Parking Rejects Bond Review Proposal

The Pittsburgh Parking Authority Board has put the breaks on City Council’s plans to fund the pension program by selling its parking assets. By a 3-2 vote, the board rejected a proposal by Pittsburgh City Councilwoman and board member Natalia Rudiak that would have sent out a request for proposal to get bids to review the viability of a $220 million bond issuance. Specifically, the RFP would have asked for bids to appraise the assets, hire a consultant to look at what rates could be charged, hire a financial advisor to review the viability of the bond and hire bond council to look at the tax status of such a bond. Some members of council and the Pittsburgh Controller believe it would be a tax exempt bond but the mayor’s office disagrees. The City Council was hoping the Parking Authority would approve the proposal and then eventually let the bond and purchase a city owned garage, 5 surface lots and miles of parking meters. Rudiak reminded board members that they were only voting for an RFP, not to purchase the assets. Board member and City Finance Director Scott Kunka called that a “ruse” and voted no. Christopher D’Addario followed suit and board member Linda Judson voted no saying she did not think the Parking authority was where such a review process should begin. Judson says council could do the work but she added that if the city council were to hire consultants she hopes the board would have input into the review process. Natalia Rudiak says the idea is not dead and she will return to council members to look at other options. Mayor Luke Ravenstahl says he is drawing up a budget that assumes the pension will be taken over by the state. During the public comment portion of the meeting Mayor Ravenstahl told the board that he would not support any plan that put the city further into debt. “It is irresponsible to open a new credit card to pay for an old credit card,” says Ravenstahl. He says the vote was a waste of time.

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.

Mayor Condemns Council's Pension/Parking Plan

Pittsburgh Mayor Luke Ravenstahl today rejected city council's plan to sell Pittsburgh's parking assets to the Parking Authority in order to pay down a portion of the city's pension debt. "I have no intention whatsoever of supporting this plan and I think if the residents of the city saw it they would support that position as well." Ravenstahl cited the lack of public airing of council's plan and the parking rate hikes that it would implement as two of his chief concerns, as well as the still unknown financial burden that a state takeover by the Pennsylvania Municipal Retirement System would require. One of council's issues with the mayor's plan to privatize the city's parking garages and meters was the steep hikes it would mean for residents. Today, Ravenstahl called their concern disingenuous, while comparing the rates council would implement to help pay down the 30 year bond the Parking Authority would float to purchase the parking assets for $225 million. Legislation will be presented to the Parking Authority Board on Wednesday to buy the parking assets and Ravenstahl says he won't seek to influence their decision though he hopes they'll reject it. He plans to hold a meeting on Monday at 1 p.m. in council chambers to compare his recently rejected plan for a private takeover of the parking assets, to city council's plan.  His plan would have leased parking assets to LAZ Parking and JP Morgan Asset Management for $452 million dollars for 50 years - council panned his proposal 7-1. Ravenstahl says if some other action isn't worked out he will veto council's plan and prepare for state takeover.


Click here for more information on council's pension/parking plan.

Council Moves Forward on a Pension Plan

Pittsburgh council approved a preliminary plan today that would sell the city's parking assets to the Parking Authority for $220 million, float a 30 year bond to buy those assets and increase parking fees to pay down the debt. Under the plan, that payment would lift the city's pension fund to the 50% funded level; currently it hovers below the 30% funded mark. The 50% level means state takeover would no longer be mandatory. But a number of question marks remain. The Parking Authority still has to approve the deal and councilwoman Natalia Rudiak, who also serves on the Authority's Board, plans to introduce legislation to the Authority next week. Mayor Luke Ravenstahl would also have to approve the deal and he has said he's not interested in allowing the city to take on any more debt. Yet another scenario would allow the city to bring the pension fund to 50% percent funded by selling assets to the Parking Authority and then turning the fund over to state control voluntarily. Everyone is still waiting on the Pennsylvania Municipal Retirement System to give hard numbers on how much the city would have to pay into the pension fund annually to bring it to the fully funded level. Council also discussed the need improve the technology used at meters and garages and in collection to move the city's parking into the 21st century. Councilman Ricky Burgess--who favored he mayor's plan to privatize parking assets and a voluntary take over by the state--was the lone no vote on all of the parking/pension legislation.

Council Rejects Parking Lease, Angers Firefighters

On a 7 to one vote with one abstention today, Pittsburgh City Council officially rejected Mayor Luke Ravenstahl's proposal to lease parking authority assets to a private company in an effort to shore up the underfunded pension fund. The 50-year lease would have resulted in more than $450 million dollars for the city. $220 million of it would have been used to raise the pension program above the 50% funded level to avoid a state takeover. After the vote the firefighters who had packed the council chambers gathered in the hall to listen to their president Joe King. King rallied his members by painting a picture of a city budget that he says will be 25-32 million dollars in the red. “All of this debt is going to fall on the
Home owners and the employees and the businesses of this city, “ says King, “ and I’ll tell you who should be held accountable, those nine people in there.” King says the firefighters will remember the vote when they go to the poles next year. He then called on council to reduce the city’s budget by reducing the size of city council. King warned his members that he believes the city will begin to “brown out” the department. He says the city cannot layoff firefighters so it will selectively, temporarily close firehouses to save on overtime. King says, “this is not about safety, this is about money.”

Council still has several options before it. A plan created by city controller Michael Lamb and sponsored by Council members Darlene Harris, Natalia Rudiak and Patrick Dowd calls for the city to sell the parking garage lots and meters it owns to the Parking Authority for $220 million dollars. That money would then be used to shore up the pension fund. The Authority would have to issue a bond to cover the cost. The proposal also gives the authority the ability to set rates without council approval. Dowd admits that it will lead to hire parking rates but he says the increase will be much less than if the assets were leased to a private company. “Given the choice between handing over the assets to a private company or a public authority, I’ll take the authority every time,” says Dowd.

Councilman Doug Shields says he will listen to the details of the controller’s pan at a meeting and debate it in council tomorrow but for now he still likes the idea of a state take over of the pension plan. He notes it is the only option that puts the pension plan on a 30-year path to being fully funded.

Voting for the lease deal was Ricky Burgess. Theresa Kail-Smith abstained.



LAZ Parking issued a written statement following council’s no vote expressing its disappointment. It reads in part, “Our expertise in operating, investing in and managing parking systems around the country would have provided great benefits to the City, its residents, visitors and downtown commuters…. Over the past several weeks we have had the opportunity to speak with members of Council and made several suggested amendments to be sensitive to the matters raised by Council Members.” The company says it will have other opportunities in other cities looking to better manage their parking assets and tackle fiscal challenges. The statement ends, “Our hope is that the City of Pittsburgh and other municipalities and government agencies around the country learn how important it is in a process like this one to have alignment between City Council Members, the Office of the Mayor and other important stakeholders.”

Mayor Expects State Takeover of Pension

Mayor Luke Ravenstahl responded to City Council's preliminary vote against his proposed plan to solve the city's pension problem by saying he is done lobbying them and expects a state takeover of the city pension fund.

Council voted down the plan last week and is expected to take a second vote on Tuesday.

Ravenstahl said he and his staff have come up with a plan that would parlay proceeds from a leasing parking facilities to a private operator into a pension fund bailout.

He said the plan would be a viable alternative to the state takeover that would lead to dramatically higher pension payments that the city could make only by raising taxes or cutting services.

His staff has begun preparations for a state takeover of the pension fund.

By state law, the state will take over the fund if the city is unable to raise the level of funding from about 27 percent of the requirement to at least 50 percent by the end of this year.

Ravenstahl said he now intends to devote his attention to other issues. Private industries had bid about $452 million to lease the parking facilities. He said, in the future, turning down his plan will be looked at as "a golden opportunity" that was missed.

House Dems Won't Pass Senate GOP Amended Pension Bill

The Pennsylvania Senate has passed a pension reform bill but a House Democratic spokeswoman says the measure is now “dead in the water” on a concurrence vote.
Senate Republican leaders have refused to vote on the House’s natural gas severance tax bill, saying the measure violates the state Constitution by including two bills in one piece of legislation.
But during a committee vote, the Senate did the same thing, adding language creating a new legislative fiscal office into the pension bill.
Governor Rendell and other Democrats are crying foul.

"It amazes me the way we find some things violate the single source doctrine, and others don’t. the same group that’s worried about the single source doctrine over here seems not to worry about it over there."

A memo drafted by Senate Republican lawyers argues pension reform and the fiscal office are “tightly unified,” and predicts the measure would stand up to a court challenge.
The House inserted the severance tax language into legislation addressing county codes.
A spokeswoman for the House Appropriations Committee says the lower chamber won’t pass the pension bill now.

PMRS Sec: It’s a Marriage not a Takeover

The head of the Pennsylvania Municipal Retirement System went before Pittsburgh City Council Thursday for several hours in an effort to make the members understand just what the system does and how it can work with the city. Under state law, if the city does not bring its pension funds up from the current 27% funded level to 50% funded by the end of the year, it will be forced to turn over its assets to the Pennsylvania Municipal Retirement System for management. PMRS Secretary James Allen stresses that it was the state legislature, not he, who came up with the idea. Allen calls it an “arranged marriage” rather than a “takeover” as it has been portrayed. Pittsburgh Mayor Luke Ravenstahl has proposed leasing the city’s parking assets for the next 50-years to infuse enough money into the pension system to bring it up to the needed 50% level. Council has shown little to no interest in the plan and some members have suggested that being taken over by a state-wide system would not be that bad. The mayor warns that if the PMRS takes over the pensions it will lead to an unaffordable increase in payments.

The system currently manages more than 900 municipal pension funds. 418 of them are fully funded and the rest are on a 30-year path to that number. Only five are under 30% funded. Pittsburgh would be put on a path to being fully funded. Currently the city must put at least $46 million dollars into its pension system annually, the Ravenstahl administration says that number would jump to 72 million dollars a year if it were to be taken over by the PMRS. Sec. Allen says they are crunching the numbers and will have an estimated payment rate to the city council in three weeks. The data needed to make the calculation was sent to the system this week and last after the council issued a subpoena to the mayor’s office. If the city is compelled to enter into the system, state law will allow it to send just 75% of the required amount to the PMRS for the first 6 years.


Allen says no mater if the PMRS takes control of the pension assets or if the city retains control, the IRS is starting to crack down on pension funds that are not operated in the best interest of the pension holders. He says that includes making it fully funded.

The PMRS currently is offering a guaranteed 6% rate of return for municipalities that have voluntarily entered into the system. Pittsburgh would be given the same rate of return. Allen says the 6% rate will remain in effect for 2011 and will be recalculated every year there after. The system tries to smooth the ups and downs in the market by building as much as a 10% reserve in good years and allowing the fund to dip into the red in the lean years. Allen says right now the PMRS actually has 84 cents for every dollar it says it has but before the market crash was funded at $1.09 for every dollar it had credited to its investors.

Council Tentatively Rejects Mayor's Parking Deal

Pittsburgh City Council today delivered a huge setback to Mayor Luke Ravenstahl's plan to lease the city's 12 parking garages and 9,000 meters. The mayor wants to lease the parking assets for 50 years to the joint venture, Pittsburgh Parking Partners for $452 million and use half of that sum to boost the city's pension fund to 50% of its $990 million obligation.
But, Council today voted 6-1 preliminarily against the mayor's proposal. Councilman Patrick Dowd said they didn't kill the mayor's proposal because "it's been dead a long time....The mayor's people have said the clock is ticking so let's get this dead plan off the table and work on viable solutions."

Dowd believes such a solution is selling the parking assets to the Parking Authority for $220 million and using that amount to bring the pension fund up to the 50% threshhold. The state has threatened to take over the pension fund in January unless it has at least 50% of its obligations. Dowd says he believes selling to the Parking Authority and keeping the assets public is a good solution but he is still open to other alternatives.

Dowd says he does not think there will be any switch when a final vote is taken..."I don't believe there will be any change.....I only believe there is one resurrection, and it isn't this bill."

Harris: Study is Necessary...Burgess: It's a Waste of Money

By a vote of 8-1, Pittsburgh City Council today gave final approval to spending $250,000 to hire Finance Scholars Group to conduct a study of the city's parking assets. Council President Darlene Harris says the study is necessary for "council to make an informed decision" on how best to use the city's parking assets to boost the city's pension fund to at least 50% of its obligations.
The money will come from city parking revenues and the lone "no" vote Ricky Burgess called it a waste of money.
Burgess supports Mayor Luke Ravenstahl's proposal to lease the city's parking garages and meters for up to 50 years for at least $200 million.
Finance Scholars Group will have until August 1 to study the mayor's plan as well as other proposals including Harris' idea to float a bond to bolster the pension fund and use revenues from increased parking taxes and fines to pay back the bonds. Councilman Patrick Dowd and Controller Michael Lamb have proposed transferring some of the parking assets directly to the pension fund.
The consultant will also determine a value of the city's parking assets.

Harris says there is enough time to come to agreement on a plan to use the parking assets before the January deadline when the state would take over the pension fund..."We just want to make sure we do what's in the best interests of the residents of Pittsburgh."

Council Gets Pension Update

Pittsburgh City Council today held the first of five post agenda meetings and hearings on the city's ongoing underfunded pension plan. The city's pension plan is funded at only about 29% of its obligations to retirees and current employees.
Under legislation approved and signed into law in September, Pittsburgh was given a 2 year reprieve to get that amount up to 50%. To bolster the fund, Mayor Luke Ravenstahl has proposed leasing city-owned parking garages and using that money to reach the 50% threshold.
At Thursday's meeting, Scott Kunka, the city's director of finance, Bill Urbanic, council's budget director, City Controller Michael Lamb and Jim Roberts of the Act 47 management team. Urbanic says the city's pension fund has never been near 100% funded
"in 1999-2000 it came close to 70% funded but that was short-lived because the bubble blew up in the technology market."
Urbanic says state financial assistance for municipal pensions is based on the number of current employees and not retirees, and that hurts Pittsburgh which has been downsizing its workforce. Urbanic says you need enough money coming in from employee contributions to be able to pay out the pensions to the retirees.
Urbanic told council that a single pension system is needed in the state and that other states have successfully implemented such a program.
Controller Lamb told council that changes should be made to the state's funding formula. He says that he doesn't want "to knock out" any municipalities that receive state help funding pensions even if they are well to do. So he suggests that municipalities currently receiving state help be frozen at the current figure and that the truly distressed communities (like Pittsburgh) receive the additional money that is coming into the state pool of funds.
Act 47 Manager Jim Roberts says the city is increasing its contributions toward its pension obligations and believes it will continue to do so.
Council's finance chair Bill Peduto says upcoming hearings will include testimony from state officials, national pension experts, and representatives from Chicago who will discuss their experiences in leasing parking assets.

Governor Ed Rendell has signed pension reform legislation into law. The State Senate approved the measure after many of the reforms the Senate inserted earlier were removed by the House.
The legislation gives the city of Pittsburgh a 2 year reprieve before state takeover of its pension plan. At the request of Mayor Luke Ravenstahl, state lawmakers gave the city 2 years to bolster its pension plan which is only funded at 28% of its obligations to retirees and current employees. City Council President Doug Shields is a member of the Pittsburgh Municipal Pension Board says this will give officials time to seek bids and then lease city-owned parking garages. The mayor wants to use that revenue to help bring the city to the 50% threshold of funding the pension system.
The legislation also allows Philadelphia to raise its sales tax to 8% for 5 years to address a budget deficit and to improve its pension fund balance.
The Senate okayed the bill even though the House stripped provisions that had been approved by the Senate that would freeze pensions and change the way new hires would contribute to a pension plan.