Thursday, December 1, 2011

DECEMBER: Deep Cut from the Pension Album

Right. How to get things started? How about some rare, B-side, never-before-published material?

I wrote the following letter to the P-G in the wake of its 9/22 editorial Pension Reprieve. I edited it only slightly and resubmitted it after a follow-up editorial four days later entitled Better Mayor. It was not picked up (not a criticism -- some great letters appeared on the days it might have run) but even still, it tends to stay relevant after pieces like Tackled for a Loss and most recently He's no JFK.

So without further ado:

In recent weeks, PG editorialists have bluntly set themselves the task of deposing Luke Ravenstahl as Pittsburgh's mayor. While I certainly appreciate the thrill of donning a helmet and charging into political battle, we must remember that the challenges a city faces are indifferent to simple changes of the guard.

To wit, the pension "solution" crafted by City Council and the City Controller satisfied the whim of the state Legislature but did nothing to address the underlying funding crisis. Although your editorial pointedly refused any credit to the Mayor for helping to avoid a "state takeover," the fact that underwriters and state officials credulously assented to the unprecedented arrangement is proof enough that city leaders must have been working grudgingly in concert.

Specifically, the Mayor was wise to leave certifications of compliance and his Finance Director's signature from the documentation entirely -- in some matters, discretion is the better part of valor. An I.O.U. for $735 million over 31 years time generates no present-day liquidity with which to earn interest, make investments or actually pay pensioners from an account poised to empty in a handful of years. The claim of being "62% funded" is a grand, mutually agreed-upon fiction.

Like it or not, the only solution proffered on a scale befitting the crisis was Ravenstahl's proposed leasing of public parking garages and meters to private investors. That it proved unpopular should have been no surprise, as it committed the cardinal political sin of honesty -- the honesty that a billion dollar debt cannot be paid without noticeable discomfort.

Soon we will again be right here, facing the same intractable difficulty only with a slimmer menu of options. Try not to be surprised if in hindsight we regard this mayor as having somehow seized the mantle of seriousness and foresight.

I realize this begs for some explanation. How, during the very week that protesters had garrisoned Zuccotti Park, could a future 99 percenter issue a letter advocating the selling out of public assets to Wall Street investment bankers?

Obviously the answer has a little to do with public employee pensions -- and a lot to do with basic math and Pittsburgh's pension history. I wouldn't recommend leasing revenue-enhancing assets as a general rule; the city obviously was (and remains) under the thumb of bond holders and a legacy of evacuation, parasitic financial advisers and near-sighted political leadership. A spiritedly negotiated long-term parking assets deal would have constituted a a bit of swashbuckling derring-do, a turning of the tables, a "So crazy it just might work" style of arrangement.

Meanwhile, in a world with no parking lease and the Non-Lease Plan generating more sparks than revenue, Mayor Ravenstahl now seeks to borrow $80 million for routine capital improvements from Wall Street investment bankers while City Council remains skeptical.

Mr. Peduto suggested that the city borrow a smaller amount for 2012 and 2013 and preserve borrowing power for future years. (P-G, Joe Smydo)

Indeed. Trying to recollect if anything might possibly occur as we turn the page to 2014 that would make the receipt of bunch of money more palatable to several at that time.

The real issue however is, how much money would we have to borrow come 2014? How much will we have to borrow, either and any way, to satisfy the pensioners, the other creditors, and the demands of our routine "capital needs" we have routinely been failing to meet? How many hundreds of millions of dollars? Two? Three? More?

A better question: who is working on a new, presumably improved parking assets deal? After all it is that or "renegotiate" with our various creditors, isn't it? I know it seems like campaign season already, but it is in fact still 2011. The time horizons for the "Wait until somebody we all like better can execute various maneuvers" gambit make it the more fantastical, unrealistic feat of derring-do. Not possible without a ton of CGI and willing suspension of disbelief. Do not try this at home.