Under the timeline contained in the "Request for Concessionaire Qualifications" released by the Pittsburgh Public Parking Authority earlier this year, prospective bidders interested in entering into a long-term lease for the publicly owned parking assets were to submit responses to the RFQ by March, due diligence on the applicants would be done through June, final proposals would be due in July, and a close of the deal would occur in November.
That timeline is predicated on the fact that the purpose of the lease is to turn an up front lump sum into a deposit for the anemic pension funds. Under existing state law, if the City can show a 50% minimum funded ratio (assets/liabilities) by the valuation taken in January 2011 then it is business as usual. If that 50% is not met, then the state is going to take over administration of the plans.
So one has to wonder what, if anything, the proposed action by City Council to spend $250k by amending the Capital Budget and Community Block Grant Budget to engage a consultant to study the lease idea does to that timeline and the plan. Presumably, Council is going to have to sign off on the lease idea in the end (notwithstanding any complicated financial arrangements, the Authority owns the assets up for lease consideration) and wants to have the best information available. But what happens if their analysis stretches past the established period of due diligence that is supposed to wrap up this month? What if it even goes into the dog days of July when the pool of bidders (11 parties as of March) is submitting final proposals?
This a key week for the debate over how the City will proceed with its garage plan: City Council is expected to vote today on whether to hire its own consultant to study the options on the table (a lease, a revenue bond, a transfer of ownership to the pension fund) and by Friday interested parties in the lease proposal are to submit responses to a RFQ handled by the Parking Authority.
Three legal opinions on the proposed alternative of transferring ownership to the pension fund have come forth, and have argued that there are major problems with the plan. Earlier this month we wrote a blog about questions that this alternative plan raised.
The legal objections? That the Authority cannot give up ownership without first satisfying its debt, that state law on pensions would prohibit it ("operation of a private business is not an investment security and would be a clear violation of the restrictions of the Municipal Pension Recovery Act") and that owning real estate would violate the commitment to investment diversity for the City’s Comprehensive Municipal Trust Fund (the CAFR says that an "allocation of 65% equity, 35% income with a variation of 10% above or below these targets for each classification").
Despite the objections the proponents for the alternative plan have indicated that they will continue to pursue the idea.
An alternative has arisen to the Mayor’s plan of leasing Parking Authority garages to a private interest in exchange for a lump sum payment (that sum would be used to pay off the Authority’s debt and bring up the asset total of the City’s pension funds): making the pension funds the "owner" of the garages.
News reports describe the transaction as "giving the pension fund ownership of some or all of the city’s 11 parking garages". It is doubtful that the pension funds could buy the garages as that would further deplete the low balance of the funds, and it raises lots of questions about the merit of this proposal versus the lease or sale.
Would the Parking Authority’s bondholders allow such a transfer? Would the Authority board resist "giving ownership" away? Could they be compelled? How would the lump sum needed for the pensions be realized? How would the pension funds-which hold $52 million in debt securities and $207 million in cash and cash equivalents-do owning publicly owned infrastructure? What becomes of the debt elimination plan for the Authority?
The Mayor says he is open to the alternative and that "if this ends up being the proposal, that’s fine" while also noting that the transaction "doesn’t equate to real dollars" the way a lease or sale agreement would. Clearly it is going to take time to explore the proposal, all the while the clock on restoring the pension funds to health continues ticking.