The numbers are in:
The valuation results indicate that the parking garages and the meter system are worth approximately $199.8 million and $201.3 million, respectively, in net present value for the next fifty years ... These results incorporate fixed values for inputs such as elasticity of demand, annual growth rate, and the discount rate. Simulation analysis tested the sensitivity of the valuation in the presence of parameter value uncertainty to a likely range of parameter values. This generated valuation ranges of $152.4 million to $236.5 million for the parking garages, and $133.8 to $234.3 million for the parking meter system. (FSG, page 19)
So if guns were held to Council's "independent" consultant's heads, they'd avow the lease on the table to be worth $401.1 million. Which is exactly $50.6 million less than LAZ Morgan Draper Pryce is offering us.
And if you let them play it safe and account for all remotely likely variables, they would offer a possible value range between $286.2 and $470.8 million. Which, at its highest extreme, would be only $20 million or 4% higher than what is being offered.
That's what they're saying, right?
Right. But we knew that already. Pittsburgh will require relief from the state and/or statewide reforms to stay above the 50% pension funding red line and out of trouble permanently. And we can rely on them to do so right after they seriously regulate drilling.
There is a lot of hand-wavy stuff trying to make it sound like the lease might be a problem even if the numbers are good, some of which I think implies an inaccurate picture of what is in the lease, and some of which fails to acknowledge how the City is off-loading considerable revenue risk onto the operator.
ReplyDeleteBut ultimately, despite all that, it does seem to support the view that the City got a pretty good price, which likely makes this the least bad option available.
@BrianTH.. Except that on this blog and others, people are salivating over the 'extra $$' over and above those purportedly needed to get the Pension fund to 51% (or whatever is the minimum today).. I will LMAO if the City funds the pensions at the minimum, spends the excess (supoposedly ~$100M) and the City faces the abyss again. The City should declate bankruptcy and void/modify significantly any and all pension obligations... thereby welcoming the parasite public-sector Union employees to the "real World".. a World occupied by those of us who don't/didn't have the protection of cushy civil service jobs.
ReplyDeleteMaybe LAZ Morgan Draper Pryce ran the same numbers as the independent guys, but they expect 10 to 15% deflation.
ReplyDeleteThe Bankruptcy Code requires state authorization before a municipality can enter bankrupcty, and the state is entitled to set conditions in so granting authorization. Given that the state in this case has a long-standing law, Act 111, that requires municipalities to go to binding arbitration with police and fire unions over contract disputes, I wouldn't count on the state authorizing a municipal bankruptcy in which the municipality could simply void its obligations to its unions.
ReplyDeleteNot that you will ever hear about any of this on the relevant talk radio shows.
I will LMAO if the City funds the pensions at the minimum, spends the excess (supoposedly ~$100M) and the City faces the abyss again.
ReplyDeleteIF the lease plan is approved, That is exactly what Burgess plans to do.
Councilman Ricky Burgess, a lease proponent, said the study reinforced his commitment to the plan. He said he wants to take $120 million in lease proceeds and use the money to stimulate investment in city neighborhoods, including some that might be hurt by parking rate increases.
How are you going to stimulate business when the parking rates double or triple?? This plan is going to have the opposite impact. If Burgess has his way, the city will be right back where it started within a few years. Only this time, we will have sky high parking rates and no parking revenue to meet the increased pension obligations.
BrianTH - bankruptcy code does not require state authorization. It merely requires that municipalities be allowed under state law to file Chapter 9. Big difference. It already happened in PA WITHOUT state authorization in Township of Westover. In BK, City could reject collective bargaining agreements and dish off pension to the PBGC and re-write terms of bonds. Only problem is that no politician that wants to get re-elected will ever admit that bk is our best option.
ReplyDeleteWITHOUT state authorization in Township of Westover.
ReplyDeleteI don't know PA state law in detail, but I'm fairly certain that it contains many specific provisions that apply to smaller municipalities only.
In regards to what to do with the excess -- I would not want to get steered into a scenario in which we need to sell or lease our water assets next.
ReplyDeleteIf they sell the Allegheny, then all that money on the tunnel will be even more wasted.
ReplyDelete"bankruptcy code does not require state authorization. It merely requires that municipalities be allowed under state law to file Chapter 9. Big difference."
ReplyDeleteI actually don't understand what you are suggesting--what in your mind is the difference between needing authorization and needing to be allowed?
To summarize a complex topic, due to Act 47 and Act 11 of 2004, certain conditions would need to be met in order for Pittsburgh to file bankruptcy, AND the governor would have to approve the filing, AND the City's Act 47 plan would be used as a guide for the bankruptcy action. And that last part is a killer, because the City's Act 47 plan doesn't include renegotiating existing contracts.
Forget Act 47, Act 11, Act 111, and all the other state fuck ups:
ReplyDeleteEliminating pensions that have already been promised is illegal under that state constitution.
There are some possible arguments to the effect that the aforementioned Article I, Section 17 of the PA Constitution wouldn't apply to voiding contracts in a federal bankruptcy action. But that is uncharted waters.
ReplyDeleteToo many factually incorrect, or at least misconstrued, things being thrown around in the above thread to address them all. But on the one point that an option is to "dish off pension to the PBGC " is just not true as local governments are generally not covered by the PBGC. City workers would just not be covered in the event of a defuault on their pension payments.
ReplyDeleteAs for whether 'permission' is required to go into bankruptcy you get into legally tenuous issues because of the unprecedented nature of a large Pennsylvania municipality trying to file for bankruptcy. The permission conceived of would likely be through DCED in some form. My take is that it is an irrelevant argument in many ways. If you can't pay a cash obligation, you are in a technical state of bankruptcy, legal filing or state permission or not. Worth watching Harrisburg as it teeters toward a cash zero state. Do they need to ask permission of big H Harrisburg to run out of money?
Too many factually incorrect, or at least misconstrued...
ReplyDeleteThat's nothing. You should see the parts of the Internet which aren't about Pittsburgh or regional economic development.
That's nothing. You should see the parts of the Internet which aren't about Pittsburgh or regional economic development.
ReplyDeleteand to think I believed that Mr. Rogers had once been a Marine Corps sniper.
"My take is that it is an irrelevant argument in many ways. If you can't pay a cash obligation, you are in a technical state of bankruptcy, legal filing or state permission or not."
ReplyDeleteIn the context here, the practical question is whether the City could get a federal judge to "void/modify significantly any and all pension obligations." Being in a "technical state of bankruptcy" wouldn't achieve that--the City would have to be in an actual Chapter 9 process with the bankruptcy judge having that authority under state law.
In other words, the point of the discussion above is that one way or another, it is ultimately up to the state whether or not Pittsburgh will have to fulfill its existing pension obligations in full. And in fact the state has the power to force the City to prioritize fulfilling those obligations, a power which it has already exercised.
So the notion suggested above--that someone it would just take a unilateral act on the part of the City to void/modify its existing pension obligations--is simply wrong. And that, unfortunately, is a relevant point, because a decent number of people have been encouraged to believe that is an option for the City.
Somehow, not someone, in that last paragraph.
ReplyDelete