Here is the report.
First issue: the city actuaries' numbers were off by only $1.9 million, or a mere 0.2%. Congratulations, you guys, you win both showcases.
Second issue: The cheat sheet is found on page 19. "Scenario 3" is the mandated State Takeover, which appears likely to occur in 58 days unless we somehow conjure $220 million or more during the interim. Under the terms of this takeover, the city's annual payment would shoot up from the present $47 million to between $86 and $92 million in the years 2013 through 2016 -- and then to between $127 million and $160 million in the years 2017 through 2032. The differences from our present $47 million of course would get taken out of our annual budget somehow.
2013 is not exactly science fiction, nor is 2017; there will be no hoverbikes for example. Expect this post to grow a little, and expect the implications of this report to be discussed by your favorite local political figures tomorrow at 1:30.
MORE: Null Space describes the increases as "incomprehensible" (only partially because he's looking at our present baseline MMO of $38M instead of the "MMO+" of $47M we've been managing to pay) and then finds "worse" news in it.
So, it's not as bad as Ravenstahl thought...in fact, it's far worse.
ReplyDelete"Just let the state take over" sounds great at a CMU cocktail party, but placed in actual terms it will be a disaster.
One thing I am not seeing is wherein lies the necessity of enacting grave cuts during this 2011 budget cycle, as our MMO would not increase for another 2 years. The cuts would arrive sure as the sun shall rise but not in time to steel our resolve to avoid this takeover. MAYBE THEY WANTED IT THAT WAY?
ReplyDeleteI had trouble with the document, probably because I've never used Google Docs. Does it say how much we need to pay in 2017 if we put in $220 million?
ReplyDeleteActually MH, try it now.
ReplyDeleteThat's the tricky bit; it doesn't appear to spell out what happens if we pony up the cash. Probably because if we do, we don't get taken over by them so we could do whatever we want and it's our funeral... but if our plan would still be to get 100% funded in 30 years, it sounds like every payment would be cut by close to half?
Thanks. It works.
ReplyDeleteAbove I wrote "Close to half" ... no that can't be right because the payouts keep piling up also, never mind.
ReplyDeleteThank goodness Council got all this information before it made any final decisions on its options . . .
ReplyDelete. . . or does Council now get to ignore these numbers too?
Yea. Peduto's plan doesn't sound like much of a plan anymore, does it? Council has a plan, but Lukey would rather block it with his questionable legal analysis and poor quality powerpoint presentations.
ReplyDeletePlaying around with Excel, starting with $220 million and assuming a fixed 8% annual return, I was able to construct a payment reduction that looked like this (2011 to 2029):
ReplyDelete7.5
8.3
9.1
10.0
11.0
12.1
13.3
14.6
16.1
17.7
19.5
21.4
23.5
25.9
28.5
31.3
34.5
37.9
41.7
45.9
41.3
37.2
33.4
30.1
27.1
24.4
21.9
19.7
17.8
Assuming 6% fixed return:
5.9
6.5
7.1
7.9
8.6
9.5
10.5
11.5
12.6
13.9
15.3
16.8
18.5
20.4
22.4
24.6
27.1
29.8
32.8
36.1
32.5
29.2
26.3
23.7
21.3
19.2
17.3
15.5
14.0
I tried to roughly (very roughly) match the shape of the MMO curves.
Sorry, that was 2011 to 2039, and again, only a very crude approximation of the payment curve.
ReplyDeleteTED:
ReplyDeleteThe rain falls on the just and the unjust alike. Joy cometh in the morning...
Well, maybe not THIS morning.......
Any more dreams? (I mean plans?)
What's this about "Peduto's Plan"? Sorry, but where the heck is that? Unless I am mistaken, his plan is "let the state take over"? it seems like that is totally off the table now, given these numbers.
ReplyDeleteTime to set aside personal dislike of the mayor and square up with this - we need a cash influx, and we need it WITHOUT borrowing more money. So far only one plan offered that - the one that 5 folks in a community meeting "universally panned".
Hopefully these numbers are shocking enough that a compromise version of the lease can get through the pitchfork crowd. A compromise version of the lease could actually be better--for example, I was never thrilled with the 50-year term, and if it was changed into something more in the 20-30 year range, that would be fine with me. And who knows . . . that sort of thing might allow almost everyone to claim that it was their courageous actions during the process that were responsible for achieving the best possible outcome.
ReplyDeleteThat said--I'm still not sure it is wise to bet against nothing happening. It doesn't make sense to do nothing, but nothing is often what happens when there are too many veto points and any viable action would have politically-unpopular elements.
If the pension was fully funded, the MMO would be $16 million dollars.
ReplyDeleteThe City gets $15 million in state pension aid.
Employees contribute $9 million.
Its all out there in cyberspace if you know where to look
If the City got to 50% funded (actually only 45% funded) and continued to put in $45 million dollars while paying out $80 million dollars, wouldn't it be reasonable to figure that the MMO in 2017 might be $127 million dollars anyway?
ReplyDeleteKind of defeats the magic of getting to 50% funded
While I'm impressed with everybody that there's some fundamental negotiation, I'm a little concerned that the prior arrangement will be watered down so much that upwards of $50 million will get chopped off the bid price -- meaning the pension fund might still only be filled 50% + a nickel, it'll be subject to a possible takeover again in only 2 years, and still we'll have turned public control of a public asset over to yahgahgahgahgah.
ReplyDeleteFrom Bojack:
ReplyDeleteOne word-
BANKRUPTCY!!
Let it go to court, it's happening elsewhere, why should we be last?
Govt. equivalent of Chap 7, then change laws allowing and defining alterations/ adjustments to outrageous public pension plans!
Why shouldn't OUR employees be subject to the same forces as let's say- TWA pilots??
It's GONNA happen! Let's be first instead of broker and last!!!
To the extent the lease payment gets chopped due to a stingy rate schedule, that is something which could be renegotiated in the future if the City needs more money for the pension. The same applies to the length of the lease--and in fact periodically extending the lease to keep it in that 20-30 range, assuming everything is going well, may be a good strategy regardless of the pension situation.
ReplyDeleteUltimately, though, the pension problem isn't one that the parking assets can solve. That is going to take reform at the state level, so all this is basically about buying time for such state-level reforms to occur.
Oh, and it is also about getting an upgraded, much more user-friendly parking system, with closer to optimal rates. But no one seems to care much about that besides me, and (maybe) the Parking Authority.
And incidentally, whether or not the City could go into bankruptcy, and what it could actually do in bankruptcy about its existing pension contracts and pension obligations, would all be up to the state as well.
ReplyDeleteWrong again Bram. A state take over does not kick-in in 2 years. BTW the city put in 60 Million this year not 47.
ReplyDeleteExplain that -- "a state takeover does not kick-in in 2 years" -- does that mean it will not kick in for another two years, or it does not NOT kick in for another two years?
ReplyDeleteAnd I'm clearly having trouble receiving consistent info on what the city has been contributing, but I don't think it detracts from my larger point of, "It'll be a lot more".
I just heard Peduto on KDKA radio. He was talking about some way of putting $170 million up front money and then lower payments by using debt. Did anyone hear it.
ReplyDeleteJust tuned in ... it sounds like a big chunk of that up-front money under Peduto's plan would be from the non-profits -- so I have to come in a little skeptical also -- as well as $40+M from the "restricted fund" which was very much supposed to be for DEBT not pensions (although I think we're all potentially willing to let that distinction slide now).
ReplyDeleteBram, Your answer to the question above:
ReplyDeleteAct 44 calls for the fund to be shifted to PMRS if it is not 50% funded on January 1, 2011. That is the only date that calls for a state take over. Nothing in the Act requires the fund to maintain that level at any point in the future. That is not to say it's a good thing to be less than 50% funded or that the legislature couldn't pass another bill that would require state takeover. The state legislature could jus as easily repeal parts of Act 44 and avoid the state takeover all together. Bottom line is the city should try to find the least expensive way to get to 50% on 1/1/11 and they should not put one more dollar into that fund until they deal with the cost side of the equation. Even if you put 330 Million in, it will continue to drain out and we will all be here again within the decade. I'd rather still own some assets at that point.
Anon 10:13 said, "The state legislature could just as easily repeal parts of Act 44 and avoid the state takeover all together."
ReplyDeleteActually, not so much, because it just went home until Jan 3. Although aside from that, the political climate I think makes it likely that the state will get only more hawkish on Pittsburgh -- particularly if it eludes the takeover through debt or phantom revenue, then continues to backslide -- but I'll admit that's raw speculation.
The link under the "Update" appears to demonstrate that it'd be eminently doable to meet future MMO's after a "large cash infusion", without bartering more assets. I agree it'd be far more cost-effective to address the costs side first, if we could ... but call me cynical, I just don't see any cause for optimism on that front. On the margins, I do think it's likely in due time that the non-profits will enter the equation, but frankly believe that's more likely only after a major conservative maneuver by the City.