The post in which I credulously presented Dok Harris' take on city pension fund performance between 2005-2007 has been eliciting significant pushback, and more so since it was picked up by the P-G's political blog.
So I'll publish the gist of the criticism here, nice and prominent-like.
One notable e-mail came from City Controller Michael Lamb. Since it came from his office e-mail and was not prefaced the way almost all political e-mails I receive are prefaced ("BRAM THIS IS OFF THE RECORD!!! DON'T YOU DARE BLOG THIS!") I'll reproduce it for you:
I was forwarded your entry on this subject and I will follow-up with Mr. Harris but his pension analysis fails to acknowledge one key factor. In the years 2005-2007, the gain pointed to is not the investment performance. In fact, that number represents the performance of the fund after contributions and deductions. The annual cost of the pension system is about $80 Million. In 2005-2007 the city and the employees were contributing about $50 Million. That $30 Million shortfall was made up by investment performance.
In short, the fund did much better than Mr. Harris suggests.
Also, the $120 Million loss is actually a much smaller loss on a percentage basis than the market suffered. I know it’s a smaller loss (percentage wise) than I took on my IRA.
It should be noted that in 2007 we changed pension fund advisors. We have since lowered the expected actuarial return which requires the city to put more money in annually. We have also downsized the number of fund manager we are working with to hold down costs.
There is still a lot to do and the $200 Million infusion will not solve our problems but we actually have had a pretty good investment performance when compared to other public pension plans.
I feel like I should have caught that, teh maths thing.
And it's true in November of 2007, Mercer Investment Consulting did take over for Hirtle Callaghan & Co., which had been responsible since 1995 (P-G, Rich Lord). Personally I've heard this was an unpopular switch among some politically connected Downtowners.
We will see if Dok Harris -- who announced in June via Facebook that he re-registered as a Democrat and looks forward to voting in Lawrenceville -- decides to hit the ball back.
Additionally, and in response, I asked Michael Lamb on-the-record whether he believes such a $200 million or more (hopefully more!) infusion, though insufficient in itself, is still necessary to "solve our problems" -- and if so, where he thinks that infusion should come from; and if not, what alternate courses of action he believes Pittsburgh should take. I will let you know of his response.
*-UPDATE: Lamb responds-
The $200 Million is necessary to get the fund to 50% and avoid the state takeover. I have been supportive of avoiding the state takeover for many of the reasons Dok points out in his letter. I still believe the fund can reflect a 50% funded status by 12/31/2010 while keeping public assets public. Specific proposals on how to do that will be made public after the lease proposals are submitted.
Right, I forgot: only after the bids come in. Though I don't personally understand that -- if Pittsburgh advertises that it has some other workable options, would that not encourage higher bidding and better offers from potential lessors, so as to tempt us away from these alternatives?
**-RELATED: Councilwoman Rudiak offers amendments to the lease deal, which might suggest her mind is open to a lease deal (Trib, Adam Brandolph).
Maybe this has been determined already, but I was left wondering a couple of days ago why Harris was weighing in. Now it seems obvious. He's living Larryville now and is likely planning to run against Dowd. And this, from Potter's parking article, along with Lamb's immediate push back, makes it more apparent:
ReplyDelete"City Councilor Patrick Dowd says he and city controller Michael Lamb have been exploring alternatives [to the parking lease] of their own ..."
Ravenstahl has said doing nothing would force the city to pay $30 million more per year into its pension fund, which would equate to a 24 percent property-tax hike; a 44 percent wage-tax increase; or the layoffs of 400 police officers.
ReplyDeleteWhy does Ravenstahl insist on using extreme scenarios to push his foolish plan? The fact that he has resorted to scare tactics only reinforces the idea that the guy has a vested interest in the lease.
First of all, nobody suggested that we are going to nothing. There are alternatives.
Even in the highly unlikely event that we "do nothing": the city would increase parking rates, increase the property and/or wage tax and save money across all segments of the workforce. To even suggest that police will be reduced by 400 or taxes will go up 44% is disingenuous at best.
$200M only gets them to 50%. Think about that for a moment. Yes, think.
ReplyDeleteNo matter what is done, serious more work is needed.
Here's my suggestion - Start over. Void any and all pension promises. Declare bankruptcy if it's the only way. It's high-time ALL public-sector employees realize what we private sector employers/employees have been through.
A serious divide is happening in this Country concerning public-sector employee pensions and the taxpayer's repsonsibility for such.
Personally, I am almost on the side of 'who cares?'. I'm leaving the Pittsburgh area in 1-2 years, or less, to move South once daughter finishes College.
Rather than void the pension liability, just pay those who get the pensions in $10 bills once a month from a window downtown in the City-County Building. If they fail to show up, hold the cash for the next time they are in town.
ReplyDeleteAt least we'll get some parking meters some action as they flood to town to pick up their money.
It will be good for the economy. And, some of the money might come back to us via the casino as well.
Seriously, the City of Pgh could sell off its interest in Heinz Field. Have the Steelers chip in $200-Million or more.
Anon 8:55 said: "To even suggest that police will be reduced by 400 or taxes will go up 44% is disingenuous at best."
ReplyDeleteI agree that measuring currency in units of Police Officers, always, is tiresome and silly. Apparently someone in the Mayor's office long ago must have decided that this actually works, but I'd love to see the evidence.
Even still, the idea cutting evenly "across all segments of the workforce" -- haven't we all been in agreement that we've cut to the marrow since Act 47? Would you suggest getting rid of a few more attorneys? Another half of City Planners? Our last building inspector? How about laborers? All of which is to say I think "44 police officers!" is a more easily tuned-out argument than, "Act 47 already slashed us down to a skeleton crew or worse at every battle station."
It will be a great day when our police forces get all the money they need and the non-profits have to hold a bake sale to put their name on a tall building in giant-ass letters.
ReplyDeleteI'm tempted to put the same joke on Pittsblog. It would work better there and I may as well get more from my knowledge of 80s bumper stickers.
ReplyDeleteJoke? I'm thinking about making it my banner sub-header.
ReplyDeleteIf I recall correctly, most of the people who didn't like the bombers were also not so big on police forces.
ReplyDeleteTalk to guys who really understand, like Briem. I think he made a compelling argument in his noting of Vallejo, CA's issues with bankruptcy that is by no means very likely that we would allowed to go into bankruptcy. Moreover, as an Act 47 municipality, the state gets to decide whether or not we can even file for bankruptcy, before we even get a taste of a federal bankruptcy judge thinks of it.
ReplyDeleteBankruptcy is not an option.