak and Doug Shields said they’ve received the state’s go-ahead…” (See also WTAE, Janelle Hall)
So this would be akin to a voucher good for approaching $30 million a year towards our pension obligations … does anyone know what would our annual MMO’s look like under this plan? Because the reason to avoid the takeover is to prevent our annual payments from skyrocketing too badly — seems to me this would first need to be judged on that basis. (Also have to account for continued facilities maintenance and operations at the Parking Authority w/o access to that revenue.)
Original post follows:
And wait, is the Controller a presenter or an
invitee? It’s clear the Mayor is an invitee but…
ANALYSIS: Council floated something a lot like this a while ago, but kept holding it without much further discussion. One drawback to the idea would seem to be that you probably can neither invest nor accrue interest from pledged future revenue — but it’s better than nothing. Another drawback is at least some assumption of risk — but life is risk, no? Considering where we are in the conversation, the only salient concern might be whether or not the state legislature plays ball and will acknowledge a municipally-legislated I.O.U. as a paid account.
Missed this: the Allegheny Institute provides a superlative and concise backgrounder, for its first two and a half paragraphs. Then they veer into a polemic which is in part reasoning, in part inoperative bluster, and in part a discomforting echo of the same cognitive dissonance over which Null Space has been getting queasy.