Monday, October 25, 2010

Council and Mayor Spar Over Pension

More than four hours of debate, lecturing, name calling, and posturing in Pittsburgh City Council Chambers today all boiled down to a single question. The question posed to Mayor Luke Ravenstahl by Pittsburgh City Councilman Bruce Krauss came more than three and half hours into the meeting, “So we are at a stalemate?” Ravenstahl answered, “That’s a fair word, sure.” That short exchange may have made all of the other talk around the conference table moot.

The council has rejected the Mayor’s plan to fund the pension program up to at least 50% through the lease of parking assets for the next 50 years and the Mayor says he will not support the council’s plan to sell assets to the Pittsburgh Parking Authority to fund the pension program. If the city does not get its pension program up to the 50% funded level by the end of the year state law will force the Pennsylvania Municipal Retirement System to seize control of the pension’s assets and layout a schedule to make the plan fully funded within the next 30 years. Everyone agrees a take over by the PMRS will lead to higher minimum payments. How large those payments will be should be known by the end of next week but the Mayor’s office has estimated it will cost the city an additional 27 million dollars next year.

The meeting opened with Mayor Ravenstahl outlining why he thought the council’s plan was irresponsible. He says it is based on what he believes to be an erroneous assumption that a bond floated by the Parking Authority would be tax exempt. If the IRS deems the bond to not be tax-free it would increase the interest rate by 2 to 3 percent. The council disagrees. While pension bonds are usually taxable, City Controller Michael Lamb and Councilman Patrick Dowd argue that it is would be a bond to purchase an asset, not a pension bond. The Mayor also believes the plan puts the parking assets at risk. Council moved its plan partially based on the argument that it keeps “public assets public” while the Mayor’s plan would give control of the assets to a private company. Ravenstahl says the poor financial condition of the city and the parking authority, coupled with the poor condition of the garages means “it is a very real possibility” that the authority would default on the bond. “That means that the public assets would become the assets of Wall Street,” says Ravenstahl. Under the lease deal the assets return to the city in 2051.

The meeting nearly disintegrated after the Mayor’s presentation when he began to asking councilwoman Natalia Rudiak questions about the viability of the plan and its chances of being accepted by the Parking Authority. Council President Darleen Harris scolded the Mayor for asking questions saying a post agenda meeting is intended to help the council gather information, not to launch a debate.

After cutting to the heart of the mater with his question to the mayor, Councilman Bruce Kraus suggested that the council should stop looking at either plan and instead begin talking about how to best deal with a state pension take over. “So lets be honest and call it what it is and begin to do our due diligence and make certain that however the state is to administer this plan it become administered in the most efficient manner with the least impact on services that need to e delivered and the least impact on city employees,” says Krauss. Councilman Ricky Burgess says all of the council’s efforts to derail the mayor’s plan were aimed at forcing a state takeover and them put the blame on the mayor.

At one point Councilman Bill Peduto suggested that the city should look at a hybrid plan. He says the city should consider increasing parking rates on the same schedule as is suggested under the Controller’s plan and then use those funds to help cover the increased pension payments that would come following a state takeover.

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