Tuesday, July 12, 2011

Parking for Profit: Whistlin' Past, over Trifles


Okay, I don't have any kind of grip on startup costs -- I only know about legacy costs.

Three Pittsburgh City Council members rejected the Parking Authority director's suggestion Monday to double some hourly meter rates to help pay for meters that accept credit cards, five weeks after higher rates and expanded enforcement hours took effect in some neighborhoods. (Trib, Bill Vidonic)


I was under the impression that we owe crazy tons of money to retired city workers and municipal bondholders, and have no nothin' revenue to pay for it. And driving is so nineteen hundred and late. Let's raise the meter rates, let's raise the garage rates, let's raise a few more garage roofs and dig some garage holes. Let's think about services contracts and a congestion tax.

And while we're at it, let's think about our investment strategy.

Let's do just about everything besides raise wage, property and small business taxes, or really let go of the quality of city services, or go bankrupt, or eliminate just about all neighborhood projects, or roll the dice that Harrisburg will fix everything before most of that happens (they're only geniuses at helping us prolong our suffering.)

SEE ALSO: P-G, Joe Smydo; and P-G, Team Effort

51 comments:

  1. Remember when someone offered to not only give the City a ton of cash but also to pay for upgrading the meter system?

    I wonder what happened to that deal--seems like it would have been a good idea.

    ReplyDelete
  2. BrianTH:

    It wasn't politically convenient to those who chose not to do the math at the time.

    ReplyDelete
  3. Maybe they should have hired a financial consultant to do the math for them and determine if it was a good deal.

    Slightly less sarcastically, the reason it wasn't "politically convenient" is that the relevant politicians intentionally demagogued the issue. And I guess from their perspective it worked, since they won their primaries.

    ReplyDelete
  4. If the Authority does not know the costs to capital improvements, then why raise rates so much and arbitrarily?

    Authorities are professional instruments run by professionals, right? Bean counters to count beans, yes?

    ReplyDelete
  5. BrianTH - All that aside, it might also have made sense to turn down the deal(s) and aggressively handle the parking racket in-house. However, any politically-induced tentativeness and incrementalism underscores the difficulty we suspected in the public sector running the system for profit, or rather, for staying above water.

    ReplyDelete
  6. Bram,

    There is the competent management part, but there is also the financing part.

    Not faced with an ongoing fiscal crisis, the operator could finance upgrading the meter system (and many other technological upgrades) with the expectation of getting paid back over a relatively long term with future revenues. In contrast, this need to double rates to pay for meter upgrades is a clear sign of a system facing serious financing constraints.

    And some of us tried to point all this out at the time--the consequence of turning down what their own consultant concluded was a very generous financing offer was that the City wouldn't end up with enough revenues to both deal with the pension crisis and upgrade the parking system at the same time. And here we are.

    In short, elections have consequences. And so do bad financial decisions.

    ReplyDelete
  7. City wouldn't end up with enough revenues to both deal with the pension crisis and upgrade the parking system at the same time.

    The city wasn't getting enough money to deal with the pension crisis. It was getting enough money to punt the pension crisis down the road just long enough for incumbents to get into different jobs. And it was structuring the bill so that I could keep paying for that ten years of breathing space for the rest of my life.

    ReplyDelete
  8. MH:

    So punting the pension crisis 9 months down the road, just long enough for the same incumbents to KEEP the jobs they have, and you paying that bill for the rest of your life was better than getting the 10 years, and perhaps solving the problem in that time period.

    The simple, yet painful, solution to this was clear -- If in fact the parking assets were to be used in the resolution of this crisis -- Lease the assets, take the $452 million, use the $330 left after paying off the Authority's debt and paying for the transaction and depositing it in the Pension Fund, enroll in PMRS voluntarily (where they have to give us 6% interest, annually whether the assets earn that amount or not) and in 17 years the Pension would have been 102% fully funded. More importantly, had the City done that, the MMOs wouldn't have exceeded $65 million in any year in the amortization window (which is what we are paying right now, but will increase undoubtedly)

    You can argue the logic of using the parking assets in such a way, but the bean counters whose job it is to say what is most likely to happen said that would work.

    Obviously, it didn't happen because NO ONE liked that solution.

    ReplyDelete
  9. MH,

    I agree that the City wasn't going to be totally dealing with the pension crisis either way. Of course there was no option available to even partially address, let alone fully address, the pension crisis that didn't involve long-term liabilities (none that the state would allow, that is).

    But all that is beside the point. The City ended up pledging future parking revenues to the pension fund anyway, and otherwise got much worse financing and no professional help managing the assets. That's a worse deal no matter how you slice it.

    ReplyDelete
  10. Anonymous,

    Based on prior conversations with MH, I suspect he supports an Option 3, in which the City escapes its pension liabilities without having to pay for them. Which sounds nice, the only problem being that Option 3 has never actually existed.

    ReplyDelete
  11. BrianTH - Nah, MH wants us to go bankrupt, or similarly pay the piper and swan-dive off the "cliff". Am I right? A respectable position that I do not share.

    ReplyDelete
  12. Bram,

    Bankruptcy would be a way of escaping liabilities, but that would take the state's permission.

    To the extent I could pin down MH at all, I believe the argument was that if the City immediately started the draconian fiscal measures necessary to increase the pension funding at a reasonable rate, the state would finally take pity on the City and grant to it the powers and/or rights necessary to escape a large chunk of those liabilities. That could be bankruptcy, or it could be something else.

    As to why MH thinks the state would react in that way, I was never able to figure that out.

    ReplyDelete
  13. The city is taking draconian measures as far as I'm concerned and started taking them well before this latest round of the pension crisis hit. Road repair, pensions, water infrastructure, bridges. None of it has been maintained adequately for at least a decade.

    I have no idea what is going to happen, probably nothing good regardless, but it is absurd that the city hocks 40 years of its only good, new revenue source for a few more years of a patch on one of the many clusterfracks it finds itself in.

    Call me when the mayor takes even the minor fiscal measures necessary to adequately fund a pension for somebody who is hired today and I'll start to feel bad that I have no idea about what will happen in 2020.

    ReplyDelete
  14. Oh yeah--I forgot about the parts where various local politicians become very unpopular, and this solves the pension problem because . . . well, just because it does!

    ReplyDelete
  15. MH - Point of information, we don't have any idea what's going to happen in Sept/Aug of this year. The relative rate of draconaity could increase precipitously ("Red Draconian" measures? Explosive mages?). We need a countdown clock, pronto-stat; is anyone in immediate possession of the "exact date"?

    ReplyDelete
  16. Yea, I still haven't the slightest idea how the council plan is plausible by the state law.

    ReplyDelete
  17. It's plausible if Harrisburg still says so -- and there are whispers -- but it also just may not for certain be enough money.

    ReplyDelete
  18. Don't blame me. I voted for Harris.

    ReplyDelete
  19. And DeSantis and once for "A boil on Murphy's Ass".

    ReplyDelete
  20. I have said it before and will say again, City Council is ruining thenCity. Their so called progressive supporters raw arrogant and I'll informed. The PG is carrying their water. Wake up people.

    ReplyDelete
  21. In Pittsburgh, does "progressive" mean anything other than white, under 40, and been to college?

    ReplyDelete
  22. The full data is due to the state on Sept. 1 -- no telling by when Director James L. McAneny of the Public Employee Retirement Commission (PERC) must make his determination.

    There are 5 gubernatorial appointees and and 4 legislative appointees from the four caucuses on the Commission (minus 1, with Senator Jay Costa D-Allegheny having recently resigned.)

    ReplyDelete
  23. of course its not going to be enough money...anytime you raise rates be they parking or utility you find that people cut back in using them...cigarette taxes are a perfect example of tax rates resulting in decreasing tax revenues...you would expect that increased parking rates will result in more bike traffic and more bus usage....but less money for pension relief!!

    ReplyDelete
  24. I really doubt the downtown parking rates increases would be enough to lower use. Other parts of the city maybe, the rates on the street parking downtown and the authority garages were well below market clearing rates.

    ReplyDelete
  25. At least during working hours. You'd think with smart meters they could set rates different for after 6:00 or something.

    I'm a frequent bus rider. I'm happy for the service provided by the Port Authority and grately for its (mostly) careful, capable drivers. And I'm happy that Pitt makes the bus free. But riding the bus at rush hour just plain sucks.

    ReplyDelete
  26. rich, MH - When it comes to automobile transportation and gettin' around, it seems there is a strong tendency for capacity to fill up despite ulterior incentives. (NPR)

    Better luck arguing that increased parking rates will lead to less food and beverages sold, and other impulse purchases. (Of course, all sales will go down if TAX rates go up to the point where Pittsburgh becomes a noted national leader.)

    ReplyDelete
  27. Bram, You are right that McAneny makes the decision but that decision will be based on info provided by the Mayor's office. Mcaneny has said that the use of future revenue is permitted but what will the Mayor's office do in reporting the value? Will they screw the deal, putting the city in even worse financial condition, just to make the point that council should have done the lease.

    ReplyDelete
  28. Mcaneny has said that the use of future revenue is permitted

    That's what I don't get. Future revenue is something we don't have yet. The only think different about the council's plan is that they have pledged a specific future revenue. I don't see the difference between "IOU $800 million dollars" and "IOU $800 million dollars, $200 million of which I will pay for from increased parking revenues."

    ReplyDelete
  29. too bad...in this climate challenged world you would hope that in a city full of students, with worker access to downtown, fairly flat with adequate trails, bike riding should be a a no brainer...sure wish a couple of our council people would lead the way by riding to work each day...you know practicing what they preach...

    ReplyDelete
  30. I have been trying to ride a bike, but not to work. I'm still deciding whether it sucks or not.

    ReplyDelete
  31. Anon 12:34 - My impression -- my hope -- is that McAneny is empowered to make himself in receipt of all the data. And all the data behind the data. And some other data he'll mix with the City's data to produce new data. What he does with all that data, well, if anything that may reflect back to the Commission and Harrisburg.

    ReplyDelete
  32. MH..it does suck for awhile,but once you get a regular pattern of riding,the benefits accrue to you on many levels....those first couple months of riding after say not riding since being a teen is certainly challenging...

    ReplyDelete
  33. The last two times I rode (just down Beechwood), I got killer headaches. The two times before, I didn't. The only difference is either that I'm still at the end of a cold or that the helmet is screwing with my head. I didn't have a helmet for the first rides.

    ReplyDelete
  34. "My impression -- my hope -- is that McAneny is empowered to make himself in receipt of all the data."

    Let's hope Bram. It's clear that the worst result for Pittsburgh financially would be administration of the fund by PMRS under Act 44. Let's hope the administration understands that and does not allow its irritation with council to get in the way of responsible action here.

    ReplyDelete
  35. The only advantage of avoiding PMRS management is to avoid actually funding the pension adequately.

    ReplyDelete
  36. MH - You are so wrong about that. The costs in the initial years will crush this city. The city needs to continue funding the pension as it has for the past two years for the next 7 or 8 years before we can put in the kind of money PMRS will demand. Act 44 does not give Pittsburgh that kind of flexibility.
    Also, the idea that PMRS guarantees a 6% return is absolute nonsense. They certainly try and have done a decent job but no-one can make that kind of guarantee.

    ReplyDelete
  37. I know Act 44 doesn't give Pittsburgh flexibility, but the local pension officials have been abusing flexibility for years. PMRS doesn't guarantee a 6% return, it assumes a 6% return. The city assumes (or has been if they changed it recently) an 8% return which is one reason that the pension got so underfunded that it can't possibly catch-up in 7 or 8 years. PMRS isn't demanding anything but plausible accounting. Act 44 is demanding plausible accounting plus making-up for years of implausible accounting.

    ReplyDelete
  38. I'm pretty sure the deal at PMRS presently is that they release revenue from a surplus-years fund to goose annual returns up to 6% as necessary. I can see how that'd be impossible if the elephant that is Pittsburgh enters the system during what happens to be an off-market year or two. Or I can see how it'd be even better for our pensioners, since PMRS makes less bad bets based on market timing and finds themselves contending with less illiquidity, than what is done in-house.

    Regardless, although I don't think City infrastructure can make it all the way to the honey-toned debt cliff in 6 or 7 years even if we had that much time to address pensions (and we don't), I think we can get ourselves into shape to start paying that piper in 2 or 3 years with the right series of revenue-generating maneuvers.

    ReplyDelete
  39. One solution to our pension crisis would be to put a whole bunch of money (say a windfall from leasing a cement and asphalt related asset) into a relatively high risk investment and hope it pays off. Given the amount of effort various people have put into making sure that the management stays local, I’m very much afraid that local leaders are just smart enough not to say that in public but not smart enough to realize how much their plan sounds like a guy talking to a bookie holding a bat.

    ReplyDelete
  40. Folks... Mr. McAneney also said this as late as May 13th this year and refering specifically to this notional asset (Trib):

    "I don't know why they did it without professional assistance, but apparently they did, and now I'm worried they didn't do it right," said James McAneny, head of the Public Employee Retirement Commission. "No one has bothered to notify us exactly what they did."

    Even leaving open the possibility of a shortened quote lacking full context.. whatever he was trying to say should not be giving warm fuzzies to anyone on the 5th floor.

    ReplyDelete
  41. So I've been spelling his name wrong. Now we're in for it.

    JAMES L. McANENEY. IF YOU THINK WE DID IT RONG, JUST LET IT SLIDE, BRO'.

    ReplyDelete
  42. More from that Vidonic Trib article c/o C. Briem:

    "Please give me this stuff in advance before we make ourselves nuts worrying about this," [McAneney] said. "If we wait until Sept. 1, there's no way (the retirement system) can take over administration in two months."

    SORRY JIM NOT HOW WE DO THINGS.

    ReplyDelete
  43. Or rather, DON'T GIVE US ANY IDEAS.

    ReplyDelete
  44. Reichbaum a dinosaur?

    Say it ain't so...

    ReplyDelete
  45. anxiously waiting to hear some of those money raising maneuvers from the cast that gave us the 'warm fuzzies" C Briem just mentioned

    ReplyDelete
  46. rich10e - Exactly. Worse comes to worst, I'll take whatever the draconian bill is MINUS what we generate from $2/Hr parking meters and hiked garages through the end of the year. Best comes to best, maybe we get to maintain a nominal capital budget into the future after all.

    ReplyDelete
  47. "I really doubt the downtown parking rates increases would be enough to lower use."

    Hahahaha! Exactly the opposite of what we initially heard from the opponents of the May...ERRR I mean the lease deal.

    ReplyDelete