Friday, December 10, 2010


Kenney Completes Mission at PWSA.

Chalk up one scalp for Patrick, I suppose...

Michael Kenney resigned today as executive director of Pittsburgh Water and Sewer Authority in advance of a report expected to detail his personal ties to a vendor providing line insurance to PWSA customers. (P-G, Smydo & Lord)

Asked whether it was concerned what comes next for the embattled former authority director, Pittsburgh only shrugged.

Like Mr. Kerr, most of Utility Line Security's principals also are executives with Utilishield, which sells water line warranties outside of the city, and Resource Development and Management, which is led by former Allegheny County officials Joseph M. Hohman and James J. Dodaro.

Mr. Kenney described a long professional and personal relationship with the firms and Mr. Kerr. (P-G, Rich Lord, 3/26/10)

That guy. Always with the reverse-trails of breadcrumbs. Alright, so this might not have been a successful scalping, so much as routine seppuku.

*-ADDED: Reading the article again, it's unclear how near the report was to completion, but apparently there were some proceedings earlier this week:

As a rule I dislike using screencaps from Facebook, but the guy doesn't tweet like he used to and does most of his city-related web-trafficking in facespace.

*-UPDATE: Null Space provides a whale of an update on all things water and PWSA.

Thursday, December 9, 2010

AND NOW come the Plaintiffs...

It's been reported that Firefighters Local 1 are suing the city on the grounds that a mandatory state takeover would violate only their collective bargaining agreement, but it turns out it's a little more sophisticated than just that:

5. At all times relevant hereto, the Second Class City Code has provided that a pension fund be established in the City of Pittsburgh specifically for retired and disabled city firefighters...

6. At all times relevant hereto, the Second Class City Code has also provided that the care, management, and control of the "Fireman's Relief and Pension Fund of the City of Pittsburgh" be exclusively performed by a local board of managers ("Pension Board") which include City officials as well as members who are directly elected by the city firefighters and beneficiaries of the fund... (Firefighters v. Pittsburgh)

So they're not arguing a takeover conflicts with their contract so much as it conflicts with the Second Class City Code, a prior established state law:

23603 Board of managers

There is hereby created for the care, management, and control of such fund a board of managers, consisting of twelve members, to be known as the "Firemen's Relief and Pension Fund Board of the City of ..........." The personnel thereof shall be as follows: The mayor or chief executive, the president of council, the city solicitor, the city controller, the director of the department of public safety, and the chief of the bureau of fire, who shall be ex officio members, and six elective members from among the following classes of the members and beneficiaries of such fund: One member to be elected from among the deputy chiefs, battalion chiefs, captains, and lieutenants; three members to be elected from among the other members of the fund; and two members to be elected by the beneficiaries of the fund. (PA code)

The lawsuit goes on to establish the various tasks locals have been empowered to perform, frame this mandated empowerment as "rights", and posit that under a state takeover their contractual, statutory and constitutional rights would be eliminated.

Now, this is where it gets interesting: the Firefighters are not suing to invalidate the new pension funding laws in order to uphold the older pensions board laws. They are suing to force the City to act in concert with both -- that is, to cough up the money.

16. The City of Pittsburgh is mandated to appropriate sufficient funds, via tax increases if necessary, to comply with its collective bargaining agreements with its firefighters as a matter of law. Harney v. Russo 255 A.2d 560 (Pa. 1969) ... Tate v. Antosh 281 A.2d 192, 201 (Pa. Cmwlth. 1971)...

17. Additionally, the May 20th, 2009 Act 47 Recovery Plan stated that a preferred option to pay for increased pension obligations would be, among other things, to adopt the Mayor's plan to lease the parking assets...

18. The May 20th, 2009 Act 47 Recovery Plan stated that in the event that the City was unable to obtain sufficient funding for the pension plans, as a failsafe option, the City was mandated to pass as part of its annual budget sufficient tax increases to fund the required additional pension contribution for the budget year... (Firefighters v. Pittsburgh)

And therefore, they assert, since any "unilateral system modification" to the Pension Fund ultimately violates the PA Constitution, and any "dimishment" (not a real word) to the fund would ultimately violate the Home Rule Charter -- the City should be ordered via injunction to get its 50% funding together by January 1, prohibited from allowing a state takeover to occur, and made to accept "one of the stated options to sufficiently fund the pensions": that is, a lease, or taxes now so as to preserve the makeup of the fund, not comfortably in the future.

IMPRESSION: It's hard for me to imagine a judge enacting a parking lease for us, or ordering a tax anticipation bond be issued (and taxes be raised) in this rapid a time frame, but I certainly see the potential for this to get chaotic as all get-out. The Firefighters have a credible enough complaint, and how a judge decides to resolve it, starting on Dec. 20, could ultimately surprise everybody.

Tuesday, December 7, 2010

POTUS on Impasses, Logjams, Rancor & Division

The Life Insurance Gambit: Let's Do This Right.

In a clear a sign that the pensions funding quandary has passed the Godzilla Threshold, Council President Darlene Harris boldly forwarded a plan that has not exactly been attacked yet:

She said the plan would be similar to "dead peasant" insurance, a controversial practice in which an employer takes out a policy on the employee, often without saying so. If the employee dies, the employer receives a payout.

Under the plan Mrs. Harris is circulating, the city would work with a corporate partner.

That entity would provide an up-front payment, which would be allocated to the pension fund. The corporate partner and the pension fund would split future payouts from the life insurance policies. (P-G, Joe Smydo)

The framework was discussed a bit on the Comet in November. One issue with it is that the subjects of each policy would almost certainly in fact have to sign off on those policies, even under current law. The next problem is, since it has never been attempted on a massive scale and its widespread acceptance would likely negatively impact the insurance industry eventually and as a whole, state or federal lawmakers would probably act to make it illegal shortly after it begins spreading.

And of course, we only have 24 days to get something off the ground if we'd in fact like to retain control over our pension fund.

In light of all this, the Comet has a not-even-modest proposal to get this right:

  • In exchange for a proportionately much larger up-front payment, let the corporate partner (or partners) keep the whole future payouts.
  • Instead of including only persons vested in the pension fund, target everyone vested in the City of Pittsburgh: that is, every man, woman and child residing in the City and every expatriate in Steelers Nation.
  • In order to motivate full willing participation, offer each subject a $10,000 signing bonus.

Assuming that a $1 million life insurance policy can be sold on the market for about $400,000, the City of Pittsburgh would net $390,000 x 300,000 citizens = $117 billion. That is of course a rough estimate based on rough assumptions that some among our population would still not sign on / be unsuitable, offset roughly by many in our diaspora participating out of solidarity. In truth, we may need to motivate our prospective corporate partners to take on such a heavy and untried insurance aggregation project, so let's give them a quantity discount and call it a cool $100 billion up-front payday.

Although this cannot be organized by Jan 01 2011, a hundred billion would offset even the most bearish MMO projections under state takeover. There should even be enough left over to start paving the recommended 80 miles of streets per year -- in gold if we so desire.

In light of the fact that this would motivate a response from the wider insurance industry and their lobbyists, we would only have one shot to execute this -- and would need to do so with a certain amount of speed. Local political solidarity is a must, local opinion leaders would need to be sold on the idea in advance, street teams would need to be organized to garner the contracts ward-by-ward and block-by-block, and certain potentially skeptical lawmakers would need to be cut in on the ground floor. The active public campaign should probably be timed to coincide with August recess or something similar.

Owing to the need for operational security, this post will probably disappear within days. But if you'd like to see a $50 billion infusion into the city's capital budget and put a laser rifle turret on every block of Carson Street, forward this now to a friend who you know loves Pittsburgh. And the next time you see Councilwoman Harris, press your index finger to your nose and wink for me.