Sunday, August 1, 2010

The Parking Space Solution: A New Situation

Pittsburgh's municipal pension funds are presently 29.6% funded, making it one of the very worst -- if not the single worst -- of all major and middling cities in the nation.


Roughly speaking and apropos of nothing, this came about due to an unwillingness to delegate sacrifices, a compulsion to cave under political pressure, and a special love of putting off 'til tomorrow what might be done today.

As a consequence of this growing absurdity, last year the Commonwealth of Pennsylvania was roused to assume the management of this city's public pension funds as part of statewide legislation that assumes control over all municipal funds that are urgently distressed at levels below 50% funding.

50% is still critical mind you, but not quite ROTFLMAO-worthy.

However, we the Pittsburghers, loathe to surrender local control (despite having ceded a great deal of it already under sharp duress in 2004) begged, pleaded and cajoled the Legislature into carving out an extension for us -- for Pittsburgh, the biggest basket-case of them all -- on the logic that we have a Plan, that we are closer than they all realize, and that we are about to monetize some cherished assets in an innovative fashion.

The taxation aspect of this Plan never materialized (we couldn't identify a single constituency capable of shouldering that burden, fancy that) but that measly $15 million line item was small-potatoes, operating-budget style money anyway. The parking space monetization was our main pitch. The legislators agreed it looked very promising, granted our special extension, and continued eagerly to look forward to it.

And so we spent our extension hiring consultants, working with brokers, and informing the public. And here we are.

We have various options. I think this is all of them. Some will probably be new to you.


1) Monetize the Parking Spaces.

PRO'S: Should net us over $320 million, thus avoiding a state pensions takeover, and retiring Parking Authority debt to boot. Does not relinquish control over a "core" city function essential to the people's health and welfare. Likely to generate additional future revenue through collateral monetization (advertising) when this is permissible under our zoning code. Allocates a significant portion of our financial burden to out-of-city commuters, a goal many have long sought. Should satisfy our partners, the Legislature and the oversight boards, thus enhancing our chances of petitioning these successfully in the future and very likely expediting our liberation from these bodies.

CON'S: The rates at garages and meters will increase, as the parking market allows. Local business communities, both Downtown and in several neighborhoods, will envision the destruction of their world and be sorely displeased with their representatives. In the neighborhoods, more people will feel coerced into parking two blocks or more off the main drag onto side streets, where there are no meters. Other people, particularly those headed Downtown, will feel compelled to take public transportation, requiring cash payments to the Port Authority. Somebody, somewhere is likely to make a profit. Luke Ravenstahl will have succeeded at something.

2) Take Out a Bond Issue.

PRO'S: Will generate at least $220 million, thus avoiding a state pensions takeover. Will not upset or in any way discomfort a single person. Does not relinquish political control over a non-core but nonetheless cherished public asset. Parking rates will not rise quite as much as the market will allow.

CON'S: Approximately $450 million will need to be repaid, over the course of 20 years. Parking rates will still rise greater than half as much as under a lease, in order to cope with this debt. In so budgeting, Pittsburgh incurs risk in the event that anything negatively impacts the parking market: rises in gas prices, a double-dip recession or worse, continued population loss, natural or man-made disasters.

Back to certainties: this new debt will significantly hinder our ability to issue other bonded debt for the purposes of repairing our already threadbare infrastructure -- which absolutely must happen soon -- or for other capital projects. Future residents of the City and region will regard us much as we do our own forebears, for having made the same decisions to pay-it-backward. Parallels with a certain refinancing scheme under Mayor Murphy which we now all employ as a cautionary tale will be too exact to ignore.

3) Make the State Delay Once Again.

Yes, as previously divined at the Comet, this argument is likely to make a concerted and exciting appearance!

PRO'S: To those who believe deep down inside that it is unavoidably time to pay the piper and monetize our parking spaces -- very possibly a majority -- this will enable them to be reelected first, which is awesome. Those who are less fundamentally exercised over Pittsburgh's hysterical 29.6% pensions funding level get to avoid being encumbered by it. Those who resent past state decision making, and the existence of the ICA in particular, get to rattle their legal sabers for a time in populist fervor. And all of the above, together with still others, get to enjoy the fruits of a noteworthy temporal victory over an at-times arrogant mayoral administration.

CON'S: The present lease deal, which has taken almost a full year to arrange, may wind up being scrapped before the outcome of the appeal-to-slash-showdown-with the Commonwealth becomes apparent. To the extent that it will be a legalistic showdown, these rarely go well for us; and to the extent that it will be a plaintive appeal, state officers will remember that we already begged and pleaded with them once precisely in order to arrange this lease deal. Meanwhile, the 29.6% funding level could slip even further, deepening the hole.

In addition, those resigned to executing a lease eventually -- only not before an election, and/or not one known as "Mayor Ravenstahl's plan" -- may encounter a different environment. In addition to a deeper hole to fill, infrastructure investors may not have the same confidence in a flaky city which took them down this selfsame road only to cop out at the precipice for a host of idiosyncratic reasons. On top of this, although it appears the economy and the credit markets have recovered from what might have been a true Depression, talk of a double-dip recession has become commonplace thanks to fundamentally insufficient Congressional stimulus and stubbornly weak job numbers. This double-dip would equally impair our ability either to monetize assets or issue debt.

In short: we know we now have a window to make gains against our fiscal difficulties one way or the other -- and we also have a lease deal already developed, the terms of which have been widely trumpeted over months, should we opt to go that route. We know relatively little about the future, and there are sound reasons not to play dice. Yet dice are always tempting when there is much -- politically -- to be gained.


  1. I notice the option of an outright sale is not listed even though it's likely the best one. Only in that way can one attract substantial investment while still not locking the city into fixed land uses.

    As I said before, my ultimate hope is that some garages, eventualy are lost to new mixed use development.

    Yes, this does hand control over to private owners--IMHO, where it should have been in the first place.

    Of course, the dynamics of any such deal would rely on the degree to which the city (and the State) would hold it's end of the bargain and not try to bail out when the pain starts. No doubt, there will be at least some pain here for some.

  2. You left out the option of letting the state take over. Home rule hasn't been a great boon for the city. If we have to sell assets to meet debt payments, and we do, I'd be much happier to have shifted leadership first.

  3. You also left out bankruptcy, which may be possible is we drag this out enough that Harrisburg gets to go broke. We can be cool, like all of those people in California who bought $1.2 million houses with an income of $6,000 a month.

  4. MH - Techncially ur right, letting the state take over is an optoin, but I'm pretty sure its a politcal nonstarter. You could say that for bankruptcy or a property sale as well (look how much fretting there is over a lease, JM). I guess I should have said these are the lkily options.

  5. I'd be much happier if one of the options you consider likely resulted in continuing pressure to balance the budget for real.

  6. I hear the elected at the public meeting flatly refused not to take campaign $$ from company, consultants, attnys or financiers involved

  7. This is going to be like the bank bailout where banks got more money based on how far they had their head up in their ass and if you owed money you got the bailout without requiring the management who drove you broke be fired. I'm starting to think the commies were right about some things. Based on the infrastructure, the state is withering away.

  8. MH, yes the state is withering away and it has been for years.

    I do however think this is an important moment since this is now more obvious to all.

    The decaying infrastructure is in fact the city's trump card. In 10-20 or perhaps as little as five years a good chuck of the far flung infrastructure will be beyond repair, driving more people back into dense areas where less investment is needed, per person.

    By all means "stimulate", the faster we go broke, the faster we can get back to making rational decisions.

    It's interesting that the two cities with likely the best economies and development patterns in the world; Singapore, and Hong Kong both started their progress when they had few resources and no pipeline of "free money".

  9. A quick note on Number 3: The four caucuses' Pittsburgh area senators and reps sent a letter to the city that there will be no delay. Period.

    Option 2? If City Council chooses this option, as I imagine Harris will propose, they will be showing all the forethought of Masloff's advisors (ie, Joe Mistick) when they got us into this mess to appease the unions.

    MH's plan of letting the state take over misses the point. The state takes over, and the city still has to come up with 30M a year. (And the only options come from prop taxes, wage taxes and cuts.)

    Which brings us to the much anticipated Dowd plan. So instead of inconveniencing business owners and suburbanites, Dowd would raise taxes on property owners (which would immediately impact business owners in increased rent), raise taxes on workers who live in the city, and cut police/cut fire houses/cut DPW/cut areas that are already cut to the bone. Going into an election year, Dowd will prove again why his career is finished on City Council.

    Then there's the Peduto and Shields plan of just attacking Ravenstahl's plan.

    Sad for those who reflexively hate him, but Luke is the only adult at the table.

  10. MH's plan of letting the state take over misses the point. The state takes over, and the city still has to come up with 30M a year. (And the only options come from prop taxes, wage taxes and cuts.)

    How did I miss that point? The state would go looking for more money and would almost certainly hit on the same plan of selling the parking. Original thinking is hard and Morgan Stanley employs people better at it than either the city or state. But, the blow to the power of local politicians would be huge.

    My point is that how and when we get the pension money is secondary. The primary issue is that Pittsburgh has demonstrated it is not capable of regulating itself and it needs the fiscal constraint from Harrisburg. Yes, Harrisburg sucks, but we suck so much worse. I wouldn't own property in the city if the Act 47 commission wasn't there.

  11. Ed Heath brought up an excellent point the unions buying the lots. It would secure jobs, stop privatization, and provide a new source of money flow--plus, help their own pension problem.

  12. There is so much not accounted for in all the Parking Discussions. The CIty has an aging infrastructure and will need up to over a 100 million in capital or face closing at least a third of the downtown garages. Where will people park then? Rate increases would need to go through the roof and they would then have no impact on the current parking debt of over a 100 million.
    Listen up because Rates go up regardless of the plan going through. They can talk bonds all they want but the truth is that the pension is just the tip of the iceberg that the lease solves. Residents should be pushing to alter the agreement to include more residential parking programs that are guaranteed to be enforced. Let's not forget that the Parking Authority can't operate as efficiently either. The solution is to lease but to do so with terms that take into account the voices of the people. Let the folks leasing the asset be on the hook for rehab and rebuilds as well as the terms of the agreement for which the City still holds a large governing voice in.

  13. Elaine,
    They neither have the money, nor the interest. He can also propose that the US hand the west coast over to China to square up our debt. It's just as likely to happen.

    I'm still unsure whether you grasp the issue: do you realize that if the City of Pittsburgh doesn't put 200+M in the pension fund by January 1, 2011, the state will then take over the pension fund, *who will then mandate the City to pay an EXTRA 30M a year to the state?* The state will not "go looking for more money" - they will simply send the city a bill. (And again, the only options left for the city is property tax, wage tax and cuts.)

    "The primary issue is that Pittsburgh has demonstrated it is not capable of regulating itself and it needs the fiscal constraint from Harrisburg." I respectfully disagree. For once, the City (at least the mayor and probably three councilors) recognizes the only way to get out of the mess they inherited is not to delay the inevitable, but own up to their problem and to lease off a non-essential asset - instead of EVEN less desirable alternatives.

  14. Nice post. A few random thoughts:

    (1) One small quibble: the timing of the deal really shouldn't matter too much as far as general market conditions for assets are concerned. Basically, whether we are selling these assets high or low, presumably the pension will be buying different assets low or high respectively, and it should be a wash. The debt cancellation part may not be quite as neatly subject to this analysis, but I doubt that will look like a bad deal at any time in the near future.

    (2) I agree that selling these assets with a minimum of strings attached would be ideal--but there is no reason to think we couldn't coordinate with the leaseholder on such a sale in the future. Which leads me to . . .

    (3) My biggest concern is that the terms of the lease be sufficiently flexible. At a minimum, we need to make sure we can adopt best-practices for parking rates in the future (see the discussion in the last thread). And I also agree we should allow for non-parking uses as well. None of this is theoretically impossible, and in practice need not even result in a lower price, as long as a reasonable split of future costs, benefits, and so on between the City and leaseholder are contemplated and provided for in the lease.

  15. What's the evidence that Harrisburg is a bastion of fiscal restraint?

    What really should happen is a real deal bankruptcy process, but our political class won't allow that.

    Real bankruptcy in the real world would force a full sale of assets.

    The thing is though that Pittsburgh's problems are very much the result of stupid management and poor land use. They are not so structural that they are beyond repair.

    In fact across the country, the places that seem doomed are the low density suburbs. Some are run by Democrats, some by Republicans and many have fairly responsible management, but a very high percent are broke anyway. and remember, that the state picks up a big chunk of their infrastructure costs. Look at New Jersey and search for a place without a property tax crisis. Same with Long Island.

    NYC, however has a spendthrift government and lot's of insane unions like we do but they are structurally getting lots of tax revenue also in relation to costs.

  16. Love the photo of car on two wheels!

    Honestly, it wasn't me that parked.



    Is it now time for complete City-County Merger?

    Spread the pain...

    If you think lease option is tough, talk 'complete' merger.

    County Pension Fund Dollars are earned in is why they fare better than City Pension Fund.

    With the collapse of the Steel Industry and locals that once walked to work or rode streetcars...

    ...wage taxes decreased to the point that public services once adequate to support the City Proper, are now, not self sustaining. City boundaries however remain the same.

    With loss of jobs, violence increases. Roads are more traveled by suburbanites...Property values decreased due to unemployment and less upkeep by owners and, poor schools whether perceived or otherwise contribute to lower property value, as whites flee elsewhere.

    Studies recently concluded that local City and County Non-Public Safety Employees are underpaid: disproportionately, to a larger degree, women and other minorities.

    As such Municipal Employees other than Public Safety Employees , can not invest in Stocks or Bonds...eggs are in one basket: Pension.

    It is the little guys, that feel betrayed.


  17. The problem with municipal bankruptcies is that the state can attach all sorts of conditions, and there is no guarantee that the results would end up being best for the City.

  18. That is correct. right now, there is no full fledged legitimate bankruptcy process.

    However, one must realize that now the shoe is on the other foot and power is shifting towards the creditors.

    When only one city or entity in a semi solvent state is in trouble, the state can easily control the rules of bankruptcy and protect whatever sacred cows they like. Now we have a situation in which almost every local and state entity is in a financial hole and desperately needs to please the bond market.

    A few more years of "stimulus" and even the Feds will be in that spot. It could actually happen much sooner. only a few states are really far from California's situation.

    Gaming the system is not an option.

  19. Two things:

    If the State were in our corner, would they not lift our Second Class City status? Why is it, that the Commonwealth, only has one First Class City?

    And, given to it.. benefits surely deserved, by Pittsburgh and others?

    Another: Thing….Humor me...

    To define. Non-Profits verses Tax-Exempt.

    Food Banks: Non-Profits.

    Hospitals and Universities... Private or Religious : Tax-Exempt.

    Tax- Exempted...has, wider definition. No more TIF'S…and, so on...


  20. MH,
    I'm still unsure whether you grasp the issue: do you realize that if the City of Pittsburgh doesn't put 200+M in the pension fund by January 1, 2011, the state will then take over the pension fund, *who will then mandate the City to pay an EXTRA 30M a year to the state?*

    Yes, I get that. Also, Pittsburgh doesn't have 200 million dollars liquid. We don't have 30 million dollars liquid. We don't have any way to raise the taxes in any way that could get close to $30 million a year. That would require a change of state law. We're fucked. Might as well keep the immobile assets, especially since selling them isn't linked to any plausible way to keep the city from going just as insolvent in 10 years.

  21. We've already shot well past the "careful management is essential to get past this crisis" and are into the "if we don't count as too big to fail, we're going to fail anyway." We may as well fail in a way that doesn't involve selling parts of the street without getting them paved.

  22. MH: Said fucked!

    A little profanity is "In Order"!


  23. This is for Potty-Mouthed MH:

    Pittsburgh's Home Rule Charter, is absolutely worthless.

    Placebo Legislation!

    Political touchy, feely legislation.

    After inception was so watered down that it was rendered meaningless.


    Appease the ignorant...


  24. Bram, sorry about the swearing.

  25. MH: Language, plz.

    In terms of muni bankruptcy, though its uncharted territory, couldn't a judge order us to sell off the garages at sheriff's sale, pleasing nobody but MR. Morris?

    In terms of future solvency, maybe I'm being naïve but it seems like we're inching our way toward switching to defned contributions or 401ks. Looking back fondly on days when we had artificially cheap, plentiforous parking spaces might be just the thing. Rather not go thru this with water, or fees for ambulance service which gets done places.

  26. Leasing the assets is a shortsighted and foolish move that only benefits Ravenstahl, his advisors, and the the new parking operator.

    Lease or no lease. The state will eventually take over.

    The city should keep the assets and increase the rates.

  27. "since selling them isn't linked to any plausible way to keep the city from going just as insolvent in 10 years."

    I know what you mean, selling assts doesn't change the deep proglems in the pension scheme or the way the government is run.

    However, I do think just by substantialy, rasing rates during peak hours and opening up the prospect that the garages might not always be there; one is making a big change in the right direction.

    Up until now most policies have worked to make it a better deal to live out of town and have undermined the locational benefits of the urban center. This would do the opposite.

    Many of our neighborhoods are not far from the duel core job areas and could easily be served by cheap shuttles etc... Things are finally heading in the right direction.

    It's all about harvesting the greatest revenue stream from the land relative to the dollars spent.

  28. "Leasing the assets is a shortsighted and foolish move that only benefits Ravenstahl, his advisors, and the the new parking operator."

    Thank you for eloquently detailing the Tribune Review plan - criticize the only viable option without proposing a serious alternative.

    Let me know in which way it benefits Ravenstahl - if by politically, then yes, it might, and that's why some oppose it. But if you are claiming he and his advisors will benefit from it financially, then detail it, put your name on it, and be prepared to defend a libel suit. Silly statements like that are the equivalent of putting your elbow into your fellow Shadyside barstool companions side, assuming a joke we are all in on - but one without foundation in demonstrable fact.

    "Lease or no lease. The state will eventually take over."

    Only if the city falls under 50% and the person in the mayors office fails to make the minimum obligation - but this mayor has paid over the minimum since he assumed office.

    "The city should keep the assets and increase the rates."

    And that's the recipe for complete meltdown. Let's make this clear, if the city does not sell this non-essential asset, it must pay an additional 30M in FY 2011. You can't "increase the rates" to cover that.

    When you have a real proposal, we'll all listen up.

  29. Average age of City Employee is 47.

    Police and Fire can retire @ 50.

    Donut Monks and Feather-Nesters are real problem.

    Not everyday Joes....

  30. MH,
    "Yes, I get that. Also, Pittsburgh doesn't have 200 million dollars liquid."

    The monetization of city parking assets will indeed net 200M into our pension fund.

    "We don't have 30 million dollars liquid. We don't have any way to raise the taxes in any way that could get close to $30 million a year. That would require a change of state law."

    No, there is a way, but you are right that state law makes it very limiting. The city can raise property taxes and wage taxes.

    "Might as well keep the immobile assets, especially since selling them isn't linked to any plausible way to keep the city from going just as insolvent in 10 years."

    Unless you can show some particular attachment to these non-essential assets, I don't see why we "might as well keep" them when they can be put to good use. Fact is that as long as the city maintain the fund at 50% (by the one time influx of 200M from the parking assets, and we continue to pay our minimum municipal obligation,) insolvency is just a word that anonymous cowards put on blogs. (That's not directed to you, actually, but to bloggers - unlike Bram, who provides serious, sober analysis - who provide nothing but juvenile commentary interspersed with links to newspapers.)

    Of course, Pittsburgh will still be treading water. What is needed, and where you are dead on accurate, is the need for Harrisburg to allow the city to increase other taxes, like the LST, which stands at a laughable, flat $52 per year.

  31. Jack

    It appears you dislike the term "InsolvenCity."

    It also appears, from your striking statement that "insolvency is just a word," that you don't think much of accounting.

  32. Infi, I think he was also making fun of your blog. It is possibly an acquired taste.

    Selling assets that produce revenue (and could produce much more) to pay off debts is generally not a good sign for financial stability. Especially when interest rates are at historic lows. When the debts being paid are for services received a decade or more ago and the revenue is essential to keeping from going into more debt, then you are insolvent regardless of whether or not you can sell the kids' baseball cards to get by for a few more years.

    Even without this pension thing, the city is not meeting current needs plus debt service from current revenue. It is going deeper and deeper in the hole each year. It is just obviously deferred maintenance instead of actual borrowing. Without the revenue from the parking, the city has no hope of even keeping up with basic services, let alone stopping the pension hole from getting deeper. The only way the pension fund doesn't go back below 50% again is if the stock market hits double digit returns for a few years. Basically, this is $200 million for gambling. We hit, Pittsburgh gets to keep its independence. We lose, the next mayor will have to sell something else and double down. Neither way helps me in the slightest.

    As for what happens if we don't find $200 million, yes, the city could come-up with an extra $30 million, but only a few years and I don't think anybody could win re-election is they tried. You can only raise property taxes so much before property values drop enough that you aren't gaining revenue. Same with the wage tax and residents with jobs.

  33. I would like to point out, when it comes to assets, that a single man from a well connected family is worth big money as groom on another continent. I'm not sure of our mayor's current legal status, but he's heading that way.

  34. John Morris, I agree with much of what you have said and should have probably been paying more attention instead of swearing.

    On your first point, I would be perfectly happy selling the garages if it were just the garages. They are trying to sell the meters and enforcement and everything (i.e. rights to part of the street). That is a very different matter and could be a huge limitation on future development including improving transit. But, just the garages doesn't solve the pension problem and is not, as far as I am aware, on the table.

  35. If there's one thing I hate seeing here more than swearing, it's threats of libel suits. :-)

    But now we're at the meat of it! Anon 4:48 commented:

    "Leasing the assets is a shortsighted and foolish move that only benefits Ravenstahl, his advisors, and the the new parking operator. // Lease or no lease. The state will eventually take over. // The city should keep the assets and increase the rates."

    One faction at a time, in reverse:

    If we are choosing to lease due to the pro's of leasing or due to the con's of the alternative options, then I do not reject out of hand a new parking operator making a profit. That's what's called a "deal" and it is necessary in politics and in life. Said operator may even employ people after all.

    If Ravenstahl's "advisers" benefit personally -- well, if we are speaking of public employees or publicly paid consultants, that would be dreadful and all bets are off. If we are speaking of advisers with no formal role -- that may be irritating to many, but I don't see any foul IF -- if!! -- we have undertaken a transparent, fair and competitive process, and our 7 qualified bidders duke it out to our benefit. I have not seen any red flags so far and frankly have been somewhat impressed. Maybe all the scrutiny has paid off / sunk in / caught up? It's nice to think about.

    Similarly, on the Mayor personally: not even during the heyday did anybody accuse him of reaching his hand into public coffers to pay for penny candy. Rather, I think you are suggesting benefit in terms of campaign funding. If a quid-pro-quo has been arranged, that would again be dreadful and all bets are off. If however nature is going to take its course in as much as our brand new campaign finance regulations will allow -- again that will be annoying, but I'm not sure government could ever brush its teeth in the morning if we begin disqualifying any activity which involve contributors out of hand. The sheer number of major and minor investors in a winning consortium, and the conceivable range of their other investments and business ties, might make strict abstinence impractical. I'm not sure there is a precedent anywhere for that kind of renunciation and I'd be interested to hear of one.

    BOTTOM LINE: The key part of Anon 4:48's comment hinges on the word "only" in the clause "only benefits Ravenstahl [etc]", and that hinges entirely on the strength of the contention, "Lease or no lease. The state will eventually take over." Okay. That's an assertion. I don't know what to think of it, but I was impressed at seeing Ravenstahl, Lamb and Shields all stand shoulder to shoulder in opposition to such a thing last year. If I haven't already mentioned it, I meant to: if someone (in government) is going to argue that a state takeover is desirable and / or inevitable, they're going to have to do that. To me it sounds unnecessarily pessimistic.

  36. Selling assets that produce revenue (and could produce much more) to pay off debts is generally not a good sign for financial stability. Especially when interest rates are at historic lows.

    Luke's plan would make JG Wentworth blush.

  37. If there's one thing I hate seeing here more than swearing, it's threats of libel suits.

    You can get sued for what you say on blogs? Because I think I once suggested someone was a serial killer in a comment at Null Space. Sure, they seemed a bit suspicious, but just statistically, it isn't very likely that they were actually killing travelers.

  38. A few odds and ends:

    One of the many strange features of a Chapter 9 bankruptcy is that there is no provision for the judge to order the municipality to sell assets.

    The argument that the state might take over anyway so the City shouldn't reduce the funding gap doesn't make much sense to me. Even assuming the state will inevitably take over, reducing the funding gap in advance would mean the City wouldn't have to increase its annual contribution as much. And the way the state calculates the necessary annual makeup payments, the City would have a better cash flow situation for quite a while by reducing the funding gap, as opposed to trying use revenues from the parking assets to offset the increased contributions.

    Finally, I believe the City would retain enforcement under the proposed lease terms. But I agree it would be desirable for the City to have the right to eliminate street parking spaces--although I wouldn't mind if they had to pay compensation to the leaseholder to do so. I think that may be how the lease actually works, but I admit I am not sure.

  39. How would selling the meters and parking enforcement undermine transit?

    The devil may be in the details, but mostly this would tend towards making transit more attractive.

    If we have learned one lesson by now, it's that the government's prime specialty is giving things away. It has no incentive to maximise value or protect resources.

    Remember, that if well done this policy may both raise revenues and create a more efficient use of parking spaces, putting them in the hands of the people who want and need them most. It may at the margins get some residents to dump their cars. Also, rates will probably only be high in peak hours and may still be free sometimes.

    Selling assets that should not have been owned in the first place or priced below market value is a step forward.

    The point is to clear the decks and send notice that the city wants high density, revenue maximizing development in and near the core parts of town like East Liberty, Oakland, The Strip Downtown and The North Shore.

  40. How would selling the meters and parking enforcement undermine transit?

    You can't take the curb lane for the monorail.

  41. So I found a recent powerpoint on the proposed lease deal, and it does in fact provide that the City retains the right to determine the number and location of meter spaces, but the City has to pay the vendor if it reduces the number of spaces. Which, again, makes sense to me.

    It also specifically reserves for the City the right to implement peak period pricing, congestion pricing, or similar plans.

    That addresses my main concerns.

  42. My main concern is that we are going to lose the $200 million in the stock market or just cheated by Morgan Stanley. But, it is good to know the city kept leeway on that.

  43. Retaining ownership of the parking assets (on a leveraged basis, I might note) isn't much different than just putting all that money into one microcap stock, and one that happens to be located in the City as well. That is loading up on diversifiable risk, and you don't get any compensation for diversifiable risk, so your expected risk-reward balance is very likely to be poor

    And while I don't know the details of how the pension invests its funds, it has to be more diversified than that.

  44. Have you followed the stock market for the past 10 years? If you were diversified, you just lost money in a variety of sectors.

    You can, I suppose, think of the Pittsburgh parking as a smallish business, but that isn't right. Since you cannot add more parking without the city of Pittsburgh approving it, this isn't a free market business. This is the government sale of a monopoly, a tool widely used back in the day when governments were often too weak to collect an actual tax.

    Pittsburgh isn't selling a business or real estate, it is selling an income stream that has a very low variance because it comes with the power of government.

  45. fyi, there is a standard for bankruptcy of a Pennsylvania city (or township, borough, etc.) Check out Westfall Township, PA.

  46. Check out Westfall Township, PA.

    Size matters.* That's not the same or close to the same.

    *That's what she said.

  47. There are already existing competitors--City parking is actually the minority of public parking Downtown. And of course City parking competes with its own free parking, public transit, non-public parking, and so on. And even if the City parking did have market power, there are still going to be risk factors that effect the entire market (fuel prices, economic conditions, development patterns, and so forth).

    So I don't think it is at all obvious the income stream will have little variance, particularly not over an extended time frame.

  48. Oh, and I forgot to mention disruptive technologies as a risk factor. Wirelessly-enabled carsharing, for example, could have dramatic effects on the total demand for parking if it achieves significantly higher penetration.

  49. And of course City parking competes with its own free parking, public transit, non-public parking, and so on.

    Free parking is gone from downtown with this, public transit does not look to be growing its market share any time soon. The Port Authority will be doing better than expected if it can hold its current routes and not get the tunnel turned into a paintball arena. Nor can you add significant non-public parking without city permission. The city isn't not the only supplier of parking, yes, but it is the only supplier that can have a meaningful expansion. And it is the supplier with power to set the rates. Kind of like Saudi Arabia is in the oil market.

    There is a risk from disruptive technology, but I don't think that is likely to result in less demand for parking downtown without a collapse of the city's economy in general. Betting on "something besides privately owned individual automobiles" has been a steady loser since 1945. I'm sure it will end some day, but I don't see it happening outside of an economic contraction so tough that none of this stuff matters.

  50. We need to be careful about the precise question we are asking. Future parking-revenue trends are going to be a function of future parking-demand trends. And you don't need to have a complete reversal in the underlying demand factors in order for the demand trend to fall substantially short of expectations, which means future revenues could fall substantially short of expectations as well.

    On to some particular factors:

    Fuel prices are completely out of the City's hands.

    Free parking is already a viable competitor for the neighborhood meters--and more on this below.

    As for spending on public transit--who knows over the next 50 years? Or even the next 10. The current recession won't last forever, the country is steadily urbanizing and densifying, congestion, fuel prices, environmental and national security concerns are all putting the squeeze on highway-building--the politics and policies of transportation spending could change quite a bit in the next few decades.

    As for disruptive technologies--so far Zipcar is eliminating about 15 privately-owned cars per Zipcar. Even assuming they are currently cherry-picking their best-case customers, significant penetration with anything close to that ratio could dramatically reduce total parking demand. That could lead to lots more free parking availability in the neighborhoods, and maybe less parking demand Downtown (assuming they have accounted for residential growth Downtown in their current revenue forecasts).

    And so on. The idea that we can reliably predict local parking demand trends for the next 50 years, or even the next 10 or 20 years, strikes me as highly implausible. The fact is that even a monopolist (which the City is not) faces market risk, and the parking industry is not somehow immune to market risk.

  51. The current recession won't last forever

    One hopes.

    the country is steadily urbanizing and densifying,

    Pittsburgh isn't. It has become much less dense lately and the region has only seen growth in suburbs. Even the country as a whole isn't urbanizing and densifying in any way that would support having fewer drivers.


    Pittsburgh has a few choke points, but we are well below the congestion levels that have prompted other regions to take action.

    fuel prices, environmental and national security concerns are all putting the squeeze on highway-building--the politics and policies of transportation spending could change quite a bit in the next few decades.

    Yes, over the next few decades. Whatever does happen, and I agree that something is likely, will barely be started in before the lease is over. It takes years to switch a commonly used technology. And, if what happens is electric cars, parking will still be in demand.

  52. Again, we need to be precise with the question. Your best guess on trends isn't the relevant issue. The issue is how much possible variance there could be around our best guess, projected over the next few decades.

    Anyway, Pittsburgh actually has been urbanizing to some extent recently--the rural parts of the MSA have experienced disproportionate population loss along with the City, and so it has been the suburbs gaining at the expense of both. Recent data, though, indicates the City's population is stabilizing, but I wouldn't bet on that being true in the rural areas. Generally, exactly what these trends will look like over the next few decades is difficult to predict, which again is the point.

    As for congestion--it has been steadily increasing along the aforementioned choke points, and if we don't do anything it will very likely keep getting worse. So, over the next few decades, we will probably do something. Will that mean adding new tubes to the Fort Pitt and Squirrel Hill tunnels? Or expanding rapid transit? Or a combination of both? Who knows--again, parking demand is going to be sensitive to a lot of decisions that are difficult to predict.

    As for timeframes: 50 years is plenty of time for lots of things to bend the trend significantly in different directions. You are right that if electric cars are the future response to higher fuel prices, maybe that will be good for parking demand. But if the response instead is a lot more public transit, that would not be so good. It would also not be so good if development patterns start favoring more walking and biking. And so on.

    Again, not to beat a dead horse, but my point isn't that we know future trends will be worse than expected. My point is that all this is very, very hard to predict in advance, so there is definitely going to be a lot of irreducible uncertainty at this point when it comes to future parking demand, and hence future parking revenues.

  53. Oh, another possibly disruptive technology to keep an eye on: urban gondolas. They've started to get decent penetration in South America, and the Europeans are starting to experiment with them too. Modern urban gondolas have very high operating efficiencies, they don't take up valuable surface ROW space, and things like hills and rivers don't add nearly as much to the capital costs. So if urban gondolas become a standard part of the U.S. transportation mix, they could gain wide application in Pittsburgh in particular, thanks in part to our local topography.

    And that is just stuff I know about. 50 years is a long time.

  54. Fifty years is a long time. I'm not suggesting that there is no risk that demand for parking will drop appreciably in the next 50 years. Just that there is less risk of that happening compared to other investments. Because 50 years is not a long time for infrastructure investments. Decade long periods for planning and construction are the norm and things are built to last for centuries. An urban gondola systems that meets any significant portion of regional transit needs is far less likely than electric cars coupled with nuclear power. Both of those components exist.

    Pittsburgh may have stopped its decline in population, but it is a long way from the kind of density that has been associated with non-automobile based transit systems.


    The "Combined Pension Fund" is still $500 Million Under Funded...

    What next?

    Some ideas to fully fund:

    Expand capacity of Pittsburgh's water supply to surrounding communities that pay more for water.

    All newly employed City Employees go to Defined Contribution plan.

    Current employees (Municipal) contribute more contingent upon corresponding increases by City and State.

    Public Safety Employees: Contribute money that is normally paid to Social Security to the City, rather than pocket.

    Resuscitate Tuition Tax. At lower rate...

    Double $52 service tax (Or, whatever it is called) to $108.

    Payroll tax for Tax Exempts earning over City Medium Income.

    Increase Entertainment Tax. All new Sporting Venues...will not relocate.

    Go after percentage of Drink Tax. Buy the way, argument similar in opposition did not close bars. People will park, regardless...

    Come On! How about some brainstorming...

    And, not least of which, consider savings in reduced bond costs to continue the revitalizstion City...


  56. Monk, Sez:

    Brainstorming can get ugly!

    ‘Get Revenue, Historical Perspective’

    Place Toll Booths on High Occupancy Lanes...

    Get rid of Bus Lanes, open to public...

    Both concepts vile in nature? More environmental harm was created in construction of these monstrosities, than all the petrol saved.

    Waste of Capital Resources...with no environmental return.

    Highways to Heaven, paved in gold...

    Public Transit was only profitable in Urban Environment...

    History tells us this much.

    Want to save money on transportation...?

    Move to the City and take bus!


  57. Again, it doesn't have to be that the demand for parking actually drops. I suspect they are modeling an increasing demand for parking, so just a slower increase in demand than expected would constitute a significant risk to their expected revenues.

    Anyway, many of the risks I noted don't depend on a lot of infrastructure changes--e.g., fuel price changes can happen a lot faster than we could possibly build nukes or swap out the U.S. vehicle fleet, which in fact just happened, resulting in a significant reduction of VMT below trend.

    To the extent some of the risk factors I noted do depend on infrastructure investment--while much infrastructure investment in the U.S. has been on a very slow track recently, particularly public transit infrastructure investment, again that is subject to change (and to some extent is already changing at the federal level). So I don't see how one can dismiss the risk of public transit investment in the Pittsburgh area significantly picking up in pace--again, it might not happen, but the risk of it happening is enough to make the point.

    As for urban gondola systems--they are actually quite quick to build, and there are no hard limits on scalability. In that sense they fall somewhere between new bus routes and light rail in terms of potential speed of implementation. Again, whether urban gondolas will be adopted as a common U.S. technology remains to be seen, but if they were adopted, it is quite likely that would lead to a much quicker buildout of rapid transit options precisely in cases like Pittsburgh (which, as you point out, lacks the density for a lot of the more expensive rapid transit options, but may well have ideal densities in many areas for gondolas).

    Finally, even if you were really, really convinced investing all $300+ million in the parking industry was the best possible financial investment at this time (and I bet if you had the $300 million in hand and pitched that to the pension fund, they would laugh you out of the room), there is no particular reason to insist on investing all of it in the parking industry in Pittsburgh. There are parking REITs and such that would at least allow you to diversify your parking holdings.

  58. monk,

    Most of your ideas would require state authorization. Which doesn't make them bad ideas, but the state has yet to prove very cooperative.

  59. Brian!



  60. Onarato...will not be next Gov.

    His position on drunks paying for tunnels to nowhere will be his un-doing.

    Cost of Underwater North Side Portal is equivalent to: total unfunded City Pension Liability after lease of parking garages...

    I want some of the Drink Tax, that I so richly deserve. Not in form of money pit, under river...

    It is not only the State Officials that screw us. But ex City Councilman, longing for futures that do not include Pittsburgh residents.

    Case in point: there is former City Councilman Jack Wagner...

    Wabash Tunnel!

    Scoundrels all…

    If not already in jail...where is Southwestern Legislative Contingent to Harrisburg?

    Ferlos', next?



  61. I'd prefer a gondola over the tunnel, if that were an option. I do have a fear of heights, but no cable car can be as rickety as the Greenfield Bridge and I go over that all the time.

  62. there is no particular reason to insist on investing all of it in the parking industry in Pittsburgh.

    There is if you are in Pittsburgh and already have the garages. It is a known thing, which is a big plus for a local government that has no demonstrated skill at innovation.

  63. 50 years is likely going to see a lot of innovation in parking. If you become a passive investor in a bunch of parking companies, you don't have to have any particular skill at operating parking assets, now or in the future.

    By the way, if parking in Pittsburgh is the best asset available in the whole wide world, why aren't people agitating for the pension fund to do whatever it takes to buy out ALCO?

  64. By the way, if parking in Pittsburgh is the best asset available in the whole wide world...

    I didn't say that. I said it is a better asset than what they are likely to get with the $200 million because they can't get much but stocks and bonds. Any gains there come after six layers of corporate management and 4 giant banks get their cut.

    Of course, the best investment isn't on any stock market. We should try to invest in the future of America's children. By which I mean, sell pot.

  65. MH.

    I miss your profanity/passion.


    The Pittsburgh Council that I am most familiar with...

    Included Mayor Bob O'Conner...Greenfield resident.

    He was part and City's Pension problems.

    Lump him in same gondola with Onarato, Wagner and Ferlo...

    Just sayin... currently is lived "in the run".

    Folks say Councilman Shields, has out lived his usefulness.

    I once ran for Council against Diven....Good Guy.

    Busted De-Weasel...of course, it may be Mike's Brother...Joey how works for Corbett, had something to do with it?

    Just sayin...Shields’ is focusing on Magistrates job...

    Hasn't a care about Greenfield, nor, did his mentor ... Mayor O'Conner


  66. The total $300+ million includes about $100 million in debt (those dreaded bankers are hard to avoid). By the way, if you would prefer to BE one of the dreaded bankers, that is what bonds are for (not a risk-less venture, though). Finally, I'm not sure I would count on the Parking Authority's overall labor efficiency beating the average microcap company.

  67. Monk sez:

    I know how unpopular this may sound.

    My faith, lies in Luke....

    He gained Presidency of City Council, as default.

    Not unlike Sophie, after Caligui death.

    Difference is...Council President Jack Wagner, and Councilmen Onarato, Ferlo and O'Conner where witness to Elected Employee Representative to the City Of Pittsburghs Municipal Pension Funds Board Of Directors: Ray Wolfgang's Execution...

    Blood upon Sophie...City Controller Tom Flaherty and Ray Wolfgang had questions concerning PA Act 205, The Pension Recovery Act.

    Time was 1990-91...

    The State Takeover...was henchforth, foregone conclusion..

    Public opinion died, at hands of City Councilmen...

    Lest We Forget!

    Luke is transparent...


  68. Thanks, I guess. I'm not entirely sure what that all means. And didn't O'Connor live in Squirrel Hill?

  69. The above was posted to Monk @5:38.

  70. I live in Squirrel Hill.

  71. I'd have deleted his 5:38 comment also but you referenced it.

  72. Don't let me stand in your way.

  73. It's your blog and it got very far from what passes for polite.