Grounded PILOT?

A major part of the City’s pension bailout plan hinges upon getting more money from the Parking Authority as a payment in lieu of taxes (PILOT). This year "Authority Payments", which count money from authorities in addition to the Parking Authority, total $11.4 million. Next year the amount is forecast at $20.1 million, an amount projected annually from the current five-year forecast.

A letter from a Councilman to the Mayor stated the Parking PILOT agreement "…currently gives the City $1.3 million dollars…This needs to increase to $2.6 million this year and $9.3 million in 2012 and beyond in order to cover the hole in the City’s budget from diverting parking tax revenue to the pension". Movement on that measure has effectively ground to a halt. The latest incident coming last week when a majority of the board voted against forming a panel to study how the Authority could raise revenue and dedicate some of it to the City. The panel idea was put forth by a board member who is also a City Council member and a proponent of the bailout plan. All of this serves as a way to examine what the proper relationship between the City and its authorities really should be.

The Controller’s CAFR notes that the cooperation agreement between the City and the Parking Authority dates back to February of 1995. It was amended five years later to increase the PILOT payment to where it currently is. That increase was 36%; the current proposal for 2011 to 2012 would be for a more than three fold increase. The payment is made, however, "…only upon the Parking Authority successfully meeting its debt service requirements". The Authority has outstanding debt of around $100 million.

Could the Water Authority Evaporate?

Tucked into the discussion on the City of Pittsburgh’s finances was a mention that part of the overall wish list could involve privatization of the Water and Sewer Authority, the public agency that is responsible "for the operation and improvement of the City’s water distribution and wastewater collection systems".

This responsibility was housed within the City water department for many years; the Authority was created in 1984 and in 1995 entered into a Cooperation Agreement and a Capital Lease Agreement that transferred Water Department employees to the Authority and the Authority agreed to lease the water system for a period of thirty years. Under the terms of the agreements the Authority assumed workers’ comp liabilities, provides the City with up to 600 million gallons of water free of charge, subsidizes the water rates of South Hills residents who are served by a private operator, pays the City $101 million annually under the lease, and, in the year 2025 can purchase the system for the nominal fee of $1.

Water and sewage systems are popular options for privatization-after all, providing drinking water is not a core public service and much of it is supplied by private interests currently. According to the Reason Foundation’s most recent privatization report, some 1,300 local, state, and Federal agencies contracted out some part of water service in 2008. Six privately operated plants reverted to municipal control the same year.

Much like the proposed parking lease deal, the attractiveness of selling/leasing the water system hinges upon opportunities for profit and much of that is tied to debt load and the City’s audited financial statements show that the Authority has $881 million in outstanding net debt, about $150 million more than the general obligation debt of the City itself.