From the office Councilman Daniel Lavelle: Pittsburgh’s Pension Problem


Prior to my election as Councilman to District 6, I stated that successful governance requires a symbiotic relationship between a community and its representatives. A reciprocal exchange of information and education must flow freely between the two to ensure that informed decisions are made in the best interest of the body-politic as a whole.

With this holistic approach to governance in mind, I wish to highlight an upcoming date of pivotal importance for the future of the City of Pittsburgh: Nov. 1, when Council will be asked to decide, as a united body, whether or not to approve the bid from JP Morgan and LAZ Parking for a 50 year lease of the City’s parking assets.

What must initially be understood is the core problem associated with this complex set of issues. The City has been debilitated by a bleeding pension fund which has become, in recent years, only 30 percent fully funded. At the current rate, and for quite some time now, there have been more retirees receiving benefits than there have been contributors paying into the system. This results in a gradual depletion of funds. 

In response, the City filed and qualified for distressed status in accordance with the Municipalities Financial Recovery Act, also referred to as Act 47. These actions triggered a commitment on behalf of the City to adhere to a recovery plan drafted at the State level.

It was followed by the passing of Act 44 in 2009 with the stated purpose of offering relief and restructuring of pension payments for all municipalities. Fast forward to present time and what we are faced with is a requirement to ensure the pension is minimally funded at a 50 percent level before the end of the calendar year.

Should we fail to do so the State will be granted right to control and dictate decisions regarding the City’s pension. This can be translated into a guaranteed spike in taxes, service cuts, and cuts to the municipal work force. In numbers it equates to an additional $30 million annual deposit into the pension fund, which adds up to a yearly total of $75 million.  

City Council recently received confirmation of the final bid for the lease of our parking assets: $452 million. The administration had previously stated a minimum of $300 million was needed to ensure a net profit of $200 million (the remainder $100 million would go to cover current debt owned by the Parking Authority).

As your Councilman, what must be measured and diligently considered beyond those numbers are the hidden costs associated with the deal. If accepted, for 50 years a private entity will assume control of 12 garages and 8,500 metered spaces. The immediate impact will be felt in rate hikes scheduled to occur in the plan’s first 5 years, with subsequent increases being matched to the Consumer Price Index.

Questions also arise as to how we can maintain the pension funded at a 50 percent level once our parking assets, themselves a steady source of revenue, are no longer at our disposal. How will businesses be affected by the deal? How will our residents fare? What is the plan for the future, beyond the next year?

For these purposes Council hired its own consultant to examine the viability of alternative options. They include the possibility of placing the parking assets into the pension fund, thereby monetizing the assets and using the generated revenue to further fund pension obligations; floating a bond, which involves incurring additional debt; or doing nothing, leaving things as-is and allowing for a stake takeover, leaving the City dependant on financial decisions made at the State level.                                                  

If one were to assume rate increases parallel to those suggested in the concessionaire agreement, as well as upgrades of the parking infrastructure that would maximize their revenue generating potential, results from the findings determined the garages and meters could conceivably generate $2.4 billion over the next 50 years.

The current market value of the assets, however, came in at a conservative $401 million. The option of placing the assets into the pension fund was ultimately not considered by the study, whose consultants determined it wasn’t a legal alternative, but the plan is still being studied and looked into by Controller Michael Lamb. For the rest of the proposals a concrete conclusion could not be reached as to which would be the better option, significant drawbacks being noted in each of the options for the lease, the bond issue and the state takeover.  

My job is to weigh each alternative against the other to arrive at what should be the option of greatest benefit for the future health of the City. For this I need you, as fellow citizens, to inform yourselves on the vital issue and weigh in with your concerns, questions, thoughts and ideas.

Accordingly, on Oct. 11, starting at 6 p.m. in Council Chambers (414 Grant St., Fifth floor), City Council will be holding a public meeting to discuss the parking lease deal and the findings of Council’s independent study. Please join in on the conversation and let us work together to decide what is the best recourse of action for the City of Pittsburgh to follow.

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