Thursday, December 30, 2010

Thursday: Politics and Realities

Some links to some stories:

"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.


  1. 1st, excellent body of work, as always. 2nd, really cool link to the Xanatos Gambit

  2. Thanks, V! Sorry if people are wasting their day surfing through TV Tropes now ... lots of good gambits in there. Yesterday it was starting to look a lot like Xanatos Speed Chess.

  3. I am still perplexed by council, but perhaps more so by the media. The PG and council friends have been bashing the mayor for not working with them, but did they work with him? Why should the mayor endorse a plan that is doomed to fail? That doesn't make any sense. If the state really would accept something less than a cash infusion why didn't the state OR council say that like, uh, 6 months ago? I also like how council continues to say that the mayor controls the parking authority (which he does sort of kind of), but then everything council passes is depending on COUNCIL telling the parking authority what to do. If the parking authority actually acts in the interest of the PA, then surely council will criticize them for not being independent (of the mayor). Now, Peduto is saying that the mayor wants to engineer privatization of assets by not finding a solution. I thought it was Peduto that ALL YEAR said he favored state takeover??? Did he not see this coming? Besides, the Mayor basically said to council - tell me what tweaks you want in the lease plan and I will work with you on it. It is flat out wrong to say he wasn't open to compromise. What is the difference between council legislating what happens with parking assets for the next 30 years or a private company having the right operate them for the next 30 years?

    Listen, there is the reality. Council is currently like the R's in Congress. They have one goal - embarrass the mayor and deprive him of any legislative victories in order to make him weak and have his donors abandon him. While most won't understand this, it is true - council's actions are hurting the City. The one thing that is certainly true is that the Mayor's biggest folly in all of this was his failure to reach out publicly and build a coalition of business and community leaders. That will continue to be the mayor's downfall, but council cannot be left with the ability to make decisions on behalf of our great city. They have proven themselves to be driven by ulterior motives instead of what is best for Pittsburgh.

  4. everyone seems to be misusing the term "state takeover".. or at the very least what it applies to.

  5. Excellent post by the 10am anonymous.

    Shields has not advanced any solutions on this issue at any time. I think we can go ahead and ignore his ramblings. Peduto has been openly saying that the state should take he's accusing the mayor of "engineering" it...? I really don't think that's going to work for him, and it certainly won't work for the city.

  6. Council's problems are rooted in their belief system;they're anti privatization,anti wall st, stuck in the mud progressives.We have a couple career politicians and the remainder made up of community activists.Most of them have run in multiple candidates primaries and have zero general election competition.They represent a fraction of their council district and only a small,minuscule portion of the city.Their attitude has been sophomoric at best and moronic at the bottom of the scale.

  7. what are they afraid the state will find if they take over the pension - more wrong misdeeds???
    and what is the boy mayor getting out of the deal he set up - nothing is ever free in his administration

    also, the strip club was there first, the school came second, if it was ok when the school wanted to be there what is the issue? and on that note, stripping is supposedly entertainment and that is a school for the performing arts is it not .......

  8. Very simply- if the state takes over, they will then be able to force the city into a number of things - including impossible yearly payements and things like selling off city assets like parking and the PWSA.

    Each and every one of these last-minute plans are worse than the lease deal.

    By the way, council has now scheduled a meeting to take place at 11:00pm Friday night. All of this scrambling around is pathetic - they had at least a year to work on this. Most of them spent all of that time saying, "why shouldn't the state take over?"

  9. of all the bad information all around on this.. it just isnt true that the state will gain any more ability to force the city to sell anything because of this. PMRS has not additional overlordship that the ICA and Act 47 team do not have as it is. So it's not to say state can't force anything, they are the state, but nothing in the (still potential) PMRS assumption of pension management changes anything on that. If you think otherwise, can you cite where that authority comes from?

    The potential privatization of PWSA is actually kind of funny. All should know the city did divest itself of the water authority alreay. Was just the city water dept until spun off for cash in early Murphy years. That was all described at the time as "privatization" so what would this be? Given the debt at the PWSA and pretty isurmountable captial investment needs down there it's a bit hard to see any rational investor getting into that and if they did it would be a very different argument than any we have been having.

  10. the pwsa spin off and the sale of the golf course, aviary, zoo, and other revenue gaining assests, including the parking authority, were sold off during Sophie's time in office for the same reason they are scrambling now.... still want to know what they are afraid the state will find if it takes over

  11. There's big money in letting people experience the joy of a bird voiding on their head while indoors?

  12. when during Sophie's tenure was the PWSA spun off? As a paper entity the PWSA was created under Caliguiri.. and the real guts of it, i.e. the transfer of the city water dept, along with monetization of it all, was 94.. or 95. I forget the date. But I missed the Sophie part.

    and you may have it backwards on the revenue generation part. Zoo especially received money from the city.. it didnt send a check back.

    that's why this whole debate is so screwed up. People have things, not just off, but backwards, on a lot of important points.

  13. On second thought, nobody answer that. Rule 34 and all.

    But, the zoo and the aviary were not revenue gaining assets while the city had them. If they are now, it is because they can do things that they couldn't while they were part of city government. That is, people will give money to a charity, not a city office. And labor costs/rules/pensions are much less of a problem outside of city government.

  14. Zoo and aviary both get RAD money I do believe. Was actually the real point of the RAD to get the cost off city books.

  15. My first job with the City was as Engineer for the Aviary. My blessing to Director Clack...

    Privatization as much as I opposed it at the time, does open Minds.

    I just read letter from my Union, the PJCBC and it basically sez "Mayor get your head out of your ass". Rare correspondence...

    So there is meeting on Dec 31st @ 11pm?


  16. I'd agree the ICA and Act 47 Coordinator don't automatically get new powers if the pension is taken over. However, when the minimum pension contributions escalate, it may become a lot harder for the City to create financial/recovery plans that meet with their approval absent a sale of assets. Still, at a guess the City would be allowed to cut services and raise taxes (at least on residents) instead of selling assets.

  17. don't automatically get new powers if the pension is taken over

    Seriously, they don't get any new powers. No 'not automatically' about it.

    and the minimum pension contibution will be going up no matter. Only question is how much sooner, and how much later. That really is all that is being fought over here from a city budget perspctive.

    I'm waiting to see the exact verbiage... but from what I can tell they went from undercounting to way overshooting what they needed to put in. Someone really does not want to take any chances with the potential of PMRS taking over. Of course that comes with the price of bigger payments now.

  18. Brian,

    The City has one option "Cut Services"...Raising Taxes on City Residents, absolutley! Tax the poor and turn blind eye to subourbonites...

    Not an option!


  19. $735,680,000, $414,700,000 - what's the difference, really? Calculation, long as the can keeps getting kicked down the road...

  20. Chris,

    With all due respect, you are quibbling with my choice of words and avoiding the actual substance of what I wrote.

    My point was that increasing the City's fixed near-term financial commitments will indeed have an impact in terms of the ICA and Act 47, because it will make it harder to craft financial and recovery plans that meet the relevant statutory standards. De facto, that could make future asset sales more likely, even though the ICA and Act 47 team probably will not have the explicit authority to dictate such sales (although the Act 47 team might recommend them).

    I already agreed that doesn't really amount to a "new power". But if you are trying to imply that significantly increasing the City's fixed near-term financial commitments has no practical significance whatsoever when it comes to the ICA and Act 47, I think you are being misleading.

    As for it just being a matter of sooner or later--for one thing, the City is currently financially distressed, but may not be in the future, in which case the applicable legal regime could change. For another, political/legal events may intervene to reduce the City's pension liabilities in the future, or give it more financial options in general, and the cumulative probability of that happening increases with time.

    So while one certainly can't count on a more favorable situation for the City in the future, one also can't rule that possibility out, and thus it makes some sense for the City to try to buy some time.

  21. Minuteman,

    Given all the hostility Council has shown to the very idea of NPV calculations (at least since their hired-gun financial analyst gave them the wrong damn numbers!), it doesn't surprise me they couldn't actually perform one when necessary.

  22. Brian,

    I wish I could write like you


  23. Yes Chris, I don't think anybody is arguing that PMRS will suddenly gain powers to lease and sell things. The argument is that if our MMO's double or triple under PMRS's regime of management, and the state becomes nervous that its agency is going to get shafted by a Pittsburgh unable to keep up, then the state may acquire THE MOTIVATION to start forcing us to make deals using authority it already has. Or, if when the state reauthorizes the ICA it grants it more powers (which may be justifiable in any event) that would make such maneuvers even a simpler, more streamlined process.

  24. My feelings are thus:

    Mayors original plan far exceeds anything remotely close.

    If Council-Lamb proposal is enacted, union members will swipe @ own arse.

    Should Luke move on, any member of Council voting on placebo legislation, will tread path along with toilet tissue affixed to shoe.

    My Union sold me OUT! PJCBC.

    Recent letter should have been sent months ago!

    And, for this I pay dues to idiots?

    Go LUKE!


  25. The argument is that if our MMO's double or triple under PMRS's regime of management...

    What we need to pay stays the same regardless. The only question on that matter is how long we can stretch the payments. Stretching makes sense, except there is every reason to think that the city wouldn't actually make the payments to fund the actual need without oversight.

  26. If I am quibbling with words then everyone else is mangling them. If you have listened any of this debate as it was going on, folks on city council keep describing what could happen as a complete state takeover of the city. For the person who is not wasting even more time than they should parsing it all, the public would think the state is about to gain some de facto oversight of the city which is just not the case. I honestly think some of them believe there will be some new power that will descend on the city via, or because of PMRS. There is not even any evidence in any of this that suddenly the ICA or Act 47 is even going to all of a sudden exercise any more ineffectual power than they do now.

    Buying time, of the concept of buying time, is what has put us in this predicament year after year. Pension fund is functionally pay as you go as it is now. Time has been gone for some time. Since actuarial math is too obscure for most folks, it gives some illusion that isn't the case... but it is where we are at.

    Best part of city council yesterday was when Director McAneny had to give a micro-tutorial on what a discount rate was vs. a rate of return. Seemed to be some fundamental confusion over it all which makes you wonder how any numbers came out of this process. So yeah, 400 mil, 700 mil. That's like a rounding error given all the other issues.

    So the words matter.. IMHO. Hard to even figure who is . You think city does this to itself, but here again it's been helped along by a lot of folks to again head down the rabbit hole.

  27. ... who is making any sense. that is.

  28. Anyway, the latest council plans seems to much stupider than what either side started with. Anybody who thinks improvement requires heightening the contradictions should be cheerful.

  29. Plankton vs. Guppy vs. Bass vs. Dolphin vs. Shark...

    Vs... Monk and 6 pack, and bloodworms, and salty gear...

    To think State nor Fed's won't chomp upon existing monies and revenue stream...

    Under funded Pension Liabilities will be seized by State and Federal overseers....

    All In!


  30. Chris,

    I don't feel personally responsible for the misstatements of others. I agree that phrases like "state takeover" have been employed in misleading ways, but I think the point I was making above is nonetheless correct. I think Bram's point, which is related but a bit different, is also valid.

    I also don't think you really responded to the specific point I was making about buying time. You are absolutely correct the City has been getting away with grossly underfunding its future liabilities--but that is my factual assumption as well. The plain truth is that unless the City's future pension liabilities are trimmed in some way, it is going to have harsh consequences for the City's stakeholders. But 30 years is a long time, and this basic issue isn't limited to Pittsburgh, and I don't think it is unreasonable to try to minimize the damage in the short term with the hope that future political conditions get to the point that something substantive can be done.

    Accelerating the payments in effect starts locking in the negative consequences of those future liabilities. If you assume the future liabilities are immutable, that point may not seem all that compelling. But that is not my assumption, and I wouldn't want the City to assume so either.

  31. Accelerating the payments in effect starts locking in the negative consequences of those future liabilities.

    Did you switch sides or something? Because the lease is the biggest lock-in of all and your second paragraph reads like something I said and you yelled at me for.

  32. The lease would lock in a favorable estimate of the future value of the relevant parking revenues. That is a good thing regardless of what is then done with that money, because the City doesn't benefit financially from taking a concentrated bet on future parking revenues, and the lease would be good for the parking system as well, and some of the proceeds would be used to cancel other liabilities (the parking debt).

    But that is besides the point, because I am arguing here in favor of making enough of a contribution to get to 50% and stave off an acceleration of pension payments, which is independent from the question of whether or not the lease is a good idea for getting that money.

    I do recognize that if you thought the City could permanently get away with the current amount of funding, that would be preferable. But I don't think that is likely--even in an optimistic scenario in which the future liabilities are eventually trimmed, the City will likely have to provide at least as much funding as 50% funding today would represent.

    That said, I also recognize that if the state actually does let the City get away with the current plan, it might be a pretty good idea, because it would minimize the present contribution. The merits of this idea would be particularly clear if the City would have the option of buying back the revenue commitment in the future--a question I have asked here but don't as yet know the answer to.

  33. Oh, and to make something explicit: assuming the state lets the City get away with this, my preference would probably be to combine the two: do the lease and also make the necessary pension contribution in the form of a pledged schedule of payments and not a lump sum of cash. You may have to twiddle the lease again to do that--I'm not going to bother looking up the projected future revenues from taxes and revenue-sharing in the last incarnation of the lease, since this is undoubtedly an idle conversation.

  34. BrianTH, you write:

    "But that is besides the point, because I am arguing here in favor of making enough of a contribution to get to 50% and stave off an acceleration of pension payments..."

    Alright, so now we've essentially accelerated our pension payments unilaterally by $13 million starting immediately and by $27 million starting in 2018. Isn't that starting to put us on track for tax increases and service cuts? Especially if the funding level, which is not going to get any better, gets worse what with the $30 million negative cash flow AND continued revised actuarial reports? I'm starting to miss what are the advantages to stave off the takeover with what are indisputably off-brand Band-aids.

  35. The merits of this idea would be particularly clear if the City would have the option of buying back the revenue commitment in the future

    With what? Profits from smuggling cigarettes? Your views seem to only make sense if goal #1 is local control of the pension, even ahead of actually paying the pension.

  36. I'll get back to BrianTH's earlier point.. but there is a cash issue here. The notional asset works to push down the MMO I think all agree. Yet it isn't a current asset no matter what universe you are in. So in fact it could accelerate the cash draw in the early years. Whether the dedicated 13mil more or less offsets the lowered MMO increment you need to work through. but....

    and I hate to ask.. and I have followed this as best I can while staying sane.. but is there a rationale for why parking tax revenues will double between 2017 and 2018. If there is a weak link here I would say that even if PERC buys this whole income stream asset concept which I guess they must.. if they are not just running away entirely then they still might question the jump. Unless they 'signed off' on that as well.. just seems to beg some questions of state code limiting the parking tax rate.. could be an inflation assumption I suppose.

    Did anyone go to the ICA meeting that was said to have happened to approve this? or talk about it? or something?

  37. You'd have to go back to the James Allen report to get a sense of how the net cash flows worked out. As I recall, there may be a year or two upfront where the net cash flow is worse, but I'm pretty sure the annual cash outflow would be significantly lower starting in 2013, and probably would go net positive overall not long after.

    I believe tbe gap really expands in 2017--that may explain the scheduling of contributions.


    I don't care at all about local control of the pension. I'd like to do the lease for various non-pension-related reasons I have frequently stated. I think it is probably a good idea for the City to try to minimize the amount it is required to contribute to the pension over, say, the next 10-15 years.

    And if I am wrong about the cash flow implications of this plan over the next 10-15 years, I'd be happy to withdraw any support for it.

  38. According to the PG:

    The parking tax will generate about $46.7 million for the city next year. The diversion of $13.4 million in 2011 and additional amounts in future years will create significant holes in the city operating budget. Some breathing room will come after 2017, when the city eliminates a portion of its debt, freeing up an $48 million annually for other purposes.

    So I guess that is the explanation for how they can step up the parking tax contribution in 2018.

  39. Chris, go back to academia where your mincing words is worth anything. What is the goal of the state and the power brokers in Harrisburg and the County? Answer: City and County merger. People may or may not want that in the blogosphere but the allegheny conference definitely does. Their goal is to starve the City of cash and force the raising of taxes and retirement of debt. Then pressure builds from within (higher taxes) to merge and from outside (retire debt and make more palatable for suburbanites). When the large payements start as Bram correctly pointed out, both of those pressures will build and we will need to sell more assets or significantly raise taxes. When we dismantle all of the democratic institutuions of power Republicans and corporatsim will gain power. The PWSA is next, then URA then Port Authority. Pretty soon no more money flowing to traditional democrat allies of unions and vendors and privatization galore! Peduto is unwitting ally in that aim. This is brass tax politics my friends and the City is going down fast. This latest stunt by council merely dedicates operating revenue to the pension that will need to be replaced. Not smart or great or anything to celebrate. Will they now try and dictate to the parking authority what it can do with it's revenue? I though Bill and Rudiak want authorities to be independent? Quick change of heart when it suits their agenda. Will they strap the PA so it can't borrow again? Will they do what government has done in this City for the past 40 years and meddle too much? Council is the problem, not the mayor. If you don't believe me, just ask yourself this question: does the parking authority have it's own pension and what is it's funding status?

  40. I don't see why foes of the Harris majority are turning on Chris. He was supportive of the parking lease when it was still for $452 million and quite expensive on parkers. A fact which I will NEVER EVER tire of reminding people. :)

  41. I didn't realize this thread was still active.  I suspect I was talking about it long before it even became a real plan.

    I was supportive of selling the garages. Still am actually. There was a moment when I thought (and I could have been wrong) Burgess or someone floated and idea of leasing AND the state takeover.  That was a 2nd best solution, but one I thought had some merit. Of course that is exactly opposite what just about everyone else wants. I still think it will happen.  In fact I think the main consequence of all this has been to make it inevitable. Just a matter of when.

    don't worry Bram.. I have a thick skin. Folks should argue with me more. Not sure what the point is of that post was or I would have a retort. I was actually at the press conference where mayor came out in favor of city county merger fwiw. and last I checked D majority on county council was pretty solid. So someone is fearful of those suburban D's. Way too much paranoia in this town is one of the real problems.

    Parking authority does have a pension and its pension fund is close to fully funded last I looked. But it's a small number of people and a small $$ amount.  Not quite sure the point??

  42. God forbid the County take over the Port Authority . . .