Monday, September 19, 2011

LOCALLY APPOINTED BOARD PERMITTED BY STATE TO CONTINUE MANAGING PENSION FUND

Group hug:



Wrapping up a season-and-a-half long story arc:

State officials today approved Pittsburgh`s plan to bolster its chronically underfunded employee pension funds, staving off a state takeover that city officials predicted would cost up to $100 million annually. (Trib, Bob Bauder)


Next, of critical importance:

The city now must determine how it will offset the general fund deficit. Council`s plan for plugging the gap with revenue from increased parking garage and meter fees has been stymied by disagreements between members and the mayor`s office.

Pittsburgh Parking Authority officials say they must first address capital improvements to the parking facilities before the authority can turn over any extra cash to the city. (ibid)


Reax:

Two contentions there: 1) That the Council-Controller / Controller-Council plan did the trick (fairly accurate) and that "the pensions" are "saved" (fairly shorthand).


That'll be the overwhelming consensus contention.


Sounds like a rip-roaring good time.

Excerpted from a press release from Mayor Ravenstahl:

“This is extremely good news for the people of Pittsburgh,” Ravenstahl said. “We worked very hard to make sure that the City's plan would be accepted by our accountants, actuaries, and ultimately the Commonwealth. I want to thank members of my finance team for their hard work in ensuring that we can continue to provide quality services and balanced budgets with no new tax increases. This is a critical step for us as we get closer to completing our financial recovery."


Council President Darlene Harris sent out her own press release touting funding that is "sufficient to avert takeover by the Commonwealth", and naming, crediting and/or quoting various officials for last year developing "the inspired idea of using present valuation."

The Allegheny Institute adopts a tone of confusion:

[W]hy was the City so afraid of a takeover? The state law clearly stated collective bargaining would remain at the City level. Also, where is the binding language that holds future City administrations and Councils to honor the promises of 2010? And, if we are to take the comments of the City Controller at face value when he said the bailout plan "is no long-term solution [but] a mechanism to avoid state takeover", then what is the long-term solution? (Allegheny Institute)


An oft-cited rationale for takeover aversion has been that the mandatory commencement of annual $100+ million pension payments was deemed infeasible. Of course, questions persist as to how long the fund can remain solvent without dramatically more substantial cash payments -- notwithstanding the commitment of 30 years worth of future parking tax receipts.

As for the blogger/professor/economist/nabob, we are left with this:

[N]o matter what the state says today, nothing at all has changed impacting the long run financial health of the city of Pittsburgh. This all gives 'accounting fiction' an entirely new meaning. (Null Space; see also from this pm)


Well. Be that as it may. But look on the bright side. We'll still have chances to make news.

31 comments:

  1. The city now must determine how it will offset the general fund deficit.

    They could raid the capital fund for that.

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  2. Allegedly they'll raid the fund balance first. I don't expect that will continue to work very long though, and the oversight boards will throw a conniption fit.

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  3. Too bad electronic banking makes check kiting nearly impossible.

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  4. Anyway, I've very glad we didn't have to lease the outside edge of our streets, but this seems more like a good start toward fixing things than a solution.

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  5. What, no "I told you so" from Rev. Ricky? He had said that if it was accepted that the board was simply buying in to a Pinocchio scam and was in kahoots or something vicious and crazy. I can't even keep his nuttiness straight. Find the words for him Bram.

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  6. Lamb was way out there on this one. Like the solution or not, you got to give him credit for finding a way to work this through council, the mayor's office and the Harrisburg crowd.

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  7. No Surprise Here... Anyone in the know, knew it. Future remains murky...

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  8. Anonymous 4:30 - As a solution to State Takeover, there's nothing not to like about it. Well, now that we know it worked / was successfully sold.

    As a solution to the pension problem, well, it ain't one, but then again there are no "solutions" to that, are there? Short of selling or leasing off our beloved assets, commencing dramatic and out-of-character renegotiations with our creditors, ramming through other revenue streams such as market rates for water to nonprofit customers and ye olde tuition tax, and a whole slew of technocratic fixes like reforming up our real estate transfer tax laws and piggybacking on PMRS's investment decisions ... and even then we might be dreaming.

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  9. Would like 'Quote' from Darling Harris? Doug Shields, Patrick Dowd, Peduto-Head, Natalia... and, other legislative spamers? Director Khonka (Kunka)? Victory or lifeboat.....?

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  10. Director Khonka (Kunka)

    How dare you misspell a Ukrainian name? My father would be offended if he weren't an Irishman with an easy to spell name.

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  11. Bram! Turn it loose....

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  12. Does it work now? The quotes from Councilperson Harris and other officials.

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  13. I would love to be proved wrong...

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  14. Here is the problem - the reaction from politicians. They are acting like they won the Super Bowl. I don't care what side of politics you are on, the only thing that happened today was that the City avoided state takeover. That is it, nothing more and nothing less. The pension is still ONLY 62% funded according to the State. That ain't good people. AND, to get to that point all council did was move money from one line item to another. No new revenue, no new ideas, nothing. I'm glad we avoided takeover, but the giddy reaction from politicians (council and the Mayor) is the problem, not a symptom. They didn't DO anything.

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  15. I wonder how funded it is in terms of liquidity? As in, we can invest as though we are funded at what level?

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  16. I don't think I've seen liquidity used that way before, but if you mean what do we have to actually invest, the answer is no more than before as of yet. But, we're still locally managed, so we can try a high risk/high reward strategy. All we need is somebody to hire a consultant good enough make it sound not at all like gambling.

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  17. Yawn. All due to smoke and mirrors. Everyone keeps focusing on the revenue or asset side without telling and FORCING the Pension Plan participants.. "There is not and will NEVER be enough money to pay these Pensions."

    There is not one single politician or bureaucrat that would make a living in the private-sector. Not one.

    I could be (somewhat) gleeful that I don't live in the City, but as a PA taxpayer I *know* the City will be bailed out at some point in the future. My only hope is that I'm in NC or SC before that happens.

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  18. Do you need a recommendation for a mover? North Carolina is nice, but too many people from New Jersey if you don't watch where you move.

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  19. Not that anyone seems to care, but although this "worked" to prevent a takeover of the pension fund, it remains true that if the City had done a lease instead, it would have gotten a better deal for itself financially, including a very welcome infusion of capital for repairs and upgrades to the parking system--which everyone recognizes we need, and yet which remains undone and unpaid for.

    And all of that is in addition to getting competent management of the parking system, something which recent events have once again proved we lack.

    Of course any consideration of what would be good for the parking system and best for the City financially died long ago. But as various people and entities do their end-zone dance, I think it is worth recalling that the issue was not whether we could use parking revenues to prevent a state takeover, but rather what was the best way of doing that. And everything we have learned so far confirms this was not the best way, not even close.

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  20. I'm sure we've had this debate before, but this large infusion of capital would be money that would be spent by the same guy who cannot hire a competent manager for the posting system. Punting down the road and hoping for the next election was the best case, assuming the state didn't take over and then accept the current dodge only after taking control.

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  21. "parking system" not posting.

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  22. MH,

    Nope, the lease was structured to require a variety of capital improvements from the operator, and so those funds the City now won't get would have been spent by the operator.

    I suspect that you may be thinking of the extra cash the City would have gotten up front, which is a different category of funds the City now won't get.

    A large portion of that extra cash would have gone to retiring Parking Authority debt, and obviously there is no management issue with those funds. That leaves the remainder of the extra cash, which people at that time weren't quite sure what to do with (it basically resulted from the bids coming in higher than expected).

    Now there are worse problems to have than getting more cash from the same assets and not knowing what to do with all of that extra cash. But even if you were really concerned about discretionary use of those funds, you could have insisted on using them to cancel other pre-existing liabilities. Or you could have cut the term of the lease to reduce the amount of extra cash and eliminate this "problem"--which in fact the operator was willing to do.

    Instead, Council decided to eliminate the "problem" just by getting a lot less value out of the same assets. Nice work!

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  23. I am dying for some Scott "The Director" Koonka scuttlebutt.

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  24. "In case our viewers are wondering, that hometown crowd here in Pittsburgh is not booing, they're Koonking!"

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  25. And, today parking meter enforcement was eliminated after 6pm until the end of year. Ergo, less revenues to support this snafu. All the politicians are "Happy, Happy, Joy, Joy" (/Ren & Stempy reference). Sweet.

    A broken record - True and needed adjustments to Pensions similar to what has happened in the private sector *must* be implemented regardless of Union contracts, etc. That will probably only happen when the sh*t really hits the fan. City employees will feel real pain, then. Serves them right.. they keep electing and supporting the buffoons that got them in this mess.

    I suppose I could say - "It will be OK if the State bails the City out at that point because I'll be loooong gone to NC or SC. All the rest of you non-City taxpayers will pay."

    I won't because the sheer ineptitude of City politicians sickens me. God, what a bunch of (Democrat) morons that couldn't get or hold a real job in the private sector.. at least not at the Company I own. (Yeah, you.. Boy Mayor, Darlene Harris, 'PeeWee' Dougie Shields, et al.)

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  26. Just because you make fleshlights doesn't mean you're better than everybody else.

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  27. To whom are are you talking? If me, then I'm clueless about you comment. Fleshlights? Huh?

    But, I'm right about what I said.

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  28. We're talking to you, CM.

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  29. Oh, cryptic. Proof that Conservatives live in reality and Liberals live in fantasy/game-land... or their Mother's basement.

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  30. Conservative Mountaineer - Even when I'm grinding my own partisan political axe, I try to focus my fire on those conservative ideas from which I differ rather than characterize those who espouse them, and have never resorted to defining the other half of the country as "morons" or "buffoons". In fact, simply repeating that the other side is "dumb" is rarely a productive debate strategy or mixer attitude.

    Also I never cheer on bad economic results because it will chastise voters who disagree with or are different from me, even if I'm sure they are mistaken. Nor do I brag about my own perceived importance / value relative to the rest of society, nor do I taunt people (for what, three years now?) about how I'm going to move away to a better place soon.

    You've lately revealed some annoyance here and there about feeling unfairly put-upon in blog comment threads, so I figured I'd volunteer my impressions as a frequently online denizen as to your situation.

    That, and they're not even very good fleshlights.

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